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[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]

                        PRESSURING NORTH KOREA: 
                           EVALUATING OPTIONS

=======================================================================

                                HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON ASIA AND THE PACIFIC

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 21, 2017

                               __________

                           Serial No. 115-12

                               __________

        Printed for the use of the Committee on Foreign Affairs

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ 
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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM R. KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID N. CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina          AMI BERA, California
MO BROOKS, Alabama                   LOIS FRANKEL, Florida
PAUL COOK, California                TULSI GABBARD, Hawaii
SCOTT PERRY, Pennsylvania            JOAQUIN CASTRO, Texas
RON DeSANTIS, Florida                ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina         BRENDAN F. BOYLE, Pennsylvania
TED S. YOHO, Florida                 DINA TITUS, Nevada
ADAM KINZINGER, Illinois             NORMA J. TORRES, California
LEE M. ZELDIN, New York              BRADLEY SCOTT SCHNEIDER, Illinois
DANIEL M. DONOVAN, Jr., New York     THOMAS R. SUOZZI, New York
F. JAMES SENSENBRENNER, Jr.,         ADRIANO ESPAILLAT, New York
    Wisconsin                        TED LIEU, California
ANN WAGNER, Missouri
BRIAN J. MAST, Florida
FRANCIS ROONEY, Florida
BRIAN K. FITZPATRICK, Pennsylvania
THOMAS A. GARRETT, Jr., Virginia

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

                  Subcommittee on Asia and the Pacific

                     TED S. YOHO, Florida, Chairman
DANA ROHRABACHER, California         BRAD SHERMAN, California
STEVE CHABOT, Ohio                   AMI BERA, California
TOM MARINO, Pennsylvania             DINA TITUS, Nevada
MO BROOKS, Alabama                   GERALD E. CONNOLLY, Virginia
SCOTT PERRY, Pennsylvania            THEODORE E. DEUTCH, Florida
ADAM KINZINGER, Illinois             TULSI GABBARD, Hawaii
ANN WAGNER, Missouri

                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Mr. Bruce Klingner, senior research fellow for Northeast Asia, 
  The Heritage Foundation........................................    10
Sung-Yoon Lee, Ph.D., Kim Koo-Korea Foundation professor in 
  Korean studies and assistant professor, The Fletcher School of 
  Law and Diplomacy, Tufts University............................    26
Mr. Anthony Ruggiero, senior fellow, Foundation for Defense of 
  Democracies....................................................    38

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Ted S. Yoho, a Representative in Congress from the 
  State of Florida, and chairman, Subcommittee on Asia and the 
  Pacific: Prepared statement....................................     4
Mr. Bruce Klingner: Prepared statement...........................    12
Sung-Yoon Lee, Ph.D.: Prepared statement.........................    28
Mr. Anthony Ruggiero: Prepared statement.........................    40

                                APPENDIX

Hearing notice...................................................    66
Hearing minutes..................................................    67
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Prepared statement..........    68

 
                        PRESSURING NORTH KOREA: 
                           EVALUATING OPTIONS

                              ----------                              

                        TUESDAY, MARCH 21, 2017

                       House of Representatives,

                 Subcommittee on Asia and the Pacific,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 2:07 p.m., in 
room 2172, Rayburn House Office Building, Hon. Ted Yoho 
(chairman of the subcommittee) presiding.
    Mr. Yoho. Well, good afternoon, everyone. My thanks to my 
colleagues and the panel for joining me today to conduct this 
timely and important hearing. We are meeting today during what 
is probably the most significant shift in U.S. policy toward 
North Korea since it began its illicit nuclear program. The new 
administration has shown a willingness to embrace new thinking 
on the North Korea issue, and my goal for today's hearing is to 
discuss ways Congress can continue to drive a policy on North 
Korea that finally implements all the tools we have available.
    The subcommittee will come to order. Members present will 
be permitted to submit written statements to be included in the 
official hearing record. Without objection, the hearing record 
will remain open for 5 calendar days to allow statements, 
questions, and extraneous materials for the record, subject to 
length, limitations, and the rules.
    Again, I would like to welcome everybody here today. 
Secretary of State Tillerson left the world's media breathless 
last week when he restated that all options are on the table 
regarding North Korea, implying military options. His next 
statement that we have had many, many steps we can take before 
we get to that point, received less attention, but was really 
actually more significant.
    This is what I hope to focus on today: The many unused or 
incompletely implemented tools that we can use before the last 
resort of military action, something none of us would like to 
see. North Korea's nuclear program has never been a bigger 
threat, and we need to respond with all the tools at our 
disposal.
    If we can look at the first slide. It is a missile graph. 
If anything, Pyongyang has dramatically accelerated its 
belligerent behavior, conducting two nuclear tests and two 
dozen missile launches last year. Since 2015 Kim Jong Un has 
tested more missiles than Kim Jong Il, his father, and Kim Il 
Sung, his grandfather, combined, while making continued 
progress toward an ICBM capable of targeting nearly the entire 
continental U.S. If you look at the second slide, you will see 
the range of those missiles that they currently have. While 
Secretary Tillerson was visiting China on Sunday, Kim Jong Un 
oversaw a rocket engine test that could contribute to these 
efforts.
    For 20 years, we have responded to every North Korean 
provocation with either isolation or inducements to negotiate. 
Our efforts to isolate Pyongyang have either been incomplete or 
hamstrung by China. Meanwhile, North Korea has used 
negotiations to extract wealth without ever slowing weapons 
development. Since 1995, we have provided $1.3 billion in 
economic and humanitarian assistance to North Korea, and 
weapons development has only accelerated. As Secretary 
Tillerson stated during his trip to the region last week, this 
is 20 years of failed approaches.
    The Obama administration's strategic patience was a low-
effort strategy, taking some measures to isolate North Korea, 
and then simply waiting for the Kim Jong Un regime to wake up 
and give away his nuclear weapons. Certainly, there is plenty 
of blame to go around, if we are looking at George Bush taking 
North Korea off the State Sponsors of Terrorism record, or the 
Clinton administration allowing North Korea to even start a 
nuclear program, although it was deemed for peaceful purposes, 
we saw they strayed from that.
    This ineffective approach has gotten us no closer to a de-
nuclearized peninsula. A more forward leaning North Korea 
policy will require more effort and resolve, as we have seen 
passivity fail time and again. It takes time. It takes time for 
these threats--and take the threat seriously and use our entire 
toolbox.
    Congress can be important in this work, and we have to 
ensure that the things that we set forward, we follow through 
on. We have to ensure continued robust support for injecting 
outside information into North Korea to encourage defection and 
expose Kim's propaganda. Thae Yong-Ho, the highest ranking 
North Korean defector in decades, recently said this was the 
best way to force change in North Korea.
    This committee has also done important work in increasing 
financial pressure on the regime, and I look forward to 
continuing our work on the sanctions this Congress.
    We should also re-list North Korea as a State Sponsor of 
Terrorism in light of its long history of horrific crimes, most 
recently, the assassination of Kim Jong Nam with the VX nerve 
agent in Malaysia.
    The administration must also start using its secondary 
sanctions authority against the Chinese entities that have 
allowed for North Korea's continued weapons development. China 
accounts for 90 percent of North Korea's economic activity. The 
failed policies of the past assumed that if the United States 
did not anger China, China would help promote de-
nuclearization. It is time to stop pretending that China's 
North Korea policy is motivated by anything else than extreme 
self-interest of China. China has benefited from undermining 
sanctions and tolerating North Korea's nuclear belligerence. 
North Korea's missiles are not aimed at China, and the growing 
security challenge is an excellent distraction from China's own 
illicit activities.
    I have been heartened to see both Secretary Mattis and 
Tillerson reaffirm our critical alliance with the Republic of 
Korea and Japan. Our officials also rightly continue to reject 
proposals that we halt military exercise with South Korea to 
bring North Korea to negotiations.
    China's retaliation against South Korea over the deployment 
of THAAD is also unacceptable. THAAD is solely oriented toward 
the defense of South Korea. China should address the threat 
that makes that necessary rather than interfering with our 
security cooperation.
    It is encouraging to hear that the administration will not 
make further concessions to hold talks or to negotiate a 
weapons freeze that leaves North Korea's threat in place. 
SWIFT's recent decision to finally cut off the remaining North 
Korean banks from its financial messaging service has also been 
a welcome development.
    I am looking forward to help build a stronger, more 
complete North Korea policy, and look forward to hearing from 
our panel on these developments and options. Without 
objections, the witnesses' written statements will be entered 
into the hearing.
    I now turn to the ranking member for any remarks he may 
have.
    [The prepared statement of Mr. Yoho follows:]
    
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                             ----------                              

