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The Hidden Side of Sanctions Against North Korea

The economy of Democratic People’s Republic of Korea (DPRK) has suffered through decades of international sanctions -that were intensified after the two nuclear tests of 2006 and 2009-and the imposition of extended controls over its economy and trade by the UN Security Council (UNSC).

The health system of DPRK has been one of the most impacted sectors; The North Korean government maintains the policy of military first and spends significant amounts of the country’s meager resources for military and nuclear development. Thus it bears a large part of the responsibility but any analysis would be one-sided and biased if it failed to equally address the impact of the international sanctions against DPRK.

In 2013, following North Korea’s nuclear test of February, unilateral sanctions were adopted by the international community, banning luxury goods, imports and financial transactions. On March of the same year, the government of the US announced the imposition of control measures against the Korean Bank of Foreign Commerce by freezing any financial transaction between Korea and all institutions of American interests. These measures came as an addition to those already enforced by separate countries (i.e. Switzerland, Australia, UK, Canada, Japan, and the Netherlands) as well as those economic sanctions that indirectly affect North Korean interests.

A case in point is that of Banco Delta Asia in Macao. In September 2005 the US accused the bank of laundering capital and circulating counterfeit money on behalf of North Korea. The US decided to take financial measures against the bank. Alarmed by the massive flight of foreign capital, the government of Macao, froze 24 million dollars belonging to Korean interests and ordered an independent investigation. The investigation was undertaken by Ernst &Young and the government of Macao. No evidence of money laundering was found, yet Banco Delta Asia remains blacklisted without the right to conduct any business in dollars thus causing painful losses to the fragile economy of North Korea.

On January 2015, the US voted for the expansion of a series of measures they had already enforced to include ten Korean officials and three companies. These were decided as retaliation for the alleged internet attacks that North Korea had launched against Sony. It is worth mentioning that the attacks were never proven to have come from North Korea while there is some strong evidence that they were conducted by disgruntled ex Sony employees.

Sanctions and economic isolation are supposed to stop financing and the smuggling of cash that contribute to North Korea’s nuclear and missile program and halt the import of luxury goods to the country’s elite and are not intended to have any adverse humanitarian consequences for the civilian population.

Ban on luxury goods has been adopted by the UNSC since 2009 with the resolution 1874 that includes a list of goods that are not allowed to be exported to DPRK. But the vague concept of “luxury” makes it difficult to implement it.

The UNSC list includes a variety of goods, ranging from luxury cars to cigars and lipstick but is not conclusive. The latest resolution 2094 states that definition of what is “luxury goods” remains an obligation of each member state. This means that every country has the right to consider more goods to be a ‘luxury’ and therefore every country can decide on its own on how strict it wishes to be with DPRK when it comes to the implementation of sanctions. As a result, many countries have decided, either independently or under the pressure of powerful allies, to end all commercial relationships with North Korea including the export of goods of basic necessity.

There is no detailed study connecting the sanctions with the levels of malnutrition or the general humanitarian situation in DPRK. Some development index have improved in the country even under strong restrictions. However it is not easy to assess if the improvement wouldn’t have been even swifter had the sanctions not been imposed. It is important to note that China does not always act according to the UN resolutions and maintains trade with North Korea. Accordingly it is hard to speculate what the consequences might be if China decides to strictly impose sanctions against its neighbor.

But international aid organizations and aid workers who are active in DPRK have been quite straightforward and linked the collapse of the vital public services to the international sanctions.

According to aid agencies, the shortages first hit the health sector; essential medicine and diagnostic devices are either unavailable or take many months before they can get into the country. As a result, programs designed to fight diseases such as Tuberculosis, either delay indefinitely or get altogether cancelled.

South Korean Yonhap news agency reported in 2014 that the World Health Organization (WHO) had plans to provide to provincial hospitals of DPRK additional testing devices for Tuberculosis (TB). This would include the GeneXpert device that provides a platform for testing people with suspected drug-resistant TB and for all living with HIV virus in a highly accurate manner. By cutting the time for diagnosis from six to eight weeks to just a few hours, the device is crucial in halting the spread of TB The disease is endemic in DPRK and according to WHO data, 409 out of 100,000 North Koreans suffered from TB in 2012. But sanctions made those plans quasi impossible. GeneXpert is developed by the US based company Cepheid Inc. and a special permit had to be issued from the US chamber of commerce in order for it to be exported to North Korea. US imposed sanctions resulted to significant delays and it took more than a year for the first device to reach Pyongyang.

Imports of second line anti-tuberculosis drugs suffered the same delays. One of the main five second line drugs to fight drug resistant TB is Kanamycin A. that is procured to DPRK by the Global Drug Facility (GDF), a Stop TB partnership entity. But the GDF manufacture company of Kanamycin is based in Japan that implements strict sanctions against DPRK. As a result the drug could not be imported and alternative medicines had to be found causing further delays and interruptions.

Additionally, surgery anesthetics, common antibiotics, obstetric medicines, spare parts of medical devices and laboratory supplies cannot be imported or are significantly delayed to enter the country if some of their parts or substances are listed as prohibited goods.

According to the US trade law, every supplier or seller of a product (drug, chemical, machinery, be it a car or a simple computer) which includes 10% or more of components or products made in the US must procure a permit and an approval from the US government, before they can export it to any other country. Consequently it is not only drugs or devices that are produced in the US that cannot reach DPRK. Even a product which is almost entirely made in a third country but it has a component or a spare part made by a US based company, it cannot be imported to North Korea without the permit of the US authorities. Those restrictions apply to everything, from the import of much needed technology to modernize public services, to spare parts of agricultural machinery, fertilizers and pesticides.

But sanctions do not only affect products and medicines. The donation of soccer balls is considered a breach of the international sanctions because the 1874 resolution of the UNSC includes all sports goods in its list of luxury items. Accordingly, in the autumn of 2013 the cargo of an American Charity was confiscated; it contained 1000 soccer balls to be donated to two North Korean orphanages. On June 2012, the Security Council of the UN issued a strict statement accusing DPRK of attempting to import cars, alcohol and used pianos for its schools. The fact that such a strict statement included the accusation of importing used pianos for educational purposes is telling of the sanction rational and the way this is interpreted by the Security Council of the United Nations.

The years of 2013 and 2014 were probably the worst for aid organizations working in DPRK. The sanctions against the Bank of Foreign Commerce of North Korea had frozen all financial transactions and the aid groups were unable to pay salaries to their staff, rent and utilities bills. Even the World Food Program (WFP) had to suspend production in five out of its seven factories producing fortified biscuits for malnourished children. More than half a million children were dependent on the WFP ratio for their daily nutritional needs. Aid agencies in DPRK needed special permits in order to import cars, or even computers and the administrative delays forced many organizations to halt their programs. European Banks refused to transfer any money to the north Korean Bank of Foreign Commerce even if the European Union had issued no specific ruling against such transfers. As a result European aid organizations in the country exhausted their resources without being able to replenish them,.

But even with the sanctions, the country’s elite has never really suffered. Chanel goods, Italian wines, foreign cigarettes, Swiss watches were still largely available in Pyongyang and the major cities and the nuclear program continued to develop.

After more than twenty years of failed sanctions, questions remain unanswered.

Is there any justification for the international sanctions besides their political significance? How long will the international community continue to punish ordinary Koreans for the actions of a government that they have no control on?

More articles by:

Fragkiska Megaloudi is a Greek journalist specializing in human rights reporting. Her latest book on North Korea will be published this fall.

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