Bitcoin Becomes Part Of North Korea's Geopolitical Arsenal

Via OilPrice.com,

Fresh off the news of North Korea claiming that the United States has declared war due to U.S. President Trump’s military positioning and contentious rhetoric, a report from FireEye has suggested that the DPRK may be mining something other than coal.

With tensions at an all-time high, North Korea is looking towards new means of pursuing their economic and defensive goals, and following increased cyber-attacks on South Korean cryptocurrency exchanges, it may be possible that North Korea is eyeing bitcoin as a hedge against geopolitical turmoil or even a means of skirting sanctions.

While North Korea has only limited access to petroleum due to increased sanctions and zero proved reserves of its own, the country isn’t without resources. South Korean estimates suggest a possible trillions of dollars’ worth of rare earth minerals waiting to be dug up. These include iron ore, zinc, copper, graphite, gold, silver, magnesite, and approximately $9.7 trillion worth of coal and limestone.

North Korea’s increased belligerence, however, has put a damper on hopes to rebuild the country’s mining sector. As North Korea became increasingly aggressive, the UN began placing bans on the country’s metal exports. And this year, following the increase in weapons testing, the UN upped the restrictions, including fresh bans on coal, iron, and iron ore exports, with China soon following suit.

Now, North Korea is completely shut off from, or with very limited access to the import or export of nearly every conceivable commodity.

Many countries have even imposed harsher financial sanctions on North Korea as global pressure for action intensified. Japan and China have suspended all North Korean transactions and on Tuesday, September 26, the United States imposed greater sanctions, targeting North Korean financial institutions and regime members acting as representatives for the country’s banks in China, Russia, Libya and the United Arab Emirates

So not surprisingly, Kim Jong-Un is looking for a solution, and cryptocurrencies seem to have peaked his interest.

King Jong-Un’s regime is certainly no stranger to cryptocurrencies. Between 2013-2015, the country hacked South Korean bitcoin exchanges, stealing approximately 100-million won (nearly US$90,000) in Bitcoin every month. Additionally, the country was linked to the Lazraus Group which was reportedly behind the WannaCry ransomware that infected over 200,000 computers across 150 countries.

With the country’s tech-smart regime, and coal exports banned, North Korea may have found a use for its most abundant resource – bitcoin mining.

Recorded Future, an intelligence research firm backed by Google Venture and In-Q-Tel (a venture capital firm funded by the CIA), released a report on North Korean internet activity, including what was identified as the start of bitcoin mining by users on May 17.

In an interview with VOA Korean, Priscilla Moriuchi, the director of strategic threat development at Recorded Future explained: "We weren"t able to determine the volumes, like how many bitcoin they can generate per certain time period. We could just see activity.” Moriuchi added that the intelligence firm had two hypotheses regarding the activity – the first being a group connected to the government, the other being an individual who had access to the internet.

Speculation leans to a connection to high-ranking officials in Kim Jong-Un’s regime, Moriuchi noted. Due to the limited access individuals have to the internet in North Korea, and especially the lack of expensive equipment necessary to pull off such a feat, it is likely that the government played a significant role in the mining activity noted by Recorded Future and In-Q-Tel.

North Korea’s biggest trading partner and de facto leader in the Bitcoin world, China, may also play some role in this developing story.

The founder of Bitcoin NYC Meetup, Jonathan Mohan, noted: "It wouldn"t surprise me if, perhaps, hypothetically, North Korea were to have pre-existing business relationships in China that wouldn"t mind purchasing bitcoin from them, and then just disseminating it to the Chinese market as you would with any other bitcoin."

Interestingly, this string of news comes just after China’s clamp down on cryptocurrencies, with many of its major exchanges planning to shut down at the end of the month. CNBC has noted that the Chinese general administration of customs did not respond to requests for comment.

“North Korea using these technologies is not exactly a loophole to the sanctions — that could be overstating the power of bitcoin itself,” Yaya Fanusie, a former CIA counterterrorism analyst, told The Washington Times. “But you have a cat-and-mouse game evolving, and this is just the type of emerging technology that the [U.S. intelligence community] needs to develop expertise to understand."

As geopolitical rules and boundaries become grayer, how this situation unfolds will surely be something to keep an eye on.

Luke McNamara, a researcher at FireEye and author of the September 11 report notes “There are variety of things they could do to cash out.”

Beijing Orders All North Korean Businesses To Close

In the latest sign that China is moving to dramatically limit its exposure to its restive neighbor and long-time economic dependent, Chinese authorities on Thursday ordered all North Korean firms to stop doing business in the world’s second-largest economy, fulfilling Beijing’s obligations according to the latest round of UN Security Council sanctions, which were passed two weeks ago.

The order comes just days after President Donald Trump revealed that the People’s Bank of China had asked the country’s banks to sever their business ties with North Korea.

Specifically, they were ordered to stop providing financial services to North Korean customers and to wind down existing loans, severing one of North Korea’s most reliable connections to the global financial system. It was reported that the banks were warned that continuing to transact with North Korean business could result in embarrassment and economic losses, according to Russia Today.

After the UN Security Council passed new sanctions two weeks ago, the Chinese Commerce Ministry said North Korean firms and joint ventures in China would be closed within 120 days.

Meanwhile, on Tuesday, the US announced sanctions against eight North Korean banks and 26 individuals. The new punitive measures followed President Trump’s executive order targeting North Korea’s access to the international banking system.

Perhaps the intensifying economic desperation in the isolated country has helped push more young men and women to volunteer for the country’s army. According to official propaganda, nearly 5 million North Koreans have volunteered for the army over the past week. That’s a staggering success rate for the country’s recruiters, considering the North has a population of about 25 million people.