    Mr. Sherman. Thank you, Chairman Yoho. I want to thank you 
for holding these hearings in light of North Korea testing of 
missiles in March and February of this year, with missiles 
landing in Japan's exclusive economic zone. I join with you in 
believing that, certainly, North Korea ought to be listed as a 
State Sponsor of Terrorism, not only because its actions 
threaten the United States, but because of the assassination in 
Malaysia and the continuing terrorism, having kidnapped 
Japanese civilians and held them to this day. It is not an act 
of terrorism just when you do the kidnapping; it is an act of 
terrorism every day you hold the victim, or perhaps, in some 
cases, the body of the victim if they have expired.
    The last time we held this hearing was just a few months 
ago in September. North Korea had just conducted its fifth and 
largest nuclear weapons test. Kim Jong Un's intentions are 
clear: He wants to be able to be accepted as a world nuclear 
power capable of threatening the United States.
    A February 27 report from the U.N. Panel of Experts on 
North Korea to the U.N. Security Council detailed the regime's 
flouting of sanctions by trading in prohibited goods and by 
using evasion techniques. The Panel of Experts' report also 
highlighted that North Korean banks, including designated banks 
or correspondent or pay-through accounts with foreign banks, 
foreign joint ventures with foreign companies maintain 
representative offices abroad, and that trading companies 
linked to North Korea, including designated entities, open bank 
accounts that perform the same financial services as banks.
    All of these issues need to be addressed, but we need to 
approach the problem of North Korea with both a clinched fist 
and an open hand. Our Secretary of State says all options are 
on the table. I don't think the military option is on the 
table. I think, to some extent, his statement distracts us from 
the actions that we really need to take, actions that Wall 
Street will not like. At the same time, we need to put all 
options on the table in terms of the concessions that we are 
willing to make, or reasonable concessions, at least, in order 
to secure a binding and verifiable freeze and rollback of North 
Korea's nuclear missile programs.
    We need our partners and allies. Whatever government 
emerges in South Korea should not reopen the Kaesong plant, 
because when North Korea can sell slave labor, whether it does 
so on the Korean Peninsula or in Malaysia, where there are 
1,000, I guess they don't call them slaves, but indentured 
workers, whose earnings go to Kim Jong Un, when that happens, 
not only do we violate labor standards, but we enrich the 
regime.
    As to China, our efforts have not been enough to change 
China's cooperation with North Korea. China accounts for 90 
percent of North Korea's legitimate trade, 95 percent of its 
foreign direct investment. It is North Korea's lifeline. China 
recently cut off purchases of North Korean coal. There is more 
there than meets the eye. China may have already reached its 
quota under U.N. Security Council resolution, which limits the 
amount of coal that it can purchase in any year.
    China fully understands what is the Wall Street policy 
here: Make a lot of noise, pound the table, sanction a few 
companies, but don't interrupt the huge exports of China to the 
United States; do nothing that really forces China to change 
its policy, but pound the table loud enough so that you cannot 
be accused of being weak.
    Strength is not proven by volume. Strength is proven by 
success. We are not going to be successful in changing China's 
policy until we are willing to put a tariff on all Chinese, or 
virtually all Chinese, exports to the United States. Wall 
Street doesn't want us to do it, therefore, we won't do it. 
Therefore, the real objective of the Trump administration is to 
yell loudly, call that strength, and not actually do anything 
that would upset Wall Street or be effective.
    One more area I think we can be effective is in deterring 
Pyongyang from selling nuclear missile material or completed 
weapons to terrorist organizations or to Iran. This starts with 
reaching an agreement with China that at least they should not 
allow overflights of their territory from Iran to Pyongyang, 
unless those flights stop for inspection or refueling, which 
would include inspection, in China. If China is allowing planes 
to connect Iran and North Korea, cash can be going in one 
direction, missile material in the other, and China has to be 
held responsible.
    The North Korean Human Rights Act is set to expire. We need 
to reauthorize it this year.
    Yes, we have had 20 years of failure, 20 years in which we 
have refused to make any concession, not even a nonaggression 
pact, and therefore, we can seem strong while accomplishing 
nothing. I suspect that that is the policy that we will 
continue, and that we will be back in this room next year and 
the year after, and the only difference is the latest North 
Korean provocation will be a missile that flew further or a 
nuclear stockpile that is larger. I regret that I believe we 
will be in this room within a few years to talk about not 
atomic, but hydrogen nuclear weapons.
    Mr. Yoho. Let's hope not. And that is the purpose of this 
meeting, so that we can help draft those.
    Mr. Sherman. I hope so. I yield back.
    Mr. Yoho. We are going to go now to members. We each get a 
minute, and we are going to hold you to that so that we can get 
on with that. We first go to Dana Rohrabacher.
    Mr. Rohrabacher. Okay. It is time to get tough with Korea, 
right? North Korea, however, shouldn't be mistaken, when we get 
tough with North Korea, that we are getting tough with the 
North Korean people. North Korean people are subjugated people. 
They are kept in place by a bloody tyranny. And whatever we do, 
it should be aimed at the leadership in North Korea, and not 
the people of North Korea.
    So, in fact, we should look at the people of North Korea as 
potential allies, our greatest potential allies in bringing 
about what needs to be brought about to have a more peaceful 
and secure world. Our goal should be the removal of this wacko 
regime that is just--that now is threatening the world as it 
develops its nuclear capability. Let us not forget that the 
Chinese have had the most influence of anyone. They could have 
stopped this a long time ago.
    So I suggest we look at banking, I suggest we look at other 
ways of putting the pressure directly on the North Korean 
leadership and make sure that our Chinese friends know they are 
accountable for what happens.
    Mr. Yoho. Thank you, Mr. Rohrabacher. We are going to go to 
another Californian, Dr. Ami Bera.
    Mr. Bera. Thank you, Mr. Chairman. Thanks for having this 
hearing.
    Obviously, the North Korean dilemma isn't one 
administration or another administration. As complicated as it 
was in the Obama administration, it is probably a bit more 
complicated now as they continue to move forward.
    I think the first step is to reassure our allies in the 
region, the Republic of Korea and Japan, that our commitment to 
the region, our commitment to the defense of the region has not 
wavered. I think that is important for the North Koreans to 
understand we are not wavering in our commitment.
    I do look forward to the testimony of the witnesses. I look 
forward to how we move forward, but, again, provocation on 
North Korea's part is not a way to start a dialogue or start a 
path toward de-nuclearization or stability on the peninsula. 
This starts with dialogue and standing down. Again, our 
commitment is unwavering.
    I will yield back.
    Mr. Yoho. Thank you, Doctor. We will next go to Steve 
Chabot from Ohio.
    Mr. Chabot. Thank you, Mr. Chairman. Thanks for holding 
this hearing.
    Days ago, North Korea touted the successful test of its new 
high thrust rocket engine. If this test was, in fact, 
successful, it would underscore North Korea's growing nuclear 
delivery capabilities. Unfortunately, this does not come as a 
surprise, considering the rogue state's relentless pursuit of 
nuclear armament.
    I am deeply concerned that this test confirms, yet again, 
that North Korea is making significant advances in its nuclear 
weapon technology. Other reports indicate that North Korea 
continues to make technological advancements in its delivery 
systems, and that it will soon be able to strike the United 
States.
    Now, considering the uncertainty of the political situation 
in South Korea and our new leadership here in the United 
States, it is important that Congress and the new Trump 
administration work together to come up with a coherent 
strategy.
    Let there be no mistake: If North Korea attains the ability 
to reach American soil with a nuclear device, our Government 
will have failed the American people.
    I yield back.
    Mr. Yoho. Thank you, sir. We will next go to Ms. Tulsi 
Gabbard from the State of Hawaii.
    Ms. Gabbard. Thank you very much, Mr. Chairman. Thank you, 
gentlemen, for being here.
    I represent a State that falls directly within North 
Korea's range of their current intercontinental ballistic 
missile capabilities, and obviously, the people of my district 
in Hawaii view North Korea's increased capabilities as a direct 
threat to the people of our State, as it is a direct threat to 
our country.
    Obviously, the current strategy that has been deployed for 
so long toward North Korea has been ineffective, both in 
achieving a de-nuclearized North Korea, but also in putting a 
halt on their ever-increasing capabilities. This is something 
that we hear often by those who come and speak to us, a clear 
identification of the problem and the imminent threat it poses, 
but very few people have constructive solutions. So I am 
looking forward to hearing your comments, and hope that you can 
offer some ideas on how our current strategy should be changed. 
Thank you.
    Mr. Yoho. I appreciate your words. Next, we will go to Mrs. 
Ann Wagner from Missouri.
    Mrs. Wagner. Thank you, Mr. Chairman.
    With a new administration in the White House, and South 
Korean Presidential elections scheduled for May, figuring out 
how the new U.S. and ROK administrations can act as 
harmoniously as possible in addressing the North Korean threat 
is certainly the question of the hour.
    Recently, former Director of National Intelligence James 
Clapper said that convincing North Korea to give up its nuclear 
arms is a ``lost cause.'' But the Obama administration's 
policies of strategic patience that have allowed the Kim regime 
to prosper is now over. And as has been stated here earlier, 
Secretary Tillerson says that all options are back on the 
table.
    Whether we can roll back the damage of the international 
failure to temper the Kim regime depends largely on whether we 
choose to understand North Korea's intentions, and develop an 
intelligible strategy in response. I look forward to hearing 
your testimonies and engaging on this issue.
    And I thank you, Mr. Chairman.
    Mr. Yoho. We thank you.
    Next, we are going to go to our witnesses today, but before 
we start, Mr. Klingner, I had the opportunity to sit with you 
the other day. And, you know, I feel very strongly about that, 
that the information we will hear from you guys today will go 
into policies that we are going to direct at the State 
Department, to the White House, so that as my ranking member 
here, Mr. Sherman, said, we don't have to have this talk again. 
I know you guys are tired of having the talk over and over 
again. So we want to have very concise language that we can 
take, and go to the administration to redirect this foreign 
policy so that we can bring the threat of the nuclear weapons--
take it away.
    So, we are thankful today to be joined by Mr. Bruce 
Klingner, senior research fellow for Northeast Asia at the 
Heritage Foundation; Dr. Sung-Yoon Lee, Kim Koo-Korea 
Foundation, deg. professor in Korean studies and 
assistant professor at Tufts University, The Fletcher Law 
School and Diplomacy; and Mr. Anthony Ruggiero, senior fellow 
at the Foundation for Defense of Democracies.
    We thank the panel for joining us today to share their 
experience and your expertise, and I look forward to your 
comments. We are going to--if you would, stay with the timer, 5 
minutes, don't forget to push the talk button. And you will 
hear me kind of rattle the gavel little bit if you go over 
that. We look forward to getting onto the questions.
    So, Mr. Klingner, if you would start. Thank you.

