Axis of Evil

Will Trump's Next Iran Sanctions Target China's Banks?
By Gordon G. Chang

There are several banks in China and elsewhere, including Southeast Asia and Singapore, that are currently housing North Korean funds that are under sanction, but nothing has been done.

Friday, the U.S. Treasury’s Office of Foreign Assets Control sanctioned individuals and companies in three networks for “procuring technology and/or materials to support Iran’s ballistic missile program.”
The measures are partly in reaction to Iran’s January 29 test of an intermediate-range missile.
One of the three networks, headed by Iranian businessman Abdollah Asgharzadeh, contains Chinese individuals and their companies.
CNN reports that the Trump administration is planning at least another round of Iran sanctions. 

Those measures could—and should—hit Chinese banks. 

Unplugging Chinese financial institutions will shock global markets, but measures that leave them untouched will be ineffective.
Asgharzadeh, according to Treasury, has had dealings since 2013 with three “China-based brokers,” Richard Yue, Jack Qin, and Carol Zhou. 

Yue works with Cosailing Business Trading Company, which provides, among other things, financial services to Asgharzadeh. 

Qin uses Ningbo New Century Import and Export Company to ship goods to the Iranian.
The sanctions imposed Friday on the three individuals and the two companies were initiated by the Obama administration and reflect decades-old attitudes about the best method of stopping Chinese proliferation. 

There are, however, two principal problems with these measures, which were designed to gently warn but not to inflict severe cost.
First, the most recent sanctions, like those in the past, were imposed on small fry. 

China’s small-fry individuals and entities for decades have been selling equipment, components, materials, and technology to Iran for its ballistic missile and nuclear weapons programs.
Beijing maintains one of the world’s most sophisticated monitoring systems of people inside its borders, so it either knows of the activities of proliferators on its soil or decides not to know. 

Either way, it is at the very least complicit in proliferant activity. 

“China is the biggest international force in what the U.S. government calls ‘export diversion’ or knowingly shipping equipment to a country that cannot legally purchase that equipment for itself,” notes U.S. News & World Report, summarizing Christopher Swift, a former official in the Office of Foreign Assets Control.
Some months Beijing may use an entity in Ningbo. 

In others, it might employ an enterprise in Dandong. 

The main culprit is not in one of these far-flung cities but in the heart of the country, Beijing.
Treasury has taken the view that sanctions on low-level actors will send a message to the Chinese capital, but by now American officials should know Beijing never takes the hint. 

If Washington wants to stop the trade in missiles and weapons of mass destruction, it will have to make an impact. 

It can make an impact by imposing costs across the board, on all entities owned by the Chinese central government and, more to the point, the Communist Party.
Second, Obama, like Bush before him, was hesitant to sanction Chinese financial institutions, even though he must have known they were intimately involved in proliferation. 

For instance, both Cosailing Business Trading and Ningbo New Century Import and Export have to be using Chinese banks. 

CNN reports that “a U.S. official said the individuals who came under sanction on Friday have ‘touch points’ in the U.S. financial system.”
And so did the entities and individuals named on September 26. 

That day, the Office of Foreign Assets Control sanctioned Ma Xiaohong, three co-workers, and her company, Dandong Hongxiang Industrial Development Co., for ties to North Korea.
Treasury’s notice contains no explanation, but Korea sanctions expert Joshua Stanton has told me that the sole reason for the measures was the providing of assistance to Korea Kwangson Banking Corp., itself sanctioned, to launder money.
Furthermore, on the same day the Justice Department announced the unsealing of money laundering indictments of the same four individuals and Hongxiang. 

Justice also initiated a civil forfeiture action to recover funds in 25 Chinese bank accounts.
Washington, unfortunately, imposed no punitive measures on the banks in question. 

As the Wall Street Journal noted in a September 29 editorial, the Obama administration, with its failure to go after the banks, signaled they “are untouchable.” 

Beijing maintains strict control over its financial system through the ownership of all major banks and most of the others as well, and it has the means to know of all payments in and out of the country. In addition, the Chinese central government intercepts and closely monitors communications, both internal and foreign. 

There is only one conclusion: Beijing has been complicit in illicit money transfers.
So how does the new Trump administration stop the Iranian missile program? 

It should start with the source.
Tehran may have an Iranian name for the missile launched on January 29—it calls the launcher a Khorramshahr and American officials say it was a Shahab—but it was almost certainly North Korean in origin, as Pentagon sources believe. 

The missile was either shipped from the North or, more likely, made in Iran from North Korean plans. 

The North’s version of the missile is known as the Musudan. 

Iran has been getting most of what it needs to launch intermediate- and long-range missiles from North Korea.
How then does Trump stop North Korea? 

“The best move and the long-term move would be to enforce sanctions already in effect,” Bruce Bechtol of Angelo State University told me. 

“This means going after banks that launder North Korean money. There are several banks in China and elsewhere, including Southeast Asia and Singapore, that are currently housing North Korean funds that are under sanction, but nothing has been done.”
As Bechtol, the author of North Korea and Regional Security in the Kim Jong-un Era, notes, this “will not only squeeze North Korea but it will also force China to more actively enforce sanctions or risk having nations from all over the world taking their funds out of banks located in China.”
Thursday, Trump in connection with Iran said “nothing is off the table.” 

The first option on his table should be sanctions on Chinese financial institutions handling the illicit trade of two rogues with lots of missiles and plenty of hostility, North Korea and Iran.