Outpost: Life on the Frontlines of American Diplomacy: A Memoir

by Christopher R. Hill

  “Sure.”

  “Okay, Got it. Gotta go.” I turned off my phone to make sure I didn’t get any more incoming calls and rushed to get the change in the text, explaining to Wu that it would be clearer English. He started reaching for another pack of cigarettes and it was only 10 A.M. After all, I said cheerfully, this “peaceful coexistence” line is very Cold War–like. We’re moving on . . .

  “You tell me you are trying to change the text at this point?!”

  “Really, ‘exist peacefully together’ is much better English. Ambassador Randt, don’t you think so?”

  “Absolutely.” (Memo to self: buy that man a beer.)

  Wu accepted the change, noting that in his official view it was a translation fix, and we were done.

  Minutes later we were in the large conference room with the plastic tulips, and for the first time I was able to look at my closing statement as written for me in Washington. The substance of the statement was fine, although the tone didn’t quite achieve the near-euphoric atmosphere in the room. The statement helpfully included a definition of the “appropriate time” when the North Koreans could expect the parties to “discuss, at an appropriate time,” the subject of the provision of a light water reactor. The definition of appropriate time was based on North Korean action in fulfilling its denuclearization obligations, hardly something the North Koreans could object to. But another line in the statement caught many people’s attention: “. . . the United States will take concrete actions necessary to protect ourselves and our allies (whether they ask for it or not) against any illicit and proliferation activities. . . .”

  The effort to attack the North Koreans for illicit activities had been ongoing through the summer months. North Korea had long played by its own rules, most famously using its diplomatic pouch to smuggle cigarettes and other tax-free items to its embassies in several northern European countries for the purpose of financing their operations. As several investigative journalistic pieces had revealed over the years, the North Koreans operated a wide range of bank accounts whose primary function appeared to be the financing of the family fortunes of the Kim dynasty, as well as the importation of luxury items into North Korea to satisfy the demands of the elites and, more generally, to finance foreign trade.

  Even while we were furiously negotiating the Joint Statement in mid-September, the U.S. Treasury announced the designation of Banco Delta Asia as a primary money-laundering concern. Banco Delta Asia was an obscure bank operating in Macao, a former Portuguese colony known for its casinos. I was not surprised about the designation, but the decision to announce in the middle of negotiations seemed to confirm the suspicions of many—including some on my team—that the purpose was not to give me added negotiating leverage (something I would have welcomed), but rather to sidetrack the negotiations entirely.

  I had absolutely no doubt that North Korea was engaged in illicit activity, nor did I have any doubt that the sleepy and sleazy gambling mecca of Macao, could well be the hotbed of it. Over the months, teams from the FBI and Secret Service that had found their investigations often running through Macao had briefed me thoroughly on the issues as they related to law enforcement. But I also found these teams of professionals very skeptical and not amused about some of the efforts of media-savvy nonprofessional, political appointees in the Treasury and State Departments to publicize North Korean activities rather than use them, as law enforcement professionals would do, to trace more such activities, work with local authorities in whose jurisdiction the activities taking place, and get them shut down.

  In addition to being impressed by the obvious professionalism, calmness, and just-the-facts approach of the FBI and Secret Service agents who would gather in my EAP office, all wearing their trademark dark suits and white shirts, I believed that they could be a valuable complement to our negotiations. I had on many occasions told the North Koreans what I had also said publicly, that when a country pursues weapons of mass destruction, has the world’s worst human rights record, and counterfeits foreign currencies, it should not expect these sorts of activities to fly below the radar screen. And as intrigued as I had been by the efforts of State and Treasury, I became far more interested in professional law enforcement efforts that would make the North Koreans understand where their activities had put them. Most important, by simply following normal law enforcement efforts and not specially set-up structures in the State Department, the North Koreans would start to notice that the noose was tightening. At the same time, they would have little to complain about because there was nothing publicly being said about it.

  However, Stuart Levy of the Treasury Department, a highly politicized protégé of John Bolton who had been part of the Florida recount battle in the 2000 presidential election, kept good relations with the media and briefed them frequently, often overselling his product. My predecessor at EAP, Jim Kelly, had hired David Asher, a young, very bright, but ideologically minded political appointee, as if to say “EAP can be crazy, too.” Asher, also an overseller of financial measures, saw to it that many developments came to light with the press.

  Thus when the Banco Delta Asia announcement came, it infuriated almost all our Six Party colleagues—especially China, South Korea, and Russia—and was widely seen as a challenge to the entire negotiating process, not to speak of a return to unilateralism. For the Chinese, it was an example of something they had seen during the course of recent centuries: extraterritorialism.

  “What are you doing?” Wu asked me.

  “It is law enforcement,” I answered wanly.

  “That is not how law enforcement officials behave,” he responded without a trace of his usual good cheer.

  Wu was right. The designation of the bank as a primary money-laundering concern had been made according to a domestic U.S. law, the PATRIOT Act, which had been passed in the wake of 9/11. But by 2005, the notion that the extraterritorial provisions of the law were necessary to “protect” America did not hold water in places like Beijing. Instead, it was seen as a vehicle for the United States to impose its will in any jurisdiction where it saw fit to do so.