  STATEMENT OF MR. BRUCE KLINGNER, SENIOR RESEARCH FELLOW FOR 
            NORTHEAST ASIA, THE HERITAGE FOUNDATION

    Mr. Klingner. Thank you, Chairman Yoho, Ranking Member 
Sherman, and distinguished members of the panel. It is truly an 
honor to be asked to appear before you again.
    The security situation on the Korean Peninsula is dire and 
worsening. There is a disturbingly long list of reasons to be 
pessimistic about maintaining peace and stability in Northeast 
Asia.
    In response, some experts advocate negotiating a nuclear 
freeze, but a premature return to talks would be another case 
of ``abandon hope, all ye who enter here.'' Would the ninth 
time be the charm? Pyongyang signed four previous agreements 
never to develop nuclear weapons, and once caught with their 
hand in the nuclear cookie jar, four subsequent promises to 
abandon those weapons. And a record of 0-for-8 does not instill 
a strong sense of confidence about any future attempts of 
negotiation.
    During the decades of negotiation, the U.S. and its allies 
offered economic benefits, developmental and humanitarian 
assistance, diplomatic recognition, declarations of 
nonhostility, and turning a blind eye to violations and 
nonimplementation of U.S. law. All failed. Seoul has signed 240 
inter-Korean agreements and participated in large joint 
economic ventures at Kaesong and Kumgangsan. All of these 
failed to induce Pyongyang to begin to comply with its de-
nuclearization pledges, moderate its belligerent behavior, or 
implement economic or political reform.
    Moreover, it is difficult to have dialogue with a country 
that shuns it. It was North Korea that closed the New York 
Channel in July 2016, severing the last official communication 
link; they walked away from inter-Korean dialogue; and even 
refuses to answer the phone in the Joint Security Area which 
straddles the DMZ.
    And the freeze proposals all call for yet more concessions 
by the U.S. and its allies in return for North Korea to begin--
to undertake a portion of what it has already obligated to do 
under U.N. resolutions. The strongest case against diplomacy 
can be found in the regime's own words, in which the highest 
levels of the regime, including Kim Jong Un, have repeatedly 
and unambiguously made clear they will never abandon their 
``treasured sword'' of nuclear weapons, as well as that the 
Six-Party Talks are dead and ``null and void.'' Hope is a poor 
reason to ignore a consistent track record of failure.
    And there are consequences of a bad agreement. A freeze 
would undermine the nonproliferation treaty and send the wrong 
signal to nuclear aspirants like Iran, that the path is open to 
nuclear weapons. Doing so would sacrifice one arms control 
agreement on the altar of expediency to get another.
    Instead, there is now an international consensus on the 
need to punish and pressure North Korea for its repeated 
violations. Increased financial sanctions, combined with the 
increasing pariah status of the regime from its human rights 
violations, have led nations and companies to sever their 
business relationships with North Korea, curtail North Korean 
overseas workers visas, and reduce the flow of hard currency to 
the regime. I have included a lengthy list of these actions in 
my written testimony.
    Cumulatively, these efforts reduce North Korea's foreign 
revenue sources, they increase strains on the regime, and 
generate internal pressure. North Korean overseas financial 
operations are suffering.
    The U.S. has had all the authorities it needs. It has just 
lacked the political will to go beyond timid incrementalism in 
enforcing our laws.
    Now is also the time to break some China. The U.S. should 
stop pulling its punches, and go where the evidence takes it. 
The North Korea Sanctions and Policy Enhancement Act mandates 
secondary sanctions on third country, including China, whose 
banks and companies that violate U.N. sanctions and U.S. laws.
    Other measures that I will mention just briefly, but cover 
in more depth in my written testimony are, as you have already 
pointed out, put North Korea back on the State Sponsors of 
Terrorism list. Since its removal from the list, Pyongyang has 
conducted numerous terrorist acts which meet the U.S. legal 
requirements for being put back on the list. Returning North 
Korea to the list would be a proper and pragmatic recognition 
of the behavior that violates U.S. statutes. It also increases 
North Korea's diplomatic and economic isolation for its 
actions.
    Also, we should designate additional entities for human 
rights abuses. Last year, the U.S. finally imposed sanctions on 
North Korean leader Kim Jong Un and 15 other entities for their 
ties to North Korea's atrocious human rights records, which 
constitute crimes against humanity.
    Also, we should improve information access into North 
Korea. Promoting democracy and access to information in North 
Korea is in both the strategic and humanitarian interests of 
the United States. International efforts to penetrate the 
information firewall in North Korea should expand on ongoing 
efforts with radios, DVDs, cell phones, and thumb drives, but 
also utilize new technology for more innovative ways to get 
information in and out of North Korea.
    In conclusion, Washington must sharpen the choice for North 
Korea by raising the risk and the costs for its actions, as 
well as for those, particularly Beijing, who have been willing 
to facilitate the regime's prohibited programs and illicit 
activities and condone its human rights violations.
    Sanctions require time and political will to maintain them 
in order to work. We must approach sanctions pressures and 
isolation in a sustained and comprehensive way. It is a policy 
of a slow python constriction rather than a rapid cobra strike.
    Thank you, again, for the privilege of appearing before 
you.
    [The prepared statement of Mr. Klingner follows:]
    
    
    
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                              ----------                              

    Mr. Yoho. Mr. Klingner, I appreciate it.
    Dr. Lee, if you would, please.

  STATEMENT OF SUNG-YOON LEE, PH.D., KIM KOO-KOREA FOUNDATION 
   PROFESSOR IN KOREAN STUDIES AND ASSISTANT PROFESSOR, THE 
     FLETCHER SCHOOL OF LAW AND DIPLOMACY, TUFTS UNIVERSITY

    Mr. Lee. Thank you, Mr. Chairman, distinguished members of 
the subcommittee.
    With your permission, I would like to make five points in 
the following order: First, I would like to mention the 
mundane, and then proceed to comment on the arcane, the inane, 
the profane, and the humane.
    First the mundane. North Korea is a Korean state vying for 
legitimacy against a far more successful, attractive Korean 
state. The basic internal dynamic in the Korean Peninsula 
almost dictates that North Korea try to maximize its one 
strategic advantage over its neighbor. By the conventional 
industries of measuring state power, military power, political 
economic power, territorial size, soft power, North Korea does 
not fare very well against its southern neighbor except in the 
field of--except for military power. Therefore, the proposition 
that through artful diplomacy or a little bit of coercion, we 
can get North Korea to give up its nuclear weapons, as we did 
vis-a-vis the former Soviet republics of Kazakhstan, Belarus, 
Ukraine that inherited Soviet nukes, or South Africa, this is a 
tall order. It is quite unrealistic, in my opinion. So it is 
something new--a new approach is imperative at this point.
    The arcane. I think in the wake of North Korea's third 
nuclear test in February 2013, the new, young Xi Jinping regime 
was quite irate, and they said a lot of things that seemed to 
please American ears in the spring of 2013: ``We are going to 
put some hurt on them. We have finally come around. We are 
going to punish North Korea.'' This is pure illusion. 
Historically, North Korea has insulted, defied the top Chinese 
leaders far more egregiously than in 2013. Always, the Chinese 
grit their teeth, increase aid. And, indeed, in 2013, China-
North Korea trade increased to $6.5 billion, an all-time high.
    May I just give you one example, historical example. In 
1982, September, Kim Il Sung visited China, met with Deng 
Xiaoping and the top leaders, pleaded with the Chinese 
leadership to approve the hereditary succession of power from 
father to son, which is a sensitive topic in the communist 
system, it is a contradiction. Then the next summer, Kim Jong 
Il made a trip personally and met with Deng Xiaoping and used 
Deng Xiaoping as a foil, as a smokescreen for his plan to lay a 
bomb for the visiting South Korean President in Burma in 
October 1983.
    China, listening to North Korea's request, conveyed to the 
Reagan administration repeatedly the message that, you can do 
business with these people, you can talk to them, please. Deng 
Xiaoping told the visiting Secretary of Defense, Caspar 
Weinberger, on September 28 that message. That very same day, 
Deng Xiaoping also agreed to give North Korea 20 former Soviet 
MiG-21-type fighter jets.
    Now, when the bomb went off on October 9, Deng Xiaoping 
lost face. He was very irate. He said Kim Jong Il will never, 
as long as I live, be able to set his foot on Chinese soil, and 
he didn't until 2000, the year 2000. Yet, Deng Xiaoping honored 
the agreement to provide North Korea with warplanes.
    My point here is China has a strategic interest in the 
Korean Peninsula that defies moral principles, that defies 
security interests of the United States.
    The profane. I don't mean North Korea's propensity to hurl 
insults at American and South Korean leaders. What I refer to 
is North Korea's state policy of using food as a weapon, North 
Korea's policy of mass, deliberate mass starvation, as the U.N. 
Commission of Inquiry of 2014 alleges. This is a very serious 
allegation. The U.N. Commission of Inquiry Report on Human 
Rights in North Korea states that North Korea's crimes against 
humanity have ``no parallel in the contemporary world.'' The 
section on the violation of the right to food and other related 
aspects of the right to life, pages 144 to 208, merits close 
reading.
    This is the kind of regime that we are dealing with, a 
regime that enjoys a tremendous advantage of industrialization, 
urbanization, nearly 100 percent literacy among the population; 
yet, is among the top nations of the world every year, every 
single year, afflicted with serious food insecurity. This is 
the product of the determined, perverse policy of the state, 
not U.S. sanctions or climate change or poor soil, poor 
weather, and so forth.
    Lastly, the humane. I think human rights is essential to 
our policy toward North Korea, because, as I mentioned, 
starvation, hunger, these are visceral, universal human 
emotions that can be understood quite easily. It will be very 
helpful in pushing for more human rights operations, 
information dissemination into North Korea so that the world, 
that the world public opinion changes in our favor, and that we 
name and shame North Korea, and that we educate the North 
Korean people of the true nature of the regime and try to 
invite them to take the risk of crossing the border into a free 
Korean state.
    Thank you.
    [The prepared statement of Mr. Lee follows:]
    
