Archive for the ‘International trade’ Category

US Treasury “311s” North Korea

Thursday, June 2nd, 2016

Here is the statement from the Treasury Department:

Treasury Takes Actions To Further Restrict North Korea’s Access to The U.S. Financial System

6/1/2016

Action Responds to the Threat that North Korea Poses to the Global Financial System; the United States Calls on International Partners to Similarly Takes Steps toward Severing Banking Relationships with the Dangerous Regime

WASHINGTON – Today, the U.S. Department of the Treasury announced a Notice of Finding that the Democratic People’s Republic of Korea (North Korea) is a jurisdiction of “primary money laundering concern” under Section 311 of the USA PATRIOT Act. Treasury, through its Financial Crimes Enforcement Network (FinCEN), also released a notice of proposed rulemaking (NPRM) recommending a special measure to further isolate North Korea from the international financial system by prohibiting covered U.S. financial institutions from opening or maintaining correspondent accounts with North Korean financial institutions, and prohibiting the use of U.S. correspondent accounts to process transactions for North Korean financial institutions.

Section 311 gives the Secretary of the Treasury the authority to identify a foreign jurisdiction to be a primary money laundering concern. Once identified, the Secretary can require U.S. financial institutions to take appropriate countermeasures. The special measure proposed in today’s NPRM would impose the most significant measure available to the Secretary under Section 311.

“The United States, the UN Security Council, and our partners worldwide remain clear-eyed about the significant threat that North Korea poses to the global financial system. The regime is notoriously deceitful in its financial transactions in order to continue its illicit weapons programs and other destabilizing activities,” said Adam J. Szubin, Acting Under Secretary for Terrorism and Financial Intelligence. “Today’s action is a further step toward severing banking relationships with North Korea and we expect all governments and financial authorities to do likewise pursuant to the new UN Security Council Resolution. It is essential that we all take action to prevent the regime from abusing financial institutions around the world – through their own accounts or other means.”

Reasons for This 311 Determination

Treasury is taking this action consistent with the North Korea Sanctions and Policy Enhancement Act, enacted on February 18, 2016, which requires Treasury to determine within 180 days whether reasonable grounds exist for concluding that North Korea is a jurisdiction of primary money laundering concern, and if so, to propose one or more special measures. In addition, the United Nations Security Council adopted Resolution 2270 on March 2, 2016, which in part requires UN Member States to sever correspondent banking relationships with North Korean financial institutions within 90 days of the adoption of the resolution.

North Korea is proposed for action under Section 311 because (1) North Korea uses state-controlled financial institutions and front companies to conduct international financial transactions that support the proliferation and development of WMD and ballistic missiles; (2) North Korea is subject to little or no bank supervision anti-money laundering or combating the financing of terrorism (“AML/CFT”) controls; (3) North Korea has no diplomatic relationship, and thus no mutual legal assistance treaty, with the United States and does not cooperate with U.S. law enforcement and regulatory officials in obtaining information about transactions originating in or routed through or to North Korea; and (4) North Korea relies on the illicit and corrupt activity of high-level officials to support its government.

Impact of the 311 Notice of Finding and the NPRM Special Measure

While current U.S. law already generally prohibits U.S. financial institutions from engaging in both direct and indirect transactions with North Korean financial institutions, this NPRM, if finalized, would require U.S. financial institutions to implement additional due diligence measures in order to prevent North Korean banking institutions from gaining improper indirect access to U.S. correspondent accounts. While North Korea’s financial institutions do not maintain correspondent accounts with U.S. financial institutions, North Korean financial institutions frequently conduct transactions on behalf of the North Korean government and state-controlled corporations. The NPRM, if finalized, would prohibit the use of third-country banks’ U.S. correspondent accounts to process transactions for North Korean financial institutions.

Italics added for emphasis.

The “Notice of Finding” is here, and is also worth reading.

According to the Wall Street Journal:

Treasury Department officials said they are moving to ban non-U.S. banks and entities from processing dollar transactions on behalf of North Korea, an arrangement known as a U-turn, in a move to block its international trade.

