Post a Comment On: China Matters

Update:

The Washington Post’s Glenn Kessler weighs in with what I regard, in my dyspeptic mood, as an inevitable piece of behind-covering by Treasury officials trying to explain how they couldn’t move $25 million dollars in 12 days.

The North Korean diplomats, meanwhile, resisted the U.S. proposal of setting up a humanitarian fund with the money. They would not fill out forms, provide bank account numbers, or sign waivers that would allow the money to be released to a humanitarian fund. They stuck to a simple message: "We want our money."

The Treasury officials left China thinking no deal was possible...

Not much clarity here beyond an attempt to ascribe the inability to move $25 million to North Korean “show me the money” goofiness.

Recall that the original agreement was that the money would be deposited in a North Korean Foreign Trade Bank account at Bank of China, not some “fund”, and Pyongyang “pledged” to spend it on humanitarian and educational purposes.

The DPRK has proposed the transfer of the roughly $25 million frozen in BDA into an account held by North Korea's Foreign Trade Bank at the Bank of China in Beijing.

"North Korea has pledged, within the framework of the Six-Party Talks, that these funds will be used solely for the betterment of the North Korean people, including for humanitarian and educational purposes. We believe this resolves the issue of the DPRK-related frozen funds.

In other words, the North Koreans would get their money in their account and then they would promise to spend it on the widows and orphans. I expect Kin Jung Il would be on his best behavior and, even if he was stupid enough to blow it on cognac and cigarettes, who cares? We’re trying to de-nuclearize North Korea, not set up the Pyongyang branch of the Ford Foundation to disburse $25 million transparently and effectively.

As to whose idea this was, judging from remarks Daniel Glaser made at a press conference in Beijing on March 19 announcing the “humanitarian and educational” boondoggle, he seems to be saying that it was North Korea’s idea, not America’s:

QUESTION: After saying that it was totally up to the Macanese authorities how to hand over the money, why is the U.S. announcing this?

DEPUTY ASSISTANT SECRETARY GLASER: We had - I was in Macau just on Saturday, and we discussed a number of things with the Macanese authorities. It was an opportunity for us to present the results of the investigation that we had conducted into BDA, and we did that. It was an opportunity to discuss the finalization of the Section 311 rule, and it was an opportunity to discuss the overarching mechanisms that could be used with respect to bringing a resolution to the funds transfer issue. Now this is a North Korean proposal, and both we and the Macanese thought that it was a very promising proposal. So I don't think this is about anyone imposing anything on Macau. I think this works very well for Macau, and I think that they found it to be a promising proposal. It will have to be accomplished in conformity with their laws, and I'm sure it will be.

and

QUESTION: You said you were taking the North Korean proposal as is. This is a North Korean proposal that you have accepted, that the United States had no part in this proposal whatsoever. By doing that are you accepting that this was a problem - an issue with the bank - and that the bank is to blame for this issue, or does North Korea share some of the problem in this whole issue?

DEPUTY ASSISTANT SECRETARY GLASER: This was a North Korean proposal. It was actually put to us in the bilateral working group that we had with them. So yes, it's a North Korean proposal. With respect for who's to blame, I think there's a lot of blame to go around. There were problems with the bank that we've articulated, and we've also articulated problems with many of the account holders. I think that there's a lot of blame to go around.

No “fund” there. And a lot of “North Korean proposal”.

Maybe “fund” is just another example of the sloppy verbiage that the U.S. has been applying to this situation since December, and they were just talking about the North Korean account at BOC.

Or maybe the U.S. (or the Treasury Dept.) decided to throw some more sand in the gears by trying to place new obligations on the Bank of China and North Korea for tracking, disposing of, and accounting for the money through a “humanitarian fund” as we saw fit.

The theme that China, as Bank of China’s regulator, would have “obligations” concerning the account had already made an unwelcome appearance in March.

QUESTION: The fact that these are going into a Bank of China account - does that suggest that China will have some responsibility in ensuring that the funds are used appropriately?

ASSISTANT SECRETARY HILL: I think any regulator has certain responsibilities, and I would put the Chinese in that category, as would any regulator of any bank account anywhere.
...
QUESTION: Who's going to be in charge of the humanitarian funds?

DEPUTY ASSISTANT SECRETARY GLASER: I think the specific modalities of this have yet to be worked out, but it will be probably deposited into a foreign trade bank account at the Bank of China in Beijing. And as we said, we have assurances that it will be used for these purposes - humanitarian purposes. And this is going to be - and these assurances have been made in the context of an ongoing process, an ongoing dialogue. And we are going to use that to make sure that our concerns are addressed and that commitments are lived up to.

Maybe in March, the U.S. expected to be sitting on the sidelines while North Korea floundered in discussions with Macau trying to implement this ridiculous agreement.

After all, a significant chunk of the frozen funds belonged to foreigners involved in North Korean business and one of them, Colin McAskill, had been quite vocal concerning his unwillingness to see his money vanish into the maw of Kim Jung Il’s “humanitarian and educational” venture.

But then the Chinese demanded that the U.S. return to Beijing to iron out the kinks—including obstacles never specified that made the Chinese government unwilling to handle the funds—and all of a sudden Christopher Hill and Daniel Glaser had the job of making the deal work, but couldn’t or wouldn’t git ‘er done.

So maybe the U.S. is trying to claim credit for proposing the “humanitarian fund” because otherwise it would be clear that the Treasury/State team had neither initiated nor accomplished anything positive—indeed had made the North Korean proposal impossible to implement—during the last two dreary weeks in Beijing.