    
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    Mr. Yoho. Dr. Lee, I appreciate it. And I almost opened 
announcing you, how poetic and eloquent your writing was, and I 
wished I had.
    Mr. Ruggiero, go ahead.

 STATEMENT OF MR. ANTHONY RUGGIERO, SENIOR FELLOW, FOUNDATION 
                   FOR DEFENSE OF DEMOCRACIES

    Mr. Ruggiero. Thank you. Thank you, Chairman Yoho, Ranking 
Member Sherman, and distinguished members of the subcommittee. 
Thank you for the opportunity to testify today.
    The Kim family dynasty continues to threaten the United 
States and our allies in Japan and South Korea with its nuclear 
program.
    Secretary of State Tillerson's trip to Asia last week noted 
that all options are on the table, including the military 
option. This is the right approach. We must take a page out of 
the Iran economic warfare effort and ensure that every option 
is considered.
    We should not kid ourselves. North Korea tested a four-
missile salvo as preparation for a military conflict, and we 
need to be equally prepared. U.S.-South Korea military 
exercises are crucial to our preparedness. We should also look 
to increase military cooperation with Japan and South Korea, 
and even explore the possibility of stationing additional 
military assets in the region.
    In addition to military deterrence, we must use all other 
levers of American power. This includes offensive and defensive 
cyber warfare strategies.
    We must also include robust sanctions. The good news is we 
have a successful template, the Iran sanctions regime. I had 
the privilege to work on both North Korea and Iran sanctions 
programs at the State and Treasury Departments. We understood 
the gravity of the situation, and we engaged in robust economic 
and financial warfare to address Tehran's direct threat to the 
United States. We need to replicate that approach with North 
Korea.
    The U.N. report released last month detailed the stunning 
finding that the SWIFT electronic banking network was providing 
financial messaging services to North Korean banks, including 
ones designated for proliferation activities. The report 
suggests that SWIFT will finally halt its services to North 
Korean banks, and it is long overdue. North Korea's access to 
the SWIFT system is a symptom of a larger problem: Indifference 
toward Pyongyang's financial activities. With extremely limited 
exceptions, North Korea should not have access to the 
international financial system. We cannot trust that 
Pyongyang's financial transactions are legitimate. It is, 
therefore, our responsibility to block this access.
    To this end, we must act against Chinese banks that 
facilitate North Korean financial transactions, just as we 
acted against several European banks that helped Iran evade 
sanctions. In fact, the U.S. fined these banks over $12 billion 
collectively for sanctions violations. Chinese banks continue 
to be the financial lifeline for North Korea, and we have not 
done enough to cut off this flow of money.
    Two stories are instructive here: First, in September 2016, 
the Justice Department revealed that China-North Korea scheme 
that provided Kim's regime access to the American banking 
system. A Chinese company and four Chinese nationals created 22 
front companies, and Chinese banks were used to conduct 
transactions for U.S. sanctioned North Korean bank. No Chinese 
bank was sanctioned or fined for this activity, and this 
activity was allowed to take place for 6 years.
    Second, in the December 2015 trial of Chinpo Shipping in 
Singapore revealed that a Bank of China representative 
suggested that the company could transact in dollars, so long 
as it concealed references to North Korean vessels and wire 
transfers. Bank of China should have been fined by the U.S., 
even if it was limited to a single overzealous employee. The 
U.S. must clarify that this conduct is unacceptable.
    North Korea is a global foreign policy challenge. North 
Korea proliferated ballistic missiles to Iran, Syria, and other 
countries, and secretly built a nuclear reactor in Syria in a 
location that has since fallen to ISIS. The reactor was 
destroyed in 2007, reportedly by Israel. There have also been 
unconfirmed reports that Israel destroyed missiles destined for 
Hezbollah.
    A February 2016 CRS report on Iran-North Korea nexus showed 
that the ballistic missile relationship is significant and 
meaningful. The concern was so serious, that the Obama 
administration sanctioned Iran the day after the nuclear deal 
was implemented. In the accompanying explanation, Treasury 
revealed that senior Iranian officials were working with North 
Korea for several years and had traveled to Pyongyang to work 
on a component of North Korea's missile system.
    Pyongyang will soon have in its possession a nuclear-armed 
ballistic missile capable of hitting North America. This 
deserves increasingly harsh responses from Washington.
    Similarly, China is deserving of increasingly harsh U.S. 
responses. Beijing is critical of any effort to increase 
sanctions against North Korea. We should not let it stand in 
our way, as it has been doing.
    Sanctions against North Korea and China are the only 
peaceful means for coercing the regime and are, for that 
reason, indispensable, but we must be prepared to deploy a full 
range of other measures to deter the threat.
    And I look forward to addressing your questions.
    [The prepared statement of Mr. Ruggiero follows:]
    
