South Korea implicated in large-scale violations of U.N. coal, shipping sanctions against North Korea

This week, a scandal is burgeoning in South Korea that a wholly owned subsidiary of the nation’s largest power company purchased large quantities of North Korean coal in violation of the coal export ban of UNSCR 2371. The other day, I tweeted about a Korean-language report in the right-leaning site Pennmike, indicating that a Belize-flagged ship carrying North Korean coal was spotted in the port of Pyeongtaek. We’ve since learned that this violation was part of a broader, long-standing, illicit trade.

An opposition lawmaker claimed Sunday that three more foreign vessels suspected of carrying North Korean coal, a banned item under international sanctions, entered South Korean ports 52 times since August last year.

Yoo Ki-june of the main opposition Liberty Korea Party made the claim, arguing that the Seoul government did not take due steps such as the interdiction of the suspicious vessels in line with U.N. Security Council (UNSC) mandates. [Yonhap]

Because neither government officials nor journalists for state-run media in South Korea bother to read U.N. sanctions resolutions, they’re missing a key point about Seoul’s legal obligation here: it isn’t just authorized to seize ships that smuggle for Pyongyang; it’s required to. Paragraph 9 of UNSCR 2397 says that “Member States shall seize, inspect, and freeze (impound) any vessel in their ports … if the Member State has reasonable grounds to believe that the vessel was involved in” sanctions violations. Well, maybe one lawmaker read them:

Yoo thinks otherwise. “The vessels are subject to detainment under UN Security Council resolutions, yet [the administration] allowed them to pass by domestic ports dozens of times,” he said. “Authorities are saying they’re digging into the case, when in fact, they’ve had their hands completely off the [situation] and are keeping their mouths shut about it.” [Joongang Ilbo]

Naturally, Seoul claims it “has been faithfully implementing” sanctions, but then, so does Beijing. It would take a very detailed and thorough investigation by the U.N. Panel of Experts to convince me that that this is true, especially given that as of yesterday, more ships continued to enter South Korean ports with North Korean coal.

The Ministry of Oceans and Fisheries has data that proves three more foreign vessels involved in the transshipment of North Korean coal entered South Korean ports, an opposition lawmaker said on Sunday.

[….]

Seoul’s Foreign Affairs Ministry said it was aware of the North Korean coal shipment prior to the release of the UN report, adding it opened an investigation into the transfers in cooperation with customs authorities. But the ministry denied it had violated sanctions by not impounding the vessels, citing a lack of “reasonable grounds” to detain them after they entered South Korean territory. [Joongang Ilbo]

Late word is that the South Korean government is denying one report that a ship carrying North Korean coal is docked in Pohang, but is investigating other reports of North Korean coal shipments. Pennmike has the most detailed reporting of the ships’ names. More here and here, in Korean.

According to the Chosun Ilbo, the purchaser of the coal was Namdong Power, a subsidiary of the Korea Electric Power Corporation (KEPCO), which generates 93 percent of South Korea’s electricity. KEPCO is currently under pressure from the Moon administration, which has promised to phase out South Korea’s nuclear power plants.

It beggars belief that South Korea’s largest power company would import such large quantities of coal from ports in Siberia, including the port of Nakhodka — a well-known point of transshipment and sanctions evasion for Pyongyang — without the South Korean government so much as suspecting the coal’s true origin. The Chosun Ilbo points to several clues that should have put the purchasers on notice — the coal was anthracite, which North Korea has in much larger quantities than its neighbors, and which has an exceptionally high carbon content and low moisture content. The coal also sold for a suspiciously low market price, at 39 percent cheaper than its Russian equivalent. Finally, it was packaged which according to Pennmike, is no longer the industry standard practice among exporters with functioning bulk cargo terminals. 

All of which would be strong circumstantial evidence, except that according to the Chosun Ilbo, the purchasers admitted to knowing that the coal was of North Korean origin, but argued that the purchases were still allowed because they came from North Korea indirectly, via Russia. It’s a position too ridiculous to waste time refuting, and as an admission of the willfulness element of the IEEPA, it’s a fine example of why lawyers tell their clients to keep their mouths shut. On the other hand, this report from the same source claims that the purchasers were shown Russian certificates of origin, which would bring us back to the circumstantial evidence. Either way, with so many obvious clues that the coal was of North Korean origin, what are the odds that no one in the South Korean government knew? Not very high, in my estimation.

There are at least four parties in South Korea that potentially bear responsibility for this violation, depending on where the money trail leads. If the money went to persons or entities known to be associated with sanctioned North Korean banks or money launderers, that will be circumstantial evidence of willfulness and intent. If the purchasers of the coal routed their payments to such an entity, the Treasury Department could do a lot of terrible things to them, but rather than cause blackouts in South Korea during a heat wave, I’d argue for the Justice Department filing a civil forfeiture case against the funds “involved in” those transactions.

Then, there are the banks that cleared the transactions. According to the Chosun, two of them are now under investigation by U.S. authorities. If the banks failed to perform due diligence to prevent North Korea from accessing our financial system, they should, at a bare minimum, face civil penalties under 31 CFR 1010.659. If their violations were willful, more severe penalties ought to apply under 31 CFR parts 510 or 596.

The South Korean ports may also face consequences. Under UNSCR 2270, all ports are required to inspect cargo controlled by North Korea. If South Korean ports failed in this obligation, cargo from those ports arriving in U.S. ports may face increased customs inspections under the amended section 205 of the NKSPEA. So, for that matter, should the Siberian ports that most commonly transship North Korean coal.

Other, more lethal consequences could apply under the NKSPEA if the violations were knowing, but the idea of these measures is not to destroy the entities in question, but to cause enough damage to their stock prices that their directors and shareholders get serious about sanctions compliance.

Finally, the South Korean government should also pay a diplomatic and political price if it authorized or tolerated this commerce. What we have here, after all, is a self-described U.S. ally that’s just entering negotiations over the cost of U.S. troops that defend it from North Korea, even as it subsidizes a direct North Korean threat to the United States, in violation of U.N. sanctions that were largely approved for Seoul’s own protection. If not even Seoul complies with those sanctions, any suggestion that other nations comply with them becomes a punchline. The obvious suspicion is that in exchange for providing no meaningful concessions in the way of disarmament, humanitarian reforms, or the opening of its society, Pyongyang secured Seoul’s wink-and-nudge complicity in violating a U.N. ban on the sale of Pyongyang’s most valuable export.

As it becomes increasingly clear that Moon Jae-in’s leftist government has chosen sides between its guarantor and its tormentor, it is appropriate to consider whether American taxpayers should continue to subsidize the defense of a wealthy OECD nation that shows so little regard for our own security. This is not how allies behave. Neither permission nor forgiveness is warranted until an investigation establishes conclusively whether the various South Korean parties involved — including its government — violated the sanctions negligently or willfully. And the moment Pyongyang’s smuggling ships weigh anchor and leave South Korea’s ports freely, we’ll have our answer.