[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
PRESSURING NORTH KOREA:
SUBCOMMITTEE ON ASIA AND THE PACIFIC
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
MARCH 21, 2017
Serial No. 115-12
Printed for the use of the Committee on Foreign Affairs
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COMMITTEE ON FOREIGN AFFAIRS
EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida BRAD SHERMAN, California
DANA ROHRABACHER, California GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio ALBIO SIRES, New Jersey
JOE WILSON, South Carolina GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas THEODORE E. DEUTCH, Florida
TED POE, Texas KAREN BASS, California
DARRELL E. ISSA, California WILLIAM R. KEATING, Massachusetts
TOM MARINO, Pennsylvania DAVID N. CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina AMI BERA, California
MO BROOKS, Alabama LOIS FRANKEL, Florida
PAUL COOK, California TULSI GABBARD, Hawaii
SCOTT PERRY, Pennsylvania JOAQUIN CASTRO, Texas
RON DeSANTIS, Florida ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina BRENDAN F. BOYLE, Pennsylvania
TED S. YOHO, Florida DINA TITUS, Nevada
ADAM KINZINGER, Illinois NORMA J. TORRES, California
LEE M. ZELDIN, New York BRADLEY SCOTT SCHNEIDER, Illinois
DANIEL M. DONOVAN, Jr., New York THOMAS R. SUOZZI, New York
F. JAMES SENSENBRENNER, Jr., ADRIANO ESPAILLAT, New York
Wisconsin TED LIEU, California
ANN WAGNER, Missouri
BRIAN J. MAST, Florida
FRANCIS ROONEY, Florida
BRIAN K. FITZPATRICK, Pennsylvania
THOMAS A. GARRETT, Jr., Virginia
Amy Porter, Chief of Staff Thomas Sheehy, Staff Director
Jason Steinbaum, Democratic Staff Director
Subcommittee on Asia and the Pacific
TED S. YOHO, Florida, Chairman
DANA ROHRABACHER, California BRAD SHERMAN, California
STEVE CHABOT, Ohio AMI BERA, California
TOM MARINO, Pennsylvania DINA TITUS, Nevada
MO BROOKS, Alabama GERALD E. CONNOLLY, Virginia
SCOTT PERRY, Pennsylvania THEODORE E. DEUTCH, Florida
ADAM KINZINGER, Illinois TULSI GABBARD, Hawaii
ANN WAGNER, Missouri
C O N T E N T S
Mr. Bruce Klingner, senior research fellow for Northeast Asia,
The Heritage Foundation........................................ 10
Sung-Yoon Lee, Ph.D., Kim Koo-Korea Foundation professor in
Korean studies and assistant professor, The Fletcher School of
Law and Diplomacy, Tufts University............................ 26
Mr. Anthony Ruggiero, senior fellow, Foundation for Defense of
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
The Honorable Ted S. Yoho, a Representative in Congress from the
State of Florida, and chairman, Subcommittee on Asia and the
Pacific: Prepared statement.................................... 4
Mr. Bruce Klingner: Prepared statement........................... 12
Sung-Yoon Lee, Ph.D.: Prepared statement......................... 28
Mr. Anthony Ruggiero: Prepared statement......................... 40
Hearing notice................................................... 66
Hearing minutes.................................................. 67
The Honorable Gerald E. Connolly, a Representative in Congress
from the Commonwealth of Virginia: Prepared statement.......... 68
PRESSURING NORTH KOREA:
TUESDAY, MARCH 21, 2017
House of Representatives,
Subcommittee on Asia and the Pacific,
Committee on Foreign Affairs,
The subcommittee met, pursuant to notice, at 2:07 p.m., in
room 2172, Rayburn House Office Building, Hon. Ted Yoho
(chairman of the subcommittee) presiding.
Mr. Yoho. Well, good afternoon, everyone. My thanks to my
colleagues and the panel for joining me today to conduct this
timely and important hearing. We are meeting today during what
is probably the most significant shift in U.S. policy toward
North Korea since it began its illicit nuclear program. The new
administration has shown a willingness to embrace new thinking
on the North Korea issue, and my goal for today's hearing is to
discuss ways Congress can continue to drive a policy on North
Korea that finally implements all the tools we have available.
The subcommittee will come to order. Members present will
be permitted to submit written statements to be included in the
official hearing record. Without objection, the hearing record
will remain open for 5 calendar days to allow statements,
questions, and extraneous materials for the record, subject to
length, limitations, and the rules.
Again, I would like to welcome everybody here today.
Secretary of State Tillerson left the world's media breathless
last week when he restated that all options are on the table
regarding North Korea, implying military options. His next
statement that we have had many, many steps we can take before
we get to that point, received less attention, but was really
actually more significant.
This is what I hope to focus on today: The many unused or
incompletely implemented tools that we can use before the last
resort of military action, something none of us would like to
see. North Korea's nuclear program has never been a bigger
threat, and we need to respond with all the tools at our
If we can look at the first slide. It is a missile graph.
If anything, Pyongyang has dramatically accelerated its
belligerent behavior, conducting two nuclear tests and two
dozen missile launches last year. Since 2015 Kim Jong Un has
tested more missiles than Kim Jong Il, his father, and Kim Il
Sung, his grandfather, combined, while making continued
progress toward an ICBM capable of targeting nearly the entire
continental U.S. If you look at the second slide, you will see
the range of those missiles that they currently have. While
Secretary Tillerson was visiting China on Sunday, Kim Jong Un
oversaw a rocket engine test that could contribute to these
For 20 years, we have responded to every North Korean
provocation with either isolation or inducements to negotiate.
Our efforts to isolate Pyongyang have either been incomplete or
hamstrung by China. Meanwhile, North Korea has used
negotiations to extract wealth without ever slowing weapons
development. Since 1995, we have provided $1.3 billion in
economic and humanitarian assistance to North Korea, and
weapons development has only accelerated. As Secretary
Tillerson stated during his trip to the region last week, this
is 20 years of failed approaches.
The Obama administration's strategic patience was a low-
effort strategy, taking some measures to isolate North Korea,
and then simply waiting for the Kim Jong Un regime to wake up
and give away his nuclear weapons. Certainly, there is plenty
of blame to go around, if we are looking at George Bush taking
North Korea off the State Sponsors of Terrorism record, or the
Clinton administration allowing North Korea to even start a
nuclear program, although it was deemed for peaceful purposes,
we saw they strayed from that.
This ineffective approach has gotten us no closer to a de-
nuclearized peninsula. A more forward leaning North Korea
policy will require more effort and resolve, as we have seen
passivity fail time and again. It takes time. It takes time for
these threats--and take the threat seriously and use our entire
Congress can be important in this work, and we have to
ensure that the things that we set forward, we follow through
on. We have to ensure continued robust support for injecting
outside information into North Korea to encourage defection and
expose Kim's propaganda. Thae Yong-Ho, the highest ranking
North Korean defector in decades, recently said this was the
best way to force change in North Korea.
This committee has also done important work in increasing
financial pressure on the regime, and I look forward to
continuing our work on the sanctions this Congress.
We should also re-list North Korea as a State Sponsor of
Terrorism in light of its long history of horrific crimes, most
recently, the assassination of Kim Jong Nam with the VX nerve
agent in Malaysia.
The administration must also start using its secondary
sanctions authority against the Chinese entities that have
allowed for North Korea's continued weapons development. China
accounts for 90 percent of North Korea's economic activity. The
failed policies of the past assumed that if the United States
did not anger China, China would help promote de-
nuclearization. It is time to stop pretending that China's
North Korea policy is motivated by anything else than extreme
self-interest of China. China has benefited from undermining
sanctions and tolerating North Korea's nuclear belligerence.
North Korea's missiles are not aimed at China, and the growing
security challenge is an excellent distraction from China's own
I have been heartened to see both Secretary Mattis and
Tillerson reaffirm our critical alliance with the Republic of
Korea and Japan. Our officials also rightly continue to reject
proposals that we halt military exercise with South Korea to
bring North Korea to negotiations.
China's retaliation against South Korea over the deployment
of THAAD is also unacceptable. THAAD is solely oriented toward
the defense of South Korea. China should address the threat
that makes that necessary rather than interfering with our
It is encouraging to hear that the administration will not
make further concessions to hold talks or to negotiate a
weapons freeze that leaves North Korea's threat in place.
SWIFT's recent decision to finally cut off the remaining North
Korean banks from its financial messaging service has also been
a welcome development.
I am looking forward to help build a stronger, more
complete North Korea policy, and look forward to hearing from
our panel on these developments and options. Without
objections, the witnesses' written statements will be entered
into the hearing.
