North Korea’s test of its most powerful and sophisticated ballistic missile to date has sparked a heated debate inside the Trump administration over whether to impose broad new sanctions against Chinese banks suspected of laundering money for the rogue regime now that it is seen as posing a credible nuclear threat to the U.S. mainland.
With the U.N. Security Council holding yet another emergency session on the North Korean nuclear program Wednesday afternoon, the U.S. and powers across Asia scrambled to contain the fallout of the North’s successful missile test, its first in more than two months and the first since President Trump made a 12-day tour of Asian capitals to discuss how to handle Pyongyang.
While analysts and some Republican lawmakers have long called for China-focused sanctions, sources close to the White House say Mr. Trump’s top aides have advised him to tread with “extreme caution” toward such a move because of fears among Wall Street investment firms that it would trigger a harsh backlash from Beijing.
“We’ve got the Goldman Sachs faction that’s still pretty strong around the president, and they say if you start sanctioning Chinese banks, there will be ripple effects and it will damage the global economy,” one source told The Washington Times on the condition of anonymity.
Mr. Trump sought to strike a more optimistic note after a phone call with Chinese President Xi Jinping, whose country is North Korea’s main ally and economic partner.
“Just spoke to President Xi Jinping of China concerning the latest provocative actions of North Korea,” Mr. Trump tweeted Wednesday morning. “Additional major sanctions will be imposed on North Korea today. This situation will be handled!”
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The president has so far followed his predecessor’s lead by urging China to do more to help contain North Korea. The White House said Wednesday that Mr. Trump called on Mr. Xi to use “all available levers” and emphasized “the determination of the United States to defend ourselves and our allies from the growing threat.”
Secretary of State Rex W. Tillerson told reporters that the U.S. government may target additional financial institutions with sanctions following North Korea’s missile launch, adding without elaboration that the U.S. has a “long list of additional potential sanctions.”
Game-changer
In New York, diplomats from the world’s leading powers warned that the suspected range of the North’s latest missile — which theoretically can reach Washington and the East Coast — is a potential game-changer.
France’s ambassador to the United Nations, Francois Delattre, said before Wednesday’s emergency Security Council meeting that the scope and scale of the North’s nuclear threat have moved past being regional and potential.
“Weakness or ambiguity are simply not an option,” Mr. Delattre said.
But analysts said it’s not clear how far China is willing to go — even toward fully implementing sanctions that Beijing has agreed to participate in previous U.N. votes. Beijing is said to have two main worries: that an abrupt collapse of the Kim Jong-un regime in Pyongyang could spark a massive refugee crisis and that a political reunification of the peninsula led by South Korea would put a powerful U.S. ally right on its border.
Publicly, Chinese officials have reacted with caution to the latest missile test by North Korea. A government spokesman in Beijing said China “strongly demands” that Pyongyang abide by U.N. resolutions and should refrain from actions that “heighten the tension on the Korean Peninsula.”
North Korea’s state media offered a glowing assessment of the missile test while suggesting that the isolated country may be easing the tempo of its testing now that it has a missile that can reach what it sees as its No. 1 enemy.
“After watching the successful launch of the new type ICBM Hwasong-15, Kim Jong-un declared with pride that now we have finally realized the great historic cause of completing the state nuclear force,” said one state TV broadcaster. The broadcast showed the order that Mr. Kim personally signed for the missile launch.
Mr. Trump, who mocked Mr. Kim as a “sick puppy” at a tax cut rally in Missouri on Wednesday, faces new pressure to respond with more than rhetoric. With heavy sanctions already boxing in the tiny North Korean economy, the likely next step could be to punish Chinese banks known to be assisting the North Korean regime.
The Treasury Department targeted a host of Chinese entities and individuals for having supported illegal North Korean financial activity in June. But U.S. officials blocked only one Chinese bank from access to the global financial system.
Reuters reported at the time that Treasury officials employed a seldom-used USA Patriot Act authority to label the Bank of Dandong an institution of “primary money laundering concern,” thereby cutting it off from the global financial system.
“To the Trump administration’s credit, that was the first action against a Chinese bank since 2005,” said Bruce Klingner, a Northeast Asia scholar at The Heritage Foundation who once ran the CIA’s Korea office.
The question is why the White House has dragged its feet since, said Mr. Klingner, who added that Treasury officials “who work sanctions will tell you they have a list in a draw of Chinese entities that are currently in violation of U.S. law by conducting money laundering for North Korea.”
“The U.S. has imposed some $12 billion in fines for European banks that laundered money for Iran, but we have not put a single penny in fines for Chinese banks that launder for North Korea,” Mr. Klingner told The Times.
Rep. Edward R. Royce, California Republican and chairman of the House Foreign Affairs Committee, called on the Trump administration in September to authorize sanctions against 12 major Chinese banks, including the world’s largest, the Industrial and Commercial Bank of China, as a way to pressure Beijing to squeeze North Korea.
White House reluctance
But Mr. Trump has balked, according to one source say, because because “there’s a lot of pro-China sentiment around the president right now from people who are financially pretty deeply involved with China.”
“These are people allowed to talk to the president directly and alarm him that we need China involved on so many things, so let’s not antagonize Beijing,” said the source, who added that the message has been amplified since chief strategist Stephen K. Bannon and White House adviser Sebastian Gorka, who lobbied hard for Chinese bank sanctions, left the administration.
The result has given others, such as National Trade Council Director Peter Navarro and National Economic Council Director Gary Cohn, more influence over Mr. Trump, the source said.
Mr. Cohn, a registered Democrat, spent 11 years as chief financial officer at Goldman Sachs before joining the administration. The company has recently sought high-level investment deals with China that could face undesired scrutiny in Beijing should Washington suddenly sanction Chinese banks.
Goldman Sachs has teamed with China’s top sovereign wealth fund, the China Investment Corp., to invest at least $5 billion mainly in U.S. manufacturing. The Wall Street Journal broke news of the deal just as Goldman Sachs CEO Lloyd Blankfein joined a delegation of high-level investment bankers and U.S. business leaders who accompanied Mr. Trump on his trip to Asia, a whirlwind tour that included a stop in China.
Some regional analysts say there are other strategic avenues the White House could pursue.
Michael Pillsbury, a Trump transition adviser who heads the Hudson Institute’s Center for Chinese Strategy, declined to comment on the Chinese banks debate, but said the White House could pursue a “supersanctions” approach once on the table during the George W. Bush administration.
“It is not just financial [sanctions], but involves a Bush system set up in 2002 called the Proliferation Strategy Initiative that would stop any ships in international waters suspected of carrying cargoes not authorized for North Korea,” Mr. Pillsbury said. “The White House has also not yet gone all the way on asking Pacific Commander Adm. Harry Harris to commence maximum military displays of force to get the attention of Kim Jong-un — nor have we gone all the way with diplomatic outreach and making offers to start drafting a peace treaty, as proposed by China in 2015.
“The president has a wide range of additional options from which to chose,” Mr. Pillsbury said.
• Dave Boyer contributed to this article, which is based in part on wire service reports.
• Guy Taylor can be reached at gtaylor@washingtontimes.com.
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