Transcripts For CSPAN3 Hearing Focuses On Impeding North Koreas Access To Funding 20170919

On textile exports. Among the witnesses were former cia and Treasury Department officials. This hearing is just under two hours. Ask to declare a recess at any time. All members will have five days to submit extraneous material to the record. This hearing is entitled a legislate iive proposal to impe north koreas access to finance. I recognize myself for five minutes to give an opening statement. Todays hearing will examine draft legislation that would impose secoese secondary sancti foreign banks whose business supports the north korean regime whether directly or indirectly. By encompassing all of north koreas Economic Activity these measures would represent the toughest financial sanctions yet directed at pyongyang. This means going after coal as well as north korean laborers abroad. The bill would incentivize greater compliance with u. N. Sanctions by leveraging our vote at Financial Institutions where certain countries with lax enforcement go to seek assistance. This bill puts those countries on notice. This has been informed by the committees ongoing work on north korea as well as the u. N. Panel of experts vaegs of existing sanctions effectiveness. Needless to say, north koreas sixth nuclear test on september 3rd coupled with its repeated launching of intermediate and long range Ballistic Missiles underline that more must be done. As a result, the legislative draft will be looking at lays out a choice. Foreign banks can do business that benefits north korea or they can do business with the United States. They cannot do both. As many of us here today are aware, this is a similar approach to one taken in 2010 against iran. There are difrss of opinion over how successful those negotiations were, there is consensus, i believe, that in the absence of secondary sanctions affecting banks, tehran would have been far less incentivized to engage in talks. A focus on banks is especially important given how north korea has evaded sanctions in the past. The North Koreans have moved much of their trading activity offshore using third country brokers and Front Companies. The specter of financial sanctions may concentrate the minds of foreign banks so the entities identified by dr. Park and others have fewer options to carry out transactions and mask north korean involvement. Having said that, this bill would expand the scope of our sanctions to encompass even actors engaged in conventional trade with the north. Given north koreas unchecked hostility, broadening our efforts this this way appears essential. Chinas response to stronger sanctions has been sited as a concern as the country accounts for 90 of the north koreas trade. I would submit those critics should be far more sensitive to a quarter century of failed multilateral efforts to rein in pyongyang. There comes a time with caution becomes a euphemism for selfdelusion. As the u. N. Security Council Talks following the norths sixth nuclear test have demonstrated, its still unclear if china is committed to meaningfully tackling the north korean threat. We are curiously asked to believe that its hands are tied when it comes to a small economically depen dent state next door. Well, if chinese officials hands are tied, then we should proceed with secondary sanctions so their banks can assist International Efforts to cut off north koreas access to finance. I want to thank our witnesses for appearing today. I look forward to their testimony. Thank you so much. Id like to share some thoughts shes committed to paper regarding todays hearing. I want to thank our witnesses for joining us. Pressuring the International Community to enforce those restrictions as well. The situation in north korea is the most you aurgent and danger threat to peace and security. It grows more dangerously as they per sursue to capacity to extend its reaches. Theres are no good options for dealing with north korea. I like the idea of having china lean hard on north korea. We should not confuse either of those things with a coherent strategy. Any ramp etting up of sanctions must be coupled with aggressive diplomatic engagement with the United States and with a frame work that entailed nuance negotiations. It concerns me that just as the crisis is accelerating, you are diplomatic are diminished. The president has yet to nominate a permanent secretary of state. The legislative proposal before us today rightly recognizes the need to exert massive and immediate pressure on the north korean regime and enlist china and others in this effort. Such a powerful approach towards sanctions. However, that have the capacity to reverberate throughout the glob Global Economy must allow for a careful calibration. We look forward to the witness views as well as your views on how the u. S. Can most effectively use its leverage to contain the alarming danger north korea presents. I reserve my time. The chair now recognizes the gentleman from washington. Thank you for the time. Thank you all for convening this important hearing. Responding effectively to north koreas provocation will require a variety of tools. We have jurisdiction over sanctions opinion i believe its important that we always keep the broader picture in mind as we work to perfect the discussion draft which has been put forward today. A regime that relies on force to stay in power. Sanctions are make further north korean advances slower and more costly giving more times to other policy tools to work. I look forward to hearing from our distinguished witnesses about how this proposed draft fits into a larger strategy. My constituents in the south puget sound includes the Service Members are counting on us to respond to this crisis in a responsible manner. So too are our allies like south korea and japan. We cannot afford to fail them. We have to get this right. Im hopeful that with steady American Leadership working in a bipartisan manner, we will get this right. I yield back, mr. Chairman. The gentleman yields back. Because of the significance of the issues under consideration and the north korean threat, a number of members from the full committee have expressed interest in participation in todays Sub Committee hearing. I ask for unanimous consent that members on the full committee but not on this Sub Committee may join in this hearing. Wi we welcome david albright. He has written numerous assessments on the secret nuke her Weapons Program throughout the world. Mr. Albright has published assessments in numerous technical and policy journals. Hes also coauthored four books. How the secret nuclear trade arms americas enemies. Prior to founding the institute h he worked as a senior staff scientist. Anthony ruggiero spent 17 years in government. Hes a Foreign Policy fellow in the office of marco rubio. Prior to joining treasury, mr. Ruggiero spent over 13 years in various capacities at the state department including chief of the defensive measures and wmd finance team. He was also nonproliferation advisor to the 2005 rounds of the Six Party Talks in beijing and participated in u. S. North korea meetings. Hes also served as an Intelligence Analyst covering north Korea Nuclear and missile programs. Bruce klingner specializes in Japanese Affairs at the heritage foundations Asian Studies center. Mr. Klingnersage sis are by his 20 years in service. From 1996 to 2001 mr. Klingner ease Deputy Division chief for korea. In 1993 and 1994 he was the chief of the cia branch during a Nuclear Crisis with north korea. From may 2009 to september 2013 many rosenberg serve and as a Senior Advisor for terrorist financing and financial crimes. Then to the undersecretary for terrorism and financial intelligence. She helped to develop and implement financial and energy sanctions. She also helped to formulate antiMoney Laundering and oversee enforcement activities. Each you have will be recognized for five minutes to give an oral presentation of your testimony. Each of your written statement will be made part of the record. Mr. Albright youre recognized for five minutes. Thank you for the opportunity to testify today. During the last few years, north korea has embarked on an intensive Nuclear Weapons testing and Production Campaign that is included the construction and operation of many Nuclear Facilities and tens of Ballistic Missile launches. Few doubt that north korea can launch missiles that can strike our allies. Its making progress toward that goal. I continue to believe that north korea can be peacefully denuclearized. Substantive negotiations appear unlikely unless north korea changes its path. Theres little choice but to exert more pressure. The uchl n. Security Council Resolution passed on monday is an important step in that direction. A near term priority is to far more effectively isolate north korea from the regional and International Financial system. A central problem is many countries are not enforcing sanctions effectively or willfully disregarding them. Punitive measures are needed to encourage compliance and deter violations. Additional u. S. Legislation that supports that goal is useful. North korea appears to target entities and persons in engaging in active ities in tens