I now turn to the ranking member for any remarks he may
[The prepared statement of Mr. Yoho follows:]
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Mr. Sherman. Thank you, Chairman Yoho. I want to thank you
for holding these hearings in light of North Korea testing of
missiles in March and February of this year, with missiles
landing in Japan's exclusive economic zone. I join with you in
believing that, certainly, North Korea ought to be listed as a
State Sponsor of Terrorism, not only because its actions
threaten the United States, but because of the assassination in
Malaysia and the continuing terrorism, having kidnapped
Japanese civilians and held them to this day. It is not an act
of terrorism just when you do the kidnapping; it is an act of
terrorism every day you hold the victim, or perhaps, in some
cases, the body of the victim if they have expired.
The last time we held this hearing was just a few months
ago in September. North Korea had just conducted its fifth and
largest nuclear weapons test. Kim Jong Un's intentions are
clear: He wants to be able to be accepted as a world nuclear
power capable of threatening the United States.
A February 27 report from the U.N. Panel of Experts on
North Korea to the U.N. Security Council detailed the regime's
flouting of sanctions by trading in prohibited goods and by
using evasion techniques. The Panel of Experts' report also
highlighted that North Korean banks, including designated banks
or correspondent or pay-through accounts with foreign banks,
foreign joint ventures with foreign companies maintain
representative offices abroad, and that trading companies
linked to North Korea, including designated entities, open bank
accounts that perform the same financial services as banks.
All of these issues need to be addressed, but we need to
approach the problem of North Korea with both a clinched fist
and an open hand. Our Secretary of State says all options are
on the table. I don't think the military option is on the
table. I think, to some extent, his statement distracts us from
the actions that we really need to take, actions that Wall
Street will not like. At the same time, we need to put all
options on the table in terms of the concessions that we are
willing to make, or reasonable concessions, at least, in order
to secure a binding and verifiable freeze and rollback of North
Korea's nuclear missile programs.
We need our partners and allies. Whatever government
emerges in South Korea should not reopen the Kaesong plant,
because when North Korea can sell slave labor, whether it does
so on the Korean Peninsula or in Malaysia, where there are
1,000, I guess they don't call them slaves, but indentured
workers, whose earnings go to Kim Jong Un, when that happens,
not only do we violate labor standards, but we enrich the
As to China, our efforts have not been enough to change
China's cooperation with North Korea. China accounts for 90
percent of North Korea's legitimate trade, 95 percent of its
foreign direct investment. It is North Korea's lifeline. China
recently cut off purchases of North Korean coal. There is more
there than meets the eye. China may have already reached its
quota under U.N. Security Council resolution, which limits the
amount of coal that it can purchase in any year.
China fully understands what is the Wall Street policy
here: Make a lot of noise, pound the table, sanction a few
companies, but don't interrupt the huge exports of China to the
United States; do nothing that really forces China to change
its policy, but pound the table loud enough so that you cannot
be accused of being weak.
Strength is not proven by volume. Strength is proven by
success. We are not going to be successful in changing China's
policy until we are willing to put a tariff on all Chinese, or
virtually all Chinese, exports to the United States. Wall
Street doesn't want us to do it, therefore, we won't do it.
Therefore, the real objective of the Trump administration is to
yell loudly, call that strength, and not actually do anything
that would upset Wall Street or be effective.
One more area I think we can be effective is in deterring
Pyongyang from selling nuclear missile material or completed
weapons to terrorist organizations or to Iran. This starts with
reaching an agreement with China that at least they should not
allow overflights of their territory from Iran to Pyongyang,
unless those flights stop for inspection or refueling, which
would include inspection, in China. If China is allowing planes
to connect Iran and North Korea, cash can be going in one
direction, missile material in the other, and China has to be
The North Korean Human Rights Act is set to expire. We need
to reauthorize it this year.
Yes, we have had 20 years of failure, 20 years in which we
have refused to make any concession, not even a nonaggression
pact, and therefore, we can seem strong while accomplishing
nothing. I suspect that that is the policy that we will
continue, and that we will be back in this room next year and
the year after, and the only difference is the latest North
Korean provocation will be a missile that flew further or a
nuclear stockpile that is larger. I regret that I believe we
will be in this room within a few years to talk about not
atomic, but hydrogen nuclear weapons.
Mr. Yoho. Let's hope not. And that is the purpose of this
meeting, so that we can help draft those.
Mr. Sherman. I hope so. I yield back.
Mr. Yoho. We are going to go now to members. We each get a
minute, and we are going to hold you to that so that we can get
on with that. We first go to Dana Rohrabacher.
Mr. Rohrabacher. Okay. It is time to get tough with Korea,
right? North Korea, however, shouldn't be mistaken, when we get
tough with North Korea, that we are getting tough with the
North Korean people. North Korean people are subjugated people.
They are kept in place by a bloody tyranny. And whatever we do,
it should be aimed at the leadership in North Korea, and not
the people of North Korea.
So, in fact, we should look at the people of North Korea as
potential allies, our greatest potential allies in bringing
about what needs to be brought about to have a more peaceful
and secure world. Our goal should be the removal of this wacko
regime that is just--that now is threatening the world as it
develops its nuclear capability. Let us not forget that the
Chinese have had the most influence of anyone. They could have
stopped this a long time ago.
So I suggest we look at banking, I suggest we look at other
ways of putting the pressure directly on the North Korean
leadership and make sure that our Chinese friends know they are
accountable for what happens.
Mr. Yoho. Thank you, Mr. Rohrabacher. We are going to go to
another Californian, Dr. Ami Bera.
Mr. Bera. Thank you, Mr. Chairman. Thanks for having this
Obviously, the North Korean dilemma isn't one
administration or another administration. As complicated as it
was in the Obama administration, it is probably a bit more
complicated now as they continue to move forward.
I think the first step is to reassure our allies in the
region, the Republic of Korea and Japan, that our commitment to
the region, our commitment to the defense of the region has not
wavered. I think that is important for the North Koreans to
understand we are not wavering in our commitment.
I do look forward to the testimony of the witnesses. I look
forward to how we move forward, but, again, provocation on
North Korea's part is not a way to start a dialogue or start a
path toward de-nuclearization or stability on the peninsula.
This starts with dialogue and standing down. Again, our
commitment is unwavering.
I will yield back.
Mr. Yoho. Thank you, Doctor. We will next go to Steve
Chabot from Ohio.
Mr. Chabot. Thank you, Mr. Chairman. Thanks for holding
Days ago, North Korea touted the successful test of its new
high thrust rocket engine. If this test was, in fact,
successful, it would underscore North Korea's growing nuclear
delivery capabilities. Unfortunately, this does not come as a
surprise, considering the rogue state's relentless pursuit of
I am deeply concerned that this test confirms, yet again,
that North Korea is making significant advances in its nuclear
weapon technology. Other reports indicate that North Korea
continues to make technological advancements in its delivery
systems, and that it will soon be able to strike the United
Now, considering the uncertainty of the political situation
in South Korea and our new leadership here in the United
States, it is important that Congress and the new Trump
administration work together to come up with a coherent
Let there be no mistake: If North Korea attains the ability
to reach American soil with a nuclear device, our Government
will have failed the American people.
I yield back.
Mr. Yoho. Thank you, sir. We will next go to Ms. Tulsi
Gabbard from the State of Hawaii.
Ms. Gabbard. Thank you very much, Mr. Chairman. Thank you,
gentlemen, for being here.
I represent a State that falls directly within North
Korea's range of their current intercontinental ballistic
missile capabilities, and obviously, the people of my district
in Hawaii view North Korea's increased capabilities as a direct
threat to the people of our State, as it is a direct threat to
Obviously, the current strategy that has been deployed for
so long toward North Korea has been ineffective, both in
achieving a de-nuclearized North Korea, but also in putting a
halt on their ever-increasing capabilities. This is something
that we hear often by those who come and speak to us, a clear
identification of the problem and the imminent threat it poses,
but very few people have constructive solutions. So I am
looking forward to hearing your comments, and hope that you can
offer some ideas on how our current strategy should be changed.
Mr. Yoho. I appreciate your words. Next, we will go to Mrs.
Ann Wagner from Missouri.
Mrs. Wagner. Thank you, Mr. Chairman.
With a new administration in the White House, and South
Korean Presidential elections scheduled for May, figuring out
how the new U.S. and ROK administrations can act as
harmoniously as possible in addressing the North Korean threat
is certainly the question of the hour.
Recently, former Director of National Intelligence James
Clapper said that convincing North Korea to give up its nuclear
arms is a ``lost cause.'' But the Obama administration's
policies of strategic patience that have allowed the Kim regime
to prosper is now over. And as has been stated here earlier,
Secretary Tillerson says that all options are back on the
Whether we can roll back the damage of the international
failure to temper the Kim regime depends largely on whether we
choose to understand North Korea's intentions, and develop an
intelligible strategy in response. I look forward to hearing
your testimonies and engaging on this issue.
