A couple days ago, the Treasury Department issued sanctions against China, Russia, and North Korea. Before now, we had bent over backwards to assure the Chinese government that sanctions were on individuals, but now the Treasury has specified that this is, in fact, a sanction on China itself. Two entities happen to be located on Peace Road (和平路), which is awesomely ironic, but other sanctions weren’t so funny.
When I was living in China, I could smell the shadiness of businesses. In architecture, the front of a building is often called a facade. That’s the doorway, maybe an archway, the name of the restaurant, maybe some fancy lights. In China, however, the word “facade” takes on a new meaning because, before you even walk in, you KNOW something’s not right.
In fact, I’ve learned that, in a restaurant, you often don’t want to be opening random doors thinking it might be the bathroom. I opened a door once and there was this guy counting such a huge wad of cash–all 100’s–that my next observation was that his hands were gigantic. He looked at me, didn’t say a word, as if he knew I was aware that I should probably just close the door and not tell anyone about it.
Well, that’s the last time I go to Little Russia in China.
Now, China has recently signed on to unanimous UN Security Council sanctions against North Korea and had previously issued its own independent import ban on North Korean for one year, moving 10,000 troops to their shared border to protect against an influx of North Korean refugees. They also previously vetoed UN Security Council sanctions and blocked action against North Korea numerous times. So it’s a mixed bag.
So what’s in these sanctions and what reason did the Trump Administration give for issuing them?
All of this has to do with North Korea. The sanctions state that they are intended to pressure and punish people and companies that are currently aiding other people and companies who have already been sanctioned as well as people and companies that are more directly involved. In other words, the Treasury has widened the net to include those who are helped people who have been blocked, but they’re also blocking new people they hadn’t known about before who are directly involved in North Korea’s military programs.
As mentioned, China blocked North Korean coal imports for one year. That year has come and gone, but now the Treasury is trying to block exports of North Korean coal to anywhere. They are using what’s called their Office of Foreign Assets Control (OFAC) to block those who procure large amounts of North Korean coal. That money would’ve gone to North Korea’s nuclear program, and the hope is that the money won’t get there for free and that North Korea won’t have much else to offer in exchange for money. Those blocked, or sanctioned, are DanDong Zhicheng Metallic Materials (originally translated from Mandarin), JinHou International Holdings (translated from 金猴国际控股, which directly translated means Golden Money International Holdings…always fun), and DanDong Tianfu Trade Co. Ltd.). If you’re wondering why DanDong twice, that’s because it’s a city very close the Chinese/North Korean border and also has one of the only main access points into China by land, called the Sino-Korean Friendship Bridge.
I’m sure some of you know, but the prefix Sino- means Chinese.
Here’s the map:
You can’t see the bridge from this far, but it’s pretty close to bottom right of the area shaded in red. That’s DanDong (丹东). Of course, that’s North Korea on the right and South Korea bravely hanging out below. In case you’re wondering, the very top right corner of the screen is Vladivostok, very important Russian port city. It’s also where they put thousands of its own troops in support of China’s doing the same elsewhere along its border with North Korea.
In other energy news, OFAC also blocked two companies in Singapore and three prominent Russian individuals from providing oil to North Korea.
Let’s stop for a second: blocking, or sanctioning, just means cutting off their access to U.S. entities and financial markets and any other resources under the nonmilitary control of the United States. It doesn’t mean we’re hacking in and blocking something or moving troops or something. We’re essentially just cutting them off, but they could go elsewhere, which is why you may often hear that “sanctions don’t work.”
There are two more sections to these sanctions: WMDs and guestworkers.
In short, we all know what WMD’s are…and where they aren’t. Anyway, North Korea is obviously in love with them so we’re trying to stop that, which brings us back to DanDong. The rest is pretty self-explanatory. North Korea wants to blow stuff up. I’ll spare you the details of specifics metals being blocked, like vanadium and other rare-earth metals that China pretty much has a monopoly on because they really only exist there.
Finally, their guestworker program is interesting. North Korea sends its most loyal citizens abroad to do anything from working on construction projects to working in restaurants. It’s possible you may have been served by a North Korean when you were visiting Southeast Asia. They’re also in Western Europe. They’re pretty much everywhere.
