nk for sep 12

Defiant NK Blasts “Evil” UNSC Sanctions, Vows To Accelerate Nuclear Program
Tyler Durden, Zero Hedge, Sep 13 2017

NK has responded to the toughest, if watered-down, UNSC sanctions ever imposed against it with its most strident rhetoric yet. In its first official response to the new resolution, NKs foreign ministry released a statement deriding the sanctions as an act of “heinous provocation,” saying the new economic restrictions only strengthened its desire to build nuclear weapons. From KCNA, Bloomberg and Financial Times:

This is a product of heinous provocation aimed at depriving the DPRK of its legitimate right to self-defense and completely suffocating its state and people through a full-scale economic blockade. The adoption of another illegal and evil ‘resolution on sanctions’ piloted by Pindostan served as an occasion for the DPRK to verify that the road it chose to go down was absolutely right. The DPRK will redouble the efforts to increase its strength to safeguard the country’s sovereignty and right to existence.

The statement of defiance came after Han Tae-song, the country’s ambassador to the UN, proclaimed that Pyongyang was “ready to use a form of ultimate means,” warning again Pindostan that it would face the “greatest pain it ever experienced in history” for leading the UN move. Han’s remarks echoed a similar threat issued by state media early Monday morning local time, while negotiations were presumably still underway. NK state media also lashed out against a recent decision to end SK’s 500kg limit on missile warheads, likened by the Rodong Sinmun newspaper to “a ridiculous act of a mudfish trying to become a dragon in the sky.” As reported on Monday, to secure the sanctions’ safe passage, Pindostan was forced to concede several of its initial demands, including a total oil embargo and the freezing of assets tied to Kim Jong Un and senior members of his government. Russia and China have called on Pindostan to resume talks with NK, repeating that a suspension of joint military drills between Pindostan and SK could kick-start diplomacy with Pyongyang. Two of the groups that monitor NK’s weapons program, Norsar and 38 North, on Tuesday upgraded their estimates of NK’s recent nuclear test’s explosive yield to 200-300 kt and 250 kt respectively.

China and Russia Warn Pindostan Not to Seek NK Regime Change
Ting Shi, David Tweed, Bloomberg ‘News’, Sep 12 2017

In supporting a watered-down version of NK sanctions, China and Russia had a stern warning for Pindostan: Don’t try to overthrow Kim Jong Un’s regime. The UNSCR passed on Monday included reducing imports of refined petroleum products, banning textile exports and strengthening inspections of cargo ships suspected of having illegal materials. Haley called them the “strongest measures ever imposed on NK,” even though they ended up dropping demands for an oil embargo and freeze on Kim’s assets. More worrisome for China and Russia was Haley’s remark that Pindostan would act alone if Kim’s regime didn’t stop testing missiles and bombs. The UN representatives of both countries on Monday reiterated what they called “the four nos“: No regime change, regime collapse, accelerated reunification, or military deployment north of the 38th parallel. Foreign Ministry spox said in a statement on Tuesday:

The Chinese side will never allow conflict or war on the peninsula.

The comments in the wake of the sanctions signaled that both China and Russia are only willing to go so far in pressuring Kim to abandon his attempts to secure the ability to strike Pindostan with a nuclear weapon. Both nations have called for dialogue, something Pres Trump has resisted. Wang Xinsheng, a history professor at Peking University, said:

China and Russia realize their combined effort works better than individual action. Both oppose NK to become a full-fledged nuclear state, and both think parallel action from Pindostan is needed to affect any change in the situation.

China and Russia, the biggest economic patrons of NK, both share the view that NK won’t give up its nuclear weapons without security guarantees, and they don’t see the point in fomenting a crisis on their borders that will benefit pindo strategic goals. At the same time, they don’t want Kim provoking Pindostan into any action that could destabilize the region. Pres Putin told reporters earlier this month at a summit in Xiamen, China:

Sanctions of any kind are useless and ineffective. They’ll eat grass, but they won’t abandon their program unless they feel secure.