And I thank you, Mr. Chairman.
Mr. Yoho. We thank you.
Next, we are going to go to our witnesses today, but before
we start, Mr. Klingner, I had the opportunity to sit with you
the other day. And, you know, I feel very strongly about that,
that the information we will hear from you guys today will go
into policies that we are going to direct at the State
Department, to the White House, so that as my ranking member
here, Mr. Sherman, said, we don't have to have this talk again.
I know you guys are tired of having the talk over and over
again. So we want to have very concise language that we can
take, and go to the administration to redirect this foreign
policy so that we can bring the threat of the nuclear weapons--
take it away.
So, we are thankful today to be joined by Mr. Bruce
Klingner, senior research fellow for Northeast Asia at the
Heritage Foundation; Dr. Sung-Yoon Lee, Kim Koo-Korea
Foundation, deg. professor in Korean studies and
assistant professor at Tufts University, The Fletcher Law
School and Diplomacy; and Mr. Anthony Ruggiero, senior fellow
at the Foundation for Defense of Democracies.
We thank the panel for joining us today to share their
experience and your expertise, and I look forward to your
comments. We are going to--if you would, stay with the timer, 5
minutes, don't forget to push the talk button. And you will
hear me kind of rattle the gavel little bit if you go over
that. We look forward to getting onto the questions.
So, Mr. Klingner, if you would start. Thank you.
STATEMENT OF MR. BRUCE KLINGNER, SENIOR RESEARCH FELLOW FOR
NORTHEAST ASIA, THE HERITAGE FOUNDATION
Mr. Klingner. Thank you, Chairman Yoho, Ranking Member
Sherman, and distinguished members of the panel. It is truly an
honor to be asked to appear before you again.
The security situation on the Korean Peninsula is dire and
worsening. There is a disturbingly long list of reasons to be
pessimistic about maintaining peace and stability in Northeast
In response, some experts advocate negotiating a nuclear
freeze, but a premature return to talks would be another case
of ``abandon hope, all ye who enter here.'' Would the ninth
time be the charm? Pyongyang signed four previous agreements
never to develop nuclear weapons, and once caught with their
hand in the nuclear cookie jar, four subsequent promises to
abandon those weapons. And a record of 0-for-8 does not instill
a strong sense of confidence about any future attempts of
During the decades of negotiation, the U.S. and its allies
offered economic benefits, developmental and humanitarian
assistance, diplomatic recognition, declarations of
nonhostility, and turning a blind eye to violations and
nonimplementation of U.S. law. All failed. Seoul has signed 240
inter-Korean agreements and participated in large joint
economic ventures at Kaesong and Kumgangsan. All of these
failed to induce Pyongyang to begin to comply with its de-
nuclearization pledges, moderate its belligerent behavior, or
implement economic or political reform.
Moreover, it is difficult to have dialogue with a country
that shuns it. It was North Korea that closed the New York
Channel in July 2016, severing the last official communication
link; they walked away from inter-Korean dialogue; and even
refuses to answer the phone in the Joint Security Area which
straddles the DMZ.
And the freeze proposals all call for yet more concessions
by the U.S. and its allies in return for North Korea to begin--
to undertake a portion of what it has already obligated to do
under U.N. resolutions. The strongest case against diplomacy
can be found in the regime's own words, in which the highest
levels of the regime, including Kim Jong Un, have repeatedly
and unambiguously made clear they will never abandon their
``treasured sword'' of nuclear weapons, as well as that the
Six-Party Talks are dead and ``null and void.'' Hope is a poor
reason to ignore a consistent track record of failure.
And there are consequences of a bad agreement. A freeze
would undermine the nonproliferation treaty and send the wrong
signal to nuclear aspirants like Iran, that the path is open to
nuclear weapons. Doing so would sacrifice one arms control
agreement on the altar of expediency to get another.
Instead, there is now an international consensus on the
need to punish and pressure North Korea for its repeated
violations. Increased financial sanctions, combined with the
increasing pariah status of the regime from its human rights
violations, have led nations and companies to sever their
business relationships with North Korea, curtail North Korean
overseas workers visas, and reduce the flow of hard currency to
the regime. I have included a lengthy list of these actions in
my written testimony.
Cumulatively, these efforts reduce North Korea's foreign
revenue sources, they increase strains on the regime, and
generate internal pressure. North Korean overseas financial
operations are suffering.
The U.S. has had all the authorities it needs. It has just
lacked the political will to go beyond timid incrementalism in
enforcing our laws.
Now is also the time to break some China. The U.S. should
stop pulling its punches, and go where the evidence takes it.
The North Korea Sanctions and Policy Enhancement Act mandates
secondary sanctions on third country, including China, whose
banks and companies that violate U.N. sanctions and U.S. laws.
Other measures that I will mention just briefly, but cover
in more depth in my written testimony are, as you have already
pointed out, put North Korea back on the State Sponsors of
Terrorism list. Since its removal from the list, Pyongyang has
conducted numerous terrorist acts which meet the U.S. legal
requirements for being put back on the list. Returning North
Korea to the list would be a proper and pragmatic recognition
of the behavior that violates U.S. statutes. It also increases
North Korea's diplomatic and economic isolation for its
Also, we should designate additional entities for human
rights abuses. Last year, the U.S. finally imposed sanctions on
North Korean leader Kim Jong Un and 15 other entities for their
ties to North Korea's atrocious human rights records, which
constitute crimes against humanity.
Also, we should improve information access into North
Korea. Promoting democracy and access to information in North
Korea is in both the strategic and humanitarian interests of
the United States. International efforts to penetrate the
information firewall in North Korea should expand on ongoing
efforts with radios, DVDs, cell phones, and thumb drives, but
also utilize new technology for more innovative ways to get
information in and out of North Korea.
In conclusion, Washington must sharpen the choice for North
Korea by raising the risk and the costs for its actions, as
well as for those, particularly Beijing, who have been willing
to facilitate the regime's prohibited programs and illicit
activities and condone its human rights violations.
Sanctions require time and political will to maintain them
in order to work. We must approach sanctions pressures and
isolation in a sustained and comprehensive way. It is a policy
of a slow python constriction rather than a rapid cobra strike.
Thank you, again, for the privilege of appearing before
[The prepared statement of Mr. Klingner follows:]
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Mr. Yoho. Mr. Klingner, I appreciate it.
Dr. Lee, if you would, please.
STATEMENT OF SUNG-YOON LEE, PH.D., KIM KOO-KOREA FOUNDATION
PROFESSOR IN KOREAN STUDIES AND ASSISTANT PROFESSOR, THE
FLETCHER SCHOOL OF LAW AND DIPLOMACY, TUFTS UNIVERSITY
Mr. Lee. Thank you, Mr. Chairman, distinguished members of
With your permission, I would like to make five points in
the following order: First, I would like to mention the
mundane, and then proceed to comment on the arcane, the inane,
the profane, and the humane.
First the mundane. North Korea is a Korean state vying for
legitimacy against a far more successful, attractive Korean
state. The basic internal dynamic in the Korean Peninsula
almost dictates that North Korea try to maximize its one
strategic advantage over its neighbor. By the conventional
industries of measuring state power, military power, political
economic power, territorial size, soft power, North Korea does
not fare very well against its southern neighbor except in the
field of--except for military power. Therefore, the proposition
that through artful diplomacy or a little bit of coercion, we
can get North Korea to give up its nuclear weapons, as we did
vis-a-vis the former Soviet republics of Kazakhstan, Belarus,
Ukraine that inherited Soviet nukes, or South Africa, this is a
tall order. It is quite unrealistic, in my opinion. So it is
something new--a new approach is imperative at this point.
The arcane. I think in the wake of North Korea's third
nuclear test in February 2013, the new, young Xi Jinping regime
was quite irate, and they said a lot of things that seemed to
please American ears in the spring of 2013: ``We are going to
put some hurt on them. We have finally come around. We are
going to punish North Korea.'' This is pure illusion.
Historically, North Korea has insulted, defied the top Chinese
leaders far more egregiously than in 2013. Always, the Chinese
grit their teeth, increase aid. And, indeed, in 2013, China-
North Korea trade increased to $6.5 billion, an all-time high.
