June 15, 2018
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The uncertain results of President Trump’s June 12 summit with North Korean dictator Kim Jong Un underscore the fact that the United States needs to keep developing tools to intensify the “maximum pressure” campaign that helped bring North Korea to the negotiating table. If North Korea proves unwilling to denuclearize and diplomacy breaks down once again, the Trump administration will need game-changing options in its sanctions arsenal. In “How to Increase Pressure if Diplomacy with North Korea Fails” authors Daleep Singh, a senior fellow at the Atlantic Council and the Center for a New American Security (CNAS), and Peter E. Harrell, adjunct senior fellow at CNAS, explain that a truly “maximum pressure” campaign on North Korea would require the credible threat of targeted sanctions against China. The authors identify opportunities to increase pressure on China to curtail its economic support for North Korea by proceeding in three parts. First, Singh and Harrell assess China’s financial vulnerabilities. Second, they review key US sources of leverage. Finally, the authors provide specific recommendations on potential sanctions if the current diplomatic opening with North Korea fails to resolve the crisis.

 

Key Recommendations:


Intelligently Targeting China’s Financial Vulnerabilities
  • Impose restrictions on Chinese companies’ access to new debt and equity financing from the United States.
  • Introduce a tailored measure that would require US banks to subject certain transactions by China’s largest banks to heightened scrutiny.

Mitigating Risks
  • The Trump administration should begin publicly discussing the possibility of sanctions against large Chinese corporates well before imposing them.
  • When imposing sanctions against China, the United States should publicly express its intent to refrain from crossing certain boundaries such as targeting China’s private sector, sovereign debt or the central bank, and money markets and derivative instruments.
  • The US Treasury Department should engage in extensive outreach to the US, European, and Asian financial sector to explain the measures before they come into effect.

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