On September 11, 2017, the United Nations Security Council unanimously adopted Resolution 2375 imposing new sanctions on North Korea in response to its recent nuclear test. The new sanctions significantly restrict trade with the country and are intended to block most of its revenue. Specifically, the UN agreed to cap the amount of crude oil and petroleum products sold to North Korea, ban the sale of natural gas to North Korea, prohibit the export of North Korean textiles, and ban the use of North Korean labor overseas. Additionally, the resolution requires the end of most joint ventures with North Korea, bans transfers of additional dual-use items to North Korea, and imposes asset freezes on sections of the North Korean government and military.
This resolution reflects increased international agreement to further isolate North Korea from the global economy and force the rogue nation to the negotiating table. It comes on the heels of other UN sanctions banning North Korean natural resource exports, and U.S. sanctions designations and legislation targeting North Korea. However, news reports also indicate that the UN resolution was a compromise between the United States and Russia and China. The United States had called for a complete ban on oil exports to North Korea and the designation of North Korean leader Kim Jong-un. Russia and China both opposed these extreme measures, but were willing to register their disapproval of North Korea’s actions, while still preserving an economic lifeline for the country.
The central elements of the new UN sanctions are the following, as detailed in a fact sheet issued by the U.S. Mission to the UN:
- Caps worldwide exports of refined petroleum products to North Korea at 2 million barrels per year;
- Freezes the current amount of crude oil provided to North Korea at existing levels;
- Prohibits the supply of natural gas and natural gas condensates to North Korea;
- Bans the exports of North Korean textiles;
- Prohibits issuance of work authorizations for North Korean nationals in most situations;
- Allows for member states to interdict cargo ships suspected of smuggling goods to or from North Korea, and provides for asset freezes and denial of port access for vessels that do not cooperate;
- Prohibits all new joint ventures with North Korea and closing of all existing joint ventures with North Korea that do not relate to certain energy and port projects; and
- Designates the Central Military Commission of the Workers’ Party of Korea, the Organization and Guidance Department, the Propaganda and Agitation Department, and Pak Yong Sik (a member of the Central Military Commission) as sanctioned persons subject to asset freezes. A travel ban is also imposed against Mr. Sik.
The comprehensive North Korean sanctions currently in place in the United States already prohibit the business contemplated by the new UN sanctions. Other countries with less comprehensive sanctions against North Korea, such as Russia and China, are required to implement these sanctions. There is no indication as to when these countries will do so, although the resolution requires UN member states to report on their implementation measures within 90 days. China implemented the August 2017 UN sanctions against North Korea within the same month.
U.S. businesses should review the new UN sanctions and ensure that their non-U.S. subsidiaries and affiliates are in compliance. It may also be appropriate to update global compliance policies. Although the United States maintains an embargo against North Korea, it is still important to watch this space, as the United States may impose additional unilateral sanctions, most likely against third countries doing business with North Korea.