May I just give you one example, historical example. In
1982, September, Kim Il Sung visited China, met with Deng
Xiaoping and the top leaders, pleaded with the Chinese
leadership to approve the hereditary succession of power from
father to son, which is a sensitive topic in the communist
system, it is a contradiction. Then the next summer, Kim Jong
Il made a trip personally and met with Deng Xiaoping and used
Deng Xiaoping as a foil, as a smokescreen for his plan to lay a
bomb for the visiting South Korean President in Burma in
China, listening to North Korea's request, conveyed to the
Reagan administration repeatedly the message that, you can do
business with these people, you can talk to them, please. Deng
Xiaoping told the visiting Secretary of Defense, Caspar
Weinberger, on September 28 that message. That very same day,
Deng Xiaoping also agreed to give North Korea 20 former Soviet
MiG-21-type fighter jets.
Now, when the bomb went off on October 9, Deng Xiaoping
lost face. He was very irate. He said Kim Jong Il will never,
as long as I live, be able to set his foot on Chinese soil, and
he didn't until 2000, the year 2000. Yet, Deng Xiaoping honored
the agreement to provide North Korea with warplanes.
My point here is China has a strategic interest in the
Korean Peninsula that defies moral principles, that defies
security interests of the United States.
The profane. I don't mean North Korea's propensity to hurl
insults at American and South Korean leaders. What I refer to
is North Korea's state policy of using food as a weapon, North
Korea's policy of mass, deliberate mass starvation, as the U.N.
Commission of Inquiry of 2014 alleges. This is a very serious
allegation. The U.N. Commission of Inquiry Report on Human
Rights in North Korea states that North Korea's crimes against
humanity have ``no parallel in the contemporary world.'' The
section on the violation of the right to food and other related
aspects of the right to life, pages 144 to 208, merits close
This is the kind of regime that we are dealing with, a
regime that enjoys a tremendous advantage of industrialization,
urbanization, nearly 100 percent literacy among the population;
yet, is among the top nations of the world every year, every
single year, afflicted with serious food insecurity. This is
the product of the determined, perverse policy of the state,
not U.S. sanctions or climate change or poor soil, poor
weather, and so forth.
Lastly, the humane. I think human rights is essential to
our policy toward North Korea, because, as I mentioned,
starvation, hunger, these are visceral, universal human
emotions that can be understood quite easily. It will be very
helpful in pushing for more human rights operations,
information dissemination into North Korea so that the world,
that the world public opinion changes in our favor, and that we
name and shame North Korea, and that we educate the North
Korean people of the true nature of the regime and try to
invite them to take the risk of crossing the border into a free
[The prepared statement of Mr. Lee follows:]
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Mr. Yoho. Dr. Lee, I appreciate it. And I almost opened
announcing you, how poetic and eloquent your writing was, and I
wished I had.
Mr. Ruggiero, go ahead.
STATEMENT OF MR. ANTHONY RUGGIERO, SENIOR FELLOW, FOUNDATION
FOR DEFENSE OF DEMOCRACIES
Mr. Ruggiero. Thank you. Thank you, Chairman Yoho, Ranking
Member Sherman, and distinguished members of the subcommittee.
Thank you for the opportunity to testify today.
The Kim family dynasty continues to threaten the United
States and our allies in Japan and South Korea with its nuclear
Secretary of State Tillerson's trip to Asia last week noted
that all options are on the table, including the military
option. This is the right approach. We must take a page out of
the Iran economic warfare effort and ensure that every option
We should not kid ourselves. North Korea tested a four-
missile salvo as preparation for a military conflict, and we
need to be equally prepared. U.S.-South Korea military
exercises are crucial to our preparedness. We should also look
to increase military cooperation with Japan and South Korea,
and even explore the possibility of stationing additional
military assets in the region.
In addition to military deterrence, we must use all other
levers of American power. This includes offensive and defensive
cyber warfare strategies.
We must also include robust sanctions. The good news is we
have a successful template, the Iran sanctions regime. I had
the privilege to work on both North Korea and Iran sanctions
programs at the State and Treasury Departments. We understood
the gravity of the situation, and we engaged in robust economic
and financial warfare to address Tehran's direct threat to the
United States. We need to replicate that approach with North
The U.N. report released last month detailed the stunning
finding that the SWIFT electronic banking network was providing
financial messaging services to North Korean banks, including
ones designated for proliferation activities. The report
suggests that SWIFT will finally halt its services to North
Korean banks, and it is long overdue. North Korea's access to
the SWIFT system is a symptom of a larger problem: Indifference
toward Pyongyang's financial activities. With extremely limited
exceptions, North Korea should not have access to the
international financial system. We cannot trust that
Pyongyang's financial transactions are legitimate. It is,
therefore, our responsibility to block this access.
To this end, we must act against Chinese banks that
facilitate North Korean financial transactions, just as we
acted against several European banks that helped Iran evade
sanctions. In fact, the U.S. fined these banks over $12 billion
collectively for sanctions violations. Chinese banks continue
to be the financial lifeline for North Korea, and we have not
done enough to cut off this flow of money.
Two stories are instructive here: First, in September 2016,
the Justice Department revealed that China-North Korea scheme
that provided Kim's regime access to the American banking
system. A Chinese company and four Chinese nationals created 22
front companies, and Chinese banks were used to conduct
transactions for U.S. sanctioned North Korean bank. No Chinese
bank was sanctioned or fined for this activity, and this
activity was allowed to take place for 6 years.
Second, in the December 2015 trial of Chinpo Shipping in
Singapore revealed that a Bank of China representative
suggested that the company could transact in dollars, so long
as it concealed references to North Korean vessels and wire
transfers. Bank of China should have been fined by the U.S.,
even if it was limited to a single overzealous employee. The
U.S. must clarify that this conduct is unacceptable.
North Korea is a global foreign policy challenge. North
Korea proliferated ballistic missiles to Iran, Syria, and other
countries, and secretly built a nuclear reactor in Syria in a
location that has since fallen to ISIS. The reactor was
destroyed in 2007, reportedly by Israel. There have also been
unconfirmed reports that Israel destroyed missiles destined for
A February 2016 CRS report on Iran-North Korea nexus showed
that the ballistic missile relationship is significant and
meaningful. The concern was so serious, that the Obama
administration sanctioned Iran the day after the nuclear deal
was implemented. In the accompanying explanation, Treasury
revealed that senior Iranian officials were working with North
Korea for several years and had traveled to Pyongyang to work
on a component of North Korea's missile system.
Pyongyang will soon have in its possession a nuclear-armed
ballistic missile capable of hitting North America. This
deserves increasingly harsh responses from Washington.
Similarly, China is deserving of increasingly harsh U.S.
responses. Beijing is critical of any effort to increase
sanctions against North Korea. We should not let it stand in
our way, as it has been doing.
Sanctions against North Korea and China are the only
peaceful means for coercing the regime and are, for that
reason, indispensable, but we must be prepared to deploy a full
range of other measures to deter the threat.
And I look forward to addressing your questions.
[The prepared statement of Mr. Ruggiero follows:]
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Mr. Yoho. Thank you all for great testimonies, and we look
forward to some spirited talks here.
Bringing out the information, and it perplexes me, what
does North Korea want? I know people say they want legitimacy
of a nuclear power. Is that correct?
But then what? If they become a nuclear power, are they
going to play nicer? And I think--I don't see a good end stage
to the direction they are heading into. I don't know what their
Mr. Ruggiero, what is their underlying theme other than
they want legitimacy as a nuclear power?
Mr. Ruggiero. Sure. I believe they want a nuclear weapon so
that they can coerce the United States into what they want us
to do, which is to acknowledge them as a nuclear weapon state.
I think that is the fallacy of the discussion of a peace treaty
as one of the prerequisites for solving this nuclear issue.
Mr. Yoho. And I see that as a false narrative, because even
if they get to that stage, which we all think they are pretty
close to that, if they get to that stage, the behavior, I don't
Dr. Lee, do you see their behavior changing in North Korea?
Mr. Lee. No, Mr. Chairman. It sounds rather absurd, but
North Korea, I believe, has a long-term strategic goal in mind.
It is a revisionist, revolutionary state. The North Korean
Communist revolution still rages on in the eyes of the North
De-nuclearization would basically mean that North Korea
would give up on its own raison d'etre, claiming to be the sole
legitimate Korean state, the perennial fear of being absorbed
by that other Korean state. That is an existential challenge.
So North Korea, by demonstrating to the United States and to
the world a credible capability of combining a nuclear warhead
with a long-range missile that can hit all parts of the United
States, then North Korea's leverage, its ability to resort to
nuclear blackmail, extortion on all kinds of issues.
Mr. Yoho. But in the 21st century, I mean, that is just a
nonstarter with the amount of nations with nuclear weapons,
that I would think--and I know going through vet school, common
sense was not common, one of my professors said, because if it
was, everybody would have it. You know, I don't see anybody
wanting to invade North Korea. You would think they would want
to become part of the world community and start doing what is
best for their people.