China’s President Xi Jinping has sought to soothe Trump’s doubts about Beijing’s commitment to denuclearizing North Korea, though the Chinese government has continued to advocate for talks between the two countries that could eventually lead to a peaceful settlement.

Pyongyang has accused the US of “declaring war” on the North, claiming that Trump’s violent rhetoric and repeated promises to “destroy” North Korea and topple the Kim regime constituted a declaration of war. Of course, the US has denied this, and both sides have continued to trade increasingly detailed threats. The North, for example, recently threatened to test a hydrogen bomb over the Pacific Ocean. Meanwhile, Trump responded that the US has devised “four or five” military options for dealing with North Korea.

US officials have expressed hope that the economic sanctions will force North Korea to the negotiating table. However, their economy has proven resilient so far. But will China’s decision to sever ties with the North make a difference? We should know soon.

US Sanctions Against Venezuela Will Hurt Americans

After fifty years of imposing embargoes and other sanctions, the United States never managed to topple Cuba"s communist regime.

After forty years of the same in Iran, the US met with similar amounts of success.

Ongoing sanctions against North Korea have not toppled to regime there. 

But, some people in Washington won"t let decades of failure dissuade them. 

Last week, Congressman Mike Coffman (R-Colo.) introduced new legislation to bar Americans from importing oil products from Venezuela. The Washington Examiner reports: 

[T]he Protecting Against Tyranny and Responsible Imports Act, or the PATRIA Act ... would target Venezuelan President Nicolas Maduro after he stripped the country"s democratically elected national assembly of its power and authority. According to the bill, the proposed ban on imports would last until the assembly"s power is fully restored.

"The goal is to change the conduct, the character of the Venezuelan government under Maduro. I think the window is closing," Coffman told the Washington Examiner. "They are dependent upon the export of oil really to fund their government, and without that, they can"t pay their security forces."

Experience suggests there is little reason to believe that sanctions will cause the regime to give up in Venezuela. If the regime has less oil money with which to pay the military, the regime can always steal more from the average citizen to make up the difference. In other words, ordinary Venezuelans will suffer more in response to US sanctions. 

Source. 

Moreover, aggressive moves such as these against the Venezuelan regime have tended to only solidify support for the regime among its supporters. Both the current president Maduro, and his predecessor Hugo Chávez, were both successful in building support for themselves on a platform of opposing US meddling in Venezuelan political and economic institutions. 

When the US threatens to intervene in local politics, this only strengthens the resolve and support of the regime"s supporters. 

The US has already been acting in a reckless manner in this regard, as illustrated by President Donald Trump"s recent speculations about invading Venezuela to effect regime change. As noted by Daniel Politi at Slate, American threats directed at the Venezuelan regime do nothing to help the opposition: 

Throughout his power grab that has accompanied Venezuela’s descent into chaos, Maduro has long warned the United States was planning to invade the country. Trump’s words seemed to play straight into his narrative, recalling a time when Washington saw Latin America as its backyard where it could intimidate governments into doing its bidding.

“Maduro must be thrilled right now,” said Mark Feierstein, who was a senior aide on Venezuela to former president Barack Obama. “It"s hard to imagine a more damaging thing for Trump to say.”

Similarly, threatening Venezuela with more sanctions — something that may make the regime even more violent and desperate — do nothing to help the Venezuelan people in general, and only energize the regime"s base. 

Coffman claims the sanctions would be lifted if the Venezuelan regime were to restore the prerogatives and power of the national legislature, which has essentially been disbanded by Maduro. 

In recent months, the Venezuelan regime has rapidly become more dictatorial as forces loyal to Maduro have increasingly clamped down on opposition politicians and essentially ignored the results of recent elections that have brought many opposition leaders to power in the National Assembly. 

The working philosophy here, apparently, is that the imposition of sanctions will force the Venezuelan regime to democratize in response. One would be hard pressed to find examples of similar tactics actually working, however.

More astute observers might also ask why — if Coffman is so committed to democracy — he hasn"t called for similar embargoes of Saudi Arabian oil. The Saudi regime, of course, has been a dictatorship ever since its founding, sponsors international terrorism, and tolerates no religious freedom or freedom of speech. The Saudi regime, for instance, routinely arrests critics of the regime, and the regime"s spokesman has outright denied that elections should be allowed in Saudi Arabia. 

If human rights are of such pressing concern to the Congressman, its unclear why Venezuela is at the top of the sanctions list. 

As with all Trade Sanctions, Americans Suffer 

As with any discussion of sanctions, of course, we need not even consider the strategic futility of sanctions, or the morality of foreign regimes. 

Far from being a matter only of concern to foreigners, US sanctions are built on the cornerstone of limiting the freedoms of Americans.

As I noted earlier in regards to the Cuban embargo: 

[S]upporting an embargo means supporting the government when it fines, prosecutes, and jails peaceful citizens who attempt to engage in truly free trade. Support for an embargo also requires support for a customs bureaucracy that spies on merchants and consumers, and the whole panoply of enforcement programs necessary to punish those who run afoul of the government’s arbitrary pronouncements on what kind of trade is acceptable, and what kind is verboten. Naturally, this is all paid for by the taxpayers...

At their heart, embargoes are nothing but a specific type of prohibition. Sometimes, the government imposes prohibitions on transactions involving certain goods, such as cannabis. Other times, the prohibition extends to all transactions with people in a certain place. The fundamentals are the same, however, in that they prohibit peaceful exchange, with heavy penalties for violators.

In the case of a new embargo against Venezuela, the effect would be to place prohibitions on American importers, and thus drive up prices for oil and energy for all Americans. Government bureaucrats would be dispatched to monitor private industry to make sure they don"t violate the prohibitions. Government agents will impose fines, and make arrests if necessary. The American government will become more powerful at the expense of American consumers and American taxpayers. 