Worldwide, we’re trying to incentivize companies to stop employing these workers because all the money they make goes right to Kim Jong Un and his nuclear program. Not just all the profits after paying the workers but all the money. They’re not paid. However, they believe it’s an honor to be selected to go abroad. Some have even used this as a way to defect.
OFAC sanctioned MOPATS, which is short for Mansudae Overseas Projects Architectural and and Technical Services because it works for Mansudae Group, which was already sanctioned by the United Nations on August 5, 17 days before these OFAC sanctions.
Finally, OFAC sanctioned a company in my favorite Chinese city of Qingdao because of its employment of these guest workers. To be clear, the Qingdao assets being sanctioned are actually owned and controlled by assets in Namibia that are being operated and controlled by China. In fact, a lot in Namibia has been controlled by China for a while now because of massive debt contracts they signed with China and now can’t pay. Sanctioned entitles here are the individual Kim Tong-Chol (no relation to Kim Jong Un himself) and Qingdao Construction Company, which was determined to be aiding Mansudae.
For a full list of these people and entities, you can click here and even see their passport numbers, home and office addresses, gender, and other identifiers.
So what’s going on here?
Well, as you can see, almost no one is actually being sanctioned. I’m not really for or against sanctions–it depends on whether they work and OFAC did say it would significantly hurt NK and I agree–but they really only blocked 10 entities and six individuals, most of whom are Chinese. This is more of a warning shot at China, telling them to stop supporting North Korea’s military aggression toward the United States. In this way, it may help. Kim Jong Un showed a vague sign of backing down on bombing Guam when he announced he would bomb outside of U.S. territorial waters about Guam. However, that could also be an attempt to get us to shoot down their missiles even though they are allowed to test them in international waters. Under international law, we’re not allowed to do that, which means they could say we provoked them. If we do nothing to stop them, it only takes a slight course correction or even a miscalculation to actually hit Guam. Therefore, it’s not clear what KJU is doing, but it’s more likely that he’s trying to trick us into doing nothing in response to missiles getting closer and closer to U.S. territory.
However, there’s another problem with these sanctions. There is an interconnected system of alternative financial networks that span the globe but are heavily concentrated in China, Pakistan, Iran, and other countries allied with China. That’s why we have to block the people that are helping people who are already blocked. In other words, we may have to widen the net further to help those who are helping the helpers. Eventually, they could get smart and get people to help them who are also influential to the United States, meaning we’d have to hurt ourselves to hurt China and North Korea.
To clear, these sanctions are aimed squarely at China, and it is meant to be a strong statement, as we all know Trump hates China. However, it’s a little breathless. I prefer sanctions over the alternative to going to war, but if they don’t work, you have to try something else. If we don’t, then we could making China think we don’t have any other options, and if we really don’t, then they could put us in check or at least in a reactionary position in which we basically keep chasing them while they stay one step ahead of us like they’ve been for a while now.
So what has China done already? Well, they are very angry, and they’ve issued strong threats. They keep pushing their faux agenda of diplomacy, trying to pretend they’re the bigger man just like they audaciously lied when they said they’d become the world’s leader in clean energy moments after Trump pulled out of the Paris Climate Accord. Please also note that China may have had a hunch 14 out of 15 countries would vote in favor of the recent UN Security Council sanctions, meaning China had to be the 15th in favor or they’d look like they were more allied with North Korea than they are pretending to be these days. In short, even if China told the truth, it should be standard protocol to assume it’s a lie because they do it so much. It’s very hard to tell what they are really thinking, which is why you have to look at its actions, which is also hard, and that’s exactly what they want.
In conclusion, these sanctions aren’t really going to be enough. The Trump Administration will likely continue to escalate to more and wider sanctions to reign in support for North Korea’s threats against the United States, but it’s likely that China will be able to survive it.