I am going to go to Mr. Klingner and ask you with the North
Korea Sanctions and Policy Enhancement Act of 2016, which I am
glad President Obama started to put the pressure on North
Korea, I feel it was a little late, but I am glad it was there,
what can we do so that this administration doesn't back off
from that. I am glad to hear the strong language from Mr.
Tillerson that we continue down this road. Is there anything
else that you would recommend that we throw in there, whether
it is more sanctions on Chinese companies or any country that
has business dealings with North Korea?
Mr. Klingner. Yes. Thank you, sir. On your first point,
their nuclear weapons serve a number of purposes, including a
military purpose. We often see it only as a signal or a
message. But, when Kim Jong Un came into power, he directed his
military to come up with a new war plan to be able to occupy
the Korean Peninsula within 7 days. That would require them to
go nuclear early on. We have seen the development of
capabilities to fulfill that plan. Last year, when they
conducted missile launches, they said it was to practice
nuclear air bursts over South Korean ports through which U.S.
reinforcements would come through, and they had a graphic for
it. Recently, with the salvo of four missiles, they said this
was practicing an attack on U.S. bases in Japan. So they want
that capability, and the ICBM is to be able to hit the United
States with a nuclear weapon. They have been having this quest
for decades. Now, that doesn't mean they are going to wake up
someday and just start a war, but by having that capability,
they see it as--another reason would be deterring U.S. military
action. They would depict it as us unilaterally attacking out
of the blue; we would see it as them preventing us from
responding to a tactical or operational-level North Korean
And also, as Mr. Ruggiero said, it is coercive diplomacy,
not only acknowledgement of them as a nuclear weapon state, but
also to intimidate South Korea into providing benefits or not
responding to actions of North Korea.
Opening up North Korea goes against what they want. They
have said they do not want to allow the contagion of outside
influence, they need to keep it out, because it would undermine
the strength and legitimacy of the regime.
I think the North Korea Sanctions and Policy Enhancement
Act was a superb step forward, not only in the measures it had,
but the ability to try to induce the Obama administration to
move forward on exercising the authorities it already had. So I
hope the Trump administration will----
Mr. Yoho. I want to cut you off there. I have got one quick
question for each of you. Would you recommend putting North
Korea back on the State Sponsor of Terrorism? Mr. Klingner?
Mr. Klingner. Absolutely, sir.
Mr. Yoho. Dr. Lee?
Mr. Lee. Absolutely.
Mr. Yoho. Mr. Ruggiero?
Mr. Ruggiero. Absolutely.
Mr. Yoho. Thank you. I am going to yield back and go to the
ranking member, Mr. Sherman.
Mr. Sherman. You stole my question, but we got good
The chairman says no one wants to invade North Korea. That
is easy for us to say. I was here when Dick Cheney did want to
invade North Korea, or at least put the kibosh on any
nonaggression pact with North Korea, because he wanted to keep
open the idea of using force to bring democracy to the northern
part of that peninsula. Who knows what we could have achieved
in return for a nonaggression pact, but we very much wanted to
keep all the--all options on the table, not to just to deal
with North Korea's nuclear program, but to deal with them,
their continued existence as a repressive state.
We have been hearing that for 20 years, we have had a
failure. Yes, if you worry about our national security, but for
20 years, we have met the political needs of Washington and
Wall Street. We do that by having a modest sanctions program
that doesn't get Wall Street out of joint or seriously affect
trade with China, while maintaining maximum demands, because it
is an affront to the foreign policy establishment here for us
to ever talk about a slightly nuclear North Korea, or even to
talk about giving them a peace treaty or nonaggression pact. So
we have modest sanctions, maximum demands, no accomplishments,
and we achieve all our domestic political objectives. I don't
know if that is failure or not.
I do want to comment, as I have before, about civil
defense. The purpose of civil defense appears to be, in this
country, to calm our population. So back when Dana and I were
kids, the population was concerned that we faced a massive
Soviet nuclear hydrogen bomb threat, and they calmed us down a
bit by having us hide under our desks. Not really anything
Now, we might be faced with one atomic bomb. Civil defense
might be successful. Immediate aid would come to any victimized
city from all over the country. But in this case, not having
civil defense calms our population, because if we had any civil
defense, we would admit that there was a threat from North
Korea, or there would be soon.
Mr. Ruggiero, I want to thank you for your comments about
the trade between North Korea on the one hand, and the Shiite
alliance, basically Assad and Iran, on the other. You pointed
out how that has happened, continued to happen, and in light of
Iran's additional money, or financial resources, could very
well happen in the future.
Let's see. We have got--so the question here is, will
modest sanctions achieve our maximalist aims?
I think, Dr. Lee, you have indicated that it goes to the
very core of this regime to become a nuclear state. Would they
give up on their nuclear program if that meant more luxury
goods for their ruling elite, or would they be willing to
suffer a 10 or 20 percent decline in luxury goods rather than
give up their nuclear program? What is more important to them,
Johnny Walker or nukes?
Mr. Lee. Continued supply of Johnny Walker, Mr.
Mr. Sherman. Is more important to them than the nuclear
Mr. Lee. Well, all carrots eventually dry up. What would
they do once they give up their nuclear weapons and no longer
have that great lever with which to bully, extort the biggest
powers in the world, including the United States? Depend on the
goodwill of their neighbors? That would be a very poor policy.
I think there is no way that we can persuade, coerce the
Kim regime to give up its nuclear weapons without, without
putting sufficient pressure that makes them think that they are
on the verge of political extinction.
Mr. Sherman. And a 20 percent decline in high quality
Scotch, that would not put them on the verge of extinction,
Mr. Lee. I believe it would be a big blow. So I think the
ban, the U.N. Security Council ban on luxury goods exports to
North Korea, that is an important component, but----
Mr. Sherman. So this regime is perhaps more fragile than I
Mr. Lee. Well, we have not tried really tough financial
sanctions, as you know, Mr. Congressman. We know that North
Korea is still dependent on the U.S. dollar system. It is their
preferred currency of choice in international financial
transactions. There is a lot that we can do to block--to
designate North Korean entities and their enablers.
Mr. Sherman. Okay. So you are saying if we kept Chinese
policy the same but were very effective in hurting the North
Korean state, we could force a change in their behavior?
I will ask your two colleagues on either side whether they
agree with that characterization.
Mr. Klingner. I would agree with you, sir, that weak
sanctions are not effective, just as weakly enforcing the law
in a city is not----
Mr. Sherman. But let's say we had sanctions that were just
directed at North Korea, so they were effective in cutting 20
percent less Scotch, 20 percent less of all the other luxury
goods, but China continued its current subsidies and trade with
North Korea. Would that be enough to imperil the regime?
Mr. Klingner. Well, what I would argue is that we need to
go after China as well. Anyone who violates U.S. laws and U.N.
resolutions should not have immunity from our laws and the
Mr. Sherman. I have gone way over time. I yield back. Thank
Mr. Yoho. Thank you, sir. I will go to our member from
California, Mr. Rohrabacher.
Mr. Rohrabacher. Well, again, let me note that the problem
is not North Korea or North Koreans, it is this clique that
seems--rather mentally ill clique that runs North Korea. The
people of North Korea are victims. They are people who--perhaps
many of them who don't even know they are victims. And perhaps
our greatest strategy could be putting out an all-out effort to
inform the people of North Korea exactly what is happening in
the rest of the world, and how they are being short-changed and
that their future is being robbed from their children by this
current unscrupulous and brutal regime that controls their
You know, one thing you could say, and this is a crazy
regime, is the one--I was noting that this is one country,
North Korea is one country that can accurately--it can
accurately be said that its leaders have gone to the dogs. I
mean, this is in--to think that a--now, is that an accurate
report that this leader has sent people to be eaten by dogs,
who had actually opposed his regime? Is that an accurate
Mr. Klingner. We don't think so. The story that Jang Song
Thaek, his uncle, was eaten by dogs was started by a Chinese
blogger, which then was picked up by Chinese media and then
picked up by a foreign media. We think, instead, he was killed
or executed with anti-aircraft artillery, as many others have
Mr. Rohrabacher. Well, I see now--so he hasn't been eaten
by the dogs, but he may well have been killed by being shot by
anti-aircraft artillery. Hmm. All right. Gee, I am glad you
said that. It really makes me feel better about the mental
stability of those folks.