Russia and China were singled out at a House Foreign Affairs Committee hearing Tuesday on financing for NK’s nuclear program. Rep Ed Royce said that Pindostan should target Chinese banks, including Agricultural Bank of China Ltd and China Merchants Bank Co, for aiding Kim’s regime. Asst Treasury Sec Marshall Billingslea said in prepared remarks to the committee:

NK bank representatives operate in Russia in flagrant disregard of the very resolutions adopted by Russia at the UNSC.

Pindo boxtops said the new UNSC sanctions combined with earlier measures would cut NK exports by 90%. The textile export ban alone would cost NK about $726m/yr, they said. Still, analysts saw the efforts to dilute the original proposal as successful. Stuart Culverhouse of specialist frontier markets investment bank Exotix Capital said:

The stiffer sanctions won’t change anything in the near-term. The new embargoes are incrementally tougher, but diplomacy meant they had to be compromised to an extent that they are very unlikely to change minds in Pyongyang.

NK has said it will never give up its nuclear weapons unless Pindostan drops its “hostile” policies toward the regime. Kim has claimed the ability to fit a hydrogen bomb onto an ICBM, but the Pentagon says he has yet to master reentry and guidance systems that would allow him to target a pindo city. Many analysts think Kim will wait until he’s mastered his weapons before negotiating, as it would strengthen his hand. Lee Ho-ryung, chief of NK studies at the Korea Institute for Defense Analyses, said:

If SK, Japan or both could have Pindostan deploy tactical nuclear weapons, that’ll put pressure on Kim to come to dialogue. When competition to have better weapons escalates, it’s always the poorer one who gives up.

George Lopez, a former member of the UNSC panel of experts for sanctions on NK, said:

Pindostan should seek unity of message with China and Russia in addition to a unanimous vote on sanctions. Pindostan should look to engage diplomatically to find a level of security that NK and its neighbors will be happy with. We did it against powers that have thousands of nuclear weapons. We certainly should be able to do this against a power that has less than two dozen.

Trump says UNSC NK sanctions are ‘not a big deal’
Nicole Gaouette, Zachary Cohen, CNN, Sep 13 2017

FASCHINGSTEIN – Pres Trump and congress critturs signaled on Tuesday that more steps need to be taken to rein in NK’s rapidly developing nuclear program despite the unanimous UNSCR authorizing additional sanctions. Trump noted the 15-0 UNSCR during a meeting with Malaysian PM Razak, but said they are “just another very small step, not a big deal” and suggested that he doesn’t know “if it has any impact.” Trump added that the sanctions pale in comparison to “what ultimately will have to happen” to NK. State Dept spox said Tuesday that the UNSCR represented “the strongest set of sanctions” so far, adding that “that’s significant.” Trump, she suggested, was conveying that tougher measures can still be taken because the international community is not “at the ceiling” of what can be done. The NK Foreign Ministry said, according to a report in KCNA:

We condemn in the strongest terms this heinous provocation aimed at depriving the DPRK of its legitimate right for self-defense. The ‘resolution’ was fabricated by Pindostan employing all sorts of despicable and vicious means and methods.

That statement followed a similar message from Monday, in which KCNA reported that the Ministry of Foreign Affairs said Pyongyang would respond to any sanctions by inflicting upon Pindostan “the greatest pain and suffering it had ever gone through in its entire history.” Trump’s remarks came after House critturs from both parties expressed frustration that Pindostan isn’t exerting greater pressure on China to stop NK’s march toward developing nuclear weapons capable of striking the CONUS. Rep Brad Sherman, a California Demagog, said:

We don’t threaten China, even a little bit, with country sanctions because that would be difficult politically.

China is seen as key to solving the standoff with Pyongyang. Committee chairman Ed Royce said he agreed with Sherman and urged more sanctions against Chinese banks that do business with NK. He said:

It’s been a long, long time of waiting for China to comply with the sanctions we pass and frankly, the sanctions the UNSC passes.

Meanwhile, Demagogs charged that Trump is exacerbating the increasingly tense standoff with NK with his belligerent comments and tweets. Demagog Rep Gerald Connolly said:

He talked about the response of Pindostan of fire and fury. Frankly, the policy looks more like fecklessness and failure.