Indeed, this has already been going on with smaller-scale sanctions imposed by the Trump administration against Citgo oil refineries. Thanks to the sanctions, Citgo refineries in the US, which constitute four percent of American fuel capacity, and which employ American workers, are finding it more costly to obtain the oil they need for the refineries. Both domestic and foreign suppliers must scramble to work around the new regulations in order to avoid fines and lawsuits from government regulators who oversee trade. The effect of this will be to put pressure on more marginal employees and on more marginal operations, leading to layoffs and diminished refining capacity. Ultimately, it is Americans who will pay the price.

Jim Rogers Warns "If Trump Starts A Trade War With China, It Will End US Hegemony"

Following Treasury Secretary Mnuchin"s threat that the US could impose economic sanctions on China if it does not implement the new sanctions regime against North Korea:

"If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the US and international dollar system, and that’s quite meaningful."

Billionaire investor and commodity guru Jim Rogers has a warning for the Trump administration - this would hurt America more because it just forces China and Russia and other countries to cooperate.

RT: What is the likelihood that the US will go through with and actually impose economic sanctions on China if it does not implement the new sanctions regime against North Korea?

Jim Rogers: Sanctions are sanctions. They could do sanctions which are not very important or don’t do much damage. And then they will have good public relations which says they have sanctions, but it is meaningless. I would suspect if anything, that is what they will start with. If they put sanctions on China in a big way, it brings the whole world economy down. And in the end, it hurts America more than it hurts China because it just forces China and Russia and other countries closer together. Russia and China and other countries are already trying to come up with a new financial system. If America puts sanctions on them, they would have to do it that much faster and in the end America will lose its monopoly on the financial system, which will hurt America more than anybody.

RT: What do you think, is it an empty rhetoric and saber-rattling from Donald Trump because he said “those [UN] sanctions are nothing compared to what ultimately will have to happen” without specifying what he meant by that. Do you think this is just mere bluff on the part of the US, or would it really use the ‘nuclear option’?

JR: If it uses a nuclear option for sanctions, it will hurt America much more than will hurt North Korea, it will hurt America much more than it will hurt China, Russia and everybody else. It will force the rest of the world to find an alternative to the US financial system. If he does that, it is going to cause a lot of turmoil in the world financial economy and in the end it is going to hurt America more than it is going to hurt anybody else.

I would give you an example, if you look at Russian agriculture right now – America put sanctions on Russian agriculture trying to hurt Russia, but it has helped Russian agriculture. Russian agriculture is booming now. In the end, America has hurt itself more than it has hurt anybody else.

RT: If that happens, what would the consequences be for the global economy? Could this end up becoming a global economic crisis?

JR: We are probably going to have a global economic problem, maybe even crisis, in the next couple of years. This may be one of the things that start it. There is always something which starts a crisis. If America does something like this, this could be the thing that did it. In 1929, it started when America started a huge trade war with the rest of the world and the economists said, “please, this is a mistake,” but America did that anyway. And then we had a great collapse and The Great Depression of the 1930s.

RT: Washington runs a $350 billion annual trade deficit with Beijing. China also holds more than $1 trillion in US debt. How could the US actually threaten China in such circumstances?

JR: Mr. Trump has been saying for over a year, two years, that he was going to start a trade war with China. He was going to put very high tariffs on Chinese goods. In his mind, he wants to do it, he is ready to do it. Some of his advisors are very much in favor of a trade war. It may very well happen. If it happens, it is going to be very bad for the world and it is going to be worse for America than for other people.

Furthermore, as we detailed previously, Beijing has announced plans to start a crude oil futures contract priced in yuan and convertible into gold and Rogers understands how much of a game changer this could be for an industry dominated by the dollar.

"This is just another step in that direction. Many people do not like using US dollars because if the US gets angry at you, they just set enormous pressure on you that can even get you out of business. China, Russia, and other countries understand this, and they are trying to move world trade and world finance away from that,” said the Jim Rogers.

As China is the world’s biggest crude buyer, the new contract may allow exporters to avoid US sanctions by trading oil in yuan. Such countries as Russia, Iran, Pakistan, Vietnam, China and many other Asian countries are interested in that, according to the expert.

The futures contract will allow participants to pay with gold or to convert yuan into gold without the necessity to keep money in Chinese assets or turn it into US dollars.

“The world has been moving that way. Iran will accept renminbi (yuan) from China now. The world is moving that way. China and Russia have currently swaps in rubles and renminbis. It is happening. But it is happening slowly. It takes a lot of time,” Rogers said.

The investor stressed the shift is not going to happen swiftly.

“In this case, there are so many people that actively want it, I would suspect that in less than ten years you will see a major shift into the trading of oil to Asia,” he said.

“When US dollar replaced the pound sterling, there was no one really going around trying to do it quickly. But now you have major economies: Russia, China, Iran and others – very much want this to happen. So, it will happen faster,” Rogers added.

US Threatens To Cut Off China From SWIFT If It Violates North Korea Sanctions

In an unexpectedly strong diplomatic escalation, one day after China agreed to vote alongside the US (and Russia) during Monday"s United National Security Council vote in passing the watered down North Korea sanctions, the US warned that if China were to violate or fail to comply with the newly imposed sanctions against Kim"s regime, it could cut off Beijing’s access to both the US financial system as well as the "international dollar system."

