Category Archives: Analysis

The Jian-Manpho Bridge: Another Failed Attempt at Economic Integration or One More Nail in the Coffin of “Maximum Pressure”?

Theo Clement, Research Associate (theo.clement@kcl.ac.uk)

The Jian-Manpho Bridge: Another Failed Attempt at Economic Integration or One More Nail in the Coffin of “Maximum Pressure”?

As recent fieldwork interviews and press reports suggest, the opening of the Jian-Manpho bridge linking China and the DPRK reflects an increased Chinese willingness to openly engage with the North Korean economy. While the borderlands have a long history of failed economic integration projects, the simultaneous opening of a third economic cooperation corridor near Manpho (in addition to Sinuiju and Rason) and a sudden rise in bilateral agreements might mean Beijing’s patience with “maximum pressure” is wearing thin and that Chinese businesses want to reestablish ties with Pyongyang before Seoul does.

What the Hanoi Summit Tells Us About North Korea’s Nuclear Intentions

Christopher Watterson, Research Associate (christopher.watterson@kcl.ac.uk)

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What the Hanoi Summit Tells Us About North Korea’s Nuclear Intentions

The second U.S.-North Korea summit was a bust, with Kim and Trump leaving Hanoi without any mutual concessions or even a joint statement. In a post-mortem press conference North Korea explained its negotiating position, stating that it was willing to verifiably decommission the Yongbyon site in exchange for sanctions relief. While this would appear to be a significant concession given that Yongbyon contains North Korea’s only operational 5 MWe reactor and proven uranium enrichment facility, this article argues that the North Korean offer does not represent a sincere commitment to denuclearisation but rather an intention to shift its nuclear weapons enterprise away from the Yongbyon site.

Fallout from Kim-Trump Summit “No Deal”

Fallout from Kim-Trump Summit “No Deal”

The much-hyped second summit between President Trump and Chairman Kim Jong Un ended prematurely earlier today with both sides unable to come to an agreement on sanctions relief and DPRK concessions. Today’s failure highlights the broader tensions in normalising relations with North Korea that are likely to persist well beyond the current US presidency.

From media reports coming out of Hanoi, it appears the stumbling block was over an apparently simple trade-off: what sanctions would be eased and in return for what denuclearisation steps by the DPRK?

Ahead of the summit, there was a sense from some DPRK watchers that some sanctions could be lifted – including certain UN measures – but most must stay in place to maintain pressure on Pyongyang in order to nudge it towards compliance in the future. In terms of denuclearisation, reports suggest that Kim was prepared to freeze or close parts or all of the Yongbyon nuclear facility which houses the country’s plutonium production reactor and its only known uranium centrifuge facility. However, this is but one of several nuclear facilities that the DPRK is believed to have. Therefore, a freeze or closure would not assuredly and irreversibly end the country’s nuclear program. This point weighs on the mind of many analysts as North Korea has previously rowed back on similar freezes in its program.

While at first glance, the differences in two sides’ positions might seem reconcilable, Pyongyang’s apparent insistence on lifting all economic sanctions at once apparently prevented the two parties from reaching an agreement. While Pyongyang’s game plan is still somewhat unclear, recent events give more credence to the idea that Kim would not give up his nuclear weapons program for only an easing of sanctions. Indeed, it should be borne in mind that the DPRK’s controversial nuclear and ballistic programs do not only constitute a strong security guarantee for Pyongyang, but also provide a tool to demonstrate that the regime is using a wide array of instruments to secure concessions from the US, ranging from a peace treaty to the Korean War to assistance in economic development.

Many in the West will welcome the US’ willingness to walk away from the summit. While Kim may not be prepared to trade the nuclear weapons programme for sanctions relief, many states in the West will feel that sanctions relief should not be granted in exchange for anything else. So, there may be some relief around Western capitals that no meaningful concessions were made.

Depending on how one reads Kim’s strategy, the failure in Hanoi might not be a complete loss. Ahead of the summit, numerous countries were positioning themselves to re-enter the North Korean market assuming that sanctions would be eased. Based on Project Alpha’s work, it seems likely that North Korea will find more lax enforcement of sanctions in many parts of the world following its diplomatic efforts with the US. One key question left unanswered after the summit is the impact of the “no deal” on current North-South dialogue. Absent a full lifting of sanctions, South Korean president Moon Jae-in will not be able to pursue its policy of economic engagement with the North – unless they break said sanctions.

Perhaps more problematically from the US perspective, the North’s engagement with South Korea is likely to continue to progress even absent a US-North Korea agreement. This may result in pressure to reopen the joint industrial zone. The US could then find itself being cast as the foreign force obstructing a further easing of tensions on the peninsula. Whereas all North-South declarations since the historical 2000 inter-Korean summit enshrined the principle of a Korean reunification led by Koreans alone. We may expect to see Kim Jong-un complaining to his Southern counterpart about what he will perceive as Trump’s stubbornness, increasing pressure on South Korea’s already difficult diplomatic position.

The status quo will also not help Kim getting the much-needed foreign investment that was pledged by South Korea, and, apparently, already agreed on by Chinese companies. The previous summit allowed the DPRK to emerge as a rational and “normal” diplomatic actor, and this episode did nothing but confirm this trend, offering a glimpse into Pyongyang’s negotiation tactics. However, from North Korean’s point of view, the “no deal” in Hanoi, unless if part of a larger strategy, might give Trump administration to upper hand in any future negotiations. While the current diplomatic sequence was started by the DPRK following Kim Jong-un’s 1st of January 2018 speech, by walking away from the negotiation table the Trump administration is imposing its own agenda. Time will tell if Pyongyang will compromise on its “all or nothing” bargaining position or if we go back to brinkmanship.