  FBI and Secret Service agents would privately complain to me that the Treasury Department’s antiterrorism finance office and the State Department’s Illicit Activities Initiative, in their ongoing talkative relationships with think tanks and journalists, were not helpful to long-standing criminal investigations.

  I agreed with them and others that the public treatment of the issues might be undermining professional investigations, and I also believed that the publicizing of our efforts was undermining the negotiation track. And what’s more, they seemed intended to do just that.

  Moreover, these efforts were completely oversold within the U.S. government as something that could supplant the negotiations by inducing the North Koreans to declare no mas and give up their nuclear ambitions (not likely), or could somehow lead to North Korea’s collapse (even less likely). There was no question that these steps had brought little Banco Delta Asia in far-off Macao to its knees (indeed, much to the glee of U.S. government sanctioneers, depositors big and small were lined up around the block in Macao to withdraw their deposits), but the $22–25 million worth of North Korean accounts frozen by Banco Delta Asia authorities in September 2005 was hardly going to have any macro effect on North Korea’s economy. No serious analyst of North Korea’s behavior believed that their response would be to give in at the Six Party Talks, or to collapse altogether. Indeed, the only effect of the steps against the bank was to derail the prospect of negotiation for some eighteen months and, of course, to make the North Koreans more careful about moving their funds around.

  I repeatedly told the North Koreans that this was the world they had chosen, that banks all over the world would be increasingly unlikely to take their funds out of concern that they would face the kind of existential issues currently facing Banco Delta Asia. I explained to Kim that the United States, like any country, had the right to take action to protect itself against ill
icit activities of the kind that the bank was complicit in. Kim was not entirely convinced that the United States was truly living in mortal fear over what bad governance at the Macao bank could do to the U.S. economy. Even before the ink was dry on September 19, 2005, I knew this was not going to be easy.

  On that day when we reached agreement on the Joint Statement, I settled into my seat on the United Airlines flight for the long journey home. An American flight attendant approached me.

  “I have a question,” she said.

  “Oh, I am sorry,” I said as I started fumbling in the seat jacket for the menu, to see if I was going to choose the beef or the chicken.

  “No, not that,” she said. “I want to know why we can have nuclear weapons and the North Koreans can’t.”

  16

  HEART OF DARKNESS

  By the time I had reached Chicago, North Korea had issued a statement. They would insist on a light water reactor (LWR) in the context of denuclearization. An LWR, relatively more difficult to use to produce bomb-making material than a graphite-moderated reactor, had been envisioned during the Clinton era “Agreed Framework,” but the Bush administration was having none of it. I did not disagree with keeping the LWR off the table, especially for a country that had lied in its previous commitments, but I thought the best way to manage the issue was to put it off. Later on, I thought, if that were the only issue separating us from a blockbuster deal, we should take a look at it. But that kick-the-can-down-the-road approach was not the stuff some in the Bush administration were made of. Why say no when hell no seemed the more honest approach?

  The statement that day suggested to some that the North Koreans were not going to live up to their obligations to denuclearize unless they received a light water reactor. In fact, the statement was simply an attempt to define North Korea’s interpretation of the provisions of the agreement that dealt with their assertion of a right to a civil nuclear program. Washington was polarized on the agreement, pitting those who oversold it as peace in our time (Neville Chamberlain at Munich, 1938) against those who saw it as not worth the paper it was printed on. Some argued that the North Koreans had only agreed when they saw the oncoming freight train of sanctions in the Banco Delta Asia case.

  When I staggered into work the next morning, the sense of pride in the Bureau of East Asian and Pacific Affairs was palpable; it was at the center of the action. Kathleen Stephens, who had been running the bureau while I was in Beijing, briefed me on what had gone on in my absence. I wasn’t in much of a mood for high-fives, partly because I didn’t have the energy to raise my arm that high, but mostly because I knew that the work had really only begun. Moreover, as Kathy remarked to me, the opposition efforts were formidable.

  The Six Party agreement had a positive, electrifying effect on the mood in Seoul. The dividend was a much-improved view of the United States and a belief that the U.S.–South Korean alliance was back on track. In China, too, there was a positive buzz, especially among those who saw cooperation with the United States in their country’s future.

  The bank scandal, however, would bedevil the Six Party Talks for the next eighteen months, during which time there would be almost no negotiation. The next round of talks, which took place in Beijing on November 9, 2005, made no progress amid a deteriorating atmosphere in the Six Parties.

  The North Koreans, as if to demonstrate they would not be intimidated (and to show they may also have a sense of irony), fired off a cocktail of short-, medium-, and long-range missiles on July 4, 2006. They launched seven in all, including its longest-range missile, the Taepodong-2. The other six tests included Scud-C and Nodong ballistic missiles, all launched from the new Kittaeryong test site. The United States issued a statement describing the launches as “a provocative act,” pointing out that they violated the voluntary moratorium on longer-range flight testing, but in the absence of any negotiating process, we could not have really expected such a moratorium to hold.