Speaking at CNBC"s Delivering Alpha conference on Tuesday, Steven Mnuchin said that China had agreed to "historic" North Korean sanctions during Monday"s United Nations vote. "We worked very closely with the U.N.  I"m very pleased with the resolution that was just passed.  This is some of the strongest items.  We now have more tools in our toolbox, and we will continue to use them and put additional sanctions on North Korea until they stop this behavior."

In response, Andrew Ross Sorkin countered that "we haven"t been able to move the needle on China, which seems to be the real mover on this, in terms of being able to apply the real pressure. What do you think the issue is?  What is the problem?"

The stunner was revealed in Mnuchin"s answer: "I think we have absolutely moved the needle on China.  I think what they agreed to yesterday was historic.  I"d also say I put sanctions on a major Chinese bank.  That"s the first time that"s ever been done.  And if China doesn"t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system.  And that"s quite meaningful."

And to underscore his point, the Treasury Secretary also said that "in North Korea, economic warfare works. I made it clear that the President was strongly considering and we sent a message that anybody that wanted to trade with North Korea, we would consider them not trading with us.  We can put on economic sanctions to stop people trading."

In other words, to force compliance with the North Korean sanctions, Mnuchin threatened Beijing with not only trade war, but also a lock out from the dollar system, i.e. SWIFT, something the US did back in 2014 and 2015 when it blocked off several Russian banks as relations between the US and Russia imploded.

Of course, whether the US would be willing to go so far as to use the nuclear option, and pull the dollar plug on its biggest trade partner, in the process immediately unleashing an economic depression domestically and globally is a different matter.  So far Washington has been reluctant to impose economic sanctions on China over concerns of possible retaliatory measures from Beijing and the potentially catastrophic consequences for the global economy. Washington runs a $350 billion annual trade deficit with Beijing, while the PBOC also holds over $1 trillion in US debt.

Ironically, the biggest hurdle to the implementation of the just passed sanctions may be the president himself.  “We think it’s just another very small step, not a big deal,” Trump told reporters at the start of a meeting with Malaysian Prime Minister Najib Razak. "I don’t know if it has any impact, but certainly it was nice to get a 15-to-nothing vote, but those sanctions are nothing compared to what ultimately will have to happen,” said Trump who has vowed not to allow North Korea to develop a nuclear ballistic missile capable of hitting the United States.

Separately, at a hearing of the House Foreign Affairs Committee on Tuesday, Republican Chairman Ed Royce said the U.S. should target major Chinese banks, including Agricultural Bank of China Ltd. and China Merchants Bank Co., for aiding Kim’s regime. Russia also came in for criticism. Assistant Treasury Secretary Marshall Billingslea said in prepared remarks to the committee that North Korean bank representatives “operate in Russia in flagrant disregard of the very resolutions adopted by Russia at the UN.”

While China and Russia supported the latest UN sanctions, officials made clear they were troubled by Haley’s comments in the Security Council that the U.S. would act alone if Kim’s regime didn’t stop testing missiles and bombs. They emphasized the world body’s resolution also emphasized the importance of resolving the crisis through negotiations. “The Chinese side will never allow conflict or war on the peninsula,” Foreign Ministry spokesman Geng Shuang said in a statement on Tuesday.

In a soundbite late on Tuesday, Japan"s Nikkei quoted prime minister Shinzo Abe who said that "in the end, [the North Korean] problems should be solved through diplomatic dialogue," adding that Japan will "work together with the international community to apply maximum pressure, so that North Korea commits to perfect, verifiable and irreversible denuclearization." For Japan to engage with the regime, he stressed it would have to be "on the condition that North Korea commits to" this complete denuclearization."

Which, of course, won"t happen: “sanctions of any kind are useless and ineffective,” Russian President Vladimir Putin told reporters earlier this month at a summit in Xiamen, China. “They’ll eat grass, but they won’t abandon their [nuclear] program unless they feel secure.”

Predictably, North Korea"s Foreign Ministry slammed the sanctions saying it “condemns in the strongest terms and categorically rejects” the United Nations adding more sanctions, North Korea’s state-run KCNA reported on Wednesday morning. Instead, North Korea warned it “will redouble efforts to increase its strength” as it seeks to establish “practical equilibrium” with U.S.

And so, not only is the entire geopolitical circle jerk back at square one, but the ball is again back in North Korea"s court, while the decision on whether or not to launch another ICBM really depends on whether China will give it the quiet go ahead; a China which responds notoriously poorly to being threatened in the global financial arena, like for example when the US threatens to kick it out of the global dollar system...

United Nations Unanimously Approves New Sanctions On North Korea

The UN Security Council has unanimously voted to step up sanctions on North Korea in retaliation for the country’s recent sixth and most powerful nuclear test. The 15-member Security Council passed the resolution unanimously, with both China and Russia siding with the US against North Korea, which however should not come as a surprise because as previewed this morning, the US drastically watered down its original sanctions proposal, which now excludes Trump"s prior demands for an oil import ban as well as international asset freeze on the government and leader Kim Jong Un, in order to win the support of Moscow and Beijing. This was the ninth sanctions resolution unanimously adopted by the 15-member council since 2006 over North Korea’s ballistic missile and nuclear programs.

Despite the compromises, U.S. Ambassador Nikki Haley said the resolution would cut North Korean exports by 90% and reduce the refined products available to North Korea by 44% and fuel by 30%. “Today we are saying the world will never accept a nuclear armed North Korea,” she said. “This will cut deep.”

Well, not really: the resolution slashes 55% of the country’s gas, diesel and heavy fuel imports, imposing a ban on condensates and natural gas liquids, a cap of 2 million barrels a year on refined petroleum products, and a cap on crude oil imports at current levels, in other words N.Korea"s oil flow remain untouched (as a reminder, China supplies most of North Korea’s crude). According to US officials quoted by Reutrs, North Korea imports some 4.5 million barrels of refined petroleum products annually and 4 million barrels of crude oil.