China is by far Pyongyang’s largest trading partner, and Chinese firms could be caught in the crosshairs, according to current and former U.S. officials.

Zhu Haiquan, the spokesman for China’s embassy in Washington, repeated Beijing’s warnings against what it considers “unilateral sanctions taken by any country.”

He added that “we should avoid any move that may further aggravate tensions” on the Korean peninsula, and said “the unilateral sanctions must not affect and harm the legitimate rights and interests of China.”

U.S. officials were pleased that China agreed in March to support the new U.N. sanctions, which could significantly impair North Korea’s ability to generate hard currency and ship its exports.

Still, U.S. officials have voiced skepticism that Beijing would significantly punish Pyongyang, a longtime ally. China has rebuked North Korea in the past for its nuclear and missile tests, only to increase investment and trade with the country.

The issue is likely to be among the topics discussed when Messrs. Kerry and Lew meet top Chinese officials in Beijing for the Strategic and Economic Dialogue, a series of annual bilateral meetings.

According to the New York Times:

As a practical matter, that would largely affect Chinese banks, which facilitate North Korea’s financial transactions with Beijing, its largest trading partner. It could also affect some institutions in the nominally autonomous Chinese regions of Macau and Hong Kong, as well as in Singapore, where Pyongyang has often gone to hide the true nature of its banking activities, and to pay for missiles, nuclear fuel and the huge infrastructure it has built around those programs.

It is hard to assess how much the action will hurt North Korea. Such sanctions against financial institutions doing business with Iran proved effective because Tehran had billions of dollars in monthly oil and other energy exports that could be choked off; North Korea has none. Oftentimes Pyongyang deals in cash. Until a few years ago it was one of the largest counterfeiters of $100 bills. But that once-lucrative fraud was largely cut off by the redesign of the $100 bill.

Banks in the United States are already prohibited from doing business with financial institutions in North Korea. But the recommended rules would require them to perform additional due diligence to ensure they are not inadvertently transacting with North Korean financial institutions or the Pyongyang government through shell companies or other fictitious entities.

Notice of the new rules has been published by the Federal Register. Feel free to comment if you like.

Josh also writes a walk-through of how this works.

Here is information from Choson Exchange.

Troy Stangarone writes about the sanctions for KEI.

The UK also strengthened financial sanctions against the DPRK.

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Russia sanctions DPRK

Monday, May 23rd, 2016

According to the Choson Ilbo:

Russia has halted financial transactions with North Korea, and the EU has added 18 individuals and one organization to its North Korea sanctions list.

The international sanctions aim to strangle the flow of hard currency into the North’s nuclear and missile programs.

The Russian central bank last Thursday told all Russian banks to halt financial dealings with North Korean agencies, organizations and individuals on the UN Security Council sanctions list, Radio Free Asia reported.

The order said the banks must immediately freeze bonds held by sanctions targets and close accounts related to the North’s development of nuclear weapons and missiles.

A Russian presidential decree will also take effect soon to close North Korean bank branches and joint venture firms.

But Russia will continue to allow financial transactions between Russian and North Korean banks authorized by the UN.

The measures deal a blow to North Korea because the two countries have only recently increased cooperation.

Russia has been criticized for giving the North Korean regime a lot of leeway by allowing its banks to open accounts for North Korean banks and settling business with North Korea in roubles.

“What’s important is whether the international community including Russia and Switzerland will put their decisions into action,” a diplomatic source said. “If they do, the North will suffer a lot.”

A recent gasoline price hike in the North seems due to Russia’s downsizing of supplies to the North.

The EU has announced its third round of sanctions since the North’s latest nuclear test. This has brought the number of sanctions targets to 66 individuals and 42 organizations. They will be banned from entering EU countries and their assets will be frozen.

Here is coverage in the Joong Ang Ilbo:

Russia’s central bank called for a suspension of all transactions with North Korea, media outlets reported Friday, which follows Switzerland’s toughened sanctions on the regime earlier this week.

