Washington is limited in its response to North Korea over Sony hack
*By Anna Yukhananov and James Pearson**
**Reuters**
**
**WASHINGTON/SEOUL Fri Dec 19, 2014 12:06pm EST*
http://www.reuters.com/article/2014/12/19/us-sony-cybersecurity-sanctions-idUSKBN0JX1UW20141219
(Reuters) - U.S. determination that North Korea was behind the hacking
of Sony Corp. unit Sony Pictures again exposes the limited leverage that
Washington has on one of the world’s most isolated and impoverished
countries should it decide to respond.
Although successive U.S. presidents have imposed decades of restrictions
on Pyongyang, the U.S. Treasury has so far directly sanctioned only 41
companies and entities and 22 individuals.
Those sanctions relate to North Korea's development of weapons of mass
destruction, including nuclear arms, but Washington has also been deeply
concerned about Pyongyang's hostile behavior toward U.S. allies in the
region.
U.S. authorities said on Friday investigators had determined that North
Korea was behind the devastating cyberattack on Sony Pictures, setting
up a possible confrontation between Washington and Pyongyang.
U.S. authorities have struggled to find much to sanction in a country
which has limited links to the outside world and whose annual gross
domestic product per capita is just $1,800, which ranks it 198 out of
228 countries, according to CIA estimates.
In contrast, financial sanctions had a big impact on Iran and Russia,
which are tied in to the global banking industry.
Pyongyang has been sanctioned in various forms by the United States for
more than 50 years and has become expert in hiding its often criminal
money-raising activities, largely avoiding traditional banks. While
sanctions may have slowed its nuclear weapons program, they have not
derailed it.
One possible response would be to pressure private companies that
provide North Korea's cellular and television services, or to persuade
China to close Internet connections, something Beijing, the North's sole
major ally, has been loath to do.
Egypt's Orascom and Thai company Loxley Pacific are both invested in the
North's telecommunications industry.
“In concrete terms, there’s not a heck of a lot they can do because one,
North Korea doesn’t have an economy, and two, we’ve already got every
sanction known to man against them,” said Jim Lewis, a senior fellow at
the Center for Strategic and International Studies who focuses on
cybersecurity.
PYONGYANG ADAPTS
With limited trade and natural resources, Pyongyang's revenues are
heavily reliant on money-making scams, which have ranged from
counterfeiting $100 bills to illicit arms sales and drugs smuggling,
according to reports by the U.S. government.
In 2005, $25 million of the regime's cash was frozen at Macau-based
Banco Delta Asia, which was designated a "primary money laundering
concern" by the U.S. Treasury.
That case stands as practically the only public success in seizing funds
from the country, which is now led by Kim Jong Un, the third of the Kim
dynasty to rule.
Kim Kwang-jin, now a defector in South Korea, worked for the North's
state insurance company in Singapore. He recalls stuffing $20 million in
cash into a suitcase in 2003 and sending it to then ruler Kim Jong Il.
That money came from exaggerated claims from reinsurers for weather
damage, ship and aircraft losses.
“We tried to use official channels like banks to conduct illegal
settlements with others. This is usually done by individuals and North
Korean companies, so it’s very difficult to detect the details in their
activities and resources,” Kim said from Seoul.
Unlike oil-exporting Iran, which is heavily sanctioned by the United
States, the United Nations and others, North Korea's puny $50 billion
economy produces few goods other than minerals and seafood sold to
China. Its trade with China was put by Beijing at $5.7 billion in 2011.
Although North Korea maintains one of the world's largest standing
armies and boasts of the capacity to deploy nuclear weapons, its
military equipment is decades out of date and most military experts say
it would lose any conventional war.
Given the success of the Sony hack, and the pulling of the company's
film "The Interview" which depicted the assassination of Kim Jong Un, it
appears likely that Pyongyang will see more upside in hacking than the
risk of reprisals.
"You can turn out the lights in Pyongyang, and they could turn out the
lights in New York. Who loses more? There’s no way for us to win a
trade," said Lewis at CSIS.
"So (with) cyber (and) military largely off the table, (that) leaves you
with public diplomacy and law enforcement. I know that’s not satisfying,
but that’s the way it is."
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