My suggestion is to hit China where it hurts. They fund 90% of North Korea’s economy. We do have options that would hurt China’s willingness to pay. If we cause an economic downturn, then they would have to choose who to pay. They wouldn’t likely have much domestic instability because they’re so good at controlling that. However, some miners have refused to work because they weren’t getting paid and some people in there to mid- to late-30’s and 40’s are moving back west from cities like Beijing, Qingdao, Guangzhou and others where jobs were plentiful because some of that has dried up. Additionally, Trump has incentivized companies to come back to the United States, and some companies were already planning on leaving. 25% of U.S. companies operating in China are leaving or already have. However, they aren’t exactly coming home like Trump hoped. They’re moving to Vietnam, India and other burgeoning low-cost countries.
All of this is incredibly good. China has engaged in what I called “entanglement.” Some people break this into two parts and call it “engagement and containment,” which goes both ways, but I believe China is not just trying to interact with the United States in order to gain control but cause the United States to hurt itself if it tries to hurt China. If we were to embargo all Chinese goods right now, we wouldn’t even be able to get basic medicine because so much of it is made in China. Almost everything is Made in China. Therefore, we’ve been interdependent. However, getting our companies out of China and dispersed throughout ASEAN countries supports international trade, makes us less dependent on any one country there, supports our allies there instead of a country that treats us horribly and supports those who treat us worse, and deleverages China’s ability to threaten and bully ASEAN countries. Moreover, it could strength those countries’ military capabilities, which would help them help themselves in the South China Sea disputes that China is causing.
I could go on and on and on about China, but the long and short of all this is that we need to smoothly exit China. They can’t really do much about that, and they’ll spend most of the time thinking that we can’t live without them, which gives us time to get that 25% up to way above 50%. By the time they realize what happened, their economy will have slowed down tremendously. Most importantly, if they can’t survive just on their economics-centered military strategy to control the world, then they’ll have to show their true colors with increased bullying and activity via actual military assets. In the process, they’ll lose billions in support from the international community, including more than dozen countries who have recently flipped to face East instead of facing the United States. All of this will unravel, and the world will have no doubt about what and who the Chinese Communist Party government really is. In doing so, of course, they’ll strongly support any action by North Korea, but they’ll be unable to do very much, which will cause North Korea to almost entirely collapse, stall their nuclear program, and frankly leave it vulnerable to attack, though I don’t think anyone would do that at that time.
So, what should WE do about all this?
There’s really not much you can say to Congress, and you obviously can’t call Trump because he doesn’t represent anybody, but that doesn’t mean you can’t do anything. There’s so much you can do.
- Support the Make in India campaign
- Stop buying anything Made In China
- If you’re starting a business, source locally or just not from China.
- Tell Congress to support the Trans-Pacific Partnership!
I want to highlight the Make in India Campaign is an attempt by the administration of Narendra Modi to take the majority of India that is too impoverished and undeveloped to even be a part of international commerce due to risks and capabilities and build enough soft and hard infrastructure into it so that India can be a major player in Asia and in the world. They have just as many people as China, but they are a democracy, and they are aligned with the United States. Moreover, they have major border disputes with Pakistan, which loves China, and with China, which hates us.
If the three countries of Russia, China, and North Korea are like a cesspool of fissile material, then these three countries represent perhaps the one battleground that could solve all U.S. problems in the region without the United States even getting involved. Imagine India being powerful enough to stop Pakistan in Kashmir or even take that region back, slow down China economically enough by taking U.S. assembly contracts, and traverse the Strait of Malacca and parts of the South China Sea. That would be a major battle ground both on land and in two bodies of water. Currently, India is dealing with Pakistan in a losing battle because China is supporting it economically and vowing to protect it in Kashmir, especially now that India didn’t sign the OBOR and China is invading Bhutan and also incentivizing its citizens to relocate to the dispute border region of Arunchal Pradesh. If we can get India powerful enough to be economically important enough to the rest of the world, the winds of change will be hurricane-force and heading right in their direction.
I sincerely feel that we can fight against China. I do not think sanctions are enough. However, I think most of what can be done must be done by the people and corporations big and small. China and, in fact, many countries are now targeting civilians in the West. Some have attacked us directly via economic entanglement, drug trafficking, and hacking, and others are making strong statements about their intent to cause the collapse of our culture. Those people talk less about our government, economy and military. They focus on us. Therefore, it is up to us to fight back against them. Don’t fight citizens of these countries. Fight their illegitimate leaders. We can and should do that.