of countries with weak or nonexistent train control systems or Proliferation Finance controls or higher than average corruption. Although a range of remedies are needed to fix the poor performance in general of many of these countries, the creation of punitive measures may be an effective means to accelerate more compliant behavior in the short term among a wide range of countries where entities and individuals see north korea as a quick way to make money or obtain military or other goods more cheaply or unavailable elsewhere. North korea has depended on a legal or questionable procurements for decades. Theyve gone offshore quite successfully to be able to acquire those goods. They dont just acquire them in the country such as china. They are able to get those goods from the United States, europe and japan by operating this china and exploiting chinas weak export control and sanctions legislation. I provided several examples in my system. China remains north koreas central, perhaps, unwitting supply conduit for its nuclear Weapons Program. One of the priorities is to change that. The Trump Administrations efforts to sanction chinese and for that matter russian owned companies and individuals that significantly support north koreas Weapons Program are a positive step. Unless china and russia show dramatic improvements, United States should go further and sanction major russian and chinese banks for any dealings. North korea has a dip low matsic path out of its isolation and sanctions. Any suggestion negotiations would need to repair past mistakes where north korea was able to evades inspections, continue expanding its nuclear programs. Agreement would need to allow unprecedented inspections and access allowing for a full accounting of the program as part of a denuclearization process. This prospect seems unlikely in the short term, its important to keep this goal available as a matter of u. S. Policy in case increased sanctions cant convince north korea to negotiate in earnest. Like wise the Trump Administration should continue to make clear that regime change is not its goal and particular if the goal is to seek cooperation from china that becomes even more important. Gentlemans time has expired. Thank you. Well look forward to the remainder of your testimony during the question and answer session. Mr. Ruggiero youre now ris recognized for five minutes. Thank you. We must ensure that u. S. Response to every north korean provocation advances our goal of denuclearizing north korea. Some experts will call for the white house to negotiate a freeze of north Koreas Nuclear program with claims it will reduce the threat and lead to denuclearization. We have seen this movie before and its ending is not encouraging. Its only for the purpose of extracting concessions in exchange for promises that will quickly violate. I noted that u. S. Sanctions did not have a serious impact because they have insufficiently targeted enough of pyongyangs international business. This work is not done. As i note in my written testimony recent actions reveal three methods pyongyang uses. In slide one the first starts with north korean revenue in china following the sale of commodities brokered by chinese firms and individuals. The payment moves through a north korean bank. From there moving left to right from there the funds move to a Chinese Company and then a Front Company that accesses u. S. Banks. The method relies on a system between north korea and china where the chinese firms and individuals hold these Bank Accounts. Slide two, please. The second method was identified by the Justice Department based on information from an unnamed north korean defector. Chinese entity one on the left side. Chinese entity one owes money while north korean entities two owes a similar amount to chinese entities two. The entities pay each other given the difficulties of moving money over the border. The third method was used by a Russian Company to receive u. S. Dollars for shipment of gas oil to north korea. This is very important given the new resolution that restricts energy sales. Providing a key vulnerability that washington can exploit. This is why its crucial for the Trump Administration to issue fines against chinese banks that are facility north korean sanctions. Matching the successful u. S. Policy as the chairman said used to pressure european Financial Institutions that were facilitating iran sanctions violations. The fines will prompt chinese banks to increase scrutiny. To be clear, if Nongovernmental Organization ks find these transportati transaction, im confident the largest banks in china can find them too. Pyongyang is trying to decouple our closest allies. Sanctions approach that focus on north Korea Financial actives has the best chance of success. Thank you for inviting me to testify. I look forward to your questions. Financial sanctions should be a core part of a pressure strategy along with projection and complemented by diplomatic engagement. I applaud the work of congress to impose new sanctions authorities this summer. To tighten financial pressure along with complementary sanctions from the United Nations. To apply pressure on north korea and international enablers. Avoiding pitfalls and using secondary sanctions is is primary of the u. S. Administration. The body that implements and enforces sanctions to Congress Must oversee aggressive sanctions implementation but give the administration adequate flexibility. Currently, only large u. S. Banks and some major european and asian banks pursue Proliferation Finance leaving all other global banks significantly vulnerable to abuse by north korean or other proliferators. Lack of knowledge and resources means they often take a mechanical approach to Proliferation Finance in the form of checking customers or transactions against entities sanctioned by the u. N. Or national governments. Sometimes but not always including the u. S. The glow ball setting standard body, the Financial Action task force. This limited approach is i inadequate and we need much Stronger Leadership from the United States. There must be stronger public, private information exchange. I out line several specific points in response to your legislative discussion draft and some ideas for additional measures. I support your tough approach on secondary sanctions and encourage the inclusion of me meaningful provisions. I urge you to consider ways to provide additional Financial Support for the treasury and state departments and the u. S. Intelligence community to expand the group of experts a crafting and enforcing u. S. Sanctions and offering Technical Assistance to Foreign Countries related to sanctions enforcement. Financially, congress should mandate new Bank Supervision requirements for u. S. Bank extending to their foreign branches, subsidiaries and correspondence. Thank you for the opportunity to testify and i look forward to answering any questions you may have. Its truly an honor to be asked to salespeople before ype. Pyongyang maintains covert access through a global of array of shell companies. Most continue to be denominated in u. S. Dollars. While the challenge is an imposing targeted Financial Measures they appear overwhelming. North korea uses a limited number of individuals to run its covert networks. Individuals responsible have remained for years. By embedding their activities into the Global Finance networks they leave behind a digital trail making them vulnerable to targeted sanctions. While china accounts for 9 90 trade, the trading system consists of 5,000 companies. Those firms are centralized among a stramaller number of la scale trading firms so the top ten importers controlled 30 of the market. Those trading firm themselves are controlled by a smaller number of individuals. As such, the north Korean Network in china is centralized, limited and vulnerable. Targeting a relatively small number of choke points can have a Ripple Effect impacting multiple networks across multiple countries. Every law inforcement action could induce remaining components to change routes, Bank Accounts and procedures to less effective means. Even legitimate businesses will become entangled and more fully implement priored Due Diligence measures. Sanctions enforcement must be innovative and adaptive. As north korea alterealtered, International Law enforcements didnt keep pace. To raise the cost of north korean defiance the u. S. Must go beyond sanctions and diplo low diplomacy. They have used sanctions as a calibrated response to north korean provocations rather than a Law Enforcement measure defending the u. S. Financial system. Beijing is not paid a price for turning a blind eye to north korean proliferation. Washington has long cowered from targeting chinese violators of u. S. Laws out of fear undermining persisten sisistenc pressuring north korea. The north korea sanctions and policy enhancement act mandates sanctions on third country banks and companies that violate u. S. Sanctions and u. S. Law. Washington should impose significant fines at a level to the 12 billion the u. S. Leveed for iran. The u. S. Should designate as a Money Laundering concerns. In conclusion the most pragmatic u. S. Policy is a comprehensive