Below is the original post, Groundhog Day for BDA Funds, outlining the apparent lack of progress in resolving the BDA funds situation as of April 11.

Supposedly another breakthrough.

According to Reuters, Sean McCormack said:

"The bottom line is that they [the Macau monetary authorities—ed.] have unblocked these accounts and the ... authorized account holders can withdraw the funds from those accounts," U.S. State Department spokesman Sean McCormack said in Washington.

Here’s what the Monetary Authority of Macao had to say:

The SAR Government of Macao has noted the public statement released by the U.S. authorities in relation to the North Korea funds in Banco Delta Asia. The Monetary Authority of Macao will continue to coordinate all parties concerned in Macao to properly deal with this issue within the parameters of existing legislations. Simultaneously, it expects all parties concerned to come up with appropriate and responsible arrangements respectively.

That's the whole statement.

Wow. Try to curb your enthusiasm, guys.

Back to Reuters:

The Monetary Authority of Macau issued a written statement that made no mention of unblocking the accounts, but Japan's Kyodo news agency quoted an authority spokeswoman as saying account holders could now withdraw or transfer the funds.

A Banco Delta Asia spokesperson also said the relevant account holders were free to do as they wished with the money.

Let’s see what the South Korean media has to say:

South Korean top nuclear negotiator Chun Yung-woo said after a meeting with U.S. chief nuclear envoy Christopher Hill the situation has returned to the status quo ante of Sept. 2005, when the U.S. fingered the bank as a “major money-laundering concern.” Pyongyang can either withdraw the money or carry out banking transactions with the funds, Chun said.

“Status quo ante of September 2005” is, unfortunately, completely untrue.

Prior to Sept. 2005, North Korea was merrily funneling all sorts of money through BDA on its way to other banks and other accounts without restriction.

We’ve really just turned the clock back to March 19, 2007 when Treasury followed up on its no-quarter final decision on BDA under Patriot Act Section 311 by ostentatiously washing its hands of BDA and announcing that the matter of the frozen accounts was “between the North Koreans and the Macanese”.

A more accurate description was that “we spent three weeks running in circles and ended up right where we had started”.

They could make a sequel to the movie Groundhog Day, in which Christopher Hill has to relive the BDA fiasco in perpetuity.

The money’s there but no other bank dares accept it--presumably because of Treasury Department shenanigans--according to the South Korean report referenced above:

North Korea had been demanding that all the assets are transferred to the Bank of China, which refuses to handle the North Korean money.

What sophisticated maneuvers did Daniel Glaser come up with during his two weeks in Beijing to “implement” a way out of the difficulties that the Treasury Department had created?

Apparently nothing.

Certainly not the written waiver for Bank of China to handle the funds that I thought Beijing would get.

And apparently Secretary Rice was unable to muster the political will or clout to get Glaser’s boss, Henry Paulson, to overrule him. That’s perhaps the most significant and disturbing element.

Absent assistance from Treasury, Christopher Hill’s solution is apparently for Pyongyang to send some guy over to pick up a suitcase full of cash, neatly recapitulating the way a lot of North Korean money made it to the bank in the first place.

North Korea will probably have to withdraw US$25 million of unfrozen funds from the Macau-based Banco Delta Asia in cash. A South Korean government official on Sunday said the North wanted the money transferred to an overseas bank account, “but realistically there are too many difficulties. Both the U.S. and China are of the opinion that everything should be discussed between Macau authorities and North Korea." A diplomatic source said despite a visit to China by U.S. Deputy Assistant Treasury Secretary Daniel Glaser, Washington and Beijing have failed to find a solution in the way North Korea wants. “To my understanding, the U.S. and China instead reviewed ways for North Korea to open a new separate account at BDA and withdraw the money, and have suggested this to North Korea." The source said the practical way would be allowing North Korea to withdraw the money after providing details about the account holder, or do so after opening an integrated account at BDA.

In a recent meeting in New York, the U.S. chief nuclear negotiator Christopher Hill put the suggestion to the deputy chief of North Korea's UN mission Kim Myong-gil. But it is unclear whether North Korea will accept. Chun Yung-woo, South Korea's top negotiator at the six-party nuclear talks, recently said the North apparently wants to open an overseas bank account to withdraw the money in cash. But sources say even if Pyongyang accepts the suggestion, it would still take a considerable amount of time because North Korea has to undergo procedures like identifying the account holder before it can withdraw the money.

And what about the legit account holders, like Colin McAskill’s DCB bank? No clean bill of health for that $6 million? He’s got to get his money back through Kim Jung Il?

Sheesh.

In other words, after all this rigamarole, it looks like the timeline for “resolving” BDA and shutting down the Yongbyon reactor won’t be met.

And Sean McCormack is apparently spinning haplessly trying to cover up the fact that we couldn’t resolve the BDA matter as we promised and the timeline for executing the Six Party Agreement is about to slip out of our fingers.

One doesn’t have to be a fan of the Six Party Agreement to be concerned about how this inability to live up to the terms of an agreement concerning a piddling $25 million will affect perceptions of America’s good faith in pursuing diplomatic engagement with regimes it dislikes—not just North Korea, but the big one, Iran.

I hope we don’t have to take this as a sign that the Bush administration’s short-lived enthusiasm for diplomacy with the axis of evil has already evaporated, and we can expect military strife with Iran after all.