Sizing Up Sanctions in the Second Trump–Kim Jong-un Summit

US President Donald Trump is meeting North Korean leader Kim Jong-un this week in the Vietnamese capital of Hanoi for their second summit. According to the White House, the goal of the meeting is to make ‘North Korea follow through on its commitment to complete denuclearization’. In return, the US has emphasised the potential economic gains available to Pyongyang, should the regime agree to give up its nuclear weapons, including investment, infrastructure and enhanced food security. President Trump has previously remarked on the potential to turn North Korea’s beaches into hotel resorts rather than missile testing sites, and South Korea has separately agreed to joint infrastructure projects with Pyongyang, and even the prospect of a joint bid to co-host the 2032 Summer Olympic Games.

Official US policy is that the comprehensive package of sanctions agreed by the UN Security Council is not up for discussion until North Korea has fully denuclearised. That much was confirmed by the US ambassador to South Korea, Harry Harris. And if there were any doubt on the matter, President Trump dispelled it: ‘we’re not removing the sanctions’, he told a conference of US state governors, gathered at the White House last Sunday.

Be that as it may and aside from negotiations to reduce military tensions on the Korean peninsula, sanctions are sure to remain the elephant in the negotiation room in Hanoi and the diplomatic process which may follow this week’s summit.

The Objective of Sanctions

One of the uses of economic and financial sanctions is as an alternative to the use of military force; they are designed to pressure target states to change their behaviour. In the case of North Korea, the imposition of sanctions was first agreed at the UN Security Council in October 2006 (Resolution 1718) in response to North Korea’s first nuclear test earlier that month. Those sanctions were limited in nature and included an arms embargo, asset freezes against individuals directly involved in North Korea’s nuclear programme, and bans on the import and export of sensitive technology and materials useable in a nuclear and missile programme.

Since then, and as North Korea’s nuclear ambitions have continued unhindered, sanctions have slowly but steadily been tightened. Today, sanctions have shut down most North Korean exports – including seafood, agricultural products, coal, textiles and North Korean labourers earning cash for the regime abroad – all of which previously generated substantial revenue for the regime. In August 2017 the US estimated that North Korea has previously earned ‘approximately $3 billion per year from export revenues’ including $400 million annually from coal exports alone. In addition, extensive targeted financial sanctions and the inability of North Korean financial institutions and companies to operate abroad means the country is facing a near-total economic embargo. The hope is that by reducing the resources and cash available to the North Korean state, Kim Jong-un will realise he is better off giving up nuclear weapons in return for economic prosperity.

In theory, sanctions are therefore tied to denuclearisation. This is a similar arrangement to the one which operated with the Iran nuclear agreement, which lifted sanctions once Tehran agreed to verifiable steps to limit its nuclear capability. The difference, of course, is that North Korea has nuclear weapons while Iran did not. Many, including this author, now believe that the complete denuclearisation of North Korea is no longer an achievable goal in the current negotiations, barring wider changes in US military presence in the Asia-Pacific region which warrant a separate discussion.

Sanctions on Paper, but not in Practice

However, in many ways Kim Jong-un has already achieved some level of sanctions relief by engaging in a year of summits with presidents Trump and Moon Jae-in.

Trump’s first meeting with Kim Jong-un – and his subsequent declaration on Twitter that ‘[t]here is no longer a Nuclear Threat from North Korea’ – has made North Korea appear to be working towards denuclearisation without necessarily doing so in practice. By engaging in diplomatic efforts, North Korea is diverting attention away from the implementation of sanctions. After the first Trump–Kim summit, reports have emerged that China – a key trading partner and economic lifeline for North Korea – is ‘quietly relaxing its sanctions against North Korea’.

North Korea’s sanctions-evasion measures depend on the ability to hide in plain sight. UN reports have consistently detailed how North Korea’s use of front companies and innovative sanctions-evasion methods such as ship-to-ship at-sea transfers of sanctioned commodities ‘render the latest U.N. sanctions ineffective’. The more lenient sanctions implementation becomes, the easier it is for North Korea to expand these illicit activities.

The problem for President Trump is that North Korea may achieve enough sanctions relief by way of lax implementation to survive, while never giving up any key aspects of its nuclear programme in return. If the objective of sanctions is to commit North Korea to limit its nuclear aspirations, the current trajectory of negotiations is not conducive to that.

Humanitarian Exemptions, not Sanctions Relief

There is, however, an option for President Trump to ensure both strict implementation of current sanctions obligations, alongside the immediate pursuit of limited and targeted economic engagements. The UN sanctions regime includes an ‘exemption mechanism’ to ‘facilitate the delivery of humanitarian assistance’ to North Korea. Licences for humanitarian aid are obtained through the 1718 Sanctions Committee, named after the UN Security Council resolution with that number, and tasked with overseeing UN sanctions against North Korea.

In recent years as sanctions pressure on North Korea has increased, funding for humanitarian activities in North Korea has dropped (from nearly $118 million in 2012 to $17 million in the first half of 2018). At the same time, the process for obtaining licences from the 1718 Sanctions Committee has faced increasing delays, allegedly stretching beyond 12 months in some cases. As a result, many humanitarian aid organisations have withdrawn from the country, including Save the Children which exited the country in 2017 blaming operational obstacles and difficulties with financial and supplier channels.

Should any talk of sanctions relief be discussed in Hanoi, Trump’s offer should not be to build luxury hotels on North Korea’s beaches, but instead commit new funding to humanitarian causes and streamlining the humanitarian approval process (and associated financial and supplier channels) further. Nascent steps have already been taken in this direction, including the US decision in January to revisit restrictions placed on American aid to North Korea. That could be an incentive to the North Korean regime, without signifying the lifting of sanctions.

At the same time, work on strengthening implementation of existing sanctions mechanisms must be continued, including pressuring states which do not follow UN sanctions requirements into compliance. As part of this, the US should ensure that countries and the private sector at large understand humanitarian exemptions provisions accurately and are encouraged to use these provisions.

A combination of promoting rigorous enforcement of sanctions meant to constrain North Korea’s nuclear and missile programme on one hand, and encouragement for the delivery of humanitarian aid projects on the other can work for two reasons. First, it keeps ordinary North Korean citizens at the heart of any discussion of sanctions in the current negotiation processes. Second, it can help to ensure that Kim Jong-un is not using the current diplomatic process to distract from sanctions implementation, but rather working towards some form of negotiated agreement to either cap, limit or even roll back the country’s nuclear programme.

In short, President Trump must strike a careful balance to ensure that negotiations do not foster lax implementation of sanctions (which could, in turn limit North Korean willingness to commit to tangible denuclearisation goals), while still ensuring that targeted sanctions waivers are granted if and when it benefits the North Korean people.  With strong personalities on both sides and decades of mistrust between the two parties this is no easy task.

Emil Dall is a Research Fellow in the Proliferation and Nuclear Policy Programme at RUSI. His research focuses on sanctions and nuclear proliferation.

The views expressed in this Commentary are the author's, and do not reflect the views of RUSI or any other institution.