Rush to war? How North Korea sanctions have not been exhausted.

Defying a popular image of North Koreans as scraping by on rice, a new class of moneyed elites drives luxury cars and shops in pricey stores. And that, say some experts, creates a vulnerability to sanctions on imports that could pressure the regime.

Damir Sagolj/Reuters
People walk in front of the Monument to the Foundation of the Workers' Party in Pyongyang, North Korea, April 16, 2017.

They are known as “donju”: North Korea’s new class of moneyed elites, who have made their fortunes in their country’s small but expanding private sector.

Despite the universal image of North Koreans as scraping by on a meager bowl of rice and clad in drab fatigues, the “donju” – Korean for “masters of money” – drive around in imported luxury automobiles, shop in pricey designer stores, and live or dine in a section of the capital dubbed “Pyonghattan.”

And it is this new class of elites that some international experts say should be targeted with sanctions as a means of pressuring the regime of Kim Jong-un over his country’s galloping nuclear weapons and ballistic missile programs.

“The reality is that Kim is increasingly opening up the country to private enterprise and building up the loyalties of the new elites by allowing them access to the cash and foreign products they need to live their comfortable lifestyles and to make more money,” says Melanie Hart, director of China policy at the Center for American Progress in Washington.

“But once you have an elite that is dependent on importing everything from ski-lifts and Audis to Coca-Cola to maintain that lifestyle and to build more wealth,” she adds, “that creates a broad vulnerability for the international community to exploit.”

Already high tensions between North Korea and the United States and its allies in the region were sent skyward over the weekend as Pyongyang carried out its sixth and by far most powerful nuclear test Saturday. To rub in the salt, the North released photos claiming to show a miniaturized nuclear weapon capable of being mounted on a long-range ballistic missile – the kind of missile Mr. Kim vows to perfect to be able to reach US East Coast cities.

The nuclear test once again raised alarms over threatened US military intervention to take out North Korea’s nuclear and missile sites, but signals out of the Trump administration suggest that – at least for now – diplomacy will be employed to respond to the North’s latest provocation.

Nikki Haley, the US ambassador to the United Nations, declared at an emergency UN Security Council meeting Monday that North Korea is “begging for war.” But she also announced that the US will propose a new sanctions resolution that it hopes to put to a council vote next week.

Seven UN resolutions

Beginning more than a decade ago, the UN has passed seven resolutions targeting North Korea’s illicit weapons activities, and the public perception may be that, short of military action, the world has about exhausted the sanctions options and other avenues for pressuring the Kim regime.

But many diplomats and regional experts say the international community still has tools at its disposal to apply greater pressure.

Until now, most sanctions on the North have focused on the country’s income-producing exports – such as coal and other raw materials destined largely for China. But imports (both of consumer goods for the new elites and the parts and technology needed for the weapons programs) should be more aggressively targeted, they say.

Some even propose an oil embargo.

Moreover, the US has only begun to apply the kinds of unilateral sanctions on North Korea that it did on Iran and that ultimately helped create the environment for a diplomatic settlement of the Iran nuclear crisis, some experts note.

“The reality is that North Korea is still nowhere near as pressured with sanctions as other governments with whom we’ve had security problems, including Iran,” says Nicholas Eberstadt, an expert in Korean Peninsula security at the American Enterprise Institute in Washington.

“There’s much more to be done to restrict their access to financial markets – and by the way, a lot of that could be accomplished by the US unilaterally,” he adds. “We hold the advantage of having the world’s reserve currency, and we should employ that” as the US did in sanctioning Iran.

Opening to private enterprise

The conventional wisdom has been that the poor and despotic North Korea simply doesn’t have the domestic pressure points of, say, an Iran. But that picture changed once the Kim regime decreed an opening to private enterprise in the early 2000s and made economic growth a primary goal, Dr. Eberstadt says.

Sanctions targeting the “donju” class’s sources of wealth are one way of upping the pressure on Kim. But Eberstadt says his close study of the North Korean economy tells him that the regime continues to benefit from a steady inflow of outside revenues.

“Under Kim Jong-un the exchange rate has stabilized and the currency isn’t falling,” Eberstadt says. Last year the economy grew by 5 percent. “That suggests there’s an untracked source of international revenue, one that serves the purposes of the regime and the elites.”

But if the US has a means of seriously restricting North Korea’s access to dollars – and thus pressuring Kim – why hasn’t it gone with it full bore?

The reason, Dr. Hart of the Center for American Progress says, is that the US hasn’t wanted to alienate third countries – like China – by targeting their companies or financial institutions doing business in dollars with North Korea.

“We have this tool that is our big advantage, but the reason we always hesitate to really use it is that we have other irons in the fire with these countries and companies,” she says.

“When it comes down to it, the White House has wanted to avoid blowing up [deals with other countries and their companies] over North Korea,” Hart says. “But when we have the Pentagon telling us how messy and deadly any military option would be, I think we need to do more than scratch the surface of every other path forward before” resorting to military intervention.

Doubts about the consumer class

Some point out that the US has done little to implement the new sanctions the US Congress approved over the summer. And not everyone agrees in any case that the so-called Hermit Kingdom has really evolved to the point where financial sanctions targeting the consumer class and its outside partners would have any impact.

“Unlike Iran, the North Korean regime does not respond to public pressure, and I do not agree that there is an avenue opening up for that kind of pressure any time soon,” says Daryl Kimball, executive director of the Arms Control Association in Washington.

The only measure that might work at this point, he adds, is a full oil embargo on the North – but that would require broad international buy-in, and so realistically could only be implemented if “coupled with a serious diplomatic effort” that includes direct US-North Korea talks.

“Sanctions are useful to get the North Koreans to readjust their cost-benefit calculation, but sanctions alone aren’t going to convince them to stop their missile tests” and nuclear advances, Mr. Kimball says.

American Enterprise’s Eberstadt says more can be accomplished with sanctions, but he also cautions that nothing is likely to dissuade Kim from his national security goals. As a result, he says US and international efforts should focus on “threat reduction” rather than on denuclearization.

“Sanctions can reduce the killing power of the DPRK,” he says using the acronym for the North’s full name, “they can slow their nuclear quest and slow the ballistic missile tests. But what it comes down to,” he adds, “is that governments a lot less weird than North Korea’s don’t negotiate away what they see as their national interests. And the DPRK sees its nuclear and missile programs as vital to its national security.”

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