North Koreas nuclear test and UN sanctions have brought
relations between the U.S. and North Korea to their lowest point
since President Bush took office. Yet it was only little more than
a year ago that for one brief moment hopes were kindled for a
diplomatic settlement of the nuclear dispute. At the six-party
talks on September 19, 2005, a statement of principles on nuclear
disarmament was signed between the U.S. and the Democratic Peoples
Republic of Korea (DPRK the formal name for North Korea). The
Bush Administration, however, viewed its signature on the agreement
as only a tactical delay. During negotiations it had firmly
rejected the statement, and was brought around only when the
Chinese delegation warned that it would announce that the U.S. was
to blame were the six-party talks to collapse.
The ink was barely dry on the document when the U.S. immediately
violated one of its main points. Although the U.S. was required
under the agreement to begin normalizing relations with North
Korea, on literally the very next day it announced the imposition
of sanctions on North Korean accounts held in the Macao-based Banco
Delta Asia, ostensibly because they were being used to circulate
counterfeit currency.
Whether there was any substance to the accusation or not has yet to
be shown, but there are at least some grounds for skepticism.
German counterfeit expert Klaus Bender believes that since U.S.
currency is printed on specially made paper in Massachusetts, using
ink based on a secret chemical formula, it is unimaginable that
anyone other than Americans could come by these materials. The
printing machines that North Korea obtained three decades ago,
Bender says, are outdated and not able to produce the USD
supernote, a high tech product. He strongly implied that the CIA
could be the source of the counterfeit currency as it runs a
secret printing facility equipped with the sophisticated technology
which is required for the production of the notes. That the CIA
has the capacity to print money does not prove that it has done so.
It would, however, have a motive, and the source has not been
traced. Wherever the counterfeit supernotes came from, the Bush
Administration was ardently using the issue as a pretext to take
action against North Korea. Despite that, Bender reports, the
opinion of experts is that the U.S. allegation against North Korea
is not tenable. (1)
Banco Delta Asia was quick to deny the charge, saying that its
business relations with North Korea were entirely legitimate and
commercial. Over a year later, the U.S. has yet to complete its
investigation. As long as the investigation remains unresolved, the
U.S. can continue to freeze the DPRKs funds. Russian Ambassador to
South Korea Gleb Ivashentsov called for the U.S. to present
evidence to back its accusation. Yet all the Russians received was
rumor-level talk. U.S. Treasury officials met with a North Korean
delegation in New York in March 2006, but provided nothing to back
the charge. DPRK delegation head Ri Gun remarked afterwards, There
were neither comments nor discussion about evidence. At that
meeting, he proposed creating a joint U.S.-DPRK consultative body
to exchange information on financial crimes and prepare
countermeasures. The North Koreans said they would respond to
evidence of counterfeiting by arresting those who were involved and
seizing their equipment. Both sides can have a dialogue at the
consultative body through which they can build trust. It would have
a very positive impact on addressing the nuclear issue on the
Korean peninsula, Ri said. The delegation also suggested that a
North Korean settlement account be opened at a U.S. financial
institution and placed under U.S. supervision, so as to allay
suspicions. (2)
Not surprisingly, the North Korean offers were rejected. By raising
the issue of alleged counterfeiting, the Bush Administration sought
to use this as a means to justify economic warfare against the
DPRK. It was not an agreement with North Korea that the Bush
Administration wanted, but regime change, and further action was
soon to come. The U.S. went on to impose sanctions on several North
Korean import-export firms, on the unsubstantiated charge that they
were involved in the arms trade. Then more sanctions were
announced, this time against several Indian and Russian firms doing
business with the DPRK, along with yet more North Korean companies.
(3)
The measures taken against Banco Delta Asia deprived North Korea of
a major access point to foreign exchange, and served also as a
mechanism for magnifying the effect of sanctions. By blacklisting
Banco Delta Asia, the U.S. caused other financial institutions to
curtail dealings with the bank, until it was forced to sever
relations with North Korea. The campaign soon took on global
significance. The U.S. Treasury Department sent warning letters to
banks around the world, resulting in a worldwide wave of banks
shutting down North Korean accounts. Fearing U.S. retaliation,
banks felt it prudent to close North Korean accounts rather than
risk being blacklisted and driven out of business. U.S. Treasury
Under Secretary Stuart Levey observed that sanctions and U.S.
threats had put huge pressure on the DPRK, leading to a
snowballing
avalanche effect. U.S. actions were meant to
undermine any prospect of a peaceful settlement. From now on, a
senior Bush Administration official revealed, the strategy would
be: Squeeze them, but keep the negotiations going. But talks, the
official continued, would serve as nothing more than a means for
accepting North Koreas capitulation. A second U.S. official
described the goal of talks as a surrender mechanism. Indeed,
even before the signing of the September 19 agreement, the U.S. had
already decided to move toward more confrontational measures,
claims a former Bush Administration official. (4)
As general manager of Daedong Credit Bank, a majority foreign-owned
joint venture bank operating in Pyongyang and primarily serving
importers, Nigel Cowie was in a position to witness the effect of
the Treasury Departments letters. We have heard from foreign
customers conducting legitimate business here, who have been told
by their bankers overseas to stop receiving remittances from the
DPRK, otherwise their accounts will be closed. To illustrate the
lengths to which U.S. officials were prepared to go, Cowie
described an operation that involved his own firm, from which, he
said, you can draw your own conclusions. An account was opened
with a Mongolian bank. Arrangements were made for legal cash
transactions. But when the Daedong Credit Banks couriers arrived
in Mongolia, they were detained by Mongolian intelligence
officials, and their money confiscated. Accusations were made that
the couriers were transporting counterfeit currency from North
Korea. A leak to the news media from an unidentified source led to
reports charging that North Korean diplomats had been arrested
for smuggling counterfeit currency. After two weeks, the Mongolian
intelligence officials in a meeting with us finally conceded that
all the notes were genuine; the cash was released. In the final
meeting, Mongolian intelligence officials appeared rather
embarrassed that they had been given incorrect information. It
requires little imagination to guess the source of that incorrect
information. (5)