 

 

 

The EU Should Tackle Iran’s Ballistic Missile Program

Emma Scott, Research Assistant (emma.l.scott@kcl.ac.uk)

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The EU Should Tackle Iran’s Ballistic Missile Program

The EU has stated that it is leading a “dialogue” with Iran to address regional issues, as well as other issues of concern including the ballistic missile program. The question is how the EU is framing the negotiating agenda on Iran’s ballistic missile program. Is its position similar to the US position or does it diverge? The EU has maintained that it shares “most of the concerns expressed by the US regarding the status of Iran’s nuclear program after 2025, ‘Iran’s ballistic missiles program’ and its destabilising actions in the region.” However, it has failed to address or expand on these concerns. While the E3 has been willing to discuss missiles with the Trump administration—albeit in talks that ended when the US quit the JCPOA in May 2018—the EU has only referred to Iran’s ballistic missile program in public statements focused on preserving the JCPOA. It has yet to address the missile program as a stand-alone issue with implications for European security, the Middle East and the theme of proliferation more broadly.

Russian Sanctions: Are They Working, Workable, and Worth It?

Steve Osborne, Senior Research Associate, (stephen.osborne@kcl.ac.uk)

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Russian Sanctions: Are They Working, Workable, and Worth It?

Russian actions in Ukraine led to sanctions being imposed by the EU, the United States, and several other international partners. There is little evidence to date that these sanctions have had significant effect on Russia’s economy or behaviour. But the question of effectiveness is far from simple. The paper will address why effectiveness has been limited – is it a matter of scope, enforcement or priority? What is meant by effectiveness in this context -what would effectiveness look like? The paper will also look at the design of the sanctions – what effects if any were they meant to have, and were they ever meant to have an economic impact? Is there evidence of sanctions evasion by Russia, or are volumes of affected trade so low as to make enforcement measures insignificant? If there is a political will to increase enforcement, or to use sanctions as part of a policy to restrain Russian aggression, how might such aims be achieved? The paper will engage systematically with existing literature, dealing both with the theory of sanctions, and on studies undertaken on the subject of sanctions effectiveness; trade data and licensing statistics; as well as EU reporting.

Implementation of UN Security Council Resolution 2231 (2015) Three Years On: the UN Secretary General’s Sixth Report

By Emma Scott, Research Assistant

The UN Secretary General has now released his sixth report on the implementation of UN Security Council Resolution 2231 (2015), which governs the Joint Comprehensive Plan of Action (i.e. the nuclear deal with Iran). The UN Secretary General issues a report every six months to assess the implementation of the resolution. Project Alpha has been following these reports. Herein, we provide an analysis of the of this sixth report’s key findings in light of the former reports, and specifically related to the implementation of the nuclear related provisions; the ballistic missile related provisions; and the restrictions on the missile transfers or activities.

 

Key findings of the report include:

  • 5 new proposals submitted through the Procurement Channel, which brings the total number of proposals submitted to 42
  • 2 of the 6 cases of illicit procurement activity set out in the previous report did not meet the criteria set out in the Nuclear Suppliers Group Guidelines of Nuclear Related Dual Use Equipment, therefore did not require advanced approval by the Security Council; enquiries into the other 4 cases are ongoing
  • Component parts of 3 additional ballistic missile launches at Saudi Arabia by the Houthis had features consistent with those of the Iranian Qiam-1 short-range ballistic missile, as previously examined
  • Two container launch units for anti-tank guided missiles recovered by Saudi-led coalition in Yemen had characteristics of an Iranian manufacturer

 

Nuclear-related provisions

Since 12 June 2018, only 5 new proposals have been submitted through the Procurement Channel, bringing the total number of proposals submitted from 37 to 42. This figure is significantly down on the 13 proposals submitted in the previous reporting period 8 December 2017 – 12 June 2018. There has been no increase on the number of proposals approved or disapproved since the last report in June 2018, and there has been a slight increase from 7 to 9 proposals withdrawn since June 2018. Although, the procurement channel was slow to take-off from the beginning, it appears that it is slowing down further and not really functioning as a mechanism on the whole, and particularly, in the aftermath of the Trump withdrawal from the JCPOA.

Status of the Procurement Channel
Reporting Period No. of proposals submitted in the reporting period No. of proposals submitted since implementation day (16 January) No. of proposals approved No. of proposals not approved since implementation day No. of proposals withdrawn implementation day No. of Proposals under review
16 January 2016 – 12 July 2016 1 1 0 0 1 0
13 July 2016 – 30 December 2016 5 6 3 0 1 2
31 December 2016 – 20 June 2017 10 16 10 0 2 4
21 June 2017 – 8 December 2017 8 24 16 3 5 0
9 December 2017 – 12 June 2018 13 37 24 3 7 3
13 June 2018 – 6 December 2018 5 42 28 4 9 1

 

Ballistic Missile-related activities by Iran

In early January 2017, approximately, one year following implementation day of the JCPOA, and in the weeks following President Trump assuming office, reports started to emerge of Iran testing a range of ballistic missiles. The UN Secretary General’s reports have indicated approximately 20 tests conducted in the last two years, the details of which are briefly outlined in the table below.

Ballistic Missile launches or tests by Iran since 16 January 2016
Date of Launch/Test Type of missile/SLV Type/Reason for Launch Reporting State/outlet
15 November 2016 Qiam Flight test Israel
29 January 2017 Khorramshahr medium range ballistic missile Flight test Confirmed by Iran
18 June 2017 Ballistic missiles Retaliation against targets in Syria Israel
19 June 2017
4 July 2017 Medium range ballistic missile medium range ballistic missile Flight test US + E3
27 July 2017 Simorgh SLV Not mentioned US + E3
2 January 2018 Shahab-3 variant Flight test Israel
5 January 2018 Scud variant Flight test Israel
February 2018 Zolfaghar Flight test Israel
April 2018 Khorramshahr Flight test Israel
May 2018 Zolfaghar Flight test Israel
May 2018 Shahab-3 variant Flight test Israel
June 2018 Shahab-3 variant Flight test Israel
August 2018 Qiam Flight test Israel
August 2018 Zolfaghar Flight test Israel
30 September Unknown (x 5) Retaliation against targets in Syria Israel (reported in Iranian media)
1 October
1 December 2018 Medium range ballistic missile Test firing United States

 

While Iran has not categorically confirmed all of these tests, it has not denied all of them either with the exception of those reported by Israel between January and August 2018. Iran explicitly confirmed the 2017 test of the Khorramshahr missile maintaining that the test did not contradict the JCPOA nor resolution 2231. Paragraph 3 of resolution 2231 “calls” upon Iran “not to undertake any activity related to ballistic missiles designed to be capable of delivering nuclear weapons, including launches using ballistic missile technology […]”.[1] The phrase “calls” is not the affirmative “decides” language of the Security Council as specified in resolution 1929 (2010) prior to the signing of the JCPOA. Consequently, the Security Council is blocked over the continuation of the program and the interpretation of 2231.