    
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    Mr. Yoho. Thank you all for great testimonies, and we look 
forward to some spirited talks here.
    Bringing out the information, and it perplexes me, what 
does North Korea want? I know people say they want legitimacy 
of a nuclear power. Is that correct?
    But then what? If they become a nuclear power, are they 
going to play nicer? And I think--I don't see a good end stage 
to the direction they are heading into. I don't know what their 
fear is.
    Mr. Ruggiero, what is their underlying theme other than 
they want legitimacy as a nuclear power?
    Mr. Ruggiero. Sure. I believe they want a nuclear weapon so 
that they can coerce the United States into what they want us 
to do, which is to acknowledge them as a nuclear weapon state. 
I think that is the fallacy of the discussion of a peace treaty 
as one of the prerequisites for solving this nuclear issue.
    Mr. Yoho. And I see that as a false narrative, because even 
if they get to that stage, which we all think they are pretty 
close to that, if they get to that stage, the behavior, I don't 
see changing.
    Dr. Lee, do you see their behavior changing in North Korea?
    Mr. Lee. No, Mr. Chairman. It sounds rather absurd, but 
North Korea, I believe, has a long-term strategic goal in mind. 
It is a revisionist, revolutionary state. The North Korean 
Communist revolution still rages on in the eyes of the North 
Korean leadership.
    De-nuclearization would basically mean that North Korea 
would give up on its own raison d'etre, claiming to be the sole 
legitimate Korean state, the perennial fear of being absorbed 
by that other Korean state. That is an existential challenge. 
So North Korea, by demonstrating to the United States and to 
the world a credible capability of combining a nuclear warhead 
with a long-range missile that can hit all parts of the United 
States, then North Korea's leverage, its ability to resort to 
nuclear blackmail, extortion on all kinds of issues.
    Mr. Yoho. But in the 21st century, I mean, that is just a 
nonstarter with the amount of nations with nuclear weapons, 
that I would think--and I know going through vet school, common 
sense was not common, one of my professors said, because if it 
was, everybody would have it. You know, I don't see anybody 
wanting to invade North Korea. You would think they would want 
to become part of the world community and start doing what is 
best for their people.
    I am going to go to Mr. Klingner and ask you with the North 
Korea Sanctions and Policy Enhancement Act of 2016, which I am 
glad President Obama started to put the pressure on North 
Korea, I feel it was a little late, but I am glad it was there, 
what can we do so that this administration doesn't back off 
from that. I am glad to hear the strong language from Mr. 
Tillerson that we continue down this road. Is there anything 
else that you would recommend that we throw in there, whether 
it is more sanctions on Chinese companies or any country that 
has business dealings with North Korea?
    Mr. Klingner. Yes. Thank you, sir. On your first point, 
their nuclear weapons serve a number of purposes, including a 
military purpose. We often see it only as a signal or a 
message. But, when Kim Jong Un came into power, he directed his 
military to come up with a new war plan to be able to occupy 
the Korean Peninsula within 7 days. That would require them to 
go nuclear early on. We have seen the development of 
capabilities to fulfill that plan. Last year, when they 
conducted missile launches, they said it was to practice 
nuclear air bursts over South Korean ports through which U.S. 
reinforcements would come through, and they had a graphic for 
it. Recently, with the salvo of four missiles, they said this 
was practicing an attack on U.S. bases in Japan. So they want 
that capability, and the ICBM is to be able to hit the United 
States with a nuclear weapon. They have been having this quest 
for decades. Now, that doesn't mean they are going to wake up 
someday and just start a war, but by having that capability, 
they see it as--another reason would be deterring U.S. military 
action. They would depict it as us unilaterally attacking out 
of the blue; we would see it as them preventing us from 
responding to a tactical or operational-level North Korean 
attack.
    And also, as Mr. Ruggiero said, it is coercive diplomacy, 
not only acknowledgement of them as a nuclear weapon state, but 
also to intimidate South Korea into providing benefits or not 
responding to actions of North Korea.
    Opening up North Korea goes against what they want. They 
have said they do not want to allow the contagion of outside 
influence, they need to keep it out, because it would undermine 
the strength and legitimacy of the regime.
    I think the North Korea Sanctions and Policy Enhancement 
Act was a superb step forward, not only in the measures it had, 
but the ability to try to induce the Obama administration to 
move forward on exercising the authorities it already had. So I 
hope the Trump administration will----
    Mr. Yoho. I want to cut you off there. I have got one quick 
question for each of you. Would you recommend putting North 
Korea back on the State Sponsor of Terrorism? Mr. Klingner?
    Mr. Klingner. Absolutely, sir.
    Mr. Yoho. Dr. Lee?
    Mr. Lee. Absolutely.
    Mr. Yoho. Mr. Ruggiero?
    Mr. Ruggiero. Absolutely.
    Mr. Yoho. Thank you. I am going to yield back and go to the 
ranking member, Mr. Sherman.
    Mr. Sherman. You stole my question, but we got good 
answers.
    The chairman says no one wants to invade North Korea. That 
is easy for us to say. I was here when Dick Cheney did want to 
invade North Korea, or at least put the kibosh on any 
nonaggression pact with North Korea, because he wanted to keep 
open the idea of using force to bring democracy to the northern 
part of that peninsula. Who knows what we could have achieved 
in return for a nonaggression pact, but we very much wanted to 
keep all the--all options on the table, not to just to deal 
with North Korea's nuclear program, but to deal with them, 
their continued existence as a repressive state.
    We have been hearing that for 20 years, we have had a 
failure. Yes, if you worry about our national security, but for 
20 years, we have met the political needs of Washington and 
Wall Street. We do that by having a modest sanctions program 
that doesn't get Wall Street out of joint or seriously affect 
trade with China, while maintaining maximum demands, because it 
is an affront to the foreign policy establishment here for us 
to ever talk about a slightly nuclear North Korea, or even to 
talk about giving them a peace treaty or nonaggression pact. So 
we have modest sanctions, maximum demands, no accomplishments, 
and we achieve all our domestic political objectives. I don't 
know if that is failure or not.
    I do want to comment, as I have before, about civil 
defense. The purpose of civil defense appears to be, in this 
country, to calm our population. So back when Dana and I were 
kids, the population was concerned that we faced a massive 
Soviet nuclear hydrogen bomb threat, and they calmed us down a 
bit by having us hide under our desks. Not really anything 
effective.
    Now, we might be faced with one atomic bomb. Civil defense 
might be successful. Immediate aid would come to any victimized 
city from all over the country. But in this case, not having 
civil defense calms our population, because if we had any civil 
defense, we would admit that there was a threat from North 
Korea, or there would be soon.
    Mr. Ruggiero, I want to thank you for your comments about 
the trade between North Korea on the one hand, and the Shiite 
alliance, basically Assad and Iran, on the other. You pointed 
out how that has happened, continued to happen, and in light of 
Iran's additional money, or financial resources, could very 
well happen in the future.
    Let's see. We have got--so the question here is, will 
modest sanctions achieve our maximalist aims?
    I think, Dr. Lee, you have indicated that it goes to the 
very core of this regime to become a nuclear state. Would they 
give up on their nuclear program if that meant more luxury 
goods for their ruling elite, or would they be willing to 
suffer a 10 or 20 percent decline in luxury goods rather than 
give up their nuclear program? What is more important to them, 
Johnny Walker or nukes?
    Mr. Lee. Continued supply of Johnny Walker, Mr. 
Congressman.
    Mr. Sherman. Is more important to them than the nuclear 
program?
    Mr. Lee. Well, all carrots eventually dry up. What would 
they do once they give up their nuclear weapons and no longer 
have that great lever with which to bully, extort the biggest 
powers in the world, including the United States? Depend on the 
goodwill of their neighbors? That would be a very poor policy.
    I think there is no way that we can persuade, coerce the 
Kim regime to give up its nuclear weapons without, without 
putting sufficient pressure that makes them think that they are 
on the verge of political extinction.
    Mr. Sherman. And a 20 percent decline in high quality 
Scotch, that would not put them on the verge of extinction, 
would it?
    Mr. Lee. I believe it would be a big blow. So I think the 
ban, the U.N. Security Council ban on luxury goods exports to 
North Korea, that is an important component, but----
    Mr. Sherman. So this regime is perhaps more fragile than I 
imagined.
    Mr. Lee. Well, we have not tried really tough financial 
sanctions, as you know, Mr. Congressman. We know that North 
Korea is still dependent on the U.S. dollar system. It is their 
preferred currency of choice in international financial 
transactions. There is a lot that we can do to block--to 
designate North Korean entities and their enablers.
    Mr. Sherman. Okay. So you are saying if we kept Chinese 
policy the same but were very effective in hurting the North 
Korean state, we could force a change in their behavior?
    I will ask your two colleagues on either side whether they 
agree with that characterization.
    Mr. Klingner. I would agree with you, sir, that weak 
sanctions are not effective, just as weakly enforcing the law 
in a city is not----
    Mr. Sherman. But let's say we had sanctions that were just 
directed at North Korea, so they were effective in cutting 20 
percent less Scotch, 20 percent less of all the other luxury 
goods, but China continued its current subsidies and trade with 
North Korea. Would that be enough to imperil the regime?
    Mr. Klingner. Well, what I would argue is that we need to 
go after China as well. Anyone who violates U.S. laws and U.N. 
resolutions should not have immunity from our laws and the 
resolutions.
    Mr. Sherman. I have gone way over time. I yield back. Thank 
you.
    Mr. Yoho. Thank you, sir. I will go to our member from 
California, Mr. Rohrabacher.
    Mr. Rohrabacher. Well, again, let me note that the problem 
is not North Korea or North Koreans, it is this clique that 
seems--rather mentally ill clique that runs North Korea. The 
people of North Korea are victims. They are people who--perhaps 
many of them who don't even know they are victims. And perhaps 
our greatest strategy could be putting out an all-out effort to 