Now, it also was noted in there that we have a situation
where South Korea, with such a vibrant economy and somewhat
stability, at least, they have democratic processes going, we
just had a leader removed from office and there wasn't blood
I remember during the Reagan years, there was an economist
that did a study all over the world, and Korea was one of them,
where communism and free enterprise, or at least capitalism in
some way, came together, and the only thing that separated the
Communist area from the free enterprise area was a line, an
arbitrary political line. So on both sides, they had the same
kind of soil, same kind of weather. This economist noted for us
in the White House, we asked to do this study, that the
production of food and the production of wealth was so much
greater on the non-Communist side of the border as compared to
the Communist side of the border, which then we interpreted as
meaning either--let's see. It was either that God exists and
that God--it is either whether there is no God, or that God
exists and he doesn't like Communists. The fact is that they
can blame it--and a lot of our people try to blame our failures
and different failures on global warming as well, but the fact
is that you have these situations around the world where people
who live in tyranny do not do well financially, which is, I
would say, the Achilles heel of this regime, in that its people
live in such poverty, that their children are smaller, and that
there are all sorts of demonstrations of this.
I want to thank our witnesses today for giving us some
specific things that we can do, especially in the economic
arena, in terms of dealing with Chinese banks and making sure
that we put the economic pressure on this regime.
Again, it is better to have no sanctions than to have soft
sanctions. Teddy Roosevelt said, it is the greatest sin--the
greatest sin is to hit someone softly. Either we are going to
do this and we are going to get rid of that regime and work
with the people of North Korea to free themselves, or we are
I would suggest that we should be working--and some of the
suggestions you have given us today in terms of grabbing onto
their economy so that that clique that runs North Korea cannot
withstand the pressure that we have generated by this type of
economic offensive on our side, that we take it and we do that
seriously rather than thinking that our only methodology of
stopping this nutty clique from getting a nuclear weapon is to
have a military operation against North Korea.
Mr. Yoho. I agree.
Mr. Rohrabacher. That would be terrible, and that should be
averted if we can at all costs, which means, let's go to the
strategy you have outlined today, which is a serious economic
strategy to bring down and to de-place the North Korean regime
that oppresses the North Korean people.
Mr. Yoho. Thank you for your comments. We will go to Dr.
Ami Bera from California.
Mr. Bera. Thank you, Mr. Chairman.
I am just going to go through a series of questions, but a
starting point, I think you all agree, if I am listening to
your answers ask your opening testimony, at this juncture,
North Korea is not going to back down and become nonnuclear.
They see this as their only negotiating leverage. Would that be
an accurate statement? So we don't see voluntarily stepping
back; probably the exact opposite.
In addition, if we are not going to go to a kinetic de-
nuclearization, which none of us think would be very easy, that
means a commitment to the region, a commitment to deterrence,
making sure all options obviously are on the table, but making
sure our allies in the region are fully secure in our
commitment. Would that be an accurate next step? And that would
be exercises, that would be deployment of THAAD, and other
assets that would send a strong message to North Korea that any
military intervention, an errant missile going into Seoul or
Tokyo would lead to dramatic repercussions. Is that accurate?
Mr. Klingner. Yes. We hope that more vigorous enforcement
of our laws and stronger sanctions, combined with the offer of
engagement if they were to do so in a pragmatic sense, would
alter their behavior, but of course we need to strengthen our
defenses and those of our allies, including missile defense
both here in the continental U.S. as well as with our allies.
Mr. Bera. So that would be a certain next step, that
deterrence, to say, it is not in your interest, North Korea, of
taking provocative action.
Obviously there was some campaign trail rhetoric about
South Korea or Japan pursuing nuclear options. That is not in
our interest, nor do we want to start a nuclear arms race in
East Asia. You know, obviously, our commitment is to that.
Would that be accurate? I think South Korea pursuing nuclear
weapons or Japan pursuing nuclear weapons would be not in our
interests. Would you--Mr.----
Mr. Lee. With every North Korean provocation, nuclear test,
the public opinion in South Korea, admittedly emotional as it
may be as a snapshot of indignation of North Korea's nuclear
tests, supports South Korea going nuclear. We know South Korea
has the technical capability within a few months or a year to
go nuclear. And in the past, of course, South Korea attempted
just that under President Park Chung-hee in the early 1970s.
So although it is unlikely that South Korea will move in
that direction in the foreseeable future, I think one should
not be surprised if, say, 10 years from now, South Korea does
make that determination at the risk of irritating or poor
relations with its treaty ally, the United States, because the
truth is, in the past when Britain, France, Israel went
nuclear, what did the United States do? Abandon its allies and
Mr. Bera. Sure. The danger there is when China potentially
steps up their nuclear proliferation as well.
So you have given us a few tools that we could pursue. You
know, let's increase sanctions, let's look at secondary
sanctions, let's obviously increase our commitment to the
region through military exercises, et cetera, get to the point
where Kim Jong Un has to make that political calculation that
the instability and his political survival is such that it is
better to come to the table. Would that be an accurate
assessment of some of the tools that we ought to be using?
Mr. Ruggiero. Sure. I think that is the ultimate goal, is
to increase sanctions, I would say, on North Korea and China,
to try and get North Korea back to the negotiating table. But
we should not kid ourselves that it is going to be easy. I
would also say on the South Korea and Japan developing nuclear
weapons, certainly not in our interests now, but we have to
have that conversation with China. And as Dr. Lee said, that in
10 years, that calculus may change for us.
Mr. Bera. So that is also a negotiating leverage, that
China needs to understand that if North Korea continues on its
current path, then it may have more nuclear-armed nations in
its neighborhood, which the Chinese obviously don't want. So it
is in China's interest to also step up to the table.
Mr. Klingner. I think on South Korea or Japan going
nuclear, while it goes against U.S. nonproliferation policy for
decades, it would undermine the Nonproliferation Treaty, it
could subject our allies to international sanctions themselves.
But if nothing else, it would also require them to divert a
large amount of their defense budget away from what they should
be spending on toward duplicating a system that the U.S. is
already providing with our extended deterrence guarantee.
Mr. Bera. All right. Thanks.
Mr. Yoho. Thank you, sir.
We will go to Mrs. Ann Wagner from Missouri. Thank you.
Mrs. Wagner. Thank you, Mr. Chairman.
China is punishing South Korea economically for its
decision about THAAD's deployment, but it looks like only to
the extent that these actions wouldn't constitute WTO
violations and that South Korea won't have any recourse
Mr. Klingner, do you believe China has gotten--how should I
put this--smarter in how it applies economic pressures? And if
over the course of the next year, if THAAD becomes a permanent
reality, do you believe China will back off?
Mr. Klingner. I believe South Korea is going to the WTO, or
is considering taking China to the WTO for its actions. China
has certainly been very heavyhanded in its, really, economic
attacks on South Korea. They are far more strong in their
actions against South Korea's defensive moves than North
Korea's offensive moves.
You know, eventually, one would hope that China would
realize how counterproductive their action is. The South Korean
public opinion of China has plummeted. It may lead South Korea
to try to diversify its economic engagement elsewhere, away
from China. They have seen the actions that China has taken in
the past against Japan over the Senkakus Island conflict
disagreement, the belligerent actions China has taken in the
South China Sea against southeast Asian nations. It can lead to
all of those nations seeing that China is not a reliable
partner and that they should reduce their engagement with
Mrs. Wagner. And if THAAD becomes a permanent reality, you
do not see China backing off?
Mr. Klingner. Well, we have seen China back off in its
intimidation against Japan after the Senkakus incidents in 2010
and 2012, where they resumed exports of rare Earth minerals,
they stopped the kind of government-induced protests against
Japanese businesses. So I would hope, and I would think it
would be the case, once THAAD becomes a permanent presence
there, then they would realize the game is over. Also, with the
likelihood of a progressive President in South Korea, who would
normally be more, you know, inclined to reach out to China and
North Korea, if China continues that kind of behavior, it may
induce even a progressive government to not lean toward China.
Mrs. Wagner. Thank you, Mr. Klingner.
Mr. Ruggiero, major Chinese banks have limited their
exposure to North Korea, at least on the surface, I will say.
But North Korean firms have successfully used Chinese middlemen
and Southeast Asia and Hong Kong commercial hubs to improve
procurement. Given North Korea's ability to outmaneuver current
sanctions, how effective would secondary sanctions on Chinese
institutions be in curbing North Korea's missile and nuclear
Mr. Ruggiero. Sure. You know, North Korea is very deceptive
in its sanctions evasion activities, but the banks are
responsible to ask the right questions. I would just give you
one stat. In the company that we are talking about from
September 2016, before the North Korean bank was designated, it
did U.S. dollar transactions of $1.3 million, and afterwards,
for 6 years afterwards, $110 million. So you are seeing a
That should have caused the Chinese bank to ask questions.
The Chinese bank could have investigated that company and
learned that it--it showed itself as, or promoted itself as key
to China-North Korea trade. So that Chinese banks should have
been asking questions of why are they engaged in these
transactions with North Korea.