The US, alongside the United Kingdom, and France, as well as Germany have jointly reacted to the recent launches. These states maintain that they are “destabilising and provocative” and conducted in defiance of resolution 2231.[2] They, alongside Israel, further maintain that the phrase “ballistic missiles designed to be capable of carrying nuclear weapons” includes all Missile Technology Control Regime (MTCR) Category I systems, defined as those capable of delivering at least a 500kg payload to a range of at least 300km. Consequently, they say, as the missiles can be categorised as such, they are inherently capable of delivering nuclear weapons.[3]

Within the context of Security Council reporting, China has been silent on the issue, while Russia has been coming to Iran’s aid. Russia maintains firstly that there is no legal prohibition through resolution 2231 on the development by Iran of missile and space programs and secondly there is no information that Iran’s ballistic missiles are designed to be capable of carrying nuclear weapons. In line with Iran, Russia also maintains that the Category I parameters of the MTCR (of which Russia is a member) were never intended to be used in the context of the resolution.[4]

Iran’s position is threefold. Firstly, it maintains that its ballistic missiles have not been designed to be capable of carrying nuclear weapons, and are thus outside the purview of resolution 2231. Secondly, Iran’s missile activities are part of its conventional deterrence and defensive capabilities, and nothing in resolution 2231 prohibits conventional missile activity.[5] Thirdly, Iran argues the definition of the MTCR is not an internationally agreed upon definition, and there is no reference to MTCR criteria in paragraph 3 of annex B to resolution 2231, therefore MTCR criteria is not applicable.[6]

Iran’s most recent test on 1 December 2018 caused further cause for complaint by the US and key European member states, but in the closed-door Security Council meeting which followed there was no consensus. Taking advantage of the blockage, Iran has said it will continue to develop and test ballistic missiles and is unwilling to engage in dialogue on the issue.[7] Consequently, despite the growing frequency, range and performance of the missiles, the status quo seems unlikely to change.

 

Ballistic Missile-related transfers or activities with Iran

Beyond the question of missile development and testing, the issue of ballistic-missile related transfers to and from Iran also remains. The question is whether Iran has transferred the missiles, parts thereof, or related technology to the Houthis in Yemen. Any such transfer post 16 January 2016 would constitute a violation of annex B to resolution 2231, which requires states to obtain prior approval from the Security Council for the supply, sale or transfer to or ‘from’ Iran of all items set out in the Missile Technology Control Regime list.

The Houthis could not apply for such authorisation because they are not a recognised UN member state, but rather a non-state actor, and such authorisation if requested by Iran would in any case never be granted because UN Security Council resolution 2216 (2015) on Yemen established an arms embargo on the Houthis. Therefore, the transfer of weaponry by Iran to the Houthis would also constitute a violation of 2216.

Launches of missiles by the Houthis in Yemen at Saudi territory began in July 2017. Since, there has been 14 launches in total. According to assessments by UN authorities, the missiles launched shared key design features with a known type of missile manufactured in Iran – the Qiam 1 short range ballistic missile.[8] Putting the question of regional stability aside, the overarching problem is the proliferation of ballistic missile technology in the Middle East, and the spread of such technology to non-state actors. Iran’s categorical denials of these transfers illustrate that it is not the Iranian government’s official position to support the Houthis and proliferate ballistic technology, probably because the views in Tehran are unlikely to be united on these issues. However, Iranian denials are questionable in view of the evidence presented by the Secretary General, leaving a certain amount of responsibility for proliferation in the region with Iran.

 

Launches by the Houthis at the Territory of Saudi Arabia
Date of Launch Number of Missiles Launches Name/Type of Missile Launched
22 July 2017 1 Qiam-1 (a Scud variant)
4 November 2017 1 Qiam-1
19 November 2017 1 Qiam-1
5 January 2018 1 Qiam-1
30 January 2018 1 Qiam-1
25 March 2018 3 Qiam-1
11 April 2018 1 Qiam-1
9 May 2018 2 Not mentioned
5 June 2018 1 Not mentioned
24 June 2018 2 Qiam-1

 

Arms-related provisions

Since the first report, the Secretary General has reported extensively on arms shipments to and from Iran. Resolution 2231 has two main provisions related to conventional arms. The first provision, paragraph 5 of annex B requires states to obtain prior approval from the Security Council on a case-by-case basis for supplying, selling, or transferring ‘to’ Iran the seven categories of arms defined by the United Nations Register of Conventional Arms.[9] In the three-year period since implementation day of the JCPOA, the UN Secretary General has only reported on one proposal to the Security Council,[10] the outcome of which has not been publicly divulged thus far. In addition, there have been another three instances of attempted unauthorised shipments to Iran – two of which were prevented by Ukrainian authorities, and one by Turkish authorities.

In the second provision concerning paragraph 6 (b) of resolution 2231, the Security Council decided to prevent, unless decided otherwise on a case-by-case basis, the supply, sale or transfer of arms ‘from’ Iran. No reports exist of Iran trying to use this mechanism and it seems unlikely in view of political circumstances, that any such request would be authorised. Instead, approximately 14 cases have been mentioned in the Secretary General’s reports where arms and related materials assessed to be of Iranian origin have been seized or recovered by fellow UN member states’ authorities. Iran has not responded to the accusations.

Finally, Iran has also been found to be displaying defence equipment in international defence exhibitions on 5 occasions, in Iraq (x 3), in Turkey (x1), and in Azerbaijan (x1). Iran’s justification for not asking for prior Security Council authorisation was that no prior approval was required because Iran retained ownership of the items exhibited. The Secretary General has requested to the Security Council to clarify whether paragraph 6 also includes temporary transfers, but the Security Council has yet to respond.

Although, the evidence from member states seems to indicate that Iran is not respecting the arms embargo imposed upon it, the Secretary General and the Secretariat continue to examine much of the evidence submitted by them. To determine a violation of resolution 2231, the transfers emanating from Iran must have taken place after implementation day on 16 January 2016.