inform the people of North Korea exactly what is happening in 
the rest of the world, and how they are being short-changed and 
that their future is being robbed from their children by this 
current unscrupulous and brutal regime that controls their 
lives.
    You know, one thing you could say, and this is a crazy 
regime, is the one--I was noting that this is one country, 
North Korea is one country that can accurately--it can 
accurately be said that its leaders have gone to the dogs. I 
mean, this is in--to think that a--now, is that an accurate 
report that this leader has sent people to be eaten by dogs, 
who had actually opposed his regime? Is that an accurate 
report?
    Mr. Klingner. We don't think so. The story that Jang Song 
Thaek, his uncle, was eaten by dogs was started by a Chinese 
blogger, which then was picked up by Chinese media and then 
picked up by a foreign media. We think, instead, he was killed 
or executed with anti-aircraft artillery, as many others have 
been.
    Mr. Rohrabacher. Well, I see now--so he hasn't been eaten 
by the dogs, but he may well have been killed by being shot by 
anti-aircraft artillery. Hmm. All right. Gee, I am glad you 
said that. It really makes me feel better about the mental 
stability of those folks.
    Now, it also was noted in there that we have a situation 
where South Korea, with such a vibrant economy and somewhat 
stability, at least, they have democratic processes going, we 
just had a leader removed from office and there wasn't blood 
shed.
    I remember during the Reagan years, there was an economist 
that did a study all over the world, and Korea was one of them, 
where communism and free enterprise, or at least capitalism in 
some way, came together, and the only thing that separated the 
Communist area from the free enterprise area was a line, an 
arbitrary political line. So on both sides, they had the same 
kind of soil, same kind of weather. This economist noted for us 
in the White House, we asked to do this study, that the 
production of food and the production of wealth was so much 
greater on the non-Communist side of the border as compared to 
the Communist side of the border, which then we interpreted as 
meaning either--let's see. It was either that God exists and 
that God--it is either whether there is no God, or that God 
exists and he doesn't like Communists. The fact is that they 
can blame it--and a lot of our people try to blame our failures 
and different failures on global warming as well, but the fact 
is that you have these situations around the world where people 
who live in tyranny do not do well financially, which is, I 
would say, the Achilles heel of this regime, in that its people 
live in such poverty, that their children are smaller, and that 
there are all sorts of demonstrations of this.
    I want to thank our witnesses today for giving us some 
specific things that we can do, especially in the economic 
arena, in terms of dealing with Chinese banks and making sure 
that we put the economic pressure on this regime.
    Again, it is better to have no sanctions than to have soft 
sanctions. Teddy Roosevelt said, it is the greatest sin--the 
greatest sin is to hit someone softly. Either we are going to 
do this and we are going to get rid of that regime and work 
with the people of North Korea to free themselves, or we are 
not.
    I would suggest that we should be working--and some of the 
suggestions you have given us today in terms of grabbing onto 
their economy so that that clique that runs North Korea cannot 
withstand the pressure that we have generated by this type of 
economic offensive on our side, that we take it and we do that 
seriously rather than thinking that our only methodology of 
stopping this nutty clique from getting a nuclear weapon is to 
have a military operation against North Korea.
    Mr. Yoho. I agree.
    Mr. Rohrabacher. That would be terrible, and that should be 
averted if we can at all costs, which means, let's go to the 
strategy you have outlined today, which is a serious economic 
strategy to bring down and to de-place the North Korean regime 
that oppresses the North Korean people.
    Mr. Yoho. Thank you for your comments. We will go to Dr. 
Ami Bera from California.
    Mr. Bera. Thank you, Mr. Chairman.
    I am just going to go through a series of questions, but a 
starting point, I think you all agree, if I am listening to 
your answers ask your opening testimony, at this juncture, 
North Korea is not going to back down and become nonnuclear. 
They see this as their only negotiating leverage. Would that be 
an accurate statement? So we don't see voluntarily stepping 
back; probably the exact opposite.
    In addition, if we are not going to go to a kinetic de-
nuclearization, which none of us think would be very easy, that 
means a commitment to the region, a commitment to deterrence, 
making sure all options obviously are on the table, but making 
sure our allies in the region are fully secure in our 
commitment. Would that be an accurate next step? And that would 
be exercises, that would be deployment of THAAD, and other 
assets that would send a strong message to North Korea that any 
military intervention, an errant missile going into Seoul or 
Tokyo would lead to dramatic repercussions. Is that accurate?
    Mr. Klingner. Yes. We hope that more vigorous enforcement 
of our laws and stronger sanctions, combined with the offer of 
engagement if they were to do so in a pragmatic sense, would 
alter their behavior, but of course we need to strengthen our 
defenses and those of our allies, including missile defense 
both here in the continental U.S. as well as with our allies.
    Mr. Bera. So that would be a certain next step, that 
deterrence, to say, it is not in your interest, North Korea, of 
taking provocative action.
    Obviously there was some campaign trail rhetoric about 
South Korea or Japan pursuing nuclear options. That is not in 
our interest, nor do we want to start a nuclear arms race in 
East Asia. You know, obviously, our commitment is to that. 
Would that be accurate? I think South Korea pursuing nuclear 
weapons or Japan pursuing nuclear weapons would be not in our 
interests. Would you--Mr.----
    Mr. Lee. With every North Korean provocation, nuclear test, 
the public opinion in South Korea, admittedly emotional as it 
may be as a snapshot of indignation of North Korea's nuclear 
tests, supports South Korea going nuclear. We know South Korea 
has the technical capability within a few months or a year to 
go nuclear. And in the past, of course, South Korea attempted 
just that under President Park Chung-hee in the early 1970s.
    So although it is unlikely that South Korea will move in 
that direction in the foreseeable future, I think one should 
not be surprised if, say, 10 years from now, South Korea does 
make that determination at the risk of irritating or poor 
relations with its treaty ally, the United States, because the 
truth is, in the past when Britain, France, Israel went 
nuclear, what did the United States do? Abandon its allies and 
friends? No.
    Mr. Bera. Sure. The danger there is when China potentially 
steps up their nuclear proliferation as well.
    So you have given us a few tools that we could pursue. You 
know, let's increase sanctions, let's look at secondary 
sanctions, let's obviously increase our commitment to the 
region through military exercises, et cetera, get to the point 
where Kim Jong Un has to make that political calculation that 
the instability and his political survival is such that it is 
better to come to the table. Would that be an accurate 
assessment of some of the tools that we ought to be using?
    Mr. Ruggiero. Sure. I think that is the ultimate goal, is 
to increase sanctions, I would say, on North Korea and China, 
to try and get North Korea back to the negotiating table. But 
we should not kid ourselves that it is going to be easy. I 
would also say on the South Korea and Japan developing nuclear 
weapons, certainly not in our interests now, but we have to 
have that conversation with China. And as Dr. Lee said, that in 
10 years, that calculus may change for us.
    Mr. Bera. So that is also a negotiating leverage, that 
China needs to understand that if North Korea continues on its 
current path, then it may have more nuclear-armed nations in 
its neighborhood, which the Chinese obviously don't want. So it 
is in China's interest to also step up to the table.
    Mr. Klingner.
    Mr. Klingner. I think on South Korea or Japan going 
nuclear, while it goes against U.S. nonproliferation policy for 
decades, it would undermine the Nonproliferation Treaty, it 
could subject our allies to international sanctions themselves. 
But if nothing else, it would also require them to divert a 
large amount of their defense budget away from what they should 
be spending on toward duplicating a system that the U.S. is 
already providing with our extended deterrence guarantee.
    Mr. Bera. All right. Thanks.
    Mr. Yoho. Thank you, sir.
    We will go to Mrs. Ann Wagner from Missouri. Thank you.
    Mrs. Wagner. Thank you, Mr. Chairman.
    China is punishing South Korea economically for its 
decision about THAAD's deployment, but it looks like only to 
the extent that these actions wouldn't constitute WTO 
violations and that South Korea won't have any recourse 
mechanisms.
    Mr. Klingner, do you believe China has gotten--how should I 
put this--smarter in how it applies economic pressures? And if 
over the course of the next year, if THAAD becomes a permanent 
reality, do you believe China will back off?
    Mr. Klingner. I believe South Korea is going to the WTO, or 
is considering taking China to the WTO for its actions. China 
has certainly been very heavyhanded in its, really, economic 
attacks on South Korea. They are far more strong in their 
actions against South Korea's defensive moves than North 
Korea's offensive moves.
    You know, eventually, one would hope that China would 
realize how counterproductive their action is. The South Korean 
public opinion of China has plummeted. It may lead South Korea 
to try to diversify its economic engagement elsewhere, away 
from China. They have seen the actions that China has taken in 
the past against Japan over the Senkakus Island conflict 
disagreement, the belligerent actions China has taken in the 
South China Sea against southeast Asian nations. It can lead to 
all of those nations seeing that China is not a reliable 
partner and that they should reduce their engagement with 
China.
    Mrs. Wagner. And if THAAD becomes a permanent reality, you 
do not see China backing off?
    Mr. Klingner. Well, we have seen China back off in its 
intimidation against Japan after the Senkakus incidents in 2010 
and 2012, where they resumed exports of rare Earth minerals, 
they stopped the kind of government-induced protests against 
Japanese businesses. So I would hope, and I would think it 
would be the case, once THAAD becomes a permanent presence 
there, then they would realize the game is over. Also, with the 
likelihood of a progressive President in South Korea, who would 
normally be more, you know, inclined to reach out to China and 
North Korea, if China continues that kind of behavior, it may 