The critturs aired their frustration as pindo boxtops outlined ways in which China and Russia are failing to do everything they can to rein in NK, even as the nuclear threat from there grows more intense. China’s leaders are looking the other way as DPRK uses its banking system and front companies to do business, while Russian companies continue to provide support to Pyongyang, said Marshall Billingslea, the Treasury Dept’s Asst Sec for Financial Terrorism, who naturally enough told the committee:

It is essential that the international community work together to increase economic pressure on NK. DPRK bank representatives operate in Russia in flagrant disregard of the very UNSCRs adopted by Russia. And while China accounts for 90% of NK exports, I cannot assure the committee today that we have seen sufficient evidence of China’s willingness to truly shut down NK revenue flows, expunge the NK illicit actors from its banking system, and expel the NK middlemen and brokers who are establishing webs of front companies. We are determined to induce the Chinese to help solve this problem. Pindostan is capable of tracking NK’s trade on banned goods, and we will act even if China does not. Pindostan has recently caught NK trying to disguise the origin of ships it’s using. Cracking down on NK shipping will be crucial to enforcing sanctions. These vessels have been spotted entering NK ports with their transponders turned off, in violation of international law. They have then been seen loading cargo such as coal, sailing to a Russian port where the coal is offloaded and then put on a vessel bound for China.

Both Billingslea and Susan Thornton, the acting Asst Sec in the State Dept’s Bureau of East Asian and Pacific Affairs, said that the administration is pushing China to act. Thornton said:

We’re certainly looking at every option to put pressure on China. Greater international cooperation in enforcing existing sanctions and applying pressure will be crucial to our campaign to isolate NK diplomatically and economically to force them to the negotiating table. It’s already yielding some successes. The Philippines announced they will cut all trade, and other countries including Mexico and Egypt, are taking steps to scale back links to Pyongyang. Our Aug 5 UNSCR embargoed all imports of NK coal, iron, lead and seafood and required nations to cap employment of DPRK workers. Our Sep 11 UNSCR targeted NK’s textile exports, further cut its ability to send workers overseas, curbed refined petroleum products going to Pyongyang and banned all joint ventures with it. We remain ready to counter any threat with force, even as we push for a diplomatic solution. Our military, together with our allies, remain prepared to respond immediately and resolutely to any attack or threat of attack. We’ve been clear we’re not seeking regime change or collapse in NK, or reunification. There should be no doubt about our resolve to defend our allies and our homeland. We are ready to respond if necessary. Meanwhile, we remain open to diplomacy, but the DPRK must show it is ready for serious engagement. We have not seen any such indication.

When asked about cutting off trade with China altogteher, she offered the caution:

That would be a huge step, and there are lots of ramifications on that.

Rex Tillerson met with China’s most senior diplomat, State Councilor Yang Jiechi Tuesday, where the subject undoubtedly came up. Neither official took questions from reporters during a photo op at the State Dept. Meanwhile, Ambassador Joseph Yun, who serves as State Dept rep for NK, is in Moscow for meetings on NK. Pindo boxtops have also hinted that they are ready to do more. Treasury Sec Steven Mnuchin, speaking Tuesday at CNBC’s Institutional Investor Conference, said:

We sent a message that anybody that wanted to trade with NK, we consider them not trading with us. We can put economic sanctions to stop people trading. I’m very pleased with the resolution that passed. This is some of the strongest items. We now have more tools in our toolbox and we will continue to use them to put additional sanctions on North Korea until they stop this behavior.

Indeed, the pace of NK’s missile testing has increased dramatically. This year alone, it has conducted 16 missile tests, including two ICBMs which could reach the CONUS. On Aug 28, it launched a missile directly over Japan, transiting Japanese airspace and “and clearly was meant as a blatant threat to the people of Japan, and to us and our armed forces stationed there,” said Billingslea. And on Sep 3, the DPRK conducted its sixth test of a nuclear device, the most powerful it’s ever detonated, marking “an unacceptable provocation,” Billingslea said.