 

Conclusion

Three years on Iran’s nuclear, ballistic missile, and arms programs are as divisive as ever, both in the region and further afield. So far, Iran is implementing its nuclear related commitments under the JCPOA. In the author’s opinion, the possibility of US military action aside, Iran will continue to do so until the easing of restrictions begin on the nuclear program in 2025. The question here is in view of President Trump’s withdrawal from the current deal, will Iran be willing to sign up to an agreement covering the period post 2025?

Restrictions will be lifted of the ballistic missile activity in 2023. However, at present, Iran seems determined to continue its ballistic activities and ballistic proliferation in the region in defiance of Western calls of condemnation and concern. The ballistic programme already high on the U.S. agenda is also rising on political agendas in Europe, so the question for another article is how should Europe respond?

The embargo on conventional arms will be lifted in 2020, but even for now, it is proving difficult to impose. In this case, the question is whether and which states will be publicly willing to engage in conventional arms transfers with Iran in the post-2020 period – only two years from now.

 

[1] UN Security Council, Resolution 2231 (2015), S/RES/2231 ()2015, 20 July 2015.

[2] UN Security Council, Third report of the Secretary General on the implementation of Security Council resolution 2231 (2015), S/2017/515, 20 June 2017.

[3] Ibid.

[4] UN Security Council, Fourth report of the Secretary General on the implementation of Security Council resolution 2231 (2015), S/2017/1030, 8 December 2017.

[5] Op. cit. UN Security Council, Third report of the Secretary General…, S/2017/515, 20 June 2017.

[6] UN Security Council, Fifth report of the Secretary General on the implementation of Security Council resolution 2231 (2015), S/2018/602, 12 June 2018.

[7] Tasnim News Agency, ‘’Iran to Continue Testing Homegrown Missiles: General”, 02 December 2018, https://www.tasnimnews.com/en/news/2018/12/02/1889585/iran-to-continue-testing-homegrown-missiles-general

[8] UN Security Council, Fifth report of the Secretary General…, S/2018/602, 12 June 2018.

[9] The seven categories of arms as defined by the United Nations Register of Conventional Arms include battle tanks, armoured combat vehicles, large-calibre artillery systems, combat aircraft, attack helicopters, warships, missiles, or missile systems.

[10] UN Security Council, Second report of the Secretary General on the implementation of Security Council resolution 2231 (2015), S/2016/1136, 30 December 2016.

Discussion Paper: UN Maritime Sanctions and the International Maritime Organisation

By  Ian J Stewart & Stephen Osborne

ABSTRACT

This paper examines the interplay between sanctions adopted pursuant to Chapter VII of the UN charter and rules governing the maritime sphere. This paper demonstrates that UN sanctions adopted on DPRK and Iran, and expanded by national measures, place requirements on maritime actors that go beyond those of IMO rules. Moreover, the paper demonstrates that IMO rules as presently constituted are poorly designed to facilitate the effective implementation of sanctions. As such, it is argued that maritime governance arrangements run counter to international peace and security requirements. In this context, a number of issues and opportunities are identified for leveraging IMO regulations.

 

INTRODUCTION

The UN Security Council has adopted a number of binding resolutions under Chapter VII of the UN charter that impose obligations in the maritime domain. These obligations are principally aimed at the programmes of countries subject to UN sanctions, which in recent years has included Iran and North Korea. However, the obligations also require that other actors in the maritime space take certain actions to deny sanctioned parties access to services. UN sanctions thus impose a global compliance obligation in the maritime space that is over and above any existing requirements set down by the International Maritime Organisation or other treaties to which states might be party.

 

The existence of such extra compliance requirements raises questions about their compatibility with existing rules. These questions include whether the sanctions are consistent with these existing rules and, if appropriate, which takes primacy. The questions also include whether IMO regulations are capable of supporting and facilitating implementation of the Security Council requirements. This paper will argue that IMO rules and regulations are presently poorly suited to implementation of UN sanctions requirements and thus that IMO rules and practices should evolve to better account for threats to international peace and security. In this paper, specific recommendations are identified to this end.

 

In order to ground these findings and recommendations, this paper proceeds as follows. First, the paper examines the scope of the maritime sanctions compliance requirement imposed through Chapter VII of the UN charter together with complementary national measures. Second, the paper examines the functioning of the IMO together with its rules and regulations in areas affected by sanctions. This is used to inform an analysis of the gaps in the system. Third, the paper identifies areas where IMO regulations and practices could improve to facilitate sanctions implementation. These recommendations consider governance opportunities beyond IMO regulations which, in practice, includes possible national actions and company-specific actions.

 

The paper draws on research into North Korean maritime sanctions evasion undertaken by Project Alpha at King’s College London. The paper also draws to some extent on research into Iranian sanctions implementation and evasion up until the nuclear deal in 2016 which saw sanctions eased.

 

REQUIREMENTS OF UN RESOLUTIONS

UN sanctions resolutions adopted against a number of countries including Iran and North Korea in recent years have increasingly imposed obligations in relation to the maritime domain.  These measures are generally targeted at the programmes, activities and vessels of the target country. However, they impose an obligation on all other states not to provide certain services or assistance to certain sectors or designated parties. In the case of North Korea, the requirement goes somewhat further as some entities linked to North Korea in third country jurisdictions have also been designated. The requirements of UN resolutions include:

  • Not to provide flag services to North Korean Vessels
  • Not to provide financial services to North Korean vessels, including financial services such as insurance and port services
  • To prevent ship-to-ship transfers
  • To stop and inspect vessels suspected of carrying proscribed goods to or from North Korea

 

RELEVANT IMO REGULATIONS

The International Maritime Organisation (IMO) is the body that regulates the high seas. It is a specialized agency of the United Nations and describes itself as the global standard-setting authority for the “safety, security and environmental performance of international shipping. Its main role is to create a regulatory framework for the shipping industry that is fair and effective, universally adopted and universally implemented.” 1 The IMO also audits states to ensure compliance with the states’ commitments to the IMO as laid down in the many conventions and treaties associated with the organisation. The IMO is thus a primary standard setter with regards to maritime issues.