induce even a progressive government to not lean toward China.
    Mrs. Wagner. Thank you, Mr. Klingner.
    Mr. Ruggiero, major Chinese banks have limited their 
exposure to North Korea, at least on the surface, I will say. 
But North Korean firms have successfully used Chinese middlemen 
and Southeast Asia and Hong Kong commercial hubs to improve 
procurement. Given North Korea's ability to outmaneuver current 
sanctions, how effective would secondary sanctions on Chinese 
institutions be in curbing North Korea's missile and nuclear 
programs?
    Mr. Ruggiero. Sure. You know, North Korea is very deceptive 
in its sanctions evasion activities, but the banks are 
responsible to ask the right questions. I would just give you 
one stat. In the company that we are talking about from 
September 2016, before the North Korean bank was designated, it 
did U.S. dollar transactions of $1.3 million, and afterwards, 
for 6 years afterwards, $110 million. So you are seeing a 
significant increase.
    That should have caused the Chinese bank to ask questions. 
The Chinese bank could have investigated that company and 
learned that it--it showed itself as, or promoted itself as key 
to China-North Korea trade. So that Chinese banks should have 
been asking questions of why are they engaged in these 
transactions with North Korea.
    Mrs. Wagner. Here is an interesting question. We know that 
Chinese--and, again, for Mr. Ruggiero. We know that the Chinese 
Government has lost access to the regime's inner circle since 
the execution of Jang Song-thaek, Kim Jong-un's uncle. Do we 
know how China is mediating its lack of access to Kim Jong-un?
    Mr. Ruggiero. Well, they have stated publicly that they 
believe they have no levers or no way to convince North Korea 
to do what we essentially want them to do. And I guess my 
argument is that we can talk here about how do we get North 
Korea to change its policy, but I think we equally have to talk 
about how China needs to change its policy. And the way to do 
that is to go after their companies and banks that are allowing 
North Korea to do these activities.
    Mrs. Wagner. Thank you. I have many more questions, Mr. 
Chairman, but I will yield back my time, and I shall submit 
them in writing. Thank you so much.
    Mr. Yoho. Great questions. And I appreciate it.
    We will go to Mr. Gerry Connolly from Virginia.
    Mr. Connolly. Thank you.
    And I am going to ask as many questions as I can, and urge 
you all to be concise. But thank you for being here.
    Mr. Klingner, you were talking earlier about the 
development of a nuclear capability in the north. How realistic 
is that threat, though? I mean, the Korean Peninsula is pretty 
intimate. And, you know, even in the nonnuclear sense, the 
north has artillery range to Seoul. So isn't it the case that 
the detonation of a nuclear device of any magnitude would also 
adversely affect the north?
    Mr. Klingner. Yes. But they certainly have been pursuing it 
for years. We think the Nodong medium-range ballistic missile 
is already nuclear capable, that they can already range South 
Korea and Japan with nuclear weapons today. We think they have 
perhaps 5,000 tons of chemical agent, both pervasive and 
nonpervasive.
    Mr. Connolly. Right. I get all that. My question, how real 
is the threat of actual utilization of such a weapon on the 
Korean Peninsula itself given the proximity of the north and 
south to each other?
    Mr. Klingner. I think it is the threat that they hope not 
to use. But there is sort of a famous story that Kim Il-sung, 
the grandfather, asked his generals, including Kim Jong-il, of, 
you know, what would we do if we were losing a war? And the 
generals all said, we would never lose. But Kim Jong-il said, 
what would be the worth of the world without North Korea? So 
they may do a Twilight of the Gods, use it in a last ditch 
pulling the temple down upon themselves.
    Mr. Connolly. Got it.
    Mr. Ruggiero, how much leverage does the United States have 
with respect to sanctions that we haven't deployed over North 
Korea? Because we don't have trade relations. We don't have 
economic relations. We don't directly bank with them or invest 
in them. I mean, what are the levers here we can use? It seems 
to me they are pretty limited.
    Mr. Ruggiero. Well, the U.N. Report noted, and others have 
noted, that North Korea needs U.S. dollars. And they need euros 
as well.
    Mr. Connolly. Right. But there are lots of ways of getting 
both.
    Mr. Ruggiero. Well, the ways they are doing it currently is 
through the American financial system. So that is a leverage 
point there. The second one I would say is that while the law 
that was passed by this committee and signed last year was 
useful, and nearly doubled the number of designations over the 
last year, 88 percent of those are inside North Korea. That is 
not the way to get at the international business of North 
Korea.
    So if you are asking about leverage, it goes back to an 
earlier question, the way you get at North Korea is maybe not 
at getting at their cognac or other parts, which is important, 
but focusing on the international business that North Korea----
    Mr. Connolly. For the record, cognac would be one thing. 
Mr. Sherman was talking about Johnnie Walker Black Label. 
Cognac, now you are talking serious.
    Let me ask the same question about China. And I heard your 
testimony. We will stipulate what the Chinese say. But how much 
leverage do they have? Now, they just said that they are going 
to cease the purchase of coal exports from the north, which 
presumably is something pretty injurious to their economy. What 
other levers do they have they are not using?
    Mr. Ruggiero. So I would say on the coal ban, I would point 
out that they had a similar ban in April of last year, and 
after that point, they imported $800 million worth of North 
Korean coal. So whether or not they abide by the ban is still 
up for a decision. I would also go back to the Iran example, 
which what we saw was European banks and European companies, 
mostly banks, that abided by the U.S. decision to say you want 
to do business with Iran, you may lose your access to the 
United States. And that happened before European Governments 
came to that same decision. That is the attitude we have to 
have with China.
    Mr. Connolly. Do you believe a robust diplomatic effort by 
the United States is still called for and could still be 
efficacious?
    Mr. Ruggiero. At this time, the North Koreans say they are 
not interested in it. But I would say that it could be down the 
road after robust sanctions implementation. I think accepting a 
freeze at this time would just put their program in place and 
have the United States accepting their program as a nuclear 
weapons state.
    Mr. Connolly. Presumably, when and if that diplomatic 
effort needs to be launched, a planned 31 percent cut in the 
State Department and USAID's budget would not really be 
helpful.
    Mr. Ruggiero. Well, I think the diplomats at the State 
Department are more than capable of negotiating a deal with 
North Korea if they are ready to do so.
    Mr. Connolly. Not if there are 31 percent fewer of them. 
You don't have to answer.
    I yield back.
    Mr. Yoho. Thank you, sir, for your questions, as always.
    We are going to go back to Mr. Sherman for another round, 
if you guys are up to it. If so, we sure would appreciate it.
    Mr. Sherman. I want to build on Gerry's comment about the 
need for a robust State Department. We may be able, no matter 
how big the State Department is, to send five diplomats or ten 
diplomats to Six-Party Talks or any kind of talks. But if we 
want sanctions, that means going to every country and trying to 
get them to change the behavior of their bank, their 
distillery, or I guess if you want cognac, maybe some other 
kind. That is incredibly labor-intensive. It is company by 
company, country by country.
    Mr. Connolly. And that takes a skill set, does it not, Mr. 
Sherman?
    Mr. Sherman. Yes, it does. But I want to focus on, we saw 
the assassination of Kim Jong Nam. It happened to happen 
recently. Is that because there was a unique opportunity 
because of his travel outside China? Or is that because of a 
unique or increased level of desire by the Pyongyang regime to 
assassinate him? Was he uniquely vulnerable when he was 
assassinated or was there a change in North Korean policy? Dr. 
Lee, do you have a view?
    Mr. Lee. I think the timing of it is significant. In 1997, 
the day before Kim Jong-il's birthday, which is February 16, on 
the 15th of February, 1997, Kim Jong-il's nephew was 
assassinated in South Korea. Why? Because he had defected and 
written an expose on the royal family. And I believe that was 
sort of a birthday gift to the so-called Dear Leader by his 
agents, to kill him on the eve of Kim Jong-il's birthday.
    Mr. Sherman. But has North Korea been trying pretty hard to 
kill this uncle every day of the week or did they----
    Mr. Lee. The half-brother.
    Mr. Sherman. The half-brother, excuse me.
    Mr. Lee. Well, I think the half-brother, Kim Jong-nam, was 
vulnerable. North Korean agents clearly would have access to 
his travel itinerary. But I think they saw it as the best time 
to do it, to carry out the act on the day of his return to 
China. I think they would have been reticent to do something 
like this on Chinese territory. That is why it was in Malaysia.
    Mr. Sherman. Did he travel often outside of China?
    Mr. Lee. Yes, sir, he did.
    Mr. Sherman. So they had other non-Chinese opportunities.
    I don't know which of you is most qualified to answer this. 
But what are the estimated hard currency and gold reserves of 
the North Korean Government? Anybody have a guess? Dr. Lee?
    Mr. Lee. I am just a newspaper reader, but for years, there 
have been newspaper reports of $1 billion to $4 billion or $5 
billion in offshore secret accounts in Europe and in China.
    Mr. Sherman. So they trust the international banking 
system, or at least they are partners in it. It is not like 
they have the currency or the gold in Pyongyang itself. They 
are relying on bank accounts.
    Mr. Lee. Well, according to the U.N. Panel of Experts 
report, most of North Korea's international financial 
transactions were denominated in the U.S. dollar from foreign-
based banks, transferred through corresponding accounts in the 
United States.
    Mr. Sherman. But their reserves they are willing to deposit 
with foreign-based banks rather than under their mattress?
    Mr. Lee. I think that gives us leverage.
    Mr. Sherman. It does, and I am surprised they are willing 
to do that.
    How much does North Korea earn from the export of coal or 
anything else that they can actually export from their own 
territory? And how does that compare to how much they generate 
by exporting labor, whether it be, you know, the workers that 
they have sent abroad? Can we put these two sources of foreign 
income in perspective?
    Mr. Klingner. That is a very good question, sir. I think 
the most prevalent estimates of the overseas labor is $200 
million to $300 million a year. The coal, I think the limit on 
it was going to reduce North Korean income by $800 million a 
year.
    Mr. Ruggiero. Last year it was $1.2 billion.