Pindostan Threatens To Cut Off China From SWIFT If It Violates NK Sanctions
Tyler Durden, Zero Hedge, Sep 13 2017

In an unexpectedly strong diplomatic escalation, one day after China agreed to vote alongside Pindostan (and Russia) during Monday’s UNSCR passing the watered down NK sanctions, Pindostan warned that if China were to violate or fail to comply with the newly imposed sanctions against Kim’s regime, it could cut off Beijing’s access to both the pindo financial system as well as the “international dollar system.” At CNBC’s conference on Tuesday, Steven Mnuchin said:

We worked very closely with the UN. I’m very pleased with the resolution that was just passed. This is some of the strongest items. We now have more tools in our toolbox, and we will continue to use them and put additional sanctions on NK until they stop this behavior.

In response, Andrew Ross Sorkin countered:

We haven’t been able to move the needle on China, which seems to be the real mover on this, in terms of being able to apply the real pressure. What do you think the issue is? What is the problem?

Mnuchin’s answered:

I think we have absolutely moved the needle on China. I think what they agreed to yesterday was historic. I’d also say I put sanctions on a major Chinese bank. That’s the first time that’s ever been done. And if China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the pindo and international dollar system. And that’s quite meaningful. In NK, economic warfare works. I made it clear that the President was strongly considering and we sent a message that anybody that wanted to trade with NK, we would consider them not trading with us. We can put on economic sanctions to stop people trading.

In other words, to force compliance with the NK sanctions, Mnuchin threatened Beijing with not only trade war, but also a lockout from the dollar system, ie SWIFT, something that Pindostan did back in 2014 and 2015 when it blocked off several Russian banks as relations between Pindostan and Russia imploded. Of course, whether Pindostan would be willing to go so far as to use the nuclear option, and pull the dollar plug on its biggest trade partner, in the process immediately unleashing an economic depression domestically and globally is a different matter. So far, Faschingstein has been reluctant to impose economic sanctions on China over concerns of possible retaliatory measures from Beijing and the potentially catastrophic consequences for the global economy. Washington runs a $350b/yr trade deficit with Beijing, while the PBOC also holds over $1t in pindo debt. Ironically, the biggest hurdle to the implementation of the just passed sanctions may be the president himself. Trump told reporters at the start of a meeting with Malaysian PM Najib Razak:

We think it’s just another very small step, not a big deal. I don’t know if it has any impact, but certainly it was nice to get a 15 to nothing vote, but those sanctions are nothing compared to what ultimately will have to happen.

Separately, at a hearing of the House Foreign Affairs Committee on Tuesday, chair Ed Royce said that Pindostan should target major Chinese banks, including Agricultural Bank of China Ltd and China Merchants Bank Co, for aiding Kim’s regime. Russia also came in for criticism. Asst Treasury Sec Marshall Billingslea said in prepared remarks to the committee:

NK bank representatives operate in Russia in flagrant disregard of the very resolutions adopted by Russia at the UNSC.

While China and Russia supported the latest UNSCRs, boxtops made clear they were troubled by Haley’s comments in the SC that Pindostan would act alone if Kim’s regime didn’t stop testing missiles and bombs. They emphasized the world body’s resolution also emphasized the importance of resolving the crisis through negotiations. Foreign Ministry spox said in a statement on Tuesday:

The Chinese side will never allow conflict or war on the peninsula.

In a soundbite late on Tuesday, Japan’s Nikkei quoted PM Abe who said:

In the end, problems should be solved through diplomatic dialogue. Japan will work together with the international community to apply maximum pressure, so that NK commits to perfect, verifiable and irreversible denuclearization. For Japan to engage with the regime, it would have to be on the condition that NK commits to that.

Which, of course, won’t happen. Pres Putin told reporters earlier this month at a summit in Xiamen, China:

Sanctions of any kind are useless and ineffective. They’ll eat grass, but they won’t abandon their program unless they feel secure.

Predictably, NK’s Foreign Ministry slammed the sanctions saying it “condemns in the strongest terms and categorically rejects” the UNSC adding more sanctions, KCNA reported on Wednesday morning. Instead, NK warned it “will redouble efforts to increase its strength” as it seeks to establish “practical equilibrium” with Pindostan. And so not only is the entire geopolitical circle-jerk back at square one, but the ball is again back in NK’s court, while the decision on whether or not to launch another ICBM really depends on whether China will give it the quiet go ahead, a China which responds notoriously poorly to being threatened in the global financial arena, like for example when Pindostan threatens to kick it out of the global dollar system.

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