China and the POE DPRK Report

As we had anticipated last week, last Friday the United Nations Security Council published its 2012 Panel of Experts Report pursuant to UNSCR Resolution 1874. Here it is.

A year ago, the Chinese member of the POE would not sign the final report for 2011, effectively blocking publication of the report. The document was then nearly immediately leaked. This year, contrary to some advance accounts, the publication of the 2012 report was not delayed due to any Chinese objections about its contents.

When the 2012 report was submitted for publication as scheduled on June 12, all members of the POE, including the representative from China, were prepared to publish it.

Before the final report was submitted, however, there was, as usual, an intense negotiation by all parties involved in drafting about its contents. By no means were all objections, or even most of them, raised by China. But I am informed that, during this negotiation, Beijing had spelled out that it would not accept draft reporting by the POE concerning equipment from China that showed up during a well-publicized military parade in Pyongyang earlier this year and was identified as TELs for new North Korean ballistic missiles. The DPRK’s TEL procurement was just one of a number of issues that had to be negotiated by the members of UNSC POE on Resolution 1874 during the final drafting of the POE report.

Jeffrey has been blogging on what the TEL procurement implies for North Korea’s ballistic missile program, so I won’t reiterate that story, and in any event I don’t profess to have expertise about ballistic missiles in North Korea.

But I learned separately, concerning the trade-control issues involved in this case, that, after a negotiation with other parties on the UNSC Sanctions Committee, China had conditioned its approval of the draft POE report on the basis that there would be no reference made to the Chinese export of that equipment. The underlying reason given for China’s insistence on this point: The exporter, Wanshan Special Vehicle Company, a wholly owned subsidiary of the China Aerospace Science and Industry Corp (CASIC), is a politically powerful state-owned enterprise with strong connections to the People’s Liberation Army. Fairly high up in the Chinese government, there are some unresolved and sensitive issues concerning North Korean trade and cooperation involving PLA-related SOEs, where middle-level Chinese export-control officials as a  matter of routine don’t have the last word.

China’s Ministry of Foreign Affairs last month went on record carefully denying that Chinese entities had violated Chinese laws or international sanctions in exporting goods to North Korea, claiming that Japanese media reports concerning this transaction were “inaccurate.” The Chinese denial doesn’t go so far as to assert that the transport equipment what we saw on parade in Pyongyang wasn’t made in China.

For the record, it should also be pointed out that the new POE report does in fact mention (and even show a picture) of the Chinese-origin TEL. However the report doesn’t specifically mention China as the source of this equipment.

Nor, for that matter, does the POE conclude in its report that the transaction that brought the Chinese equipment to North Korea represents a violation of UNSC sanctions. “The Panel will further examine this,” is the POE’s bottom line at this point.

In my travels in the region last month and then shortly after returning home, I was informed that in fact the matter isn’t everywhere seen as nearly so cut-and-dried as by those people who have deplored this Chinese export as a deliberate and nefarious effort to advance North Korea’s ballistic missile program.

There is a Chinese version of events concerning this export, which goes something like this:

• The importer of the Chinese equipment was the DPRK Ministry of Forestry, a government agency that was squarely responsible for civilian-use activities having to do with public welfare and economic development and which had not been previously identified as a player in North Korea’s ballistic missile or nuclear programs.
• Japanese media reports that the end-use had been given as “transporting of lumber” by the DPRK were accurate on this point and wholly consistent with the declared North Korean end-user.
• The transport equipment exported from China did not figure on any Chinese list of sanctioned goods.
• The consignment did not exactly and strictly conform to the description of items which had been previously identified as TELs for China’s own ballistic missile programs, and apparent modifications in the equipment carried out before it was shipped appeared to support the assertion by the DPRK that the equipment had a peaceful use.
• If the Chinese exporter intended to deceive Chinese authorities–or for that matter, the UNSC Sanctions Committee–about the nature of this transaction, the company would not, as it did, flag this export on its public internet website.

But this interpretation of the events in this case is not without its apparent incongruities. To wit:

• Prior to this transaction, the exporter sold all of this type of equipment to one client only: the PLA.
• The equipment delivered to the DPRK could not have been used for the purpose of transporting lumber. Lumber transport does not require equipment having multiple-axle differentials. The vehicles shipped were too big to be used effectively in forest road conditions in North Korea.
• The equipment supplied by the Chinese exporter does not appear to have been substantially modified to restrict it to any peaceful-use application, and it appears to match closely the dimensions of the North Korean missile carriers displayed during the parade, suggesting the possibility that the equipment may have been developed by the Chinese firm on the basis of cooperation with DPRK entities connected to the North Korean missile program.
• Likewise, it appears that the equipment supplied to the DPRK is a unique model which was not supplied previously to the PLA for ballistic-missile-launching vehicles in China.

China’s export-control authorities are, as a general rule, quite willing to crack down on private businesses and individuals who are involved in brokering or conducting questionable trade with sensitive destinations including North Korea, Iran, and Syria. With this background, China’s private sector exporters are often keen to cooperate with international sanctions. But China’s SOEs, and in particular those with important ties to the PLA, have more leeway in interpreting Chinese export guidelines and rules.

The POE report–without making any reference to the TEL transaction–urges all exporting countries to be extra-vigilant in scrutinizing any trade with the DPRK. In particular, it advised, exporters should apply “know your customer” practices before agreeing to ship goods to declared North Korean end-users.

In the case of the TEL export, efforts by personnel responsible for export authorization procedures at Wanshan to “know the customer” might well not have identified the declared DPRK end-user as a pawn in Pyongyang’s effort to procure for its WMD programs. But scruntiny by export-control authorities–assuming they would have had access and authority in this case–would have led them to the conclusion that virtually of all this type of equipment produced by Wanshan had been sold to China’s military.