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U.S. and allies target North Korean arms procurement, crypto theft

TOKYO — The U.S. will work with Asian allies to further squeeze North Korea’s procurement networks for its weapons programs, including access to cryptocurrencies, amid talk that the reclusive communist regime is preparing for another nuclear test, a senior U.S. Treasury official said on Friday.

 

“One of the reasons I am here is to talk about how we can partner more effectively with Japan in responding to the DPRK’s ongoing provocations,” Brian Nelson, the Treasury’s undersecretary for terrorism and financial intelligence, said in an interview in Tokyo, using North Korea’s official acronym.

 

“We are doing all we can to degrade the regime’s ability to develop ballistic missiles and [its] weapons of mass destruction program,” he said.

 

The effort comes as Pyongyang rattles its saber while Washington focuses on cutting off funding for Russia’s invasion of Ukraine. This year, North Korea has fired 28 ballistic missiles, an annual record, including suspected intercontinental ballistic missiles.

 

Nelson came to Japan after a visit to South Korea earlier in the week. His tour lays the groundwork for U.S. Treasury Secretary Janet Yellen’s scheduled visit to the two countries later this month. She is also due to attend the Group of 20 finance ministers meeting in Bali on July 15-16.

 

North Korea has been under a broad trade embargo since 2017, when it fired ICBMs and conducted a nuclear weapons test. The country has continued to flout a U.N. Security Council resolution restricting its trade, exporting coal and other items to countries such as China to fund the regime and its weapons programs.

 

Nelson said that for now, Washington will target banks, businesses and people “that are associated directly with the procurement chain that supports the regime’s weapons program.”

 

He said the measures would include clamping down on cryptocurrency theft. North Korea is suspected of using teams of hackers to steal digital money. The use of cryptocurrencies also helps the regime cover its tracks.

 

“We focus on crypto theft and all the cybercrime we believe the DPRK has engaged in. We are specifically going after various nodes we see the DPRK using to move funds to other virtual assets,” Nelson said.

 

“It’s a big focus of my work. It’s a big focus of the partnership we hope to build with Japan and other partners of the region.”

 

Washington is waging similar financial warfare against Russia following its invasion of Ukraine in February. The U.S. and its allies have excluded Russia from the international money transfer network and have frozen Moscow’s foreign reserves. They have also banned technology exports to Russia and have agreed to phase out Russian oil imports.

 

But the sanctions campaign has been complicated by an oil supply crunch — sending prices higher, to Russia’s benefit, while hurting consumers in Western countries.

 

The Group of Seven leading economies this week vowed to explore the feasibility of a price cap on Russian oil.

 

“The G-7 leaders are committed to designing a price cap that will effectively restrict the revenue flow to [Russian President Vladimir] Putin and allow oil to continue to flow for third-party countries,” Nelson said.

 

He did not provide a clear time frame for introducing such a cap, but said, “We hope we’ll have progressed in our conversations about how to design an effective price cap” by the time of Yellen’s visit to Asia.

 

One of the challenges for the G-7 is whether emerging Asian powers, such as India and China, will get on board the price cap initiative. Nelson was optimistic.

 

“There are strong reasons to join the price cap because it’s going to lower the cost of oil. That will benefit all the countries that are purchasing oil from Russia,” he said. Even countries that do not join the cap “will be able to bargain against the lower cost of oil coming from Russia,” he added.

 

By MITSURU OBE and HIROFUMI TAKEUCHI, Nikkei staff writers

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