strategy using all the instruments of National Power to increase pressure in response to repeated defiance of the International Community, to highlight and condemn pyongyangs crimes against humanity and ensure the u. S. Has sufficient defenses for itself and its allies while leaving the door open for diplomatic efforts. Sanctions require time and the political will to maintain them in other words to work. Its a policy of a slow python krix rather than a rapid cobra strike. Thank you for the privilege of appearing before you. Thank you fur your testimony. The chair recognizes himself frp five minutes of questioning. Earlier this month russian president Vladmir Putin argued that the potential for north korea sanctions to be effective remains limgtited. He claims the North Koreans would prefer to eat grass than give up their Nuclear Weapons. How would you respond to those that claim north korea can weather sanctions . That sanctions are not effective means of providing substance and meaning to our diplomacy and the kim regime will never care if its economy will suffer in other words to advance his weapons. Ill ask all of you to respond to that question. I think sanctions can have a very big impact on north korea. They are not implemented. Theres a lot of room to really press north korea to change its behavior. I think its a extremely valuable tool. Id like to see north korea eat its Nuclear Weapons. If thats what they choose. The sanctions should start to have a cost. I think that can be done. I think its more vulnerable because its surrounded by very big pousers. Mr. Ruggiero, when you answer this question could you address the issue that North Koreans have been creative in using third country brokers, as you testified, and Front Companies to mask their illicit transactions. As you answer the question could you address our draft bill and whether you think that banks in third countries, above all china, actually possess the capacity to identify these brokers, middle men and Front Companies. On russia i would start with perhaps president putin should focus on his russian companies. The ones that are working with a north korean proliferation entity that was designated by the u. N. In 2009. That the u. S. Sanctioned twice in the last couple of months. I would go back to 2005 that it was very effective in targeting north koreas financial activities. Theres a difference here. People criticize sanctions because its a game of whack a mole. It take a lot of resources. It did with iran. Theyre not invisible. Chinese banks and u. S. Banks looking for these activities, thats the problem. Thats the serious problem here. I would just add that china has a variety of strong reasons, strong interests ensuring theres no Money Laundering occurring in their own economy. If china, a country with sophisticated capital controls and taken measures including installing facial recognition cameras at atms in order to manage the flow of currency outside of china then they can certainly do a lot more to recognize some of these trusted agents of the north korean government that change their names and change their legal entities in order to launder money. Given how north korea has evaded sanctions in the past, i wanted you to address your quote that every u. N. Security Council Resolution is an incremental step forward because we get what china allows us to have. Do we need to do more in congress . I would tell mr. Putin that sanctions have several objectives. They are enforcing u. S. Law, imposing a penalty on those that violate our law. They put in place measures to make it harder for north korea to import items for their prohibited programs. It puts in place tougher proliferation or counter proliferation measures and we hope it gets north korea the abide by resolutions and laws. I believe in doing the right thing even if its difficult. Time has expired. Ill have to yield to the gentleman from illinois. Mr. Foster maybe you can follow up. Thank you, mr. Chairman. Thank you to our witnesses. It seems to have two strategic goals. First is to cut off access to the netechnical components. What is the rough amount of what is the dollar figure. A decent ballpark estimate for the dollar figure for how much they have to purchase outside their country to execute that program that everyones worried about . I must confess, we dont when we watch their business of acquiring equipment and we focus on the neuclear Weapons Program. They are buying a lot. Its a small fraction of a billion dollars . Yes. They also have an infrastructure thats been in place for 40 or 50 years that they have been paying for incrementally. They seem to have no shortage of cash to buy things for their nuclear program. Its not huge amounts of money. In terms of trying to understand how what sort of leaks we could tolerate in a sanctions regime designed to shut down their nuclear program, the answer is it would have to be really prohibitively tight. These objects are we have found, any way. In the case of iran where they put in place more deceptive practices in their procurement, company, governments are pretty good at detecting these things. We get a pretty good read out on a lot of what north korea has acquired over the years. We use that both strategically to understand their program and where its going but also tactically you get a lot of information about the networks that you can then act on. The problem has been chinas not cooperating. Company in German Company in china is getting help from its own government to try to defeat the north korean efforts but the Chinese Government isnt doing very much. They are the ones that should be doing the most. So the goal rather on the to cut off money, which is a tough thing is to increase information and increase our shaming ability toward once you identify the goods, you can then move the cut off the financing. Theyve got to pay for it as my colleagues have talked about. These things build upon each other. I think i would agree that going after the money is the way to hurt them most. The chinese are well known to be sort of task masters at shuffling around money in black markets. The second goal is to put pressure on the general economy. You mentioned fuel, luxury good, things like that. And the strategic goal seems to be to put the fear in the leadership in north korea of some sort of general unrest. Something that may trigger even a preexisting plan to retaliate certain against our allies which you mentioned are very hard to fema defend against their nuclear capability. I was wondering if you have thoughts on the risks were heading for. If the question was directed at me. Miss rosenberg. I would add a third which is become what i see as a primary goal for congress in contemplating mandatory sanctions now. The third goal is putting pressure specifically on the foreign or third country enablers of north koreas either specific proliferation programs or their economy more broadly. Going afterchina, in particular, Chinese Government entities or private institutions, banks and companies to encourage or compel their greater activity to advance your, as you outlined, the goals one and two. One of the mentions of the pressure tactics along with increased Information Operations and ensuring sufficient defenses is to put greater pressure on the regime stability. We want to make kim jongun fearful of regime stability if he continues down the path of defying the International Community. That said i disagree with those advocate a regime change through a decapitation strike either special forces or limited military strike. I think we are in a long term game. Its like the long cold war strategy against the soviet union. Thank you. The gentlemans time has expired. The chair recognizes the gentleman from texas, mr. Williams. Thank you to all of you witnesses for your testimony this morning. North korea continues to destabilize Southeast Asia and threaten the safety of the United States and our region. We must consider the plo found effect. Kim has proven unresponsive to sanctions imposed by the west we must consider actions that cut off the governments that prop him up. Nations that are unwilling to cut ties with the rogue regime that encourage mass destruction should not be in business with the United States of america. Is this issue for China Investment theres severe fj su there are political implications to cut them off. What i would focus on are those entities acting against the u. N. s resolutions as well as international and u. S. Law, entities violating our laws by misusing the u. S. Financial system and other criminal acts or engage in the north korea missile program. I would focus on more of a Law Enforcement basis of going after those entity is, banks, businesses, individuals violating laws and resolutions. Another question, let me follow up, if the dpr eventually falls, what do you believe will be the fate of the north Korean People exposed to decades of oppression. Do believe they can adapt to a new way of life or new form of governance. I think the answer really serves we dont know. They have been isolated for decades, fed a daily diet of propaganda. That said the information from the outside world is getting in. Whether they believe the propaganda