Mrs. Wagner. Here is an interesting question. We know that
Chinese--and, again, for Mr. Ruggiero. We know that the Chinese
Government has lost access to the regime's inner circle since
the execution of Jang Song-thaek, Kim Jong-un's uncle. Do we
know how China is mediating its lack of access to Kim Jong-un?
Mr. Ruggiero. Well, they have stated publicly that they
believe they have no levers or no way to convince North Korea
to do what we essentially want them to do. And I guess my
argument is that we can talk here about how do we get North
Korea to change its policy, but I think we equally have to talk
about how China needs to change its policy. And the way to do
that is to go after their companies and banks that are allowing
North Korea to do these activities.
Mrs. Wagner. Thank you. I have many more questions, Mr.
Chairman, but I will yield back my time, and I shall submit
them in writing. Thank you so much.
Mr. Yoho. Great questions. And I appreciate it.
We will go to Mr. Gerry Connolly from Virginia.
Mr. Connolly. Thank you.
And I am going to ask as many questions as I can, and urge
you all to be concise. But thank you for being here.
Mr. Klingner, you were talking earlier about the
development of a nuclear capability in the north. How realistic
is that threat, though? I mean, the Korean Peninsula is pretty
intimate. And, you know, even in the nonnuclear sense, the
north has artillery range to Seoul. So isn't it the case that
the detonation of a nuclear device of any magnitude would also
adversely affect the north?
Mr. Klingner. Yes. But they certainly have been pursuing it
for years. We think the Nodong medium-range ballistic missile
is already nuclear capable, that they can already range South
Korea and Japan with nuclear weapons today. We think they have
perhaps 5,000 tons of chemical agent, both pervasive and
Mr. Connolly. Right. I get all that. My question, how real
is the threat of actual utilization of such a weapon on the
Korean Peninsula itself given the proximity of the north and
south to each other?
Mr. Klingner. I think it is the threat that they hope not
to use. But there is sort of a famous story that Kim Il-sung,
the grandfather, asked his generals, including Kim Jong-il, of,
you know, what would we do if we were losing a war? And the
generals all said, we would never lose. But Kim Jong-il said,
what would be the worth of the world without North Korea? So
they may do a Twilight of the Gods, use it in a last ditch
pulling the temple down upon themselves.
Mr. Connolly. Got it.
Mr. Ruggiero, how much leverage does the United States have
with respect to sanctions that we haven't deployed over North
Korea? Because we don't have trade relations. We don't have
economic relations. We don't directly bank with them or invest
in them. I mean, what are the levers here we can use? It seems
to me they are pretty limited.
Mr. Ruggiero. Well, the U.N. Report noted, and others have
noted, that North Korea needs U.S. dollars. And they need euros
Mr. Connolly. Right. But there are lots of ways of getting
Mr. Ruggiero. Well, the ways they are doing it currently is
through the American financial system. So that is a leverage
point there. The second one I would say is that while the law
that was passed by this committee and signed last year was
useful, and nearly doubled the number of designations over the
last year, 88 percent of those are inside North Korea. That is
not the way to get at the international business of North
So if you are asking about leverage, it goes back to an
earlier question, the way you get at North Korea is maybe not
at getting at their cognac or other parts, which is important,
but focusing on the international business that North Korea----
Mr. Connolly. For the record, cognac would be one thing.
Mr. Sherman was talking about Johnnie Walker Black Label.
Cognac, now you are talking serious.
Let me ask the same question about China. And I heard your
testimony. We will stipulate what the Chinese say. But how much
leverage do they have? Now, they just said that they are going
to cease the purchase of coal exports from the north, which
presumably is something pretty injurious to their economy. What
other levers do they have they are not using?
Mr. Ruggiero. So I would say on the coal ban, I would point
out that they had a similar ban in April of last year, and
after that point, they imported $800 million worth of North
Korean coal. So whether or not they abide by the ban is still
up for a decision. I would also go back to the Iran example,
which what we saw was European banks and European companies,
mostly banks, that abided by the U.S. decision to say you want
to do business with Iran, you may lose your access to the
United States. And that happened before European Governments
came to that same decision. That is the attitude we have to
have with China.
Mr. Connolly. Do you believe a robust diplomatic effort by
the United States is still called for and could still be
Mr. Ruggiero. At this time, the North Koreans say they are
not interested in it. But I would say that it could be down the
road after robust sanctions implementation. I think accepting a
freeze at this time would just put their program in place and
have the United States accepting their program as a nuclear
Mr. Connolly. Presumably, when and if that diplomatic
effort needs to be launched, a planned 31 percent cut in the
State Department and USAID's budget would not really be
Mr. Ruggiero. Well, I think the diplomats at the State
Department are more than capable of negotiating a deal with
North Korea if they are ready to do so.
Mr. Connolly. Not if there are 31 percent fewer of them.
You don't have to answer.
I yield back.
Mr. Yoho. Thank you, sir, for your questions, as always.
We are going to go back to Mr. Sherman for another round,
if you guys are up to it. If so, we sure would appreciate it.
Mr. Sherman. I want to build on Gerry's comment about the
need for a robust State Department. We may be able, no matter
how big the State Department is, to send five diplomats or ten
diplomats to Six-Party Talks or any kind of talks. But if we
want sanctions, that means going to every country and trying to
get them to change the behavior of their bank, their
distillery, or I guess if you want cognac, maybe some other
kind. That is incredibly labor-intensive. It is company by
company, country by country.
Mr. Connolly. And that takes a skill set, does it not, Mr.
Mr. Sherman. Yes, it does. But I want to focus on, we saw
the assassination of Kim Jong Nam. It happened to happen
recently. Is that because there was a unique opportunity
because of his travel outside China? Or is that because of a
unique or increased level of desire by the Pyongyang regime to
assassinate him? Was he uniquely vulnerable when he was
assassinated or was there a change in North Korean policy? Dr.
Lee, do you have a view?
Mr. Lee. I think the timing of it is significant. In 1997,
the day before Kim Jong-il's birthday, which is February 16, on
the 15th of February, 1997, Kim Jong-il's nephew was
assassinated in South Korea. Why? Because he had defected and
written an expose on the royal family. And I believe that was
sort of a birthday gift to the so-called Dear Leader by his
agents, to kill him on the eve of Kim Jong-il's birthday.
Mr. Sherman. But has North Korea been trying pretty hard to
kill this uncle every day of the week or did they----
Mr. Lee. The half-brother.
Mr. Sherman. The half-brother, excuse me.
Mr. Lee. Well, I think the half-brother, Kim Jong-nam, was
vulnerable. North Korean agents clearly would have access to
his travel itinerary. But I think they saw it as the best time
to do it, to carry out the act on the day of his return to
China. I think they would have been reticent to do something
like this on Chinese territory. That is why it was in Malaysia.
Mr. Sherman. Did he travel often outside of China?
Mr. Lee. Yes, sir, he did.
Mr. Sherman. So they had other non-Chinese opportunities.
I don't know which of you is most qualified to answer this.
But what are the estimated hard currency and gold reserves of
the North Korean Government? Anybody have a guess? Dr. Lee?
Mr. Lee. I am just a newspaper reader, but for years, there
have been newspaper reports of $1 billion to $4 billion or $5
billion in offshore secret accounts in Europe and in China.
Mr. Sherman. So they trust the international banking
system, or at least they are partners in it. It is not like
they have the currency or the gold in Pyongyang itself. They
are relying on bank accounts.
Mr. Lee. Well, according to the U.N. Panel of Experts
report, most of North Korea's international financial
transactions were denominated in the U.S. dollar from foreign-
based banks, transferred through corresponding accounts in the
Mr. Sherman. But their reserves they are willing to deposit
with foreign-based banks rather than under their mattress?
Mr. Lee. I think that gives us leverage.
Mr. Sherman. It does, and I am surprised they are willing
to do that.
How much does North Korea earn from the export of coal or
anything else that they can actually export from their own
territory? And how does that compare to how much they generate
by exporting labor, whether it be, you know, the workers that
they have sent abroad? Can we put these two sources of foreign
income in perspective?
Mr. Klingner. That is a very good question, sir. I think
the most prevalent estimates of the overseas labor is $200
million to $300 million a year. The coal, I think the limit on
it was going to reduce North Korean income by $800 million a
Mr. Ruggiero. Last year it was $1.2 billion.
Mr. Sherman. One point two billion in coal. Do they export
anything else other than coal from their territory that is
worth talking about?
Mr. Klingner. Other resources. Resources are a large part
of their exports.
Mr. Sherman. And so in addition to the coal, any idea what
the other resources generate?
Mr. Klingner. Some of the resources, minerals, have been
precluded from export by the U.N. resolution.
Mr. Sherman. How willing is North Korea to sell a nuclear
bomb? How many nuclear weapons would they have to have for
their own use before they would think, well, this one might be
extra? Or at least something that we would sell if we could get
a really good deal? I will ask Dr. Lee first.
