U.S. Threatens China Over North Korea Sanctions

The Trump administration threatened on Tuesday to impose further sanctions on China if Beijing doesn't do more to shut down banks and other Chinese firms aiding North Korea.

If China doesn't implement the United Nations sanctions regime it has backed, "We will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system," Treasury Secretary Steven Mnuchin said on Tuesday at a conference broadcast on CNBC.

U.S. officials and U.N. investigators have said China hasn't moved robustly enough to shut down networks they say are financing North Korean leader Kim Jong Un's regime and weapons programs, including activities sanctioned by the U.N.

Earlier Tuesday, China's Foreign Ministry spokesman Geng Shuang said Beijing strictly enforces all U.N. resolutions.

Washington is intent on depriving Pyongyang of all its revenue sources even if it means unilaterally targeting firms in the world's second largest economy, Treasury's assistant secretary for terror finance Marshall Billingslea said Tuesday in testimony to a House Foreign Affairs subcommittee.

Treasury's recent sanctions targeting a Chinese bank were meant to be a "message to China," Mr. Billingslea said. "We are capable of tracking North Korea's trade in banned goods, such as coal, despite elaborate evasion schemes, and we will act even if the Chinese government will not."

China, sitting on the U.N. Security Council, has backed a steady increase in financial pressure on North Korea, and Monday approved new bans on textile exports, a cap on oil imports and limits on overseas workers. U.N. sanctions already ban coal and other commodity exports from the country, hitting one of Pyongyang's biggest income streams.

The U.S. initially asked the Security Council to approve a complete oil embargo and asset and travel freezes targeting the North Korean leader, but eased those demands, diplomats said, to win support from China and Russia, which each wield veto power on the Security Council.

U.S. officials say efforts to rein in the North Korean regime are being undermined by China's trade and finance relationship with Pyongyang.

"China's full and effective enforcement of U.N. sanctions is therefore essential," Mr. Billingslea said. "Unfortunately, I cannot assure the Committee today that we have seen sufficient evidence of China's willingness to truly shut down North Korean revenue flows, expunge the North Korean illicit actors from its banking system, and expel the North Korean middlemen and brokers who are establishing webs of front companies."

He said that if China wishes to avoid future measures, such as those imposed on Bank of Dandong and others, "then it urgently needs to take demonstrable public steps to eliminate North Korea's trade and financial access."

House Foreign Affairs Committee chairman Ed Royce, (R., Calif.), said Washington needs to increase the number of companies and individuals targeted by Treasury under the North Korean sanctions regime.

"We must target major Chinese banks doing business with North Korea such as China Merchants Bank and even big state-owned banks like the Agricultural Bank of China," both of which have operations in the U.S., Mr. Royce said.

On Monday, China's central bank issued a directive instructing state-owned and commercial lenders to take steps to comply with all U.N. resolutions, including freezing accounts and blocking transactions linked to clients under sanction.

A number of Chinese state-owned banks have been blocking North Koreans from opening new accounts this year, according to bank employees based in cities near the North Korean border.

A China Construction Bank representative said North Koreans have been blocked from withdrawing money, while an employee at Agricultural Bank of China said existing North Korean-owned accounts have been frozen.

Susan Thornton, the State Department's top diplomat on Asia, criticized Russia at Tuesday's hearing, saying in her prepared remarks that the U.S. would "use the tools we have at our disposal" if Moscow and Beijing don't improve their implementation of U.N. sanctions.

North Korea relies on oil imports from Russia. Treasury last month sanctioned two Russian-operated firms accused of selling oil to North Korea.

The senior Trump administration officials said further sanctions targeting foreign banks and firms are to come, as the administration maps out North Korea's global trade, finance and shipping networks.

"We intend to deny the regime its last remaining sources of revenue, unless and until it reverses course and denuclearizes." Mr. Billingslea said. "Those who collaborate with them are exposing themselves to enormous jeopardy."

--Felicia Schwartz in Washington and Chun Han Wong and Xiao Xiao in Beijing contributed to this article.

Write to Ian Talley at ian.talley@wsj.com

(END) Dow Jones Newswires

September 12, 2017 13:32 ET (17:32 GMT)