The new resolution also will impose an embargo on all textile trade and require inspections and monitoring of North Korea’s sea vessels by member states, but doesn’t provide for the use of military force to gain access to the ships.

According to the WSJ, a proposed ban on North Korean foreign workers, a source of an estimated $1 billion in annual revenue to the regime, also was reworded to allow countries to employ North Korean nationals if deemed vital for humanitarian reasons. It also doesn’t apply to workers who hold contracts taking effect before the adoption of the resolution.

Previously, China and Russia - veto-holders on the 15-member Security Council - had voiced opposition to harsher measures and threatened to block the vote if the ban on oil remained. China is reluctant to pressure the North Korean regime to the brink of collapse fearing instability at its border, a flow of refugees and a possible American military presence. Both Russia and China have said they favor direct talks and not sanctions.

Nikki Haley said that the sanctions will target $1.3 billion in North Korea revenue. The US ambassador to the UN added that the "strong relationship between Trump and Xi played a key role in negotiating the new UN sanctions", or translated: China imposed its terms on the US proposal so that China would note veto the mostly optical measure, to avoid making Trump look weak again in the UN. She also said that the US is "not looking for war" with North Korea, and added that North Korea has not yet "passed the point of no return." That said, by now it is completely unclear just what would entail passing said "point of no return."

After a week of intense negotiations, a unanimous Security Council vote against North Korea was viewed as politically more important than a strong U.S. stand that risked division, diplomats said. “Any perception of weakness on the side of the Security Council would only encourage the regime to continue its provocations and objectively create the risk of an increasingly extreme situation,” said France’s Ambassador François Delattre.

Of course, further provocations by the regime at this point remain all too likely. And so, now attention turns to Pyongyang and North Korea"s response: overnight, the state-run KCNA agency unleashed numerous warnings and threats toward the US should the sanctions pass.  “In case the U.S. eventually does rig up the illegal and unlawful ‘resolution’ on harsher sanctions, the DPRK [North Korea] shall make absolutely sure that the U.S. pays due price,” the spokesman of the country’s Foreign Ministry said in a statement.

However, it is unclear if these drastically watered down sanctions, which have China"s explicit blessing, will be sufficient to prompt another ICBM launch and/or nuclear test. In any case, keep an eye on those flashing red headlines.

Reports Confirm North Korea Has Enough Oil To Survive An Embargo

Authored by Adam Garrie via TheDuran.com,

While a full scale oil embargo against North Korea is unlikely, the reality is that North Korea would be able to survive such a measure with comparative ease.

The United States has recently suggested a global oil embargo against North Korea, something both China and Russia oppose. The DPRK’s neighbours to the north support UN sanctions against Pyongyang, but have firmly opposed unilateral US sanctions against North Korea.

Russia and China have made a commitment never to support sanctions against Pyongyang which could negatively impact on the civilian population of their neighbour and this would almost certainly include a full-scale oil embargo.

On the contrary, Russia’s plan to de-escalate tensions on the Korean peninsula is to develop trilateral economic initiatives linking South and North Korea to Russia. Given the realities on the peninsula, Russia’s ‘carrot’ is seen as preferable on both sides of the 38th parallel to Washington’s increasingly bellicose ‘stick’.

But even if Donald Trump was somehow able to convince the world to engage in an oil embargo against North Korea, North Korea would appear to have enough domestic oil reserves to make up for the loss of imports.

In addition to large reserves of domestic coal and the increased reliance on green energy in the form of hydroelectric power , North Korea’s domestic oil reserves are likely far greater than previous conservative estimates have indicated.

Even prior to the new threat of sanctions, North Korea has been increasingly self-sufficient in beginning to tap its still largely unused oil reserves.

In 2015, when relations between the DPRK and the rest of the world were somewhat better than they are at present, independent oil exploration expert Michael Rego investigated North Korea’s oil potential.

The results of his report paint a broadly positive picture for North Korea, a state which has always striven towards economic self-sufficiency, a principle implicit in the Juche idea of the DPRK’s founder Kim Il-Sung, which remains Pyongyang’s guiding political programme.

An summary of Rego’s report, first published in GeoExPro, was published by The Maritime Executive. The key elements are as follows, with bold lettering added to emphasise the most pertinent findings.

“China conducted surveys off the west coast (of North Korea) in the 1960s. Subsequently, Russia has also conducted surveys along with Taurus Petroleum in Switzerland and Malaysia’s Petronas.

NK News reports Rego saying that the West Sea definitely has oil and has flowed oil at reasonable rates from at least two exploration wells.

However, the country’s political climate, including sanctions currently in force, and water depths of up to 2,500 meters off the east coast present barriers to development. A shortage of funds is likely to further hamper development. In the 1990s, North Korea couldn’t provide food for its population, and it continues to struggle to meet the energy demands of its population, generally falling short even in providing electricity to its capital city.

Despite the possible hurdles, some companies appear undaunted, reports NK News. The China Railway Investments Group recently said they were planning large scale investment in North Korea including the oil and gas sector.

The Energy Information Administration (EIA) states, as of July 2015, that the country has no proven oil reserves or petroleum and other liquids production. During North Korea’s industrial peak in the 1970’s and 1980’s, the country was able to import oil from China and the Soviet Union at below market prices. Following the end of the Cold War, these deals ended, and North Korea’s oil consumption dropped from 76,000 barrels per day (b/d) in 1991 to 17,000 b/d in 2013.