The move is in line with the strongest-ever United Nations Security Council resolution adopted in early March to penalize North Korea for its fourth nuclear test and long-range missile launch and curb its weapons of mass destruction program.

The Russian central bank was reported to have issued an order to local banks and financial institutions to suspend transactions with Pyongyang on Thursday, according to Radio Free Asia.

The order stated that transactions with Pyongyang were possible only with the permission of the United Nations.

The central bank further declared an immediate freeze on bonds held by North Korean individuals, agencies and organizations blacklisted by the UN Security Council.

Likewise, Russian financial institutions will have to close any accounts that have possible links to the North’s nuclear and missile programs.

On Wednesday, Switzerland imposed tighter sanctions on North Korea, ordering the freezing of assets held by North Koreans in the country and closure of their bank accounts as well as blocking funds owned by the North Korean government.

The Swiss government made the move to block all funds and economic resources connected with North Korea’s nuclear and missile programs in line with UN Security Council Resolution 2270, which was adopted in March in response to Pyongyang’s nuclear test in January and a ballistic missile test in February.

This included mandatory inspections of all cargo going in and out of North Korea, a ban on exports of coal, iron and other mineral resources from the North, as well as prohibiting aviation and rocket fuel exports into the country.

Russia and China, two of the five permanent members of the 15-member Security Council, have generally defended Pyongyang’s stance in the council. They also negotiated some room for leeway in the March resolution on North Korea. How they implement the sanctions will be crucial to cutting the cash flow into Pyongyang’s WMD program.

The Swiss government extended an existing ban on exports of luxury items to include more goods and prohibited North Koreans from studying in Switzerland in higher physics or nuclear engineering.

On Thursday, the European Union expanded its sanctions against Pyongyang, adding 18 individuals and an entity it deemed related to its weapons program to its blacklist.

This brings the EU blacklist to 66 individuals and 42 entities considered to be involved with North Korea’s nuclear and missile development.

When asked about the government’s position on Russia’s sanctions, South Korean Ministry of Unification spokesman Jeong Joon-hee said in a briefing Friday, “We strongly welcome that countries around the world, including China and Russia, are actively taking part in these strong sanctions.”

Read the full story here:
Russian Central Bank Halts Dealings with N.Korea
Choson Ilbo
2016-5-23

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Not surprising: Inter-Korean trade to fall in 2016

Friday, May 13th, 2016

According to the Choson Ilbo:

Trade with North Korea is expected to be practically zero this year now the joint Kaesong Industrial Complex has been shut down.

According to a 2016 White Paper published by the Unification Ministry on Thursday, last year’s cross-border trade volume was a record US$2.7 billion, up 15.9 percent from 2014, thanks to an increase in trade through the industrial park.

But that accounted for 99.6 percent of all cross-border trade since other trade had already been suspended under earlier sanctions in the wake of the sinking of the Navy corvette Cheonan in 2010.

Now the industrial park has been closed there is no trade left, the ministry said.

Since the North’s latest nuclear test in January, Seoul has also halted humanitarian aid to the North. Last year, Seoul gave Pyongyang humanitarian aid worth W25.4 billion, up 30 percent from 2014 (US$1=W1,167).

Read the full story here:
Trade with N.Korea Falls to Near-Zero
Choson Ilbo
Kim Myong-song
2016-5-13

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DPRK participates in Xian trade fair

Friday, May 13th, 2016

According to Yonhap:

North Korea on Friday showed off wild ginseng roots, a tiger painting and other health products at an international trade fair hosted by China’s northern city of Xi’an.

Although North Korea and China have held their annual trade fair in the border city of Dandong, it was unusual for the North to set up booths at a trade exhibition in other parts of China.

International sanctions were tightened in early March following North Korea’s fourth nuclear test in January and launch of a long-range rocket in February.

Forty-five nations, including South Korea, participated in the “Silk Road” trade fair, which is organized by China’s top economic planner and commerce ministry.

