European banks are key to North Korea’s advance in missile technology

Two years ago, North Korean attempts to develop nuclear weapons and the missiles that deliver them were pathetic. They couldn’t get a missile off the ground, much less shoot it straight or deliver a heavy nuclear payload. Suddenly they have an ICBM, and missiles that fly reliable flight paths over significant distance. They even pose a credible threat to Guam, and perhaps soon to Hawaii or the continental United States.

How has Pyongyang been able to produce reliable missiles and viable warheads in such a short time? Warheads are a subject for another article, but they have produced the missiles by using high-quality rocket engines evidently supplied by Russia.

Michael Elleman of the International Institute for Strategic Studies published an analysis that identified the engines as Soviet RD-250 types. Other analysts point to Iranian technical assistance.

{mosads}Russia and China have long found North Korea a useful tool, using its unpredictable behavior to cause instability in the region. This is part of a pattern inherent in illicit arms trades: powerful, established bad actors recruit surrogates from among rogue nations, and fuel regional conflicts by opening markets for arms dealers who follow their political priorities.

The Russians are particularly brazen about it, and set up “false flag” operations so they can blame the trades on the U.S., Ukraine, or other enemies. They usually tip their hands, however, when their surrogates and propaganda outlets rush to the defense of their servants. As one foreign affairs analyst who follows the arms trade quipped, “If you want to know who’s working for Putin, just see who Sputnik and RT are defending this week.”

Ukrainian military and political sources say the Russians provided the engines to North Korea, masking them as Ukrainian. A Ukrainian opposition politician with a national security background told me, “I don’t like Poroshenko, and he is guilty of many things, but not of supplying engines to North Korea. Until recently, the North Koreans seldom fired any missiles, but now they do it frequently, with no sign of scarcity. These did not come from the Ukrainian stockpile, they could only have come from Russian stockpiles.”

A source close to South Korean intelligence circles told me, “the engines are not RD-250, but RD-251, coming from Russia. Our reports show that they received 20 to 40 engines in just the past year. China, Russia, Iran, and Pakistan are helping Pyongyang develop warheads, but our evidence suggests the rocket engines are coming from Russia.”

Banks are key to the trade

Although means, methods and personalities vary regionally, and even from deal to deal, there is one constant: eventually, all arms trades — even illicit ones — have to come to the bank. Some are done with the knowledge of the original arms manufacturers, who persuade government officials to look the other way while illegal activities take place. The banks look the other way also, caring only about the revenue from their lending activity.

The Trump administration is taking strong action against banks with any connection to North Korea. A Treasury spokesperson said, “We don’t telegraph sanctions or comment on prospective actions.” Under Secretary of Treasury for Terrorism and Financial Intelligence Sigal Mandelker testified before the Senate Banking Committee on Sept. 28 that Treasury is focusing specifically on foreign banks:

Banks worldwide should take note that we are acting to protect the U.S. financial system from North Korean illicit financial activity … We now have the ability to suspend correspondent account access to, or designate and freeze the assets of, any foreign financial institution that knowingly conducts significant transactions in connection with any trade with North Korea or on behalf of any North Korea-related designated person … These types of sanctions were used to great effect in the Iran context, and present a stark choice to banks around the world.

Treasury identified Russia among the countries that harbor North Korean financial agents. Many of the banks financing the black arms trade are in Central Europe, and their common feature is Russian ownership. Can European officials guarantee that these banks have not financed any illicit arms deals?

The U.S. is leading the way against financiers who profit from the illegal arms trade. European banks had better take a very good look at their balance sheets, and quickly sever any ties with traders in illegal arms.

Bart Marcois (@BMarcois) was the principal deputy assistant secretary of energy for international affairs during the Bush administration and was previously a career foreign service officer. He is a director at the Richard Richards Foundation.