is a question is amongst ourselves and varies by the individual and access they have by outside information. Thats one of the reasons like east europe, the toasoviet unio and trying to get the information of the propaganda their government gives them. Mr. Albright, can you discuss the level of cooperation of other countries outside of china do you believe of the greatest concern . North korea had considerable Nuclear Cooperation with syria including building a Nuclear Reactor bombed by israel in 2007 prior to its operation. After that its been harder to track any Nuclear Cooperation. Theres suspicions something could happen between north korea and iran, a very active area. As far i know, nothing substantial has been found. During the Six Party Talks, north korea committed not to engage in proliferation. Obviously, we dont believe thats true. I think its on notice if it does engage insignificant Nuclear Cooperation it will be incredibly significant and can trigger or cross a red line that would be very hard for the United States not to take very draconian action including even military action if it involved plutonium, weapon grade uranium or a Nuclear Grade weapon. Thank you. Can you discuss the ways in which the u. S. Government exposes and then targets Money Laundering activity related to dprk. If we impose secondary sanctions are you competent we can identify elicit transactions and stop them . I think what were seeing now the Trump Administration is using a combination of Justice Department tools and Treasury Department tools. On six occasions since late may they have used those tools to target money launderers in particular, those trying to do Financial Transactions through the United States, whether its destination, request for Asset Forfeiture or the new, whats called damning warrants setting that up in u. S. Banks, understanding that chinese banks were going to do the transactions through u. S. Banks. We need more of that. We need Nongovernmental Organizations exposing these networks and we need the u. S. Government in particular putting the right amount of resources like we had on iran on this problem. Im not sure that that latter part is happening yet. Thank you. The gentlemans time has expired and recognizes the gentleman from california for five minutes. Mr. Chairman, i want to commend you on this bill draft, look forward to working with you on it and look forward to cosponsoring it. Thank you. Ive been doing this for 20 years and for 20 years i applaud you for getting these witnesses here. Theyve enlightened me. I have sat on committees for 20 years and expert after expert has come forward. Weve gone from no Nuclear Weapon in north korea to Hydrogen Bombs in north korea. What is less wellknown is weve seen a 50 increase in the real gdp in north korea even while this regime is subject to sanctions and then were told were going to change this with quote unprecedented sanctions which just means a little bit more than what weve been doing before. Now, hydrogen weapons, icbms, 50 gdp growth, some would say our policy has been a failure. Viewed another way, our policy has been a tremendous success, a success for the Political Class in washington. Weve been able to tell americans were doing all we can to protect them and dont blame us. At the same time, weve avoided doing anything thats difficult for the Political Class in washington. What would those two difficult things be . The first would be to move beyond Company Sanctions to country sanctions. Because these gentleman and lady are experts in how we can tell china go after this bank instead of that bank. As long as china wants north korea to be relatively stable theyll find a bank that will do business with them or set one up. Yet country sanctions would be very difficult for the Political Class here in washington because that would really concern Big Companies who would wonder whether there is some risk to their supply chain. The other thing we havent done because its politically difficult is set realistic objectives and keep pinging the table sanctioned we want them to give up their Nuclear Weapons, gudaffey is dead and hussein is dead and he doesnt want to join them and if he thought his country was falling he would use them. I want to commend you, pla chairman, for the more realistic objective you have on this bill because you sun set it on verifiable limits on the nuclear Weapons Program. We might achieve those. Youve done something that those who spend their times on Foreign Affairs have been unwilling to do. Youve taken a constructive step. Ive seen this go on. Let me ask mr. Albright. Kim jongun thought his regime was going down, would he go to the hague for trial or use Nuclear Weapons . I imagine he would use them. If hes knocked off by some of his military generals he would may not use them. We would hope we will be more peaceful and saner than he is. I think they would want to survive and accommodate the neighbors. I would point out saddams people didnt do that to him and gadhafis people didnt do that to him and many of the people around them would have been worse than their leader. How is the north korean economy grown by 50 . Im trying to achieve 50 Economic Growth for my country in spite of all these sanctions . Police rhodenberg or anybody else . The first best answer to that is because theyve been allowed to do that by a broad culture of noncompliance and nonenforcement with sanctions. When active even when there were no sanction, 50 Economic Growth, i want to put this in context. Their economy is only 15 billion today they use as much oil in the country as 150 gas stations. I have 150 gas stations on ventura boulevard. They grew from a very small base and still very small which makes the whack ca mole a little bit more difficult because were dealing with relatively small moles. I yield back. We recognize the gentleman from north carolina, mr. Pettinger. Thank you, gentleman and the role you play. As you may know, i authored an amendment to mdaa. It was adopted and would prevent the Defense Department and provide Material Support to north korea Cyber Attacks. Earlier this year i led efforts to punish the Chinese Government affiliated zte, located in the usa for violating export controls and selling Environmental Technologies and resulted in a billion dollar fine. In your opinion, should my amendment capture this . Would that be an appropriation response and would selling these on the north korean Cyber Attacks . Anything that suggesting firms need to do better at identifying north korea transactions and north korea companies, i think an amendment like that and the bill thats on the floor, proposed by the committee, the main goal is diligence and making sure that d. O. D. And others do not do transactions with companies in china. On cyber, i would point out theres been some focus on north korea cyber. There have been some reports this month north korea is looking at bitcoin and other cyber enabled technologies to avoid sanctions including trying to steal bitcoin from south korea. Thats a different turn from these activities. Do you believe these an effective deterrent . Zte is an interesting case. Everybody would equate it with a large chinese bank or medium sized chinese bank, as you well know and others might forget, zte actually agreed to that fine because zte was caught doing the transactions. I would also point out there are some north korean Front Companies caught up. You think it would be a deterrent. I think zte and for the chinese leadership, if youre a senior official in the c suite of a chinese bank you have to be worried now. Mr. Clinger, what other entities like zte support north korean Cyber Attacks . A lot of the north korean programs are indigenous but need components and knowledge. Any specific ones you have in mind . I dont know specific companies right now. Would you support blocking those firms from doing business with the u. S. Or department of defense . I think we should have a provision where you can do business with north korea or have access to the u. S. Financial system. I think that is a Choice Companies should have to make. From a strategic standpoint when we discuss response from north korea as you said earlier, were really talking about china policy. How can we better compel them to work with us on this issue . We need to separate Law Enforcement from diplomacy and we can continue to cajole china to implement and require u. N. Sanctions. We dont need chinese permission to enforce u. S. Law. We make clear to them we are not going to negotiate away our Law Enforcement so we can have or have had incrementally better u. N. Resolutions but should not incrementally enforce u. S. Law. Thank you. Police rosenburg, if you could pull your mike up close when you respond, can you elaborate on the public and private sector in enhancement and capabilities that would provide us and assist in our efforts . Yes. Thank you for the question. In my written testimony i outlined a couple ideas i think would be a Good Opportunity for congress to take action increasing data sharing among the Financial Institution, according to usb of the patriot act instructing the administration to offer new guidance and adaptation in order to