Mr. Lee. I think the risk is plausible. It is high,
actually. We know North Korea has sold arms to terrorist
organizations. We know North Korea has built a nuclear reactor
in Syria, which the Israelis took out in September 2007. North
Korea is one of the world's----
Mr. Sherman. Are they to the point where, under their own
military strategy, they are close to having an ``extra or not
absolutely essential nuclear device,'' or do they need all the
ones they can produce this year for their own defense strategy?
Mr. Lee. Well, experts vary on what a second strike
capability is, perhaps 40 or 50 bombs. Some people estimate
that North Korea is very close to having 20 right now. And this
will be accelerated in the years to come, their capability.
Mr. Sherman. So you think they would want 40 for their own
defense strategy before they might be willing to sell missile
material. Though, of course, they have already shown the last
decade a willingness to sell a technology kit, if you will,
that was destroyed in Syria. Do you have any comment?
Mr. Ruggiero. I would just say I think they are far more
likely to try and milk any nuclear technology in terms of the
amount of money they can get. So they are far more likely to
duplicate what they did in Syria. So selling the means to be
able to produce missile material. I think North Korea values
their nuclear weapons. I don't think they will actually sell a
device. But they are more than willing to sell UF6, like
reportedly they sold to Libya.
Mr. Sherman. UF6?
Mr. Ruggiero. I am sorry, the material they used for
Mr. Sherman. So they will sell technology, equipment that
can be used to refine uranium or otherwise meld a nuclear
Mr. Ruggiero. My point is there is more money--I mean,
obviously they would get a lot of money if they sold one
weapon. But they can get more money, like their ballistic
missile program, if countries or other groups are interested in
the full nuclear cycle.
Mr. Sherman. While the chairman is being indulgent, I will
also ask you, is this regime so vulnerable that a 20 percent
decline, 30 percent decline in the hard currency that they
spend on their elites could actually be regime-endangering?
This is back to the Johnnie Walker question.
Mr. Ruggiero. Right. So I think we have examples in the
past, Banco Delta Asia in 2005 and other examples, that if we
find the right levers that North Korea is very interested in,
whether it is Johnnie Walker or----
Mr. Sherman. Yeah, we can make them mad. I know that. Can
we endanger the regime?
Mr. Ruggiero. I think there is a way to get them to change
their calculus. Whether we can get the Chinese on board for
changing the regime, that would be the question.
Mr. Sherman. Well, you may not quite change the regime, but
until you are regime endangering, they are not going to give up
the crown jewels.
I will yield back.
Mr. Yoho. I appreciate it. And those were great questions.
If you will indulge me for a few more minutes. Again, if I
look back over history, I was born in 1955, North Korea I think
started around 1945. I am 62, so they are 72 years old. Has
anybody tried to invade them in 72 years?
I look from my standpoint where I am, as a Member of
Congress, as a United States citizen, they don't have anything
really that I want. I would think they should know that, that
in 72 years, nobody has really tried to invade them. They
invaded the south. I would hope that the rest of the world
would look at the threat that they pose getting a nuclear
weapon, and the irresponsibility that we have seen with the VX
nerve agent that we know, the stockpile, with the VX murder of
his half-brother, and with the other murders that we have seen
using the poison needles. Is there anybody else in the world
kind of concerned about this outside of the Asia-Pacific
theater of South Korea and Japan?
Mr. Klingner. Well, I think in the last year particularly,
we have seen a growing international willingness to work
against North Korea. One would have thought it would have been
done after the first three nuclear tests, but it took the
fourth test. And so what we have seen is a new willingness, not
only on the sanctions and the targeted financial measures, but
also going after even legitimate North Korean businesses. And
it is a way of tightening the economic noose.
So as we have tried to finally get stronger, more robust
implementation of our laws and the resolutions, which is still
lagging, but also South Korea and others have gone around the
world talking to their legitimate business partners saying, do
you really want to be doing business with someone who is
involved in slave labor, crimes against humanity, and now using
a chemical weapon of mass destruction in a civilian airport? We
can try to wean away North Korea's business partners.
Mr. Yoho. Yeah, that is pretty bold, when you do that in a
public space like that with a toxic substance that is the most
lethal nerve gas that we know.
Mr. Sherman. If I can interject, and holding Malaysians
hostage in their country.
Mr. Yoho. Right. So I guess what I am trying to get out of
you is how do you involve the rest of the world? Like, this is
a serious problem. Obviously, they don't see it as serious as
we do, or maybe Japan or South Korea, that we need to get the
buy-in for the sanctions to work. How do you go to the U.N. and
say we need world cooperation? Because this is not good for
anybody, not just the region, but it would upset the whole
applecart of the world, not just trade, but, you know,
stability around the world.
How do you get the rest of the world to buy into that and
say we need you at the table to do this? Is this something we
can put pressure on through our U.N. partners and just say, you
know what, we cut off funds until you come to the table and--I
am at a loss here, because I find it very disturbing that not
everybody is standing behind us saying let's go, let's put
these sanctions on and bring this regime--I don't want to say
to an end, but bring the destructive nature of what they are
doing to an end.
Dr. Lee, what is your thoughts on how we accomplish that?
Mr. Lee. I believe the United States is in a unique
position, uniquely well positioned to take that leadership role
to make the point that tougher sanctions are necessary.
Mr. Yoho. Where would you do that? At the U.N.?
Mr. Lee. Well, through the respective U.S. Embassies in
those nations. Give other nations the choice.
Mr. Yoho. Is it an ultimatum?
Mr. Lee. No. Trading with North Korea or with us. No one is
calling for an all-out trade war with China, but U.S. sanctions
against North Korea have been very, very weak, both in degree
Mr. Yoho. And we are at a point where we can't afford to be
Mr. Lee. There is no need to be weak, in my view.
Mr. Yoho. I agree.
Mr. Lee. The self-restraint exercise over the past 70 years
with each North Korean lethal provocation probably has
contributed to the de facto peace in the region, but we have
spoiled North Korea.
Mr. Yoho. Mr. Ruggiero, I am going to go to you and just
ask, in addition to the sanctions following the reinstatement
of the North Korean State Sponsor of Terrorism, Thae Yong-ho
was noted as saying that the best thing that we can do--who is
the highest ranking North Korean defector in decades--recently
said that this was the best way to force change in North Korea
by injecting outside information. And I don't look at it as
propaganda. I look at it as injecting truth to the North Korean
people. Because you have got a society for 70 years who has
only known repression. They don't know what it is outside. And
my wife and I watched a video the other day of the young girl
that came through China and told a very compelling story that
would bring tears to anybody's eyes.
How do you get that story into North Korea? What is the
best way? Is it through the SIM cards, through broadcasting?
All of the above? Leaflets? I would like to hear your thoughts
Mr. Ruggiero. Well, I think all of the above is the right
approach. I think there was a report earlier this week that
North Korea had sent leaflets to South Korea talking about its
own ballistic missile program. And so, you know, I think we
should be meeting back and forth with leaflets. I think you
said SIM cards. I know USB drives are another area that has
been looked at.
I would also, if you don't mind on the prior question, that
is why I would go back to the Iran sanctions model. The
attitude there was to go to all these countries. And I would
just say that, you know, I know the SWIFT financial messaging
was a small amount, but the fact that Belgium thought it was a
good idea to allow SWIFT to conduct transactions with U.N.-
designated banks just shows you the attitude and the problem
that we have. I wouldn't go through the U.N.
Mr. Yoho. I don't understand how they did that or why they
Mr. Ruggiero. I don't either. I have written about how it
is probably a violation of U.S.--excuse me, the POE, the Panel
of Experts, has said it was a U.N. violation. The U.N.-
designated banks using the service was probably a violation of
the law that was passed last year. I think things like that are
areas where we need to be increasing our efforts, our
Mr. Yoho. All right. One final comment from my friend from
Mr. Sherman. I certainly agree on an all-out effort on
information, an all-out effort on the sanctions regime that we
have. But when you hold up the Iran model, keep in mind, that
was a much more vulnerable country because it has to provide a
higher standard of living to its people and because it doesn't
have China in its corner. And in spite of that, we were only
able to extract rather modest limits on its nuclear program. We
are trying to do far more with regard to North Korea.
And I yield back.
Mr. Yoho. Thank you, sir. And I would like to thank my
ranking member and my colleague, Mr. Sherman, as well as all
the other members that were here too, to ask questions. And I
would like to thank the witnesses for coming to share their
expertise on this important hearing and this important issue.
This meeting is adjourned. And thank you guys for your
[Whereupon, at 2:33 p.m., the subcommittee was adjourned.]
A P P E N D I X
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