It is difficult to get an exact estimate of the amount of oil imported into North Korea each year, states the EIA. Some estimates report that North Korea imports more than half of its oil from China and some volumes from Russia. North Korea has the capacity to refine 64 thousand barrels a day, however as a result of the economic decline, has utilization rates below 20 percent. Despite this, North Korea is able to refine enough crude oil to meet some of their domestic demand.

North Korea is currently under international United Nations economic sanctions due to its nuclear weapon and ballistic missile programs. These sanctions restrict North Korea’s access to international banking, trade and travel. North Korea is also under economic sanctions from individual nations such as the United States, China, the United Kingdom, Canada and Japan”.

The report clearly indicates that in spite of sanctions limiting some of North Korea’s ability to extract its own oil, the country does have enough proven reserves, which as of 2015, the country was able to refine in order to meet the needs of domestic consumption. These needs have not changed significantly since 2015.

In 2004, the UK company Aminex PLC estimated that a North Korea oil shelf off the Sea of Japan which was first explored in a joint effort between the DPRK and another British company in 1998, contains 4-5 billion barrels of crude oil.

Sputnik reports,

“Simultaneously, the Mongolian company HBOil conducted exploration activities in the area south of Pyongyang and drilled 22 wells. Most of wells contained crude, allowing the DPRK to extract an average of 75 barrels per day from each of them”.

As Rego’s report stated, in spite of lacking the means (due primarily to sanctions) to purchase modern drilling/extracting equipment from abroad, North Korea still has it within its capabilities to extract enough oil to supply domestic needs.

While most of North Korea’s drilling equipment as of 2015 was purchased from Romania dating back to the Ceausescu period, the country also possesses more widely produced Soviet equipment.

Most experts believe that North Korea has the ability to reverse engineer its existing imported equipment to build contemporary versions without the need to import any specific supplies.

While North Korea’s detractors often focus on what the country lacks in terms of foreign made technological devices, both in the civilian, military and energy sectors, the reality is that considering this artificial deprivation, North Korea has done remarkably well in designing its own computer systems, weapons systems and in many ways most importantly, energy extraction systems.

Based on North Korea’s own claims as well as those of independent experts and contractors who have no reason to exaggerate North Korea’s oil wealth, it is simply a matter of North Korea utilising existing oil extraction systems more effectively combined with building additional new systems based on reliable old models, in order to be largely embargo-proof when it comes to energy.

In any event, the political tensions Donald Trump has created between the US on one hand and China and Russia on the other, means that such an oil embargo is unlikely in any case. But given the tense political atmosphere and the traditional North Korean emphasis on understanding Autarky in positive terms, North Korea may well be immune to such threats sooner rather than later, in any case.

Paul Craig Roberts Sees "A Ray Of Light" From Europe

Authored by Paul Craig Roberts,

America has been a discouraging landscape ever since the neoconservatives took over US foreign policy during the Clinton regime and started the two decades of war crimes that define 21st century America and ever since US corporations betrayed the US work force by moving American jobs to Asia.

The outlook became darker when the Obama regime resurrected the Russian Threat and elevated the prospect of military conflict between the nuclear powers.

As Europe is caught in the middle, in normal circumstances European countries would have insisted that Washington cease the gratuitous provocations of Russia. But normal circumstances have not existed.

Since the end of WW2, European countries have been vassals without independent economic and foreign policies.

Europe hosts US military bases that threaten Russia. Europe has backed Washington’s wars of aggression against Serbia, Afghanistan, Iraq, Libya, Syria, Washington’s air attacks on provinces of Pakistan, and Washington’s use of Saudi Arabia to fight its proxy war against Yemen.

Europe has backed Washington’s gratuitous economic sanctions against Iran and Russia, sanctions that have cost Europe much and Washington little.

Accustomed to having its way with Europe, Washington commits Europe without even consulting the vassal governments.

Now it seems Washington’s extraordinary arrogance and hubris has resulted in overreach. Confronted with a new round of sanctions against Russia, Jean-Claude Juncker, president of the European Commission told Washington that the time has passed when Washington can put its interests first and Europe’s last.

The new sanctions have devastating economic and political consequences for Europe.

Juncker said that if Europe’s “concerns are not taken into account sufficiently, we stand ready to act appropriately within a matter of days.”

The German and French foreign ministries added their support to Juncker. The German foreign ministry said:

“It is not in the Americans’ right to judge or stipulate which way European companies may engage in cooperation with any third parties – particularly, with Russian energy companies.”

The French foreign ministry said: the sanctions “contradict international law” due to their “extraterritorial reach.”

Europe views the sanctions as a tool of US industrial policy that elevates US business interests over Europe’s business interests.

Let’s hope that Washington’s arrogance will not permit Washington to back down and that Europe will give Washington the finger and disengage from the American Empire.

Without Europe to host its military bases and to parrot its propaganda, Washington’s ability to threaten Russia would significantly decline. Indeed, a continuation of the hostile threatening attitude toward Russia would leave Washington isolated in the world.

No country wants the risk of experiencing nuclear war merely for the sake of Washington’s unilateralism.

Ron Paul: Trump Should Veto Congress' Foolish New Sanctions Bill

Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

This week’s expected House vote to add more sanctions on Russia, Iran, and North Korea is a prime example of how little thought goes into US foreign policy. Sanctions have become kind of an automatic action the US government takes when it simply doesn’t know what else to do.

No matter what the problem, no matter where on earth it occurs, the answer from Washington is always sanctions. Sanctions are supposed to force governments to change policies and do what Washington tells them or face the wrath of their people. So the goal of sanctions is to make life as miserable as possible for civilians so they will try to overthrow their governments. Foreign leaders and the elites do not suffer under sanctions. This policy would be immoral even if it did work, but it does not.

As Ron Paul relates...