The IMO has 174 members including countries that have recently been subject to UN sanctions including North Korea and Iran. There are a vast number of requirements resulting from the conventions, some relevant ones includes:

  • Vessels larger than 100 tonnes must operate an AIS (automatic identification system) transponder
  • Vessels operating in international waters must be registered with a flag state
  • All cargo vessels of 300 tonnes or more must have a unique 7-digit number issued by the IMO (I.e. IMO number) and use only this number for its entire life
  • Companies owning, managing and operating vessels must also have an IMO number (i.e. an IMO company number)

It should also be noted that the IMO is funded largely by membership fees which are calculated annually based upon the volume of vessels registered by each shipping registry; and the IMO generally takes decisions on a consensus basis in its committees and council which include all member states.

 

GAPS AND EVASION PRACTICES

As sanctions are imposed, efforts to evade them often emerge. Effective implementation, therefore, is not merely a question of enactment of legal requirements set out in a UNSCR, but also of identifying and countering sanctions evasion. In both the cases of Iran and North Korea, there are well documented examples of evasion of sanctions.  Indeed, in both cases it could be argued that there has been a widespread and systematic effort by both countries to evade the controls. Whilst these efforts have included crude physical measures, such as concealment of illicit cargoes underneath legal ones, or mis-description of goods or ports of lading on crates or manifests, there have also been ways in which the international administration of shipping has been exploited to evade sanctions. Any ship, whatever its activity, must have a flag state; must provide information to the IMO; and must provide regular position information. If ships can operate in breach of sanctions, perhaps that activity points to systemic weakness in administrative processes.

 

Flagging Issues  

The IMO requires that all vessels operating in international waters be registered with a flag state. UN sanctions require flag states not to provide flag services to vessels subject to sanctions (i.e. vessels owned or operated by North Koreans or engaged in illicit trade with a sanctioned country). In practice, however, sanctioned vessels are often able to obtain flag services through open registries. In such circumstances, the flag registry is not always wilfully non-compliant with the requirements of UN resolutions. It could be the case, for example, that the vessel manager presents false documentation to the flag registry or that the vessel becomes sanctioned after being listed on the registry. However, research at King’s College London suggests that many flag registries have in place inadequate processes and systems to conduct due diligence for potential sanctions issues. Many registries appear not to conduct a review of vessels other than at the time of registration, for example, and flag registries often do not require companies to provide registration documents to confirm their legitimacy. In many cases, open registries are run by private contractors, and the government may not have sufficient oversight in the running of the registry.

 

Presently, IMO regulations do not standardise the requirements of flag registration. Moreover, the IMO does not have a role in ensuring flagged vessels are not North Korean vessels, leaving the obligation instead to its members. Additionally, it appears that IMO audits of states currently do not check what measures states take to ensure they are not flagging North Korea vessels or indeed that the state is complying with any other aspect of UN maritime sanction. IMO regulations, while requiring vessels to have a flag, are thus not helpful in implementing UN sanctions in relation to flag issues.

 

Another phenomenon relevant to sanctions implementation, but also with wider applicability across the broader issues of lawful activity at sea, is the use of false, fake, or unauthorised shipping registries. Congo, Fiji, Samoa and the Federated States of Micronesia have all been reported as falling prey to a fraudulent registry activity.2 Previously, Mongolia and Tuvalu both contracted the services of a private company, Sovereign Ventures, to run their registry, which was reported to have ties to North Korea.3 In November 2014 the government of Zanzibar terminated its contract with the company Philtex (Belize Ltd), which it had authorised to manage its open shipping registry following allegations that Iranian oil tankers were operating under its flag. These cases are challenging for the IMO and for the relevant member state. It might be impossible for the IMO to detect the activities of a fake registry, but the IMO could take useful steps against the practice. This might include warning all mariners and other stakeholders about the prevalence of the practice; maintaining a standing request for any information suggesting such practice was going on; and acting forcefully on receipt of information to warn all stakeholders, giving full details. More strategically, the IMO could set standards for the relationship between the government and a private contractor appointed to run the registry.

 

Ownership and Management Structures  

UN sanctions can extend to individuals and entities known to be involved in prohibited activities. Generally, this requirement is limited to listed individuals and entities. However, in the case of North Korea, it extends to all North Koreans. The requirement includes an obligation not to provide financial services to individuals and entities owned and controlled by sanctioned persons. In the maritime domain this means that before any vessel can be mortgaged, insured or enter a port, confirmation is needed that the individuals and entities linked to it do not fall into this category.

 

In practice, this obligation can be partially met through the use of software that screens the entities associated with a vessel against the lists of sanctioned parties. Such software is increasingly being used by maritime flag service providers. Here, again, IMO regulations appear inadequate. An IMO service provider issues company certificates for companies wishing to be listed as the owner of a vessel. However, presently, it does not appear that the IMO requires sanctions screening at this stage, leaving the responsibility to member states.

 

Additionally, the entity legally responsible for a ship is the beneficial owner, sometimes seen as the group beneficial owner or ultimate owner. It appears that IMO regulations do not require information on beneficial owners and most databases that draw on IMO data to provide details of ship ownership do not include details of the beneficial owner. In the case of those that do offer group beneficial owner as a data field, this information is rarely available. It appears that either the IMO does not collect such data, or that it does not make it available either on a free or subscription basis.

 

A result of this is that, in the case of North Korean-owned ships, the data trail often leads only as far as a one-ship company. As one of many such examples, the North Korea-flagged Dai Hong Dan (IMO 7944695) is given in databases as owned by Daihongdan Shipping Co Ltd. Details of the ultimate owner are not available. Consequently, ship owners wishing to conceal their identity for any purpose can do so by setting up such companies. Additional layers of anonymity can be achieved by giving a care-of address, or naming a shareholder, director, or other nominated third party, as the beneficial owner. The IMO, in compiling its register, may be best placed to instigate greater transparency in the matter of ownership, by at least insisting that ultimate owner information be provided for publication.

