NightWatch

For the Night of 9 June 2009

South Korea-North Korea: The Finance and Strategy Ministry in Seoul announced on 9 June the government imposed financial sanctions on three North Korean companies effective 1 June. The three North Korean companies are Korea Mining Development Trading Corp.; Tanchon Commercial Bank and Korea Ryongbong General Corp., adding the sanctions were imposed in accordance with the U.N Security Council's decision to condemn the North for launching a long-range missile 5 April.

The sanctions prohibit South Korean companies from engaging in financial and commercial transactions with the North Korean companies and freeze the latter's assets. The three North Korean companies subject to sanctions are said to engage in missile and conventional weapons trade. The mineral and general corporations allegedly produce and export missiles and the bank provides the funding for the two companies.

South Korea will impose additional sanctions against North Korean companies if the U.N. Security Council produces a new resolution condemning the North's second nuclear test late last month.

The Yonhap article reported that no South Korean company has traded with North Korean companies and no North Korean companies have assets in South Korea. Nevertheless, Seoul imposed the sanctions to participate in the UN decision, the South Korean government said.

(Note: Yonhap is incorrect in this assertion. Agence France-Presse, quoting Chosun Ilbo, reported 9 June the Seoul government provided the US with details of 10-20 bank accounts that South Korean companies or civic groups use to remit money to the North for business or aid projects. An unidentified government official, said the accounts are suspected of being used for transactions related to counterfeiting, drug dealing and money laundering. Most are in Chinese banks but some are in Switzerland and elsewhere the official said.)

This action has little practical direct effect on North Korea. The extent of South Korean trading connections is such, however, that it could have large indirect effect, depending on whether the South Koreans follow the US practice of applying unilateral sanctions to foreign companies – such as banks -- that deal with the three North Korean firms.

The other noteworthy point is the imposition of unilateral sanctions to fill gaps in UN Security Council sanctions resolutions. North Korean behavior apparently has prompted South Korea to follow the US and Japanese lead in further isolating and hobbling North Korea.

Finally, the South’s leaders also want to demonstrate that they are not intimidated by North Korea’s behavior. They want to show the North that they know a great deal about its most secret activities and they have a wide range of resources for imposing penalties on the North without going to war.

At Kaesong, JoongAng Daily Online reported on 19 June that Skin Net, which produces fur and leather clothes, has submitted necessary documents to the Kaesong Industrial District Management Committee, which oversees Kaesong operations for the South, for closing operations and withdrawing from the complex, the company's president Kim Yong-gu said on 8 June. Skin Net entered Kaesong in September 2007 and has 103 employees. Skin Net plans to close by the end of June.

Kim explained that threats to employees' safety and declining orders forced him to shut the Kaesong plant. He said the North’s detention of a South Korean worker since 30 March was the decisive factor behind his decision to leave Kaesong.

"Without his case, we wouldn't have done this," he said. "We could live with other problems that might arise while doing business in the North. But they've taken away one of our citizens." Kim said he'd be willing to re-enter Kaesong "as long as the safety of our employees is guaranteed."

Other South Korean companies have moved equipment outside the Kaesong factories, but Skin Net is the first to completely halt its operations in the complex since it opened in 2003. The complex was built as part of the inter-Korean joint economic project, following the first-ever summit between the two Koreas in 2000. Before the North declared all contracts void last month, 106 South Korean companies employed about 38,000 North Koreans there.

South Korea and North Korea are scheduled to meet for the second round of government-level talks tomorrow in Kaesong to discuss future operations at the complex. The North is not expected to discuss the detained worker. The results on the talks are likely to influence other companies in deciding whether to stick it out.

North Korea: Update. ITAR TASS reported today that Russia has indications that a long range missile launch is being prepared at the east coast site. The area closure lasts until 30 June.

North Korea declared that it will use nuclear weapons as a “strong defensive means … as well as a merciless offensive” in order to protect its “dignity and sovereignty,” The Associated Press reported on 9 June, citing a commentary in the state-run Minju Joson newspaper. The statements, relayed by the Korean Central News Agency, appeared to be the first time Pyongyang has referred to the nuclear program as having an “offensive” purpose.

The significance of the language usage is a bit confusing because nuclear weapons delivery systems are always offensive, which is why they serve as a deterrent. One notion is that North Korean would only use nuclear weapons on warning of war, that is, when it perceived the outbreak of war was unavoidable and presumably imminent and to spoil an attack.

