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The United States has maintained fairly comprehensive economic sanctions on North Korea from the time of the Korean War until 1989. US sanctions have been based on four primary premises: first, North Korea is considered a national security threat; second, it is on the State Department's list of state sponsors or supporters of terrorism; third, the DPRK is a Marxist-Leninist state; and fourth, the country has been accused of the proliferation of weapons of mass destruction.¹

The U.S. government maintains various economic sanctions on trade, aid, arms sales and transfers, and access to assets under U.S. jurisdiction based on these four principles. Sanctions under the first rationale are specific to North Korea while the latter three apply to various country groupings of which North Korea is a part. In some cases categories of sanctions have been imposed under several different laws or regulations. Since 1992, sixteen North Korean entities have been cited for proliferation activities under U.S. laws, including executive orders issued under the Patriot Act.

Sanctions were eased somewhat in conjunction with both humanitarian need in North Korea and improved relations between the DPRK and the United States. Between 1989 and 1995 the export of goods from the U.S. commercial sector was permitted for the purposes of meeting "basic human needs." A more extensive easing of sanctions accompanied the negotiation of the Agreed Framework in 1995. In 2000, President Clinton lifted many remaining trade and travel sanctions in response to the DPRK's 1999 voluntary halt of its missile testing. Licensing and trade regulations on most items for civilian use were significantly relaxed at this time.

The North Korea Nuclear Test and UN Resolution 1718
In July 2006 the DPRK ended its self-imposed missile test moratorium and tested an array of ballistic missiles, including a long-range Taepodong-2; in response UN Security Council adopted Resolution 1695. Japan and Australia in particular responded with new sanctions. North Korea condemned the resolution, calling it a "misuse" of the Security Council. In October 2006, the DPRK conducted an underground nuclear test, and the UN Security Council adopted UN Resolution 1718. Among other measures, the resolution requires UN Member States to freeze the financial assets of North Korean people or entities determined by the UN to be engaged in DPRK WMD activities and to ban the sale of luxury goods.

The United States published new export regulations on January 26, 2007, including an "illustrative" list of luxury goods prohibited for export and re-export to the DPRK. Licenses are again required to export and re-export almost all U.S. goods, except foods and medicines; licenses will generally be approved for non-food, non-medical humanitarian items "intended for the benefit of the North Korean people" and "agricultural commodities and medical devices that are determined not to be luxury goods." (See1718: Matrix of Luxury Goods Banned for a matrix of luxury items proscribed by countries to date.)

Banco Delta Asia
In September 2005, the U.S. Treasury Department designated Banco Delta Asia (BDA), a bank in Macau, a "financial institution of primary money laundering concern," and proposed rules to restrict U.S. financial transactions with the bank.² In response to the U.S. designation, the Bank of Macau seized control of BDA, froze all North Korean accounts, and began an extensive audit. As of April 2006, the "ripple effect" of U.S. concern about transactions with the DPRK, coupled with visits by Under Secretary for Terrorism and Financial Intelligence in the U.S. Department of Treasury, resulted in at least two dozen financial institutions restricting or ending their financial dealings with North Korea.³ Australia, Vietnam, Mongolia, and China reportedly took similar measures.⁴

The DPRK responded quite strongly to the BDA designation, suspending its participation in the Six Party Talks until these and other "sanctions" are lifted. The United States has maintained that the BDA designation is a matter of protecting its currency from counterfeiting and is unconnected to negotiations on security matters (an assertion challenged by some observers). However, the United States agreed to have discussions about BDA alongside rounds of Six Party Talks. Bilateral talks focused solely on or including discussion of BDA were held in March 2006, and in January and March 2007.

On March 14, 2007 the U.S. Department of Treasury issued a rule barring Banco Delta Asia from "accessing the U.S. financial system, either directly or indirectly." In a press release, U.S. Under Secretary for Terrorism and Financial Intelligence Stuart Levy said "Banco Delta Asia's grossly inadequate due diligence and systematic facilitation of deceptive financial practices have run too deep for the bank to be allowed access to the U.S. financial system." Despite the rule regarding US banks, Macau authorities were freed to unfreeze DPRK accounts.⁵ However, "technical difficulties" in transferring the funds (including securing signatures from account-holders) resulted in the DPRK boycotting the talks while the funds were in transit.⁶ Meanwhile, The Financial Times reports that the DPRK will assurances that the U.S. will not dissuade other banks from doing business with North Korea.⁷

Last updated March 22, 2007

¹Rennack, Dianne E., "North Korea: Economic Sanctions," Report for Congress, Congressional Research Service, The Library of Congress: Washington, D.C., October 17, 2006. For more information, see the NCNK Report on Economic Sanctions.

² The U.S. maintains that the BDA designation is not a sanction; the DPRK continues to call it a sanction.

³Testimony of Stuart Levey, Under Secretary Terrorism and Financial Intelligence U.S. Department of the Treasury. Senate Appropriations Subcommittee, April 6, 2006. http://www.treasury.gov/press/releases/js4163.htm.

⁴"North Korea's Nuclear Test: The Fallout," November 13, 2006 International Crisis Group, Available on their home page, http://www.crisisgroup.org/home/index.cfm?id=4502&l=1

⁵ Buckley, Chris, "End of Bank Probe to Smooth North Korea Progress: US", Reuters, March 15.

⁶"Beck, Lindsey and Kim, Jack, North Korea talks at stalemate over frozen funds ," Reuters March 22, 2007.

⁷"BDA Denies Wrongdoing on North Korean Funds," The Financial Times, March 16.