- The Washington Times - Tuesday, December 26, 2006

Information leaking out of North Korea suggests both the economy and internal political support for the Kim Jong-il regime are deteriorating. In recent weeks, South Korean media have cited intelligence and other sources claiming the financial restrictions imposed by the U.S. Treasury are having an effect.

For years the State Department and Pentagon tried without success to find ways to pressure North Korea. The Kim dynasty that has ruled the country since World War II emphasizes “juche,” or self-reliance, refusing to make concessions to obtain foreign aid, even if it means allowing its people to starve.

But now the Treasury Department has found the North’s Achilles heel — the laundered money and luxury goods the leadership bestows on the military and other members of the elite to keep their support. The Treasury initiative began in fall 2005 when it pressed the Banco Delta Asia in Macao to freeze North Korean assets in 50 different accounts, charging the North was using the bank to launder counterfeit $100 bills. Some $24 million of the North’s assets were frozen, but that was just the beginning.

In December 2005, the Treasury advised financial institutions worldwide to limit banking services to North Korea to restrict illicit activities. In addition to counterfeiting foreign currencies, these include narcotics trafficking, smuggling counterfeit cigarettes, and selling missiles and missile parts. The North reacted by refusing to return to the six-party talks on dismantling its nuclear weapons program, saying it would not come back until the United States lifted the financial sanctions.

Since then Pyongyang has lashed out twice, first with its July 4 launch of seven missiles into the Sea of Japan and then with its Oct. 9 nuclear test, both apparently intended to pressure the U.S. to lift the sanctions. When that did not happen, Pyongyang finally agreed, after a year’s delay, to resume the six-party talks if the U.S. would discuss lifting the sanctions. Washington agreed to discuss the issue in a bilateral working group.

The six-party talks lasted all last week with North Korea demanding removal of the sanctions and the U.S. insisting on a freeze of the North’s plutonium production. But there was no progress. Ambassador Christopher Hill, the chief U.S. negotiator, said the North Koreans showed little interest in talking about anything except their frozen assets.

Stories out of North Korea may explain the government’s belligerence. South Korean intelligence sources claim to have the text of remarks Kim Jong-il made to government and military leaders shortly after the July missile launch. Mr. Kim reportedly said he decided to launch the missiles because of the “serious situation within North Korea.”

The serious situation is the threat to his regime caused by unrest resulting from economic difficulties and food shortages. A South Korean aid official told the press the fuel shortage in the North is worse than he has ever seen it, and power outages are more frequent than at any time in the last 10 years. South Korean intelligence reportedly claims the unrest has spread to the party, government, and military elites who keep Chairman Kim in power.

The unrest of the elites is believed to be due to depletion of government funds caused by the U.S. sanctions. In addition to blocking North Korean bank accounts, the Treasury convinced financial institutions worldwide, concerned about possible adverse effects on their dollar transactions, to stop doing business with North Korea. The drop in foreign exchange earnings reportedly is said to have forced Mr. Kim to suspend his custom of dispensing money and gifts to his top aides.

Another source of problems for Pyongyang is the Proliferation Security Initiative (PSI), a U.S.-led alliance of some 70 countries committed to stopping the spread of weapons of mass destruction to terrorist groups and unstable regimes. In addition to crimping North Korea’s sale of missiles and weapon materials, PSI countries have seized millions of packs of contraband cigarettes from North Korean vessels, further cutting Mr. Kim’s income.

The combination of U.S. sanctions, U.N. sanctions, and PSI interdictions appears to be putting the Kim dynasty in jeopardy for the first time in five decades. With the six-party talks off again, Mr. Kim’s next step probably will be to attempt a second nuclear test. We should take it in stride and tighten the pressure.

Regime change is the only realistic long-term solution. The financial sanctions are working and offer the best chance of achieving that goal. Mr. Hill said last week that as long as North Korea develops nuclear weapons, “they are going to have more and more and more financial problems.” That is exactly the right approach.

James T. Hackett is a contributing writer to The Washington Times and is based in Carlsbad, Calif.

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