North Korea came up with paintings, wild ginseng roots, ginseng tea, cigarettes and some medicine.

Wild ginseng roots, which are highly valued in Korea for its perceived healing benefits, were being sold at 3,600 yuan (US$549.80) per package.

A painting featuring a tiger, which is 4 meters wide and 1.5 meters high, was priced at 100,000 yuan, according to a North Korean representative.

There were about 30 North Korean representatives at the fair.

A source with knowledge of the matter in Xi’an said North Korea applied for booths at the fair, although China had not sent an invitation to the North for the exhibition.

Read the full story here:
N. Korea shows off wild ginseng roots, tiger painting at China fair
Yonhap
2016-5-13

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Taedonggang Beer goes on sale in China

Thursday, April 28th, 2016

According to the Korea Times:

Taedonggang beer, a state-owned North Korean brand, is available in grocery stores in Dandong and Shenyang, China, according to news reports.

“I noticed billboards promoting Taedonggang beer on a street near Dandong Station, and also newspaper advertisements showing the addresses and phone numbers of retail stores,” a source told Radio Free Asia.

The beer is not yet widely distributed in China. Sources from Shenyang and Dandong said they could find only a few stores selling the beer in Xita Street where many Koreans live and in Korean gift shops.

North Korea’s popular beer costs 20 yuan ($3) a bottle, four times the price of regular brands in Chinese grocery stores.

“The beer has a soft, rich flavor with more alcohol than Chinese beers,” said a Chinese man who tasted Taedonggang beer at a restaurant in Dandong.

“However, the price is too expensive for Chinese citizens to drink regularly.”

Read the full story here:
N. Korean beer sale in China
Korea Times
Lee Jin-a
2015-4-28

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North Korea looking to expand foreign trade, turning to EU and BRICS

Thursday, April 28th, 2016

Institute for Far Eastern Studies (IFES) 

North Korea is seeking to expand its foreign trade by turning to the EU and BRICS (Brazil, Russia, India, China and South Africa) for cooperation.

In the recently published book Looking at Today’s Choson from 100 Questions and 100 Answers, North Korea emphasized the importance of cooperation with EU and BRICS, saying it will “seek various ways to expand its foreign trade.”

The book noted that with the upcoming Pyongyang International Trade Fair (PITF) in May and September, North Korea is looking for grounds to engage in foreign trade to “further the cooperation with many countries around the world.”

The book also stated that North Korea is engaging in a wide range of international trade such as economic cooperation and looking into cooperative business models with Europe, Southeast Asia, Latin America, the Middle East and Africa as well as with international and regional economic organizations such as the EU and BRICS.

However, seeing as the book does not specify detailed ways in which North Korea will take to cooperate with the EU and BRICS, the plan appears as a mere hope.

While the book admitted the difficulty in building an economically strong country while facing the sanctions imposed by the international community, it emphasized that “it [North Korea] is putting its effort in expanding international trade to directly penetrate the sanctions to build a strong socialist state.”

The book also noted that the diversification of active foreign trade will enable “the expansion of width and depth of distribution through dealing with more countries on various industries on many accounts.” The diversification in this context refers to the people in charge of trade and the methods of trade.

Continuing on the idea of diversification, the book mentioned that “not only does the diversification of foreign trade not contradict itself with the independence of national economic stability, but it actually is an important asset in developing the ability of economic independence and its capability,” meaning that diversification should be a key foundation in building an independent economy.

The book explained that the independence of economy is the enhancement of people’s identity and independence that is linked to the domestication of materials. Therefore, beginning with coke (coal) gasification, Juche-iron, Juche-refractory material production line, Juche-fertilizer, and Juche-textile production line will be completed, for instance.

According to the book, this will be the core foundation in speeding up economic development in association with the domestic materials parring with international market prices to stay in market competition. It also stated that this is “not only a matter of economic efficiency, but also a fierce fight against enemy states in the war of defending socialism.”