Why is Congress so eager for more sanctions on Russia? The neocons and the media have designated Russia as the official enemy and the military industrial complex and other special interests want to continue getting rich terrifying Americans into believing the propaganda.

Why, just weeks after the White House affirmed that Iran is abiding by its obligations under the nuclear treaty, does Congress pass additional sanctions anyway? Washington blames Iran for “destabilizing” Syria and Iraq by helping them fight ISIS and al-Qaeda. Does this make any sense at all?

When is the last time Iran committed a terrorist act on our soil? It hasn’t. Yet we learned from the declassified 28 pages of the Congressional 9/11 report that Saudi Arabia was deeply involved in the 2001 attacks against Washington and New York. Who has funded al-Qaeda and ISIS in Syria for years? Saudi Arabia. Yet no one is talking about sanctions against that country. This is because sanctions are not about our security. They are about politics and special interests.

Why is Congress poised to add yet more sanctions on North Korea? Do they want the North Korean people to suffer more than they are already suffering? North Korea’s GDP is half that of Vermont – the US state with the lowest GDP! Does anyone believe they are about to invade us? There is much talk about North Korea’s ballistic missile program, but little talk about 30,000 US troops and weapons on North Korea’s border. For Washington, it’s never a threat if we do it to the other guy.

Here’s an alternative to doing the same thing over and over: Let’s take US troops out of North Korea after 70 years. The new South Korean president has proposed military talks with North Korea to try and reduce tensions. We should get out of the way and let them solve their own problems. If Iran and Russia want to fight ISIS and al-Qaeda at the invitation of their ally, Syria, why stand in the way? We can’t run the world. We are out of money.

President Trump was elected to pursue a new kind of foreign policy. If he means what he said on the campaign trail, he will veto this foolish sanctions bill and begin dismantling neocon control of his Administration.

Trump Preps New North Korea Sanctions As 'Armada' Continues Toward Peninsula

As the world watches each new North Korean development with bated breath, the Trump administration is reportedly preparing new economic sanctions which could be used in lieu of military force to de-nuclearize the country.

According to Reuters, the sanctions could include a potential oil embargo, intercepting cargo ships headed to North Korea, a ban on the country"s airline, Air Koryo, and punishments for Chinese banks doing business with Pyongyang.

Despite sending a naval force to the Korean peninsula, the Trump administration is focusing its North Korea strategy on tougher economic sanctions, possibly including an oil embargo, banning its airline, intercepting cargo ships and punishing Chinese banks doing business with Pyongyang, U.S. officials say.

U.S. President Donald Trump has approved a preliminary broad approach on North Korea and asked his national security team to craft a more detailed framework for new international sanctions and other actions to counter Pyongyang"s nuclear and missile programs, one official said.

"There"s a whole host of things that are possible, all the way up to what"s essentially a trade quarantine on North Korea," the official told Reuters on Wednesday, speaking on condition of anonymity.

Of course, the U.N. could also impose economic sanctions that would include an embargo on oil supplies to North Korea; a global ban on Air Koryo; and interdiction of North Korean freighters on the high seas, a step that would go beyond an existing requirement for nations to inspect ships transiting their territory.  The United Nations could also prohibit the use of North Korean contracted labor abroad and expand the restrictions on coal exports to a total ban, officials told Reuters.

Another step could be a ban on North Korean seafood exports, Pyongyang"s fourth-largest export to China, its main trading partner, and expanded efforts to seize assets of North Korean leader Kim Jong Un and his family.

Meanwhile, as a former U.S. State Department official points out, when it comes to economic sanctions, half measures rarely work.

Some analysts cautioned that targeting Chinese entities with so-called "secondary sanctions" could backfire and make Beijing less willing to cooperate, and that dealing with a country that already has nuclear weapons differs from dealing with one accused of trying acquire them.

"If you want to rely on sanctions to achieve your goal, you have to find a way to persuade or force the world into going all the way to a near full embargo or at least an embargo on key commodities like petroleum and on North Korean hard currency export earnings," said Joseph DeThomas, a former State Department official who worked on Iran and North Korea sanctions.

"Only if the regime sees continuation of sanctions as fatal will it consider change," he said.

Of course, news of economic sanctions comes as Trump"s "armada" is still en route to the Korean peninsula.  And while the White House seems to be open to diplomatic measures, with the assistance of China, U.S. officials have confirmed that military options remain on the table with pre-emptive strikes on North Korea remaining a last resort....a threat which Trump seemingly confirmed personally over Twitter earlier this morning.

I have great confidence that China will properly deal with North Korea. If they are unable to do so, the U.S., with its allies, will! U.S.A.

— Donald J. Trump (@realDonaldTrump) April 13, 2017

Meanwhile, China has already taken steps to cut off imports of North Korean coal shipments with customs data in Beijing on Thursday showing that imports had plunged 52% in the first three months in 2017.  But while China seems to be cooperating with diplomatic efforts to reign in North Korea"s "crazy fat kid", as John McCain has described him, they"ve consistently warned the U.S. against the use of military force. 

China, North Korea"s sole major ally and benefactor, which nevertheless opposes its weapons programme, has called for talks leading to a peaceful resolution and the denuclearisation of the peninsula.

"Military force cannot resolve the issue," Chinese Foreign Minister Wang Yi told reporters in Beijing.

"Amid challenge there is opportunity. Amid tensions we will also find a kind of opportunity to return to talks."

"Whoever provokes the situation, whoever continues to make trouble in this place, they will have to assume historical responsibility," Wang said.

"As soon as North Korea complies with China"s declared advice and suspends nuclear activities ... China will actively work to protect the security of a denuclearised North Korean nation and regime," said an editorial in the Global Times, which is published by the Communist party"s People"s Daily

So the only question now is: who will blink first?