 

Identification and Tracking (including at-sea transfers) 

A final area where tension exists between IMO regulations and UN sanctions is in vessel identification and tracking. Two separate systems for ship identification and tracking have been introduced by the IMO under Chapter V of the 1974 International Convention for the Safety of Life at Sea (SOLAS). One is the Automatic Identification System (AIS), the other is the Long-Range Identification and Tracking (LRIT) system. The two systems have different purposes, (the former being primarily for collision avoidance, the latter for security) but provide similar information. Presently, IMO regulations require every cargo vessel over 300 tonnes to report its position using LRIT at least every 6 hours; vessels of this size are generally also required to transmit using AIS.

 

A key difference between AIS and LRIT is that AIS is a broadcast system, meaning that data can be collected and made public. Access to LRIT data, on the other hand, is granted only to those authorised by contracted governments. The availability of AIS data on the internet has given rise to a number of free-to-use and subscription-based services providing near-real-time positional information. There are a number of reasons that vessels may wish to hide their position, including to avoid piracy and to evade authorities. As a result, ships may disable AIS to prevent exploitation by nefarious actors such as pirates, or to evade detection when undertaking unlawful activity; such as smuggling, illegal exploitation of natural resources, or sanctions evasion. Furthermore, insurance providers charge premiums for vessels that enter certain areas, so it has become common for vessels to disable tracking when operating in these areas. Furthermore, it is often difficult to determine whether AIS signal loss is the result of deliberate disablement or whether it is a result of signal range, or technical malfunction. Nonetheless, AIS disablement as a means of sanctions evasion is increasingly common. At-sea transfers with sanctioned vessels are prohibited but are regularly undertaken when AIS is disabled on both participating vessels. Examination of recent AIS data indicates that almost no AIS data is broadcast around North Korean ports, or from North Korean-flagged ships irrespective of location. Assuming that vessels are indeed entering and leaving North Korea, and that North Korean flagged vessels are indeed to be found in other locations, all such wilful disablement of AIS represents a breach not only of UN but of IMO requirements. Better implementation and enforcement of IMO requirements would strengthen implementation of UN requirements.

 

Given the potential justification for AIS disablement in certain circumstances such as anti-piracy, it is understandable that the UN panel of experts has been quite specific in asking commodity trading companies to ensure that their vessels transmit when operating close to Korea rather than in other areas of the world where vessel tracking is often disabled for other purposes.

 

The fact that, unlike AIS, LRIT data is only available to parties authorised by a participating government, should rule out its use by pirates, thereby removing legitimate or semi-legitimate grounds for switching it off or failing to make a scheduled or unscheduled broadcast. This potentially makes it a stronger asset to sanctions implementation in the following areas:

 

  • Flag States may request information on the location of their vessels. Either a location within an area of concern, or failure by a ship to report its position, might trigger a query being sent out to the vessel or its associated onshore companies; investigation by the flag state using other due diligence sources; reporting to the UNSC or the IMO.
  • States may request information on ships of any flag near their coasts; historical data as well as current data would be necessary to form the information picture.
  • Port States may request information on ships that have declared one of their ports as a destination; historical data as well as current data would be necessary to form the information picture.
  • Other service providers potentially involved in a transaction concerning a ship (trading companies, banks, etc.) may wish to know locational information; historical data as well as current data would be necessary to form the information picture.

 

Thus, there are some obvious opportunities to improve vessel tracking practices to aid sanctions implementation. Vessels could be required to transmit LRIT signals more frequently in areas used for ship-to-ship transfers to reduce the risks of unauthorised transfers or clandestine port visits, for example.

 

National and International Implementation

While UN sanctions and IMO regulations place obligations first and foremost on its member states, the member states in turn are required to distil these obligations through national legislation to the private sector. Given that much of the maritime sector is operated on a commercial or private sector basis rather than by governments, the question of effective implementation is central to the question of whether security council regulations can be effective.

 

A key challenge here is that neither the UN nor the IMO has set out clear guidance on what member states or service providers must do in order to comply with the requirements of UN sanctions. Indeed, while the United Nations Security Council (UNSC) has gradually provided more information and guidance on its own website, and issues implementation assistance notices, there is presently no information on the IMO website about UNSC sanctions at all. Guidance issued by the IMO, which sought to integrate sanctions compliance processes with other compliance processes, would evidently be helpful to the IMO’s members.

 

This lack of mention of UN sanctions on the IMO website, in particular, raises questions about why the IMO has not been more responsive to UNSC decisions. According to the UN Charter, it is after all the Security Council that has primacy in relation to international peace and security and its decisions are binding on all UN member states. The answer to this question is not yet fully clear. Certainly, it is apparent that the structure of the IMO, which usually requires consensus among its membership and includes countries subject to sanctions such as North Korea and Iran, does not lend itself to proactive decision making on sanctions issues. However, this would not necessarily prevent the IMO secretariat from hosting or publishing guidance from the UNSC on sanctions issues.

 

Another key challenge relates to information sharing. Presently, some governments have decided to list the vessels they have de-flagged as a result of connections with North Korea. Other governments have published examples of vessels conducting at-sea transfers. However, presently there is no requirement for member states to share information with the IMO or with other states when action is taken against a vessel or company as a result of UN sanctions. Addressing this gap would make evasion of sanctions more difficult by reducing information asymmetry between states.

 

CLOSING THE GAPS

 

Having examined the requirements of both UN Security Council sanctions and the IMO, it is apparent that UN sanctions and IMO regulations are disjointed. Sanctions are of course intended to be a limited duration event (or at least not permanent) and it might thus be acceptable that sanctions compliance requirements are not fully integrated with enduring IMO regulations. However, as the proceeding sections have highlighted, there are numerous areas where action to leverage the IMO could make sanctions compliance easier for member states. In this context, the IMO at the very least should be involved in the promulgation of UN guidance to its members.

 

There is also an opportunity to better leverage the IMO to improve sanctions implementation. These moves would likely require either a decision of the UNSC or a decision by the IMO’s own governing bodies and would thus require championing by states.

 

Vessel Tracking 

  • Vessels operating in areas relevant to sanctions could be required to transmit LRIT on a more regular basis so that flag states can identify suspicious activity.
  • States should be encouraged to investigate and report on suspicious activity by its vessels in areas relevant to sanctions.
  • Encouraging, or requiring, states that operate open flag registries to become contracting governments for the LRIT system.
  • The IMO might specifically require AIS activation at all times when vessels are outside areas agreed as being prone to piracy. This would provide the same  benefits LRIT above and would additionally permit an automated comparison of the position data from LRIT and AIS, disparity could then trigger challenge or investigation.