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North Korean market condition since new international sanctions

Wednesday, March 23rd, 2016

Institute for Far Eastern Studies (IFES)

It has been almost two weeks since the enforcement of new sanctions imposed by the United Nations Security Council (UNSC), and so far North Korea’s domestic economy seems calm. Following the sanctions, North Korea has been preparing for the 7th Party Congress in May with its 70-day campaign (or ‘speed battle’). In order for the people to focus on the preparation, the government has reduced the business hours of markets and has begun controlling the street markets (i.e., ‘grasshopper’ markets).

In particular, it was expected that the sanctions would reduce the inflow of goods into the country which would then lead to a rapid rise in market prices and exchange rates, but so far the market prices appear to have remained relatively stable. According to the Daily NK, a South Korean online newspaper reporting on North Korea, 1kg of rice is selling for 5,100 KPW, 5,150 KPW, and 5,080 KPW in Pyongyang, Sinuiju, and Hyesan, respectively. These prices are relatively similar to the prices prior to when the sanctions were in full effect (i.e., 5,100 KPW in Pyongyang and Sinuiju, and 5,260 KPW in Hyesan).

The exchange rate appears no different. One US dollar exchanges for 8,150 KPW in Pyongyang, 8,200 KPW in Sinuiju, and 8,170 KPW in Hyesan. The rate has been only slightly reduced compared to the rate prior to when the sanctions were put in place (i.e., 8,200 KPW in Pyongyang, and 8,290 KPW in Sinuiju, and Hyesan).

The reason for the stability in the market and the exchange rate is because even though the market hours have been reduced due to the 70-day campaign, the markets actually are running better than before and in some regions the price has gone down for some goods, presumably because some of these items that were exported in large scale via China have been circulated in the North Korean domestic market.

Also, aside from the underground resources (i.e., minerals) — the sanctioned items that used to account for most of the exports — other goods are still sold accordingly, which helps in stabilizing the market. Furthermore, the improvement of the domestic market cannot be taken lightly when considering the stability of the markets. In other words, unless markets are completely closed, people in North Korea wouldn’t consider it an issue.

Meanwhile, despite the international community’s sanctions against the country, including that of the UN Security Council, North Korea is claiming overproduction in areas such as electrical power and minerals in the run-up to the Seventh Party Congress in May. The North Korean propaganda media ‘DPRK Today’ has mentioned about production and the country’s success in confronting the imposed sanctions.

More specifically, since the initiation of the 70-day campaign last month (February 23rd), in order to boost economic success, Namhung Youth Chemical Complex has reportedly turned out 60% more fertilizer; Pyongyang Railway Bureau increased the traffic by 40%; Ryongyang Mine increased its production of magnesite by 20%; and 2.8 Jiktong Youth Coal Mine produced 7,200t beyond its quota. In addition, Kim Jong Suk Textile Mill reportedly has seen more than 40 labors complete the plan for the first half of the year, while Baekdu Hero’s Youth Power Plant has reached 37,000m2 in dam construction. Previously on March 3rd, the Korean Central Broadcasting radio reported that many of the production targets for February in the national economy have been surpassed.

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Chinese local governments formally notified of sanctions against North Korea

Monday, March 21st, 2016

By Benjamin Katzeff Silberstein

I’m not sure if this is anything out of the ordinary or if this is the formal routine every time sanctions have been passed. Nevertheless, it’s an interesting development. If sanctions against North Korea are ever to hit the economy where it hurts, Chinese local governments are perhaps the most important implementers since much (or most) of North Korea’s external trade occurs with them. Korea Herald:

China has notified its local governments on how to implement new U.N. sanctions on North Korea, including specific measures on imports from North Korea, a diplomatic source with knowledge of the matter said Monday.

Kim Hong-kyun, South Korea’s chief nuclear envoy, held talks with his Chinese counterpart, Wu Dawei, last Friday as the two nations vowed to fully implement the new U.N. sanctions against North Korea’s fourth nuclear test and rocket launch.

During the talks, Wu told Kim that China has been “in the process of implementing the new U.N. resolution on North Korea,” said the source, who attended the Friday meeting.

