China demands US immediately withdraw North Korea sanctions

This July 28 photo distributed by the North Korean government shows what was said to be the launch of a Hwasong-14 intercontinental ballistic missile. Photo / AP

By Simon Denyer of the Washington Post

China has demanded that the United States immediately withdraw new sanctions on companies and individuals trading with North Korea, saying that such punitive measures will damage Sino-US ties.

The Treasury Department imposed sanctions Tuesday on 10 companies and six people from China and Russia that it said had conducted business with North Korea in ways that advanced the country's missile and nuclear weapons programme.

But China's Foreign Ministry said its government had fully implemented UN Security Council resolutions on North Korea and would punish anyone caught violating the Security Council sanctions under Chinese law.

It added that it opposed sanctions outside the framework of the Security Council.

"China especially opposes any country conducting 'long-arm jurisdiction' over Chinese entities and individuals," spokeswoman Hua Chunying said at a routine news conference. "Measures taken by the United States are not helpful in solving the problem and unhelpful to mutual trust and cooperation. We ask the United States to stop the relevant wrong practices immediately."

A man in Seoul watches a television screen showing US President Donald Trump, left, and North Korean leader Kim Jong Un. Photo / AP

Despite China's professed opposition to unilateral sanctions, however, it has not hesitated to punish countries through trade if they refuse to do Beijing's bidding.

China is engaged in a major blockade of South Korean companies because it opposes the deployment of a US missile defence system, known as Terminal High Altitude Area Defense (THAAD), in South Korea.

Among the sanctioned Chinese companies is Dandong Zhicheng Metallic Material, also known as Dandong Chengtai, one of the largest importers of North Korean coal, while its main shareholder also was individually targeted.

In a related complaint the Justice Department filed Tuesday, the US government is seeking US$4 million from the company, accusing it of importing North Korean coal and sending an array of products - cellphones, luxury items, rubber and sugar - to North Korea.

In August, the Security Council agreed to a total ban on coal imports from North Korea; in the past, a limited trade had been allowed, provided the coal was not purchased from a sanctioned North Korean company and was proven to be for "livelihood purposes".

In practice, though, experts say that loophole was exploited to facilitate a trade that generated US$1 billion a year for North Korea.

In a June report by the Washington-based research group C4ADS, Dandong Zhicheng was cited among those Chinese companies that are pivotal to North Korea's ability to circumvent international sanctions and buy illicit goods. The report said targeting those companies could cause North Korea's entire overseas network to collapse.

Dandong Zhicheng alone accounted for 9.2 per cent of North Korea's total exports to China last year, according to documentation that C4ADS reviewed. Almost all - 97 per cent - of this was North Korean coal, totaling about US$250 million annually.

The company's website says it has several interests, including metals, chemicals, rubber, furniture, computing equipment, office supplies, clothing and toys. It says it does a "small amount of business" in North Korean border trade.

Chi Yupeng, the company's main shareholder, won an award from the Dandong city government as a leading entrepreneur in 2005, another award for his "remarkable contribution to enterprise" in 2008 and a third for "starting a foreign trade enterprise" in 2009.

Two other Chinese companies, Dandong Tianfu Trade and Jinhou International Holdings, were sanctioned for their part in the coal trade. Together, the three companies imported nearly US$500 million worth of North Korean coal between 2013 and 2016, the Treasury Department said.

Dandong Rich Earth Trading was sanctioned for buying vanadium ore from a company connected to North Korea's atomic energy agency, while Mingzheng International Trading was accused of facilitating dollar transactions on behalf of North Korea's proliferation network. The companies either declined to comment, hung up or did not pick up the phone when contacted by The Washington Post. The Dandong city government declined to comment.

The Global Times, a nationalist tabloid, argued that the United States could face retaliation if it continued to impose sanctions considered a "serious violation of international law" and "certainly unacceptable" to China.

"As far as we are concerned, Washington wants to use such unilateral sanctions to smear China and Russia's international image on issues regarding sanctioning North Korea, painting China and Russia as the destroyers of UN sanctions," it wrote.

Visitors watch the North side from the unification observatory in Paju, South Korea. Photo / AP

Chen Weihua, deputy editor of the US edition of China Daily, argued that the US decision would undermine cooperation between Washington and Beijing.

"The US has long believed that sanctions are a silver bullet," he wrote in a column. "But its past track records have shown that the majority of sanctions not only failed but caused humanitarian disasters in other countries."

There is little doubt, he added, that such secondary sanctions will have little or no effect in persuading North Korea to change course.

Chen also wrote that the Obama administration's decision to help topple Libyan leader Moammar Gaddafi after he abandoned his nuclear weapons program - and his subsequent death at the hands of a mob in 2011 - had damaged the US government's credibility.

Beijing is not averse to using economic pressure to get its way: It significantly cut salmon imports from Norway for years after imprisoned democracy activist Liu Xiabo was awarded the Nobel Peace Prize, has encouraged consumer boycotts of Japan, and punished countries for hosting the Dalai Lama, the exiled Tibetan spiritual leader.

Nevertheless, Lu Chao, a Korean Peninsula expert at the Liaoning Academy of Social Sciences, said Washington's decision to impose unilateral sanctions on China was inappropriate, unacceptable and "very domineering".

"China is strictly implementing the UN resolution. Though we can't 100 per cent exclude the possibility of individuals having underground deals violating the Ministry of Commerce's regulations, the United States being so far away doesn't have a proper reason to take sanction measures unilaterally," he said. "They should inform the Chinese government and let the latter deal with it."

China accounts for about 90 per cent of North Korean trade but announced this month that it was suspending imports of iron ore, iron, lead, coal and seafood products from North Korea, to comply with UN sanctions.

China's imports from North Korea fell to US$880 million in the first six months of the year, down 13 per cent from a year earlier, official figures show. But Chinese exports rose 29 per cent, to US$1.67 billion, in the first six months of the year, increasing total trade between the two countries by 10 per cent.

China is reluctant to do anything that might destabilise North Korea, a long-standing ally. It says US hostility toward Pyongyang forced the regime to develop its nuclear programme, and it urges dialogue to reduce tensions.

Yang Xiyu, a North Korea expert at the China Institute of International Studies in Beijing, called the US move counterproductive and said Washington should have worked more closely with Beijing.

"I think this shows the frustration from the US toward Beijing, that China won't play as the US wanted," he said, arguing that it would do nothing to dissuade North Korea from pursuing nuclear weapons. "It's a superfluous measure that may only worsen the Sino-US relationship and destroy the foundation of trust for cooperation between the two countries."

Cheng Xiaohe, a North Korea expert at Renmin University of China in Beijing, said the US government did not have factual evidence that these companies were violating sanctions.

"The Chinese Government will not sit by and do nothing if the sanctions are implemented without strong evidence," he said.

This story was originally published at the Washington Post and is reproduced with permission.