Flagging  

  • The IMO could improve transparency in the matter of ownership by requiring and publishing ultimate owner information.
  • The IMO should require its service provider to conduct its own due diligence before issuing company IMO numbers, including by screening the company against the UN sanctioned entity list.
  • The IMO should require its service provider to screen flagged vessels against sanctions lists and proactively raise any resulting concerns with flag states.
  • The IMO should share information among its members on vessels that have been de-flagged in connection with sanctions.

Audits 

  • The IMO should include sanctions requirements when conducting its audit of member states.

 

CONCLUSION  

 

This paper sought to examine the compatibility of IMO regulations with the requirements of UN Security Council resolutions (UNSCRs). This examination has shown that sanctions implementation does not appear to have been part of the IMO’s calculus in the international maritime administrative structures it has set up. In many cases, however, these could be adapted to make them directly supportive of UNSCRS. Likewise, it seems likely that the UN Security Council has passed Resolutions on maritime issues concerning North Korea without fully considering the mechanisms for implementing them. As the setter of standards for the industry, the IMO is perhaps uniquely placed to include in those standards the compliance with UNSCRs.

Big Data and Non-proliferation: The Alpha Proliferation Open Source Tool (Alpha-POST)

Over the last two years, Ian Stewart, director of Project Alpha, has been developing a ‘big data’ platform for non-proliferation purposes. This platform is used to inform Project Alpha’s work and acts as a test bed for big data and machine learning approaches in the non-proliferation sphere. Today, Project Alpha is publishing a paper on Alpha-POST’s design and capabilities to provide background on the platform.

The abstract of this paper, which can be downloaded HERE, reads as follows.

This paper outlines the Alpha-Proliferation Open Source Platform (Alpha-POST), developed by Project Alpha to leverage big data analysis for non-proliferation purposes. The article demonstrates how a variety of open source software tools can be fused together into a ‘software stack’ capable of ingesting, processing and leveraging vast quantities of data to aid human analysts. While Alpha-POST leverages tools such as Natural Language Processing (NLP), link chart analysis and machine learning in the non-proliferation domain, Project Alpha argues that the approaches outlined in this paper could be applied to any discipline or sphere .

A forthcoming article in the Journal of Nuclear Material Management will examine how the big data approaches developed in this platform can be used more generally in the non-proliferation domain.  Additionally, the platform will be demonstrated at the 2018 IAEA safeguards symposium.

 

 

 

 

 

 

 

Iran and the FATF: More Efforts Needed

Emma Scott and Jean-Annet de Saint Rapt

Public Statement Issued by the Plenary

The FATF plenary which took place on 17-19 October 2018 decided to continue the suspension of counter-measures against Iran. The Plenary said it was disappointed with the pace of Iran’s AML/CFT reforms. Iran now has until February 2019 to bring the necessary legislation into force, in line with international standards or risk a call for counter-measures.

Iran has been categorised as a high-risk jurisdiction and is one of only two countries on the FATF ‘call for action’ list (or blacklist), together with the DPRK. A call for action requests all countries to impose countermeasures against the jurisdiction. Countermeasures include, but are not limited to 1) the application of enhanced due diligence, 2) refusing the establishment of subsidiaries, branches or representative offices of financial institutions, 3) limiting business relationships or financial transactions with the identified country or persons in that country, and 4) requiring financial institutions to review and amend, or even terminate, correspondent relationships with financial institutions in the country concerned.[1] Since the FATF implemented its new monitoring system in 2008, Iran has been permanently on the black list. Although, the FATF has recognised that Iran made some efforts to comply, the risk of terrorism financing emanating from Iran remains a significant obstacle.

 

Iran Tries to Ease its Relationship with the FATF

In 2016, Tehran agreed to cooperate with the FATF financial body. Tehran’s motivation was that it wanted to escape the FATF blacklist to help it better integrate into the world economy after the signing of the Joint Comprehensive Plan of Action (JCPOA). Simultaneously, President Hassan Rouhani initiated major banking sector reforms, which aimed to contribute to the development of the economy and attract foreign investment. Transparency and regulation are key to such reforms as these would bring Iran into compliance with international norms such as the Basel Standards, International Accounting Standards (IFRS) and FATF recommendations.

To address its AML/CFT deficiencies, in 2016, the FATF set an Action Plan which Iran had to complete. Iran agreed to follow this Action Plan,[2] and in response the FATF suspended the call for countermeasures for a 12-month period but left Iran on its public statement. The FATF pubic statement currently includes a short summary of the recent actions taken by Iran in accordance with its Action Plan, and lists the remaining deficiencies, that still need to be addressed, in its ani-money laundering and combating the financing of terrorism regime. Only when all the action points are complete will Iran be in full compliance with the FATF requirements. In 2017, “In light of Iran’s demonstration of its political commitment and the relevant steps it has taken in line with its Action Plan”,[3] the FATF decided to continue its suspension.

Outstanding Issues of the FATF Action Plan on Iran
1) Criminalise terrorist financing (including removing exemptions)
2) Freeze terrorist assets
3) Ensure a customer due diligence regime
4) An independent Financial Intelligence Unit
5) Identify and sanction unlicensed money/value transfer service providers
6) Implement the Palermo and TF Conventions  
7) Verify wire transfers contain complete information
8) Establish a range of penalties for ML offense
9) Ensure legislation to provide for confiscation of property of corresponding value

In February 2018, for the same reason, the FATF prolonged again the suspension of counter-measures,[4] but in June 2018, in its public statement, the FATF expressed its disappointment with Iran for failing to implement the Action Plan. However, it maintained the suspension “Given the Iranian government’s continued efforts to finalize and pass amendments to its AML and CFT laws[5].

By this stage, the need for Iran to cooperate with the FATF became even more pressing. The U.S., under the Trump Presidency, had withdrawn from the JCPOA and decided to re-impose sanctions. Consequently, Iran’s economy witnessed a withdrawal of foreign investment and a depreciation of the rial. By complying with the FATF recommendations, Iran hopes to resolve its economic problems and minimise its differences with the remainder of the international community.

