Ex-officials urge renewed U.S. drive against North Korea crime income
* U.N. sanctions increase isolation, vulnerability
* North Korea has few legitimate income sources -expert
WASHINGTON, March 5 (Reuters) - The United States should revive a crackdown on drug trafficking, counterfeiting and other illicit business by North Korea that was succeeding before it was dropped to facilitate a nuclear deal with Pyongyang, architects of that policy said on Tuesday.
A renewal of the 2001-2006 North Korea Illicit Activities Initiative would deprive Pyongyang of funds to advance its nuclear and missile programs and could force it to return to disarmament negotiations, two former George W. Bush administration officials told a House of Representatives panel.
The officials said North Korea's deepening international isolation after the latest of its three nuclear tests makes its meager economy vulnerable to a renewed attack on illicit cash flows that sustain elite and military loyalty to the government.
The American-led initiative, which involved 14 U.S. government agencies and 15 foreign states, "drove North Korea out of a range of criminal businesses and cut the nation's illicit trading companies and leadership off from bank accounts around the world," said David Asher, coordinator of the program.
"I believe that if this leverage had been sustained and used effectively, North Korea's ability to defy international rules and norms could have been crippled, compelling Kim Jong-il to make a strategic choice toward denuclearization," he told the House Foreign Affairs Committee.
U.S. pressure on illicit activities was "prematurely lifted" to help seal a nuclear deal with the late North Korean leader Kim Jong-il that unraveled in 2008, said committee Chairman Ed Royce. Kim Jong-il died in December 2011 and was succeeded by his son, Kim Jong-un.
North Korea has earned its nickname, the "Soprano State," said Royce, a California Republican
"We must go after Kim Jong-un's illicit activities like we went after organized crime in the United States: identify the network, interdict shipments and disrupt the flow of money," he added.
With limited trade, Pyongyang's revenues are heavily reliant on schemes ranging from selling fake $100 bills to narcotics and illegal wildlife smuggling, according to Western governments. Pyongyang denies this, but its cash-strapped diplomats have been repeatedly caught with contraband since the 1970s.
EXPERTS SEE VULNERABILITY
Kim Jong-un has advanced his father's missile and nuclear programs, testing a long-range rocket in December and staging his country's largest nuclear test last month.
On Tuesday, Pyongyang threatened to scrap the armistice signed in 1953 that ended the three-year Korean war.
The young Kim has stepped up vitriolic rhetoric against the United States and South Korea and "escalated tension significantly over the past year," said Joseph DeTrani, a former CIA official and U.S. envoy to North Korea nuclear talks.
Despite North Korea's bluster and belligerence, DeTrani and other expert witnesses at Tuesday's House hearing said, the country is highly vulnerable to renewed international pressure.
"The sanctions are biting," DeTrani said of three sets of U.N. sanctions imposed over the North's missile and nuclear tests since 2006. On Tuesday, the United States and China, Pyongyang's closest friend, reached a deal to expand U.N. sanctions on North Korea for its third nuclear test.
Scholar Lee Sung-yoon of Tufts University's Fletcher School of Law and Diplomacy told the panel he estimated that North Korea derived between a third to 40 percent of its income from "criminal activities" and was thus vulnerable to pressure.
"Pyongyang's overdependence on its shadowy palace economy makes the Kim regime particularly vulnerable to tools designed to counter international money laundering," Lee told the panel.
The Obama administration should designate the entire North Korean government as a "primary money laundering concern," extend these sanctions to Chinese entities and other third-country partners, and use presidential executive orders to punish firms that abet Pyongyang's missile proliferation, said Lee.
Asher, now affiliated with the Center for a New American Security, recommended reviving the U.S. government efforts he once directed, reopening organized crime investigations into North Korean activities, and raising sanctions against Pyongyang to the level applied to Iran.
"Failure to effectively counter, contain, deter and disrupt North Korea's proliferation and regime threat could fundamentally jeopardize international security in the 21st century," he said.
(Editing by Mohammad Zargham)