“The Chinese side also believes that strong sanctions are needed to show its sincerity on denuclearization,” the source said.

Earlier this month, the U.N. Security Council levied tougher sanctions against North Korea’s fourth nuclear test on Jan. 6 and the Feb. 7 launch of a long-range rocket, both of which violated previous U.N. resolutions.

The new U.N. sanctions require countries to limit or ban imports of North Korean coal, iron ore and other mineral resources if the proceeds are used for the North’s nuclear and missile programs.

One of the potential loopholes is a provision that allows North Korea to continue exports of coal and iron ore if such transactions are for “livelihood purposes.”

Full article here:
China notifies local gov’ts of new U.N. sanctions on N. Korea
Yonhap News/Korea Herald
2016-03-21

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China to halt half of coal imports from North Korea, according to Chinese newspaper

Wednesday, February 24th, 2016

By Benjamin Katzeff Silberstein

Dong-a Ilbo recounts the story from Global Times:

The Chinese government will suspend half of trade with North Korea, China’s official Huanqiu Shibao (Global Times) daily reported Tuesday. It said that China will stop importing North Korean coals, which account for 42.3 percent of the China-North Korea trade, next month. The Huanqiu Shibao is a sister paper of the Renmin Ribao, the organ of the Communist Party of China, with a circulation of 2.4 million copies.

The Huanqiu Shibao quoted a trader in Dandong, Liaoning Province that China’s coal trade with North Korea will be suspended, starting March 1 and that it is probably because of the financial sanctions following the North’s satellite launch. The trader was also quoted as saying that China’s Ministry of Commerce or the customs authorities sent an order to Liaoning Province about the trade ban and that half of China-North Korea trade will be halted.

The trade also stressed that while the China-North Korea trade will likely recover from May, it depends on Pyongyang’s attitude. An informed source on China-North Korea trade also told the Dong-A Ilbo in a telephone interview that a Chinese businessman attempted to remit cash to the North via a Chinese bank in Shenyang, Liaoning Province to pay for North Korean iron ores but was informed that he was not allowed to do so. It has yet to be confirmed whether Beijing actually put a ban on imports of North Korean minerals.

Full story here:
China halts half of imports of N. Korean coals
Dong-a Ilbo
2016-02-25

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How bad is the Kaesong shutdown for the North Korean Economy?

Wednesday, February 10th, 2016

By Benjamin Katzeff Silberstein 

The Ministry of Unification in Seoul announced today that the industrial park in Kaesong be closed as a form of retaliation for North Korea’s recent rocket launch, alleging that funds from the park have been used to finance the north’s arms buildup. Wall Street Journal (with my emphasis):

A representative of South Korea’s Unification Ministry said that the move to shut down Kaesong was an effort by South Korea, “as a key party, to show leadership in taking part in these moves.”

Kaesong is an important source of income for Pyongyang. The regime received $120 million last year, and a total of $560 million since 2004, in workers’ wages directly from the South Korean side, according to the Unification Ministry. Those payments are made directly to the regime, which is then charged with paying the workers themselves, a system that critics say allows the regime to pocket most of the money.

“It appears that such funds have not been used to pave the way to peace as the international community had hoped, but rather to upgrade its nuclear weapons and long-range missiles,” the Unification Ministry said on Wednesday.

Naturally, this is bad news for the North Korean economy. But how bad exactly?

Here are a few other figures to give some sense of the proportions:

  • The volume of trade between North Korea and China only in the January-May period of last year totalled $1.1 billion, with North Korean exports accounting for $954 million.
  • Between January and November last year, the value of North Korea’s exports to China was $2.28 billion.
  • Textile exports to China from North Korea brought in around $800 million in 2014.
  • North Korean guest workers in China’s border provinces are estimated to be raising between $140-$170 million per year.

In the overall context, it seems like losses from the closure of Kaesong could be potentially bad, but not catastrophic.