  In July 2006, after the missile launches, the UN Security Council adopted Resolution 1695, condemning North Korea’s missile launches and calling for a return to the Six Party Talks. The resolution was as strong a resolution ever taken against North Korea. And most importantly, China and Russia supported us, something that probably would not have happened had we failed to engage in the talks. It even included provisions for banning luxury items to North Korea. In October 2006, North Korea exploded an underground nuclear device. It was probably a fizzle, that is, a failure to create the nuclear chain reaction necessary to explode a weapon, but no one doubted that they were planning to try and try again until they succeeded. In the wake of the October underground nuclear test, Secretary Rice thought we needed to get back to the talks and she began an intensive but quiet round of telephone calls with the Chinese foreign minister.

  The North Koreans signaled, and later confirmed to us, that they had no intention of engaging in further negotiation unless the actions taken in the Banco Delta Asia case were reversed and the North Korean accounts restored to them. Estimates of the amount of those accounts varied from $22 million to $25 million. Wu and many others in his delegation had worked hard to reach the Joint Statement of September, but he did not see where we could go with the process, now halted over a sum of $25 million.

  I told Secretary Rice that it didn’t look like any progress was going to be made. I told her I was all in favor of pressuring the North Koreans, that no one disliked that regime more than I did, but that there is a time to make one’s point and a time to move on, and $25 million was not enough of a haul to scuttle the Six Party process.

  Rice and Hadley agreed, but when it came time to reverse the action, it was clear that it was a one-way trip down sanction way.

  The problem had to do with the legal designation. Once a bank is designated a primary money-laundering concern, there can be certain steps undertaken in internal controls and other management issues to undesignate it, but the North Korean accounts had been in the bank at the time, and as part of the basis of suspicion against the bank could not easily be returned to the customer. Moreover, simple solutions like Banco Delta Asia wiring the money to another bank were not easy because that other bank would be reluctant to take tainted money and risk being designated for money laundering, too. Indeed, in the case of receiving North Korean funds and then passing them back to the North Koreans, any bank’s legal department would have good reason to advise against it.

  Leverage, I always thought, was something one could use or not, as needed in the circumstances. We threatened Milosevic with air action, we suspended the air action, and we resumed the air action. But Banco Delta Asia had become a kind of sanctions doomsday machine that could not be turned back off, at least not to the satisfaction of the holder of the bank accounts, North Korea.

  Once, while Secretary Rice was en route in the back of a SUV to a meeting at the White House Situation Room, she asked Undersecretary Joseph about how to reverse the sanctions. Joseph, quiet and well-mannered, viewed talking to North Koreans about as enthusiastically as talking to the devil.

  “It is complicated,” he condescendingly replied, not answering her straightforward question, “very, very difficult and probably cannot be done.” I couldn’t imagine giving an answer like that to my boss, but such were the ideological wars within the Bush administration.

  I had been on a trip that took me from Tokyo to Hong Kong to Fiji for a Pacific Island forum, then on to Vanuatu, where I planned a day-and-a-half visit to that tiny country where the U.S. official presence consisted of eighty Peace Corps volunteers.

  I arrived at the airport on a late-night flight from Fiji, with a cold and chills. There was a driving rain as I walked down the stairs onto the dark tarmac, to be greeted by an official welcome of Vanuatu “warriors” who met me with a traditional “island greeting,” ceremonially threatening me with their spears; then, according to the script, upon closer inspection, seeing that I was not hostile, they escorted me to the VIP room of the three-room airport.
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  Peace Corps country director Kevin George briefed Steve McGann (the EAP office director for the Pacific states) and me on the program in Vanuatu as we drove our way to a spartan hotel with a great view of the ocean. At the check-in desk I was handed a message to call the State Department Operations Center. I marveled how they had tracked me down in Vanuatu, and after about thirty minutes of dialing for an outside line (there was no cell phone service), I reached the Op Center and received word that Secretary Rice wanted to speak with me. I stood by as the operations officer connected me, and when she did, I found I was talking with Philip Zelikow.

  Phil was Secretary Rice’s counselor, a senior position for which there is no job description apart from what the secretary wants the counselor to do. Once upon a time Phil had been a Foreign Service officer, a stint on which he relied heavily when dispensing advice from his position as counselor, often starting with “When I was an FSO . . .” He was probably too intellectual to be an FSO, too much the academic. He had a brilliant, integrated mind, and if one could get over the fact that someone from Texas should not have an Oxford accent, he had many useful thoughts to offer. For the most part Phil had moderate and sensible views on issues, even if they were offered in somewhat baroque terms.

  Phil (or Philip, as he preferred) was spread rather thin in the State Department, dropping in on what seemed like random issues, then dropping out when the secretary would call him to do something else. I could discern during senior staff meetings, while I was waiting my turn to discuss North Korea, that he was one of the first to understand the Sunni Awakening in Iraq’s Anbar Province, and its significance for overcoming the early de-Baathification mistake which had so harmed our efforts in that country I would later serve in. I was impressed listening in on these discussions. He understood things that many others had not.