EU's Highest Court Upholds Sanctions Against Russia's Rosneft

Authored by Tsvetana Paraskova via OilPrice.com,

The European Court of Justice, Europe’s top court, on Tuesday ruled that sanctions imposed by the UK and the EU on Russia’s oil giant Rosneft are valid, in a ruling that also asserts the court’s jurisdiction over the common policy of the European Union (EU).

The EU imposed sanctions on Russia in 2014 over Moscow’s annexation of Crimea, with economic sanctions slapped in July 2014 and reinforced in September 2014, including against certain Russian companies that include Rosneft.

Rosneft had challenged before the High Court of Justice (England & Wales) the validity, in the light of EU law, of the restrictive measures imposed by the European Council on it and the implementing measures adopted by the United Kingdom that are based on the Council acts. The European Court of Justice was asked to rule, in essence, if the acts of the Council and the United Kingdom are valid.

In its ruling published today, the court said that “The restrictive measures adopted by the Council in response to the crisis in Ukraine against certain Russian undertakings, including Rosneft, are valid.”

“The Court holds that the importance of the objectives pursued by the contested acts is such as to justify certain operators being adversely affected. Having regard to the fact that the restrictive measures adopted by the Council in reaction to the crisis in Ukraine have become progressively more severe, interference with Rosneft’s freedom to conduct a business and its right to property cannot be considered to be disproportionate,” the court said.

Following the court ruling, Rosneft issued a statement in which it said it was disappointed by the ruling, and that it considers the court decision “illegal, groundless and politicized”.

The Court refused to admit that the EU sanctions were imposed, in particular, to achieve hidden purposes and are, in fact, an instrument of competitive struggle. Nevertheless, the Court could not explain why the limitations, applied under the pretext of Crimea"s accession to Russia, involve access of oil companies to international financial markets, oil production at the Arctic shelf, development of tight reserves, deep-water and shale fields. The Company considers that the sanctions imposed against it by the EU states are primarily aimed at increasing risks of busines operations, obstructing implementation of Rosneft"s important projects and thus creating preferences for other oil market players.

The Court ignored its own existing precedents when the decision on EU sanctions was revised by the same court due to lack of substantial evidence. For instance Iranian banks included in the EU sanctions list successfully appealed the EU regulation. The Court stated that they are not related to the nuclear program of the IRI that was the object of sanctions and the existence of the close ties to the government is not a satisfactory argument for including them in the list.

The Court refused to acknowledge that unilateral economic sanctions restrict trade by definition and contradict existing provisions of the Partnership and Cooperation Agreement (PCA) between Russia and the EU, signed in 1994. The EU’s decision to impose the sanctions is, in fact, a legitimated refusal to fulfill its obligations under international law.

“This decision proves that in Europe the rule of law is being substituted with the rule of politics,” said Rosneft, whose chief executive Igor Sechin is a close ally of Vladimir Putin.

Amazon Discloses Iranian Transactions That May Have Violated US Sanctions, Warns It May Be "Penalized"

In a 10-K filed on Friday afternoon, Amazon disclosed that certain transactions and business ties with Iran may have violated U.S. sanctions, warning that it may be penalized after a regulatory review of the activities.

In the "Other Contingencies" section of its 10-K, Jeff Bezos" company had determined that, between January 2012 and December 2016 it had "processed and delivered orders of consumer products for certain individuals and entities located outside Iran covered by the Iran Threat Reduction and Syria Human Rights Act or other United States sanctions and export control laws. The consumer products included books, music, other media, apparel, home and kitchen, health and beauty, jewelry, office, consumer electronics, software, lawn and patio, grocery, and automotive products."

The world"s biggest online retailer also said that it has "voluntarily reported these orders to the United States Treasury Department’s Office of Foreign Assets Control and the United States Department of Commerce’s Bureau of Industry and Security." and said it will cooperate with a review by the agencies, "which may result in the imposition of penalties."

As Bloomberg, which first spotted the violation, explains, the violations are the result of then-President Barack Obama"s signature of the ITRA in 2012, meant to strengthen trade restrictions on Iran and try to persuade the country to stop its nuclear activities. This law imposes civil penalties and takes other action against foreign subsidiaries of U.S. companies engaging in transactions with Iran. In January 2016, the U.S. lifted many of the economic sanctions tied to the nuclear program.

Amazon further clarified the violations which consisted of consumer products sold to individuals and unspecified groups controlled or owned by the Iranian government, among which "consumer products valued at approximately $50 for an Iranian embassy located in a country other than Iran; consumer products valued at approximately $1,300 for an individual designated under Executive Order 13224; consumer products valued at approximately $2,400 for an entity owned or controlled by the Iranian government; and consumer products valued at approximately $250 for an individual who may have been acting for an entity designated under Executive Order 13382 and owned or controlled by the Iranian government. The consumer products included books, other media, apparel, home and kitchen, jewelry, office, toys, consumer electronics, software, health and beauty, pet products, and lawn and patio."

The company also said that is was "unable accurately to calculate the net profit attributable to these transactions" and said it does "not plan to continue selling to these accounts in the future."

The statement concludes with Amazon"s declaration that its "review is ongoing and we are enhancing our processes designed to identify transactions associated with individuals and entities covered by the ITRA."

Why come clean now, and disclose violations that took place as far back as 2012?

Perhaps because Amazon, along with many other tech companies, was a key catalyst behind the recent successful lawsuit against the Trump administration"s immigration executive order. While it is unknown if AG Sessions (or Trump himself) will retaliate against said companies, Jeff Bezos, who has a long "history" with Trump, decided not to take the chance.