Why Is the US More Likely to Sanction Chinese Companies for Supporting Iran than for Supporting North Korea?

Lost amid the fallout of President Trump’s firing of FBI Director James Comey last week was the U.S. Treasury Department’s announcement of new sanctions on individuals and companies found to be supporting Iran’s missile program. Four of the seven new sanctions targets are Chinese. This matters because although this is the second time since President Trump has taken office that the U.S. has sanctioned Chinese nationals for supporting Iran’s weapons programs, his administration has not yet imposed any sanctions on Chinese nationals and companies for supporting North Korea. Though treating China lightly on North Korea sanctions is consistent with the approach of the Bush and Obama administrations, it makes little legal or strategic sense today. After all, it was North Korea, and not Iran, that tested another potentially dangerous and threatening missile yesterday.

According to Treasury, Ruan Runling, a Chinese national, and three Chinese companies associated with Ruan sold over $17 million worth of navigation-applicable technology and guidance systems to Iranian companies controlled by Iran’s Ministry of Defense for the production of missile guidance technology for the Iranian military. As of the date of the order last week, Ruan and his affiliated companies are “blocked,” which means that “all property and interests in property” they might have that are in the United States is now frozen and cannot be transferred or withdrawn. Furthermore, all transactions between these targets and U.S. persons (including foreign companies resident in the United States) are now prohibited.

The main legal basis for these sanctions is the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. 1701 et seq., which delegates broad powers to the President to impose sanctions on individuals he deems threats to the national security of the United States. Iran’s various weapons programs have long been deemed to constitute such a threat under Executive Order 13382, issued by President Bush in 2005.

But individuals and companies supporting North Korea’s weapons programs are also subjected to sanctions under the same statute and several executive orders. Indeed, U.S. sanctions against North Korea are, if anything, broader than those currently imposed against Iran. Not only do they apply to any individual or entity that directly or indirectly assisted North Korea’s weapons programs in ways similar to the Iran sanctions, but U.S. sanctions on North Korea also apply to anyone who has sold luxury goods or supported illegal financial transactions like money laundering, or indirectly or directly supported the North Korean government or its ruling party.

The key question for U.S. sanctions on North Korea is how they will be applied to foreign nationals, since the U.S. essentially imposes an embargo on all transactions between the U.S. and North Korea and the U.S. has never done any serious trade with North Korea since before the Korean War. As everyone is well aware, Chinese individuals and companies are the key source of outside economic support for North Korea.

Yet as Politico recently reported, sanctions on Chinese companies supporting North Korea’s missile programs or the North Korean government’s money laundering schemes are rare. Last September, the U.S. sanctioned Dandong Hongxiang, a Chinese company, for supporting North Korea’s weapons programs and money laundering operations. But although the U.S. seized 25 bank accounts belonging to Dandong, it did not sanction the Chinese banks that held the accounts and facilitated the payments to North Korean front companies.

According to former U.S. government officials, the U.S. has spent years compiling a long list of Chinese individuals and companies whom it can immediately sanction for violating its North Korea sanctions. The argument against imposing these sanctions is that doing so will undermine Chinese cooperation in pressuring North Korea. But even if that cooperation from China was effective (and the evidence is thin so far), any sanctions would target individual Chinese companies and individuals. It does not sanction the Chinese government in any way, nor does it impose an embargo on trade akin to U.S. trade with Cuba. It would simply sanction Chinese companies and individuals for doing what the Chinese government claims they should not be doing anyway: supporting North Korea’s weapons programs.

To be sure, imposing sanctions will not solve the North Korea problem. But imposing sanctions is a more tangible and sustainable action to show U.S. resolve on North Korea than making empty threats of military action. If imposed on Chinese financial institutions, it could also put serious new pressure on China’s leadership and economy. At the very least, it might show China that the U.S. government cares as much about North Korea’s weapons program as it does about Iran’s. That would be a good start.