China demands U.S. immediately withdraw sanctions over North Korea

BEIJING – China demanded the United States immediately withdraw a package of sanctions on companies and individuals trading with North Korea on Wednesday, and said the decision by the Trump administration will damage Sino-U.S. ties.

The Treasury Department placed sanctions Tuesday on 10 companies and six individuals from China and Russia that it said had conducted business with North Korea in ways that advanced the country's missile and nuclear weapons program.

But China's Foreign Ministry insisted its government had fully implemented U.N. Security Council resolutions on North Korea, and would punish anyone caught violating the Security Council sanctions under Chinese law.

It added that it opposed sanctions outside the framework of the Security Council.

"China especially opposes any country conducting 'long-arm jurisdiction' over Chinese entities and individuals," spokeswoman Hua Chunying told a regular news conference. "Measures taken by the United States are not helpful in solving the problem and unhelpful to mutual trust and cooperation. We ask the United States to stop the relevant wrong practices immediately."

Yet despite China's professed opposition to unilateral sanctions, it has not hesitated to punish other countries through trade if they refuse to do Beijing's bidding.

Indeed, China is currently engaged in a major blockade of South Korean companies because it opposes the deployment of a U.S. missile defence system, known as Terminal High Altitude Area Defence (THAAD), in that country.

Among the sanctioned companies was Dandong Zhicheng Metallic Material Co., also known as Dandong Chengtai, one of the largest importers of North Korean coal, while its main shareholder was also individually targeted.

In a related complaint filed by the Justice Department on Tuesday, the U.S. government is seeking $4 million from the company, accusing it of importing North Korean coal and then sending a wide array of products – cellphones, luxury items, rubber and sugar – to North Korea.

In August, the Security Council agreed to a total ban on coal imports from North Korea; in the past, a limited trade had been allowed, provided it was purchased from a sanctioned North Korean company and proven to be for "livelihood purposes."

In practice, though, experts say that loophole was exploited to facilitate a profitable trade that generated $1 billion a year for North Korea.

In a June report by the Washington-based research group C4ADS, Dandong Zhicheng was cited among a group of Chinese companies that are pivotal to North Korea's ability to circumvent international sanctions and buy illicit goods. The report said targeting those companies could even cause North Korea's entire overseas network to collapse.

Dandong Zhicheng alone accounted for 9.2 percent of North Korea's total exports to China last year, according to documentation that C4ADS reviewed. Almost all – 97 percent – of this was North Korean coal, totaling about $250 million annually.

The company's website lists a wide array of interests, including metals, chemicals, rubber, furniture, computing equipment, office supplies, clothing and toys. It says it does a "small amount of business" in North Korean border trade.

The company's main shareholder, Chi Yupeng, won an award from the Dandong city government as a leading entrepreneur in 2005, another award for his "remarkable contribution to enterprise" in 2008 and a third for "starting a foreign trade enterprise" in 2009.

Two other Chinese companies, Dandong Tianfu Trade and Jinhou International Holdings were sanctioned for their part in the coal trade. Together, the three companies imported nearly $500 million of North Korean coal between 2013 and 2016, the Treasury Department said.

Dandong Rich Earth Trading Co. was sanctioned for buying vanadium ore from a company tied to North Korea's atomic energy agency, while Mingzheng International Trading was accused of facilitating dollar transactions on behalf of North Korea's proliferation network.

The companies either declined to comment, hung up or did not pick up the phone when contacted by the Washington Post. The Dandong city government also declined to comment.

Nationalist tabloid the Global Times argued that the United States could face retaliation sooner or later if it continued to impose sanctions which were a "serious violation of international law," and "certainly unacceptable" to China.

"As far as we are concerned, Washington wants to use such unilateral sanctions to smear China and Russia's international image on issues regarding sanctioning North Korea, painting China and Russia as the destroyers of U.N. sanctions," it wrote.

Chen Weihua, deputy editor of the U.S. edition of China Daily, also argued the U.S. decision would undermine cooperation between Washington and Beijing.

"The U.S. has long believed that sanctions are a silver bullet," he wrote in a column. "But its past track records have shown that the majority of sanctions not only failed but caused humanitarian disasters in other countries."

There is little doubt, he added, that such secondary sanctions will have little or no effect in convincing North Korea to change course.

Chen also wrote that the Obama administration's decision to help topple Libyan leader Moammar Gadhafi after he abandoned his nuclear weapons program – and his subsequent death at the hands of a mob in 2011 – had damaged the U.S. government's credibility.

Beijing is not averse to using economic pressure to get its way: it drastically cut salmon imports from Norway for years after imprisoned democracy activist Liu Xiabo was awarded the Nobel Peace Prize, has encouraged consumer boycotts of Japan and also punished countries for hosting exiled Tibetan spiritual leader, the Dalai Lama.

Nevertheless, Lu Chao, a Korean Peninsula expert at the Liaoning Academy of Social Sciences, said Washington's decision to impose unilateral sanctions on China was inappropriate, unacceptable and "very domineering."

"China is strictly implementing the U.N. resolution. Though we can't 100 percent exclude the possibility of individuals having underground deals violating the Ministry of Commerce's regulations, the United States being so far away doesn't have a proper reason to take sanction measures unilaterally," he said. "They should inform the Chinese government and let the latter deal with it."

China accounts for roughly 90 percent of North Korean trade, but announced this month it was suspending imports of iron ore, iron, lead, coal and seafood products from North Korea, to comply with U.N. sanctions.

China's imports from North Korea fell to $880 million in the six months that ended in June, down 13 percent from a year earlier, official figures show. But Chinese exports rose 29 percent to $1.67 billion in the first six months of the year, pushing total trade between the two countries up 10 percent.

China is very reluctant to do anything that might destabilize the regime, which is a long-standing ally. It blames American hostility toward Pyongyang for forcing the regime to develop its nuclear program, and is urging dialogue to reduce tensions.

Yang Xiyu, a North Korea expert at the China Institute of International Studies in Beijing called the U.S. move counterproductive, and said Washington should have worked more closely with Beijing.

"I think this shows the frustration from the U.S toward Beijing, that China cannot to play as the U.S wanted," he said, arguing it would do nothing to dissuade North Korea from pursuing nuclear weapons. "It's a superfluous measure that may only worsen the Sino-U.S. relationship and destroy the foundation of trust for cooperation between the two countries."

Cheng Xiaohe, a North Korea expert at Renmin University of China in Beijing, said the U.S. government did not have factual evidence these companies were violating sanctions.

"The Chinese government will not sit by and do nothing if the sanctions are implemented without strong evidence," he said.

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The Washington Post's Shirley Feng and Luna Lin contributed to this report.