facilitate more information sharing between Financial Institutions within u. S. Jurisdiction that will also transfer to their. Could this be done enhancing our privacies and still controlling the capabilities . Absolutely. Its not a walk in the park. There are a lot of Civil Liberties and privacy considerations here. If we can do it in the term of terrorist information, we should be able to do it for Financial Information as well. Thank you. My time has expired. Thank you. The chair recognizes mr. Hill. I thank the chairman for this hearing and i particularly appreciate the expertise of our witnesses. I share mr. Shermans compliments of their long standing work on this issue and appreciate your service for our government in office and out. Bill newcom was here a few weeks ago to talk on this topic from johns hopkins. He basically in response to my question, i asked him, i said weve been dealing with this, as you have, three decades now, four presidencies. I asked him, are we ever going to get serious about sanctions on north korea. Why werent these great sanction pros posed to president clinton or president bush or president obama . He said i think the United States did too little for too long and theyre just now thinking about getting serious about it. Again, it depends on establishing this, north korea as a National Security vital interest. That confused me because i watch tv in 2002 when president bush declared north korea a part of the axis of evil. So im confused about why we north korea is so low on your chart, mr. Ruggerio, youve been in government. Tell me your top three reasons for 20 years we have not sanctioned north korea in an effective way . It has not been a it has not been the Foreign Policy priority. That this is bottom line. What you look at getting rid of the sanctions getting the money back on deltaasia in 2005. This will be bipartisan, whether removing north korea from the state sponsored terrorism right after we discovered they built a reactor in syria, whether looking at this congress approving insisting north korea be evaluated as a primary Money Laundering concern. You look at that detailed information provided last year, you see the Financial Transactions went back all the way to 2009, you start to ask the question, what have we been doing over the last 10 years . The answer unfortunately is it has not been the Foreign Policy priority. When i hear people suggest this new Administration Policy is the same as the prior one, that is just frankly not true. As i said, theyve gone after china six times, theyve gone after russia. They moved north korea up the chart. There is a lot more to do. The question of how are we going to get from this point to denuclearization, the point i would make on this administration, secretary tillerson said its a dial and at 5 or 6, its the United States determining its not at 20 right now. Thats what we really need. It should be moved to an extreme level so north korea will start to feel that impact. I appreciate that. I appreciate the work Ambassador Haley is doing in the United Nations. I dont think it is a substitute for increased pressure a by the United States and i think you for bringing this draft bill before us. You talked about the north korean vessels. Is that a United Nations sanction . U. S. Sanction . How does one do that in a legal manner . The u. N. Sanctions reasonable grounds that some kind of sanctions violation or prohibited material are being transferred. I believe, just as we did with iran, you can create a group of likeminded country, probably, south korea, japan, australia, to say we interpret that clause to say every shipment to north korea is a violation and subject to inspection. There are International Law with regard to flag state consent and master consent. That would have to be worked out. That would be a key element, just like the Proliferation Security Initiative in the 20 2000ss. Thank you. I yield back. The chair recognizes the gentleman from ohio, mr. Davidson. Thank you. Thank you for your testimony written and verbal. Ive enjoyed your dialogue on the questions. I want to say perhaps were shooting for too low of a goal. Perhaps it is a nonnuclear peninsula in korea except most of the parties dont really want that outcome. It makes it a hard outcome attain. South korea doesnt want the north to it have as long as we have their back, guess they dont want it themselves. North korea doesnt want japan to have it. I think it makes sense to set a higher goal, should have been since 1950, an instate that does not have the United States defending the Korean Peninsula all together. What would it take to do that . It would take peace, the same sorts of conditions that led to United States minimizing our presence in germany where the east and west have reconciled. We havent really moved down a past that does that, we continue to escalate and continue to make seeking Nuclear Weapons somewhat rational for a really irrational go againrations after generation. With the end in mind, that may be why we failed, along with the things my colleague, mr. Hill highlighted. I feel we have a good track record in iran to hopefully pursue a peaceful outcome to our desired end states. I get theres concerns about trade and china. Theyre a key part of supply chains and a vital part of north korea supply chain. You look at the risk on supply chain management, i think we need to get to the point we use all of the levers of u. S. Power, just like banks are forced to know your customer, the rest of the world. The sanctions highlighted in the north korea sanctions and policy enforcement act, it may take that. Mr. Klinger, i think you highlighted a number of those things in your testimony. Id like to say there is a Small Manufacturing Company from china aligned themselves from north korea and moving products, services and catch back and forth. What tangible steps can we make to close off that pipeline . I think are a number of things. First of all, its having the political will to do it. Ive hesitated the u. S. Failed to enforce its own laws as we have done on other countries for far less egregious violations. Mr. Hills what were the three reason, i might say naivete, political will. We have gone down that path and tried freezes before and they didnt work. We need to give greater resources the state department and Intelligence Department and unleash the Law Enforcement. If you talk to the officials in government for years, i have a list of north korea violators in my drawer and can take out 10 for provocation and then put the rest in the drawer. Its time to empty the drawer going against all those entities we have evidence for. Yes. Mr. Albright. Mike. Many of these companies are becoming multinational. Some come United States for their subcomponents. What u. S. Companies should be doing and havent been doing is gaining assurance from those Chinese Companies in writing they will control the end use of their product that contains u. S. Goods. Its in u. S. Law but it should be applied much broader to start to push these Chinese Companies, if they want to do business with the u. S. They have to meet our ethical and legal standards youre not arming our adversaries. Thank you. My time has exspine and. I get we have an existing law in place. We dont need more law, need enforce our existing laws. I look forward to feedback to bridge that gap. Thank you. I yield back. Thank you. The gentle lady from utah, miss love is recognized. Thank you all for being here. In the wake of north korea six nuclear test it was circulated among u. N. Security members that would have frozen north korea assets. Could we comment on the desirability of expanding the prohibition in our draft legislation to include members of north korean government and dpkrs workers party. We can start with you, mr. Albright. I think its useful to do. I think theres an executive order already on that. I would go in a different direction and say the issue on leadership assets is identification of those assets. Anything that can be done to incentivize those folks in banks and europe in particular that might have information on leadership assets, i think that would be more beneficial. Miss rosenberg. I would certainly agree, not just gathering that information and reporting back to the United States as a Law Enforcement matter but sharing that with other banks. Theres never an instance where Money Laundering exists only in one Financial Institution and allow the variety of banks where these different assets are located to understand it and stop it. Id absolutely go after leadership aes,. Last year, the u. S. Finally designated kim jongun and others for human rights violations. We have identified him in the past. Is there an executive order dated 2015 to give us the ability to sanction any government for being a member of the north korean government and we should go after kim jongun, but the other leaders. Among the other questions, mr. Kli ngner, could you discuss iran developing Nuclear Weapons and advance Ballistic Missiles. As mr. Albright was saying before, theres clearly been a missile relationship between north korea and iran. The first three missiles iran promoted were 100 made in north korea, given a local paint