Mnuchin Threatens More Sanctions on China Over North Korea

  • Treasury secretary invokes potential ban from ‘dollar system’
  • He urges obeying ‘historic’ new United Nations sanctions

UN Sanctions Cut 55% of N. Korea Gas, Diesel

Treasury Secretary Steven Mnuchin warned the U.S. may impose additional sanctions on China -- potentially cutting off access to the U.S. financial system -- if it doesn’t follow through on a fresh round of United Nations restrictions against North Korea.

The UN Security Council added new sanctions against North Korea after leader Kim Jong Un’s regime conducted its sixth and most powerful nuclear test. Mnuchin echoed the U.S. envoy to the UN, Nikki Haley, in calling the sanctions “historic” even though they didn’t include U.S. demands for a full oil embargo and a freeze on Kim’s assets. The new measures include limiting North Korea’s imports of petroleum products and banning textile exports.

“If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system -- and that’s quite meaningful,” Mnuchin said during an event at CNBC’s Delivering Alpha conference in New York on Tuesday.

The Treasury Department under President Donald Trump has broadened its reach on North Korea by slapping sanctions against Chinese individuals and entities it has accused of helping Pyongyang’s development of nuclear weapons and ballistic missiles.

“North Korea economic warfare works,” Mnuchin said. “We sent a message that anybody that wanted to trade with North Korea -- we would consider them not trading with us.”

China’s Ministry of Commerce said it wouldn’t immediately comment on the threat of fresh measures. The People’s Bank of China said this week that it has ordered domestic banks to suspend opening or changes to accounts for clients on the UN sanction list and also prohibited other financial services for those clients.

"The premise is problematic, as China has executed all UN sanctions on North Korea," said He Weiwen, a senior fellow at the Center for China and Globalization in Beijing and a former official at the Ministry of Commerce, calling Mnuchin’s remarks "pure bluff."

Trump is said to plan a visit to China in November. China’s State Councilor Yang Jiechi told U.S. Secretary of State Rex Tillerson on Tuesday that the Asian nation is looking for "positive" achievements during the visit, and again called for efforts to seek cooperation and manage differences, according to a Ministry of Foreign Affairs statement on Wednesday.

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Small Step

On Tuesday, Trump appeared to downplay the significance of the UN sanctions.

“We think it’s just another very small step,” Trump told reporters at the White House one day after the Security Council’s unanimous vote. “Not a big deal. Not big. I don’t know if it has any impact but certainly it was nice to get a 15-to-nothing vote. But those sanctions are nothing compared to what ultimately will have to happen.”

At a hearing of the House Foreign Affairs Committee on Tuesday, Republican Chairman Ed Royce said the U.S. should target major Chinese banks, including Agricultural Bank of China Ltd. and China Merchants Bank Co., for aiding Kim’s regime.

Russia also came in for criticism. Assistant Treasury Secretary Marshall Billingslea said in prepared remarks to the committee that North Korean bank representatives “operate in Russia in flagrant disregard of the very resolutions adopted by Russia at the UN.”

While China and Russia supported the latest UN sanctions, officials made clear they were troubled by Haley’s comments in the Security Council that the U.S. would act alone if Kim’s regime didn’t stop testing missiles and bombs. They emphasized the world body’s resolution also emphasized the importance of resolving the crisis through negotiations.

“The Chinese side will never allow conflict or war on the peninsula,” Foreign Ministry spokesman Geng Shuang said in a statement on Tuesday.

Read More: China and Russia Warn U.S. Against Regime Change

China and Russia -- North Korea’s biggest economic patrons -- share the view that North Korea won’t give up nuclear weapons without security guarantees, and they don’t see the point in fomenting a crisis on their borders that benefits American strategic goals. They also don’t want Kim provoking the U.S. into any action that could destabilize the region.

“Sanctions of any kind are useless and ineffective,” Russian President Vladimir Putin told reporters earlier this month at a summit in Xiamen, China. “They’ll eat grass, but they won’t abandon their program unless they feel secure.”

— With assistance by Jeff Black, Kambiz Foroohar, Ting Shi, David Tweed, and Miao Han

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