UPDATE 1: Here is the full statement from the Ministry of Unification:

Government Statement regarding the Complete Shutdown of the Gaeseong Industrial Complex

North Korea has pushed ahead with the extremely provocative act of launching a long-range missile on the heels of its 4th nuclear test, showing disregard for the repeated warnings of the international community and the suffering of its people.

North Korea’s provocations are a direct challenge to peace and stability on the Korean Peninsula and in the international community and its actions are absolutely unacceptable. Notwithstanding international efforts to deter North Korea from developing its nuclear capabilities and long-range missiles,

North Korea has declared that it would follow up on its recent provocations with additional nuclear tests and missile launches, thereby not even showing the slightest intent to forgo the development of its nuclear and missile capabilities.

The status quo is not static, as North Korea’s nuclear capabilities will be upgraded, all but leading to a catastrophic disaster. If left unattended, North Korea’s nuclear and missile development will lead to a fundamental imbalance in and threat to the security landscape of Northeast Asia, not to mention the Korean Peninsula, and the countries of this region will be left with no choice but to take measures to ensure their own survival and shore up their security, and there are concerns that this could eventually even lead to a nuclear domino effect.

Under these grave circumstances, it is clear that the existing approach will not work in discomfiting North Korea’s nuclear and missile development plans. Accordingly, what is in order is a vigorous response together with the international community that, for sure, exacts a price for North Korea’s misguided actions, as well as extraordinary measures that compel North Korea to give up its nuclear capabilities and change its ways.

At a time when the international community is seeking sanctions in the wake of North Korea’s violation of UN Security Council resolutions with its nuclear test and long-range missile launch, there is a need for Korea, as a key party, to show leadership in taking part in these moves.

Over the years, our Government has been working to continue maintaining the Gaeseong Industrial Complex despite North Korea’s repeated provocations and under extreme state of affairs, all with a view to assisting the lives of the North Korean people, providing impetus to lifting up the North Korean economy, and achieving the shared progress for both South and North Korea. We have also made every effort to move the Gaeseong Industrial Complex forward under the position that it should be developed in conformity with international norms.

However, such assistance and the efforts of our Government have ultimately been wrongly harnessed in the service of upgrading North Korea’s nuclear weapons and long-range missiles.

To date, the total amount of cash that flowed into North Korea through the Gaeseong Industrial Complex is 616 billion won (560 million dollars), with 132 billion won (120 million dollars) in cash having flowed into North Korea last year alone, and the Government and the private sector have invested a total of 1.019 trillion won. It appears that such funds have not been used to pave the way to peace as the international community had hoped, but rather to upgrade its nuclear weapons and long-range missiles.

This tramples on the efforts of the Korean Government and the 124 businesses that have set up shop in the Gaeseong Industrial Complex, and puts at risk the lives and safety of the Korean people.

Today, in order to stop funds of the Gaeoseong Industrial Complex from being used to support the development of North Korea’s nuclear and missile capabilities, and to prevent our businesses from suffering, the Government has decided to completely shut down the Gaeseong Industrial Complex.

We have notified the North Korean authorities of this decision and called on them to extend such cooperation as is rendered necessary by the complete shutdown of the Gaeseong Industrial Complex, including the safe return of our citizens.

The Government will move expeditiously forward with all steps to ensure the safe return of our citizens, and will set up a Government Task Force under the Office for Government Policy Coordination to provide the necessary whole-of-government assistance to our businesses.

We ask for the full understanding of our people that the Government’s complete shutdown of the Gaeseong Industrial Complex is an unavoidable decision, which takes into account the seriousness of the situation on the Korean Peninsula, and we call upon the people to stand with us as we seek to overcome such challenges.

UPDATE 2: Kent Boydston at the Peterson Institute offers this graph, and notes we can expect to see the trend reverse:

DPRK-China-ROK-trade-2015

Full reference to the Wall Street Journal article quoted above:
South Korea, Japan Take Steps to Penalize North Korea
Wall Street Journal 
Jonathan Cheng
02-10-2016

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