job. We know north korea was engaged in Nuclear Cooperation with pakistan and the network and others. But the cooperation with iran is more difficult to get outside of government. Thick there clearly is a relationship on the nuclear side between the two countries but very hard to get unclassified information on it. Mr. Albright, heres my connection between the two. I am concerned if we continue to just try and be as we want to be as diplomatic as possible and work with people willing to work with us, however, weve seen north korea incredibly defiant. Weve seen them go test after test after test. To me, i dont know if you have these same concerns, it seems theyre not a threat by theirself that these activities can support Nuclear Ambitions for other foreign regimes. Are you concerned about that at all . Certainly. You have to be concerned with north korea. They like to sell things of value and their Nuclear Assets have increased in value. You have to worry ant that a great deal and has to be whats watched for and the message. I dont think its a coincidence the director of the cia was on fox news raising this issue. Its important to send a signal if north korea crosses that line, willing to sell weapon grade lu tonium or Nuclear Weapons we will probably respond to take out that regime. It may be a bluff. Its important that line has to be maintained and enforced. North korea will get the message and dont want to commit suicide. Just one more question given beijings reluctance to take a harder line with north korea. What arguments should be brought to bear in order to convince the chinese pressuring the dictators of china is in their selfinterest . China wants to be a responsible member of the International Community. A lot of arguments applying sanctions on Chinese Companies are the same arguments we used in the 1980s against germany at that point, pakistan, iraq, would be iran and several others with the wherewithal to make new weapons. These are not new arguments. China wants to be responsible and should act that way. Thank you. The ladys time is expired. The chair recognized the gentleman from indiana, mr. Hollingsworth. Good morning. I really appreciate everybody being here. Everyone has reiterated already this is an important and timely topic and something we need to take with grave ernestness. I appreciate the consistent testimony everybody here has provided. One of the things i wanted to talk about is make sure we have partners engaged in this as well. Russia comes to mind and my concern continues to be they dont have an interest enforcing sanctions at the same level we do and willingness to combat this issue. The more the United States continues to be ill use the word distracted, i dont mean that lightly, north korea, the better off they may see themselves. Can you talk about engendering willingness to russia with what ever this looks like, for any of the panelists. Thank you for the question of us. A good strategy is one we discussed primarily with regard to china but in this case applying to russia, using sanctions to and Law Enforcement actions to go after those acting in violation of sanctions or in violation of u. N. Sanctions. To what extent do you think the russian government will be able to shield those companies of the ill effects of those . Its possible they would try and do that, certainly rhetorically, such as the dismissive rhetorical gestures we were discussing from president putin. If the Companies Want to use u. S. Dollars they wont be able to if Law Enforcement measures prevent them from doing that. Any Russian Company or bank that wants to stay in the good graces of the United States will be reluctant to facilitate that Going Forward not withstanding what their political top cover may offer them at home. You really believe these can be efficacious, even without participation from the political sector in russia, guess . I do. Weve seen that in other instance, not related to north korea. In iran, in the era before there was Broad International consensus for strong sanctions, going after companies was a way to have them get out far in front of their own governments on willingness to abide by sanctions. Im a business guy at heart. What does success look like . When will we know this is successful and whats the next step after that. We want the greatest extent possible to slow down or stop the technical problems with icbms or Nuclear Hydrogen weapons. We put in these tight sanctions and continue them forever. Tell us what phase two would look like putting in sanctions theoretically would work. One should emphasize we havent talked about this much. The point is have meaningful negotiations. That would be a sign of success, if north korea, without accepting benefits one new change an as sxaird to others, benefits come after. Compared to others. If there are benefits towards nuclearization, putting limits on their nuclear program, you see intrusive inspections. Inspectors have never gone outside of pyongyang in north korea yet we know theres other sites. If there is Movement Towards a peace treaty. That is also important to work into this whole process. I think on that side, i think we know and will see it. With new criteria being used built on avoiding mistakes of the past, i think well know it when we see it. I would just i would agree with most of that. I would caution we want to make sure we get out of the trap of negotiations for negotiations sake. From my perspective a freeze is not as valuable as some people think it is. I think the next step, if were talking about negotiated is demonstratable step by north korea that would flip the negotiations on its head. It used to be we freeze and drag them to denuclearization. We have to recognize this might be the regime willing to do that. If sanctions cant get them there perhaps we need to start having that conversation. Your second point not withstanding i very much agree. I want to comment on the second that we dont just freeze at the pressey bus of launching a Nuclear Attack because weve seen their willingness to renege on promises before. I dont want us to be a month, a year and a half away from an icbm and reneging in the future. Thank you. I will yield back. We recognize the Oversight Investigations Committee and Foreign Affairs committee, the gentle lady from st. Louis, mysterious, miss wagner. Thank you, mr. Chairman, for hosting this very timely hearing. In account i traveled to japan and china and korea and allies in the peninsula. I had the opportunity to not only visit dmz but dandong, i watched china trucks loaded drive across the friendship bridge into north korea. 70 of north koreas trade passes over that bridge. It was a stark reminder the United States should prioritize secondary sanctions against the Chinese Companies and banks that sustain the regime. Mr. Ruggiero, i had the pleasure of hearing you before. You wrote north korea was the fourth most sanctioned country in the world. Given the most recent u. N. Resolution, how would you rank north korea today given certain chinese investments or efforts are grandfathered from the efforts. How effective do you think the resolutions will be . Sure. I would point out february 2016, was number 8. When i testified before this surb committee in july, it was number 5. Its moving up the ranks. It has a long way to go unfortunately. The way i like to look at it similar to iran. In 2010 we had resolution 1929, that was really the foundation and sanctions passed by this u. S. Congress were what put iran over the edge and led them back to the negotiating table. We have the u. N. Foundation and we need u. S. Sanctions. Its concerning to hear the treasury secretary say we will wait and see if the chinese implement the u. N. Resolution. I think thats the wrong approach. What we should be moving forward with now is u. S. Sanctions against chinese banks. They might have a veto in the u. N. But not over u. S. Sanctions. I agree. Mr. Klingner, barring a threat to their survival, kim will never come to the negotiating table in good faith, i believe. We must change his financial calculus i discussed why comprehensive secondary sanctions are so critical. I appreciated your statement on increasing inspection and intradiction of northian shipping. Would you support mandatory sanctions on ports that dont implement required inspections . I agree we must pay much more attention to this. Agree. Thats Something Congress is looking at if a port does not carry out the sanctions they cannot come there for six months or so and were looking at it. One thing were hampered by in the u. N. Resolutions, all have been passed with chapter 7 article 41 authority where were not allowed to board a ship on the high seas, even if its suspected of carrying nuclear missi missile contraband. Weve been advocating 42 doesnt the recent package allow us to board now, and others on high seas, in terms of Member States . Thick they have new tools to stop high seas smuggling . I believe that was included in the u. S. Original draft but something tossed overboard, as it were, that did not make it in the final resolution. Yes. I think its the reasonable ground standard but still what mr. Ruggerio is saying you need flag master consent to board the ship. Mr. Albright, in my opinion, north korea already has Nuclear Weapons. It would be helpful if you can explain from public sources how many weapons the kim regime may have and where they may be. We smait they have 1330 as of the end of 2016. Its a rough estimate. 