The other notion is that the weapons would be used to support a North Korean attack that started a war of national reunification. Most strategists presume that the North would use all of its capabilities in that event.

The statement may be read to reinforce both views and probably others. It is one of the few recent statements indicating the North’s leaders have not given up pursuing Kim Il-sung’s legacy goal of reunifying Korea, including by force.

China-UN: Yonhap reported that "China has agreed on a compromise draft resolution presented by the U.S. and the Western countries," a diplomat said, asking anonymity. "We expect an announcement on a final agreement will be made soon."

Russia has yet to agree to the draft, citing the need to consult its capital, the diplomat said. "However, we understand negotiations have reached the terminal station."

The five veto-wielding permanent members of the U.N. Security Council, plus South Korea and Japan (P-5 plus 2), have met several times since the North's 25 May nuclear detonation, but have failed to narrow differences over the level of sanctions. All agree, however, on the need for sanctions.

According to Yonhap, the 35-point draft resolution bans any further nuclear and ballistic missile tests and calls for overall arms embargoes and enhanced financial sanctions on North Korea, other sources said.

The draft also calls for U.N. members to escort any North Korean vessels assessed to be carrying parts of weapons of mass destruction to their territorial waters for cargo inspections, if the North Korean ship resists inspection in international waters.

China’s support for sanctions is critical because it is the most important trading partner with the North now that it has cut most ties with South Korea and Japan. North Korea depends on China for energy, food, daily necessities and, most importantly, normally permissive access to the outside world.

Pakistan: A suicide bombing attack today on the five-star Pearl Continental Hotel in Peshawar has left 11 dead and more than 60 injured. North-West Frontier Province Information Minister Iftikhar Hussain said the attack was in response to the ongoing military operation in the Swat Valley, Geo TV reported. The Pearl Continental Hotel is owned by the same people who owned the Marriott Hotel in Islamabad which was bombed in September 2008.

Authorities speculate that Pakistan Taliban leader Baitullah Mehsud’s organization was responsible for the attack, Financial Times reported, quoting a security official. The use of multiple suicide bombers in vehicles against a hotel frequented mainly by foreigners, including Americans, has almost become Mehsud trademarks.

In Karachi, Salahuddin Babar Khatak, Inspector General of Sindh Police, ordered security to be tightened for all important persons, public places, five-star hotels, schools and hospitals, and additional police and rangers have been deployed. Khatak also ordered increased patrolling as well as snap checks of entrances and exits at important sites in Karachi.

Also in the northwest today the government renewed its bounty of Rs 50 million ($616,500) on Maulana Fazlullah, the Taliban commander in Swat Valley, Press Trust of India reported. Additional bounties of Rs 10 million ($123,000) were offered for 20 of Fazlullah's deputies, including his spokesman Muslim Khan.

Much higher bounties have been notoriously unsuccessful for the US in this region. It will be curious to learn whether they work for Pakistan. More later.

In Waziristan, authorities have declared an indefinite curfew in Bannu in efforts to maintain security, The News reported. Trading centers in areas near six police stations were immediately shut down, and residents were confined to their homes immediately after the curfew was announced over loudspeakers and through aerial firing. As mentioned previously, security operations in Waziristan appear to be next.

Syria-Israel: Syria has sent a message through Washington, indicating that it is interested in renewing peace talks with Israel under Turkish mediation, Israel National News, Haaretz and other Israeli news services reported 9 June. Turkish Foreign Minister Ahmet Davutoglu said during talks with U.S. officials recently that Damascus wants to pick up with talks where they broke off, and that all sides are awaiting Israel’s response.

It is probably a coincidence but the timing of this new item after the Lebanon election setback for Syria seems to be a face saving move for Syria and would seem to help the US special envoy in trying to restart peace talks.

Russia: Update. Interfax reported 9 June that the construction of aircraft carriers for the Russian Navy's future attack groups will begin by 2013, according to an unnamed source in the Russian navy. The source said, "The development policy of the Russian Navy, which covers the period until 2050-2060, envisages the creation of five to six aircraft carrier groups."

The target period has been extended but the number of aircraft carrier attack groups is consistent with statements made last year, despite the recession.

End of NightWatch for 9 June.