    Mr. Sherman. One point two billion in coal. Do they export 
anything else other than coal from their territory that is 
worth talking about?
    Mr. Klingner. Other resources. Resources are a large part 
of their exports.
    Mr. Sherman. And so in addition to the coal, any idea what 
the other resources generate?
    Mr. Klingner. Some of the resources, minerals, have been 
precluded from export by the U.N. resolution.
    Mr. Sherman. How willing is North Korea to sell a nuclear 
bomb? How many nuclear weapons would they have to have for 
their own use before they would think, well, this one might be 
extra? Or at least something that we would sell if we could get 
a really good deal? I will ask Dr. Lee first.
    Mr. Lee. I think the risk is plausible. It is high, 
actually. We know North Korea has sold arms to terrorist 
organizations. We know North Korea has built a nuclear reactor 
in Syria, which the Israelis took out in September 2007. North 
Korea is one of the world's----
    Mr. Sherman. Are they to the point where, under their own 
military strategy, they are close to having an ``extra or not 
absolutely essential nuclear device,'' or do they need all the 
ones they can produce this year for their own defense strategy?
    Mr. Lee. Well, experts vary on what a second strike 
capability is, perhaps 40 or 50 bombs. Some people estimate 
that North Korea is very close to having 20 right now. And this 
will be accelerated in the years to come, their capability.
    Mr. Sherman. So you think they would want 40 for their own 
defense strategy before they might be willing to sell missile 
material. Though, of course, they have already shown the last 
decade a willingness to sell a technology kit, if you will, 
that was destroyed in Syria. Do you have any comment?
    Mr. Ruggiero. I would just say I think they are far more 
likely to try and milk any nuclear technology in terms of the 
amount of money they can get. So they are far more likely to 
duplicate what they did in Syria. So selling the means to be 
able to produce missile material. I think North Korea values 
their nuclear weapons. I don't think they will actually sell a 
device. But they are more than willing to sell UF6, like 
reportedly they sold to Libya.
    Mr. Sherman. UF6?
    Mr. Ruggiero. I am sorry, the material they used for 
centrifuges.
    Mr. Sherman. So they will sell technology, equipment that 
can be used to refine uranium or otherwise meld a nuclear 
weapon.
    Mr. Ruggiero. My point is there is more money--I mean, 
obviously they would get a lot of money if they sold one 
weapon. But they can get more money, like their ballistic 
missile program, if countries or other groups are interested in 
the full nuclear cycle.
    Mr. Sherman. While the chairman is being indulgent, I will 
also ask you, is this regime so vulnerable that a 20 percent 
decline, 30 percent decline in the hard currency that they 
spend on their elites could actually be regime-endangering? 
This is back to the Johnnie Walker question.
    Mr. Ruggiero. Right. So I think we have examples in the 
past, Banco Delta Asia in 2005 and other examples, that if we 
find the right levers that North Korea is very interested in, 
whether it is Johnnie Walker or----
    Mr. Sherman. Yeah, we can make them mad. I know that. Can 
we endanger the regime?
    Mr. Ruggiero. I think there is a way to get them to change 
their calculus. Whether we can get the Chinese on board for 
changing the regime, that would be the question.
    Mr. Sherman. Well, you may not quite change the regime, but 
until you are regime endangering, they are not going to give up 
the crown jewels.
    I will yield back.
    Mr. Yoho. I appreciate it. And those were great questions.
    If you will indulge me for a few more minutes. Again, if I 
look back over history, I was born in 1955, North Korea I think 
started around 1945. I am 62, so they are 72 years old. Has 
anybody tried to invade them in 72 years?
    I look from my standpoint where I am, as a Member of 
Congress, as a United States citizen, they don't have anything 
really that I want. I would think they should know that, that 
in 72 years, nobody has really tried to invade them. They 
invaded the south. I would hope that the rest of the world 
would look at the threat that they pose getting a nuclear 
weapon, and the irresponsibility that we have seen with the VX 
nerve agent that we know, the stockpile, with the VX murder of 
his half-brother, and with the other murders that we have seen 
using the poison needles. Is there anybody else in the world 
kind of concerned about this outside of the Asia-Pacific 
theater of South Korea and Japan?
    Mr. Klingner. Well, I think in the last year particularly, 
we have seen a growing international willingness to work 
against North Korea. One would have thought it would have been 
done after the first three nuclear tests, but it took the 
fourth test. And so what we have seen is a new willingness, not 
only on the sanctions and the targeted financial measures, but 
also going after even legitimate North Korean businesses. And 
it is a way of tightening the economic noose.
    So as we have tried to finally get stronger, more robust 
implementation of our laws and the resolutions, which is still 
lagging, but also South Korea and others have gone around the 
world talking to their legitimate business partners saying, do 
you really want to be doing business with someone who is 
involved in slave labor, crimes against humanity, and now using 
a chemical weapon of mass destruction in a civilian airport? We 
can try to wean away North Korea's business partners.
    Mr. Yoho. Yeah, that is pretty bold, when you do that in a 
public space like that with a toxic substance that is the most 
lethal nerve gas that we know.
    Mr. Sherman. If I can interject, and holding Malaysians 
hostage in their country.
    Mr. Yoho. Right. So I guess what I am trying to get out of 
you is how do you involve the rest of the world? Like, this is 
a serious problem. Obviously, they don't see it as serious as 
we do, or maybe Japan or South Korea, that we need to get the 
buy-in for the sanctions to work. How do you go to the U.N. and 
say we need world cooperation? Because this is not good for 
anybody, not just the region, but it would upset the whole 
applecart of the world, not just trade, but, you know, 
stability around the world.
    How do you get the rest of the world to buy into that and 
say we need you at the table to do this? Is this something we 
can put pressure on through our U.N. partners and just say, you 
know what, we cut off funds until you come to the table and--I 
am at a loss here, because I find it very disturbing that not 
everybody is standing behind us saying let's go, let's put 
these sanctions on and bring this regime--I don't want to say 
to an end, but bring the destructive nature of what they are 
doing to an end.
    Dr. Lee, what is your thoughts on how we accomplish that?
    Mr. Lee. I believe the United States is in a unique 
position, uniquely well positioned to take that leadership role 
to make the point that tougher sanctions are necessary.
    Mr. Yoho. Where would you do that? At the U.N.?
    Mr. Lee. Well, through the respective U.S. Embassies in 
those nations. Give other nations the choice.
    Mr. Yoho. Is it an ultimatum?
    Mr. Lee. No. Trading with North Korea or with us. No one is 
calling for an all-out trade war with China, but U.S. sanctions 
against North Korea have been very, very weak, both in degree 
and kind.
    Mr. Yoho. And we are at a point where we can't afford to be 
weak.
    Mr. Lee. There is no need to be weak, in my view.
    Mr. Yoho. I agree.
    Mr. Lee. The self-restraint exercise over the past 70 years 
with each North Korean lethal provocation probably has 
contributed to the de facto peace in the region, but we have 
spoiled North Korea.
    Mr. Yoho. Mr. Ruggiero, I am going to go to you and just 
ask, in addition to the sanctions following the reinstatement 
of the North Korean State Sponsor of Terrorism, Thae Yong-ho 
was noted as saying that the best thing that we can do--who is 
the highest ranking North Korean defector in decades--recently 
said that this was the best way to force change in North Korea 
by injecting outside information. And I don't look at it as 
propaganda. I look at it as injecting truth to the North Korean 
people. Because you have got a society for 70 years who has 
only known repression. They don't know what it is outside. And 
my wife and I watched a video the other day of the young girl 
that came through China and told a very compelling story that 
would bring tears to anybody's eyes.
    How do you get that story into North Korea? What is the 
best way? Is it through the SIM cards, through broadcasting? 
All of the above? Leaflets? I would like to hear your thoughts 
on that.
    Mr. Ruggiero. Well, I think all of the above is the right 
approach. I think there was a report earlier this week that 
North Korea had sent leaflets to South Korea talking about its 
own ballistic missile program. And so, you know, I think we 
should be meeting back and forth with leaflets. I think you 
said SIM cards. I know USB drives are another area that has 
been looked at.
    I would also, if you don't mind on the prior question, that 
is why I would go back to the Iran sanctions model. The 
attitude there was to go to all these countries. And I would 
just say that, you know, I know the SWIFT financial messaging 
was a small amount, but the fact that Belgium thought it was a 
good idea to allow SWIFT to conduct transactions with U.N.-
designated banks just shows you the attitude and the problem 
that we have. I wouldn't go through the U.N.
    Mr. Yoho. I don't understand how they did that or why they 
did that.
    Mr. Ruggiero. I don't either. I have written about how it 
is probably a violation of U.S.--excuse me, the POE, the Panel 
of Experts, has said it was a U.N. violation. The U.N.-
designated banks using the service was probably a violation of 
the law that was passed last year. I think things like that are 
areas where we need to be increasing our efforts, our 
implementation efforts.
    Mr. Yoho. All right. One final comment from my friend from 
California.
    Mr. Sherman. I certainly agree on an all-out effort on 
information, an all-out effort on the sanctions regime that we 
have. But when you hold up the Iran model, keep in mind, that 
was a much more vulnerable country because it has to provide a 
higher standard of living to its people and because it doesn't 
have China in its corner. And in spite of that, we were only 
able to extract rather modest limits on its nuclear program. We 
are trying to do far more with regard to North Korea.
    And I yield back.
    Mr. Yoho. Thank you, sir. And I would like to thank my 
ranking member and my colleague, Mr. Sherman, as well as all 
the other members that were here too, to ask questions. And I 
would like to thank the witnesses for coming to share their 
expertise on this important hearing and this important issue.
    This meeting is adjourned. And thank you guys for your 
time.
    [Whereupon, at 2:33 p.m., the subcommittee was adjourned.]

                                     

                                     

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