13 to 30. The u. S. Estimates are higher than that. I think ive worked on this problem since 1995 and ive visited north korea a couple times and met their nuclear people. Theyre not giants technically and encounter problems. That estimate is lower but still a significant number and growing. The gentle ladys time has expired. Thank you. Because of the interest in the witness testimony, members are interested in a second round of questioning, if we can seek the indulgence of the witnesses for a brief second round we would appreciate that. I will recognize myself for an additional five minutes of questioning to revisit the issue of effectiveness of sanctions. You heard from mr. Sherman from california on that point over the past several decades there has been lower priority but sanctions nonetheless we have seen continued belligerence and acceleration of the capabilities of the kim regime, particularly in recent years. My question to anyone who wants to answer, what is different, if anything, about the Foreign Policy, sanctions, efforts, particularly Ambassador Haley and the u. N. Sanctions packages shes been able to secure at the United Nations . Well start with that question, mr. Albright. Id like to go back. The u. S. Policy has been to stop north korea acquiring goods in the 80s and 90s, a lot of effort was played to kick them out of europe. Their missions would go to companies and buy the goods for their nuclear program. They were kicked out. What was not anticipated was they would move to china and set up shop there and buy the same goods from european countries, get them to china and send them by truck to the nuclear program. The problem has been this is the most important change to me and this administration, is theyre willing to risk trade conflict with china to solve this problem. Since north korea set up shop in north korea, the administrations have not been willing to do that until this one. Thats critical. As you answer that question, you read the draft proposal, draft bill we presented to you. Could you comment on that bill and the extent to which it would ratchet up this pressure through secondary sanctions on the regime . From my approach we tend to get ourselves in this provocation cycle and done that over the last ten years. I agree with dr. Albright, this administration has gone after china and russia to and extent we havent seen before and needs to be sustained. In the past, ive personally written and delivered and been in the same room when these men delivered, given china a list and convince ourselves weve gone a tough way forward and chinese hand wave and were okay with that. In terms of the legislation, i noted the Due Diligence component but among the various legislations out there, its oversight. The key aspect here is insuring these bills are implemented. There are Many Companies still not sanctioned and should be subject to sanctions even from the sanctions law last year. Can i ask mr. Klinger on the heels of that answer, revisiting your comment on the importance of the distinction between the u. N. Incremental enforcement and two rounds of u. N. Sanctions and congress and the administration and the United States acting independently j how much more pressure would the legislation be proposed on additional interactions of a sanction, how much different would that make above andion the most recent round of sanctions. Each one is incrementally better than the past. We can be positive or not on moving the ball down the field. We dont need permission by . To be honest, i dont see why were having a debate why we should enforcing u. S. Sanctions. Theyre enforcing our u. S. Law. Why should anyone care about enforcing the law. The oversight congress can hold the executive branches feet to the fire to push them to enforce the laws on the books. The three main actions the Obama Administration did last year was because they were pressured by the north korea sanctions enhancement act. Its things you mentioned and also an issue of lax enforcement. Continuing to point to lax enforcement to Foreign Countries. These secondary functions are absolutely critical applying the additional peaceful pleasure. Concluding on that point, ethekd dairy sanctions you think would make a difference from previous efforts . I do. I think weve sewn that happen this year and next year as well. One of the challenges about the u. N. Security measures passed this week, theyre not selfreinforcing and where they rely on a reduction or cap on petroleum, thats something the u. N. Will have to do acting on. We have problems of inaccurate or unavailable data, members, country states not feeding the data to the United Nations. I think its a high likelihood we wont see compliance on this as matter of arithmetic and slow reporting. When the United States can call out and highlight where Foreign Countries are not calling them out it will have a major effect to where they are willing to cooperate to do so. My time is expired and ill now recognize the gentleman from arkansas for a second round of questioning. Mr. Hill. Thank you. We also learned on our previous discussion on the subject in the standup bureau, 2 of the 7 members are from provinces that abut north korea and the presumption is one gets on the Standing Committee by hitting goal established on economic development, et cetera. Im interested in your view on chinas seriousness here. Do you think they can recognize what secretary tillerson has laid out quite clearly, that we dont have aims for u. S. Presence or western presence at their border. Come on that from your political view. Do you anticipate china will be more helpful after they have their significant Party Congress i believe is to be held in october. Lets talk about the politics of China Understanding the United States sincerity ending this issue once and for all. Mr. Klinger, you want to start . I think china is as helpful it needs to be to prevent the u. S. From taken action on their own. The message that needs to be given to china more forcefully, you dont want a crisis on your border but your lack of pressure on north korea is only encouraging pyongyang and also inducing us to take defensive measures china doesnt like. You can pay me now or pay me later. Either increase pressure or we will head towards that crisis you dont want, china. Your assessment, will their diplomatic or public position be any different than when they complete their Party Congress . Ive become pretty cynical about north korea and china, they talk well and implement 14 months after each resolution and back off. Mr. Ruggiero . I believe 100 . Anyone who believes china will be more crooks after the congress is falling into beijings trap again. Saying they had a good summit and they were on board and what turned out they were not on board. I can do that over the last 10 years. It has happened time and time again. To your question how they measure seriousness, how i measure it, chinese should not be closing the north korea accounts, they should be stopping those trucks from going over the bridge. They should be in those companies saying here are the sanctions, how are you imfmenting them. They should be in the bankings doing the same thing. Until they do that, they are not serious. Dr. Albright. I cant read the i dont know chinese politics so i cant really say. I would agree with mr. Ruggiero, we do need signs of seriousness. I can give the example of a country wanting to inspection the people at the border and vital trade with china, they werent allowed in. They were literally blocked by the private Company Running their storage area. Its the signs were looking for. Id love to see some chinese busted. Ive been involved in federal prosecution of one Chinese National prosecuted successfully here. His colleagues were never prosecuted in china. Its critical. Police rosenberg, enforcement and upping the ante. Who is a bigger trading partner of china . The United States or north korea, can we use that stick . Certainly no question there. To refer back to the question posed by the chair, what has changed. The willingness of the current u. S. President to offer tough rhetoric has raised the possibility of whether trade can and should occur between the United States and china. Even if that isnt just meant to send a really strong signal, that is different and has clearly been a huge wakeup call. Obviously now the devil is in the details and how do you do implementation. When weve seen china comply with other frameworks for iran, russia, when they have gotten with the program, it has never looked like them saying two u. S. Diplomats sitting there, we got this, were with you. It comes under a different guise. I would welcome to see china come forwards with its own domestic Law Enforcement regulatory action against certain companies, or prosecuting corruption they have an interest to do. If it happens to have an effect on north korea, all the better. Theyll have a problem look like theyre