A number of pieces of legislation were sent to the Iran’s Parliament. The Parliament had already approved the Bill of Amendment to the Countering Financing of Terrorism Act, which amongst other things, lays out a legal basis for the confiscation of assets or funds to commit terrorism financing, and a Bill of Amendment to the Anti-Money Laundering Act. In September it passed a bill to join the UN Convention Against Transnational Organised Crime (i.e. the Palermo Convention), and finally, Sunday 7 October saw the Parliament pass a bill to join the 1999 International Convention for the Suppression of the Financing of Terrorism, albeit with a number of exemptions.

 

Iran’s Definition of Terrorism

The FATF Action Plan for Iran requires it to criminalise terrorist financing, “including by removing the exemption for designated groups “attempting to end foreign occupation, colonialism and racism””.[6] In Iran’s domestic legislation bringing into force the 1999 Convention for the Suppression of the Financing of Terrorism, Iran’s lawmakers carved out an exemption to article 2(b) of the Convention by stating that struggle against colonial domination and foreign occupation does not apply to the country’s definition of terrorism. The Parliamentarians further carved out an exemption to Article 6, maintaining that it doesn’t apply to the right of legitimate struggle.

That said, a number of other Middle Eastern regional states including Egypt, Jordan, and Yemen, issued reservations when joining the 1999 Convention, stating that they do not consider acts of national liberation as terrorism, and they are not on the FATF blacklist. So, that should not be an impediment to Iran’s implementation of the FATF’s standards. While the FATF may overlook Iran’s non-compliance with action point 1 if it complies with the other action points, so far, this is not been the case. The difficulty for Rouhani’s government will be to take concrete steps in freezing assets and implementing the laws passed, which is what the FATF expects.

 

Iran’s Banking Problems: Get in the Way

A broader problem for Iran is the implementation of the banking sector reform. Last March, the International Monetary Fund pointed out that the Iranian banking system had been in “distress” now for a number of years.[7] The IMF called for urgent comprehensive restructuring and recapitalisation of the banks. Since that report, the economic situation in the country has deteriorated due to the U.S. withdrawal from the JCPOA and the re-imposition of sanctions. Thus, reform has become even more critical as the monetary crisis and inflation have worsened.

The problem with Iran’s economy is that for decades, the Iranian financial sector consists not only of regulated but also unregulated financial actors, which is one of the issues the FATF has with Iran. Some of these unlicensed actors, usually affiliated with politico-religious groups, have very limited due diligence procedures on their clients and transactions. Additionally, such unregulated actors  can promise to pay high interest rates on deposits to fund credit activities, and subsequently go bankrupt resulting in significant losses for Iranian businesses and individuals. This situation also acts as a deterrent to foreign investors willing to take a risk to invest in Iran. Furthermore, international standards on credit analysis and capital requirements are not often met.

Rouhani’s reforms need to restructure the banking system in a way that will help the economy recover. The intension is to place all credit and financial institutions under Central Bank supervision, while the Central Bank intends to comply with the Basel Standards, which, for instance, set capital requirements for credit activities. For starters, in 2017, the latter issued new policies to be implemented by financial institutions.

Thus, as part of the banking reforms, Rouhani and his administration have decided to implement the FATF recommendations. The implementation of these international standards will make Iran more likely to be accepted into the international finance system. As a senior member of the Iranian government put it: “there is no guarantee all our problems would be solved if we comply […with the FATF] but I am sure that not complying would give the U.S. more excuses to increase our problems.”

 

Reaching a Consensus at the FATF: A Long Process

The decision to remove Iran from the blacklist is a FATF Plenary consensus decision. However, the U.S., holding the influential position of Chair for a one-year period, is likely to continue to push for Iran to remain on the list. The other countries may not want to keep Iran on the list if it continues its efforts to comply with the recommendations.

An on-site inspection team needs to deploy to Tehran, and report back to the Plenary on the implementation of the Action Plan, before Iran is removed from the list. The improvement of Iran’s relationship with the FATF will continue to be a gradual process as Iran slowly attempts to improve and implement a more stringent regulatory environment and reform its banking system.

Ultimately, even if Iran complies with the FATF recommendations and takes action against designated individuals or entities on UN sanctions lists, the issue of U.S. sanctions lists will remain. As a result, even with Iranian reforms, there remains the risk that any entity trading with Iran will be accused by the U.S. of sanctions evasion, and henceforth could become the target of secondary sanctions.

 

[1] The FATF Recommendations: International standards on combating money laundering and the financing of terrorism and proliferation, updated February 2018,available at http://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatf-recommendations.html

[2] Outcomes of the Plenary meeting of the FATF, Busan Korea, 22–24 June 2016, available at http://www.fatf-gafi.org/countries/a-c/austria/documents/plenary-outcomes-june-2016.html#iran

[3] FATF Public Statement, 23 June 2017, available at http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-june-2017.html

[4] FATF Public Statement, 23 February 2018, available at http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-february-2018.html

[5] FATF Public Statement, 29 June 2018, available at http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-june-2018.html

[6] FATF Public Statement, 19 October 2018, http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-october-2018.html

[7] International Monetary Fund, Islamic Republic of Iran, IMF Country Report Mo. 18/93, March 2018 available at https://www.imf.org/~/media/Files/Publications/CR/2018/cr1893.ashx

Preventing the Proliferation of WMDs: Measuring the Success of UN Security Council Resolution 1540

Editors: Daniel Salisbury, Ian J. Stewart, Andrea Viski

Click here to access the book_Preventing the Proliferation of WMDs: Measuring the Success of UN Security Council Resolution 1540

 

This edited volume provides a fresh analysis for researcher and practitioners regarding United Nations Security Council resolution 1540, the status of its implementation, and its future by providing an original evaluation of progress in implementation and challenges faced during the resolution’s first decade. In doing so, the book will consider the resolution’s utility as a non-proliferation tool with a view to identifying what further actions are required for the objectives and goals embodied by UNSCR 1540 to be achieved and sustained.  The book progresses by exploring the history of the resolution, implementation trends, implementation from a regional perspective, challenges, and future ways forward. The book appeals to a wide readership of scholars, policymakers, and other stakeholders of the 1540 process.