U.S. demands China cut oil to North Korea after new launch

By Nick Wadhams on 11/30/2017

WASHINGTON D.C. (Bloomberg) -- The U.S. demanded that China cut off all oil exports to North Korea after the country’s latest intercontinental ballistic missile test, warning that Washington will force action if Beijing fails to do so.

President Donald Trump called China’s President Xi Jinping “and told him that we have come to the point that China must cut off the oil from North Korea,” U.S. Ambassador Nikki Haley said at an emergency session of the United Nations General Assembly on Wednesday. While saying “our hopes are that China will show leadership and follow through,” Haley issued a warning: “China can do this on its own, or we can take the oil situation into our own hands.”

Pyongyang launched an ICBM early Wednesday North Korea time -- its third this year. The Security Council meeting was injected with new urgency as experts concurred with North Korea’s boast that the test showed its missiles could now reach anywhere in the U.S.

Haley didn’t specify how the U.S. would stop oil exports to Kim Jong Un’s regime, saying only that the missile launch “brings the world closer to war, not farther from it.” While the U.S. doesn’t seek war with North Korea, Haley said, “If war comes, make no mistake: the North Korean regime will be utterly destroyed.”

Trump indicated on Thursday morning that Beijing’s effort to influence Kim had so far failed. "The Chinese Envoy, who just returned from North Korea, seems to have had no impact on Little Rocket Man," Trump tweeted, using a mocking name to refer to Kim. “Hard to believe his people, and the military, put up with living in such horrible conditions. Russia and China condemned the launch.”

On Wednesday, Trump said in a tweet that he’d told Xi “additional major sanctions will be imposed on North Korea today.” By the end of the day no new sanctions had been announced, although Haley’s warning may have conveyed the president’s intended message.

Envoys around the Security Council’s horseshoe-shaped table fell into familiar camps, with the U.S., the U.K. and Japan on one side, placing full blame for tensions on North Korea, while China and Russia spread blame more widely.

China and Russia oppose moves that will lead to regime change in North Korea. Beijing in particular wants to avoid a scenario that could potentially destabilize its economy and put U.S. troops directly on its border.

Vassily Nebenzia, Russia’s ambassador, questioned whether the U.S. really wanted a peaceful solution on the Korean peninsula, saying recently announced military drills had squandered hopes for talks during a lull in North Korean activity.

“The United States and allies seem to have tried the patience of Pyongyang with unplanned and undeclared military maneuvers,” Nebenzia said. Such moves raise questions “about the sincerity of Washington” when the U.S. says it wants a peaceful solution, he said.

China’s proposal

China’s Deputy Ambassador Wu Haitao again offered a proposal that the U.S. has repeatedly rejected: that North Korea freeze its nuclear activity in exchange for the U.S. and South Korea suspending military drills.

“The most important lesson is that when the parties adopted a tough stance and misjudged each other, the chances of peace would pass them by,” Wu said.

China remains North Korea’s top trading partner. It exported 53 tons of liquefied gas to North Korea in October, 72 tons of unspecified liquefied gas and other hydrocarbon gas, and 14 tons of jet kerosene, according to trade data. Haley said North Korea is illegally getting refined petroleum via ship-to-ship transfers at sea.

Additional sanctions

U.S. Secretary of State Rex Tillerson told reporters at the State Department on Wednesday that “we have a long list of additional potential sanctions, some of which involve additional financial institutions. The Treasury Department will be announcing those when they’re ready to roll those out.”

Interdiction of ships on the high seas “could be a major new pressure point” against North Korea, State Department spokeswoman Heather Nauert told reporters. Heightened inspections of sanctioned ships was part of a draft resolution circulated among Security Council nations earlier this year, but the provision was ultimately dropped.

North Korea’s latest test only underscored Trump’s poor options as Kim approaches his ambition to become a nuclear power with global reach, an outcome the U.S. president has vowed to prevent.

Sanctions against North Korea have had limited impact on the regime’s economy. There have been no direct talks on its nuclear weapons for years. And a military strike is an unpalatable option, given the risk of widespread devastation in the region from all-out conflict.

Chinese banks

Some Pentagon officials and military analysts have said North Korea may need more time to miniaturize a nuclear warhead to fit atop an intercontinental ballistic missile and to ensure it could withstand the heat of re-entry into the Earth’s atmosphere. But few question that Kim is nearing his goal of a nuclear arsenal that could attack the U.S.

Trump has authorized the Treasury Department to cut off foreign individuals or entities from the U.S. financial system if they interact with Pyongyang. Treasury has punished several companies in China that do business along its porous land border with North Korea.

But some analysts have said more could be done, including imposing secondary sanctions on major Chinese banks and oil companies that do business with North Korea.

“In a way it’s not so much that we need additional sanctions authority, it’s more fully utilizing what we already have,” said Bruce Klingner, a senior research fellow for Northeast Asia at the Heritage Foundation in Washington. “What more could we do? It’s all these Chinese entities that we have not imposed secondary sanctions on."

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