capitulating to u. S. Sanctions. If they do it as a measure of fallujah integrity, all the better. I agree. Thank you. The chair recognizes the gentleman from texas, mr. Green. Thank you, mr. Chairman. We had duties related from adverse circumstances and bad weather and these things have attracted my attention so my apologies for not being here the entirety of the hearing. I am concerned about the sanctions and have questions that probably have already been imposed. Please forgive me for being redundant or su per louse. My initial question is if we can perfect the sanctions as codified, what would be the impact on sunshine first, and then id like to move to a secondary portion of the question which relates to the impact on north korea. On china, what would be the impact if we perfect these sanctions as codified. I will leave this question to whomever would like to respond initially. I think a way is powerful, aggressive strategy of implementation and enforcement. That may or may not include secondary sanctions measures by calling out the companies in china and certainly north korea entities and persons but in china and other International Facilitators of north korea prolive raytors or Economic Activity, that is a strong way to improve on these sanctions and make them more efficacious. Thank you. Thef cassie of these sanctions, please, would you care, sir . I would take a step back. There is obviously an impact on chinese and north korean companies. As dr. Albright noted, china has been a problem for a long time in terms of proliferation, whether iran or north korea. A successful goal could be that china finally realizes that just issuing a notice from their Commerce Department with a list of goods that are prohibited is not enough. That they need to do more, engaging their own companies, engaging their banks, Law Enforcement actions, inspections at the border, authorizing other countries to do those inspections. The chinese are at the sent over the market. Thats a problem. Until they realize they have to change their way, were unfortunately not going to be successful. Let me follow up with this question. If we effect the sanctions imposed in their entirety, what will be the impact on north korea . One impact would probably be their gas centrifuge system that makes weapons grade uranium would stop. Take a year or two. They depend on perishable goods to operate that plant. They dont make those goods. If we had a perfected set of sanctions, you could cause serious damage to the progress of the nuclear program. You couldnt stop what you have but please do not stop more. Please dont assume i have a position based on the questions im posing. These are things i need to hear answers to. The next question has to do with chinas position that if the sanctions create turmoil to the extent that north korea becomes a government that no longer exists, for all practical purposes, and people start to flood into china, theyve always raised that as a possibility. Is it possible these sanctions could create such a circumstance if completely implemented against north korea because china is a means we get to north korea. Would that create the breakdown in governance . Thats chinas fear. Theres been newer talk in china that in anticipation of that that the peoples army would occupy part of north korea in order to coming into china and also the expectation is that china would somehow seal north korea such that people in north korea could not migrate into china . Theres discussion of that. Its been on the table a long time. The discussion is recuring. China fears that. Thats part of the problem. China fears instability in north korea that could create problems for itself. And worries about that more than Nuclear Weapons. Its at the crux of the matter. And u. S. Has to solve that problem for china. Thank you, mr. Chairman. The chair now recognizes the gentleman from ohio. Mr. Davidson. I yield one minute to the chairman. Briefly, just a follow up on this hearing in the legislative proposal to impede access to finance. Would the passage of this legislation being proposed or the mere introduction of a bill that directed treasury to impose these additional secondary sanctions, woud that in your judgment give secretary tillerson and ambassador additional leverage in their negotiations with china and with russia with respect to north korea . I think thats right. When you look at the comprehensive sanctions and investment act 2010. Two panks were designated. China and iran. There were many Threats Associated with that. And banks changed their compliance procedures because of that bill. Shout korea has announced they plan to participate in decapitation exercises. This is connective not financial. And i guess im curious for the panel what your assessment of north koreas reaction to the rhetoric if not in fact the deeds. I actually a year ago the south korean administer of defensive the Previous Administration announced they have a special forces unit Whose Mission is decapitation. They have surface to surface missiles. They demonstrated an attack with practice attack on with using their f 15 k. So they had announced they would conduct such an attack if they detected signs that north korea was about to attack. He responded well preempt your preemption. My concern is the risk of miscalculation by korea or the u. S. And we stumble across a red line into some kind of connectic military action. On difficult to disearn intelligence. Thats. Thats accurate, personally. Im curious at some point doesnt this make having a Nuclear Deterrent given their mass ily weaker military stature, a rational choice for north korea to pursue . Not really. No one is planning to invade north korea. The decapitation is idea is a reaction to north korea strikes. Some of which happened against south korea. The sinking of their ship by the submarine. The artillery attack. Which they didnt respond. They said next time we will. These actions have been to be in context chblt the background is no one is planning. Sa dam had enemies. Libya had enemies. As i understand north korea doesnt have anybody who wants to invade them. I understand our sperktive and probability of invading north korea is low. They dont understand that. They see division after division getting experience in korea, that look ts like people are preparing to do that. Respect the ability to draw different conclusions. I guess the next piece i want to talk about is our naval power. Obviously massive differential in naval power there. Of the 15 billion mighty north korea economy, how much is dependent upon access to the sea . Anybody know . The north korean naval forces and air farces are small and antiquated. So it they have given their focus in the past on ground forces. And then as those conditions deteriorate in the 90s when i was at the cia, they compensated by declining conventional capabilities focusing on asymmetric. Like missiles and special forces. Are they dependent upon the sea for oil . Not exclusively. They have the capacity to take tanker or delivery as well as pipeline from north korea, from china. Pipeline. They get a fair bit by ocean. Or tanker. Over the bridge. Trucks. Okay. Thank you. The last thing is in the ability to use nay vl power, what portion of if you took this up to the nebs thing in a blockade. Short of force. Control the ocean. Is there an ability to have a disearnable impact on north koreas economy . I would imagine. You also, you have to consider the possibility of a submarine launched Ballistic Missile. You have to worry about their submarine force. And i think that a answer your question. Certainly an embargo would effect the economy. Thats the next question. Is the next step force of connectic force. I yield. Id tlik thank our witnesses for their testimony today. Without objection. All members will have five days within to submit additional questions to the witnesses of the chair. Which will be forwarded for their response. I ask witnesses to please respond as promptly as you were able. This hearing is adjourned. [inaudible conversations] [inaudible conversations] the Senate Foreign Relations Committee meets tuesday to consider the nomination of john hunts man to be u. S. Ambassador to russia. During the Obama Administration. Hell face questions alongside the nominee for assistant secretary of state. For european and affairs. Watch the confirmation hearing live at 10 00 a. M. Eastern here on cspan 3. We have to be sure that we get the best value for the healthcare dollars we currently spend, and that we do the best job we can to reform the systems so healthcare is delivered more efficiently at Higher Quality to all americans. The simple fact is, that americans are spending nearly now 1 trillion a year on healthcare. And we are not getting our moneys worth. For the past 30 years, the Video Library is your free resource for politics, congress, and washington public affairs. So whether it happened 30 years ago or 30 minutes ago, find it in cspan Video Library. At cspan. Org. Where history unfolds daily. Now a look at ongoing efforts to modernize and strengthen the u. S. Electric grid. This house energy and commerce subcommittee hearing included in Energy Department official and the chair