A nurse prepares a shot of Sinovac’s CoronaVac Covid-19 vaccine. The big question is how will aid organisations manage to inoculate people in countries facing sanctions, such as North Korea and Iran
The big question is how will aid organisations manage to inoculate people in countries facing sanctions, such as North Korea and Iran © REUTERS

Be the first to know about every new Coronavirus story

FT premium subscribers can click here to receive Trade Secrets by email

Annyeong haseyo from the foothills of Seoul’s stunning snow-dusted Namsan (South Mountain) where it’s sometimes easy to forget we’re just 50km from the heavily fortified border with North Korea. 

With Joe Biden’s inauguration just one day away, much local attention here is trained on the incoming administration’s approach to nuclear-armed Kim Jong Un. Will the new US president meet the young dictator? Will the US return to lower-level talks despite failing under previous administrations? Or, will Biden chart an entirely new course of diplomacy?

Given the domestic political turmoil raging in the US, it might be some time before foreign policy takes centre stage and we have answers.

Our main piece today discusses one related problem which, experts say, needs to be dealt with swiftly by the new president: the over-reach of international sanctions into the distribution of coronavirus vaccines. Policy watch looks at the UK parliamentary debate taking place this week on whether human rights abuses in other countries would force the government to withdraw from trade deals.

Don’t forget to click here if you’d like to receive Trade Secrets every Monday to Thursday. And we want to hear from you. Send any thoughts to trade.secrets@ft.com or email me at edward.white@ft.com

Sanctions risk undermining vaccination drives

North Korean leader Kim Jong Un. Sanctions against his regime were significantly strengthened in 2017
North Korean leader Kim Jong Un. Sanctions against his regime were significantly strengthened in 2017 © KCNA/EPA/Shutterstock

The grasp of international sanctions is long, reaching into the most unlikely of places. One such place was the home of Peter Wilson, an 80-year-old retiree in Auckland. In October last year the New Zealand police raided the humanitarian’s house, seizing his laptop and mobile phone.

The reason? Wilson is part of the New Zealand-DPRK Friendship Society, a small group with ties to the Presbyterian church which says it had months earlier sent a NZ$2,000 ($1,420) donation to the North Korean Red Cross via Pyongyang’s diplomats in Indonesia aimed at helping people in the rogue state combat Covid-19.

While the North Korean authorities have not officially reported any cases of the virus, international experts remain sceptical of the claims.

The cash from New Zealand was intended for buying basic personal protective equipment to aid the fight against the pandemic. But the transfer raised red flags for sanctions breaches. Before the police came knocking, the society’s bank was already asking questions about the money. The group’s lawyer even claims New Zealand’s spooks were involved in a co-ordinated operation.

The troubles faced by Wilson are emblematic of challenges facing all aid groups, big and small, as they try to support genuine humanitarian work in sanctioned countries such as North Korea and Iran. On paper, the UN sanctions regime explicitly allows for exceptions to be made in cases where transfers are to fund humanitarian work. This is done via the UN Security Council committees which monitor sanctions enforcement and have systems in place for humanitarian exemptions.

But, in reality, financial institutions’ risk aversion means few are willing to provide the banking channels necessary for enabling such work. Just like many western governments, banks simply don’t want to be involved, or face the potential reputational risk, with anything that could be misconstrued as supporting rogue states in their pursuit of nuclear or chemical weapons. The case of Wilson illustrates exactly why that is.

In the North Korean context, this problem has been worsening over the past three years. Since sanctions on the Kim regime were significantly strengthened in 2017 — a response to a series of nuclear and missile tests — staff from NGOs and international organisations have been forced to physically carry bundles of cash into North Korea to fund their local programmes.

With North Korea’s borders mostly closed for the past year in response to the virus, the lack of a banking channel has become an even more acute problem. Aid groups, including the International Federation of Red Cross and Red Crescent Societies, have been forced to borrow money from the North Korean government.

The big question now is how aid organisations will manage to inoculate people there and in other counties facing sanctions, such as Iran. The head of the World Health Organization has already warned that the world is on the brink of “catastrophic moral failure” as poor countries fall behind richer ones in accessing vaccines to protect their populations against Covid-19. And mass vaccination programmes will require money to be moved between states, not only for payments to pharmaceutical companies, but also to fund the large-scale logistical operations needed to support the rollouts.

With the virus’s capacity to mutate, this matters not only for the states facing sanctions, but their neighbours and — ultimately — the rest of the world. This could also create an incentive for vaccine-producing countries with a record of fewer concerns over international sanctions breaches, namely Russia and China, to step in to support places such as Iran and North Korea.

So what can be done? It is the US’s capacity to not only dole out, but police sanctions, that the banks fear most. The state department in Washington rightly states that it has been consistent in its messaging that sanctions do not cover humanitarian assistance. Yet for banks with global reputations to worry about, these assurances are outmatched by the fear of ending up in the crosshairs of the US Treasury — which vigorously polices North Korea’s illicit global financial networks. Kyle Ferrier, a fellow at the Korea Economic Institute of America, a US think-tank, said banks would remain hesitant if they saw any risk of violating sanctions, leading them to “opt out of the transactions completely”.

The broader question of what substantive policy changes US president-elect Joe Biden will pursue in relation to sanctioned countries such as North Korea and Iran might be months away. A shorter-term temporary solution to support life-saving — and legal — humanitarian work could, however, be attained through clear signalling by the new administration. “The only way that the United States might be able to assuage some of the fears of these banks is by being very vocal, saying ‘we are providing exemptions for trade or for sale of these Covid vaccines’,” said Ferrier.

Such a vocal statement from Biden is critical if the international community is to be successful in coordinating the distribution of coronavirus vaccines to all people in all countries.

Policy watch

Workers walk by the fence of what is officially known as an education centre in Xinjiang, China
A so-called education centre in Xinjiang, China. The UK has imposed import restrictions to block goods made in the region using forced Uighur labour © Thomas Peter/Reuters

Earlier this week, Alan Beattie flagged that one of the advantages the UK possessed in its attempts to win the rest of the world round to its branding of itself as Global Britain was its firmness on China.

One example of this came last week when the UK, alongside Canada, imposed import restrictions designed to block goods made with forced Uighur labour in Xinjiang province — a step the EU has proven more reluctant to take.

Today there’s another.

The House of Commons, the lower house of the UK parliament, is set to debate whether to let British courts decide if a genocide has taken place in a foreign country — a move that could have knock-on implications for any potential post-Brexit trade deal between China and the UK. The House of Lords, parliament’s upper house, voted last month to amend the Trade Bill, which the Commons is set to debate today, to allow for deals to be withdrawn if human rights abuses are found to have occurred. There’s an excellent backgrounder on the Lords amendments here.

While the EU has come in for criticism (including from Trade Secrets) for being too lenient on China, it does have form in rescinding trade privileges on the back of human rights abuses elsewhere — notably in Cambodia.

Don’t miss

A container ship sails out of Shanghai.
The cost of shipping a 40ft container from Asia to northern Europe has increased from $2,000 to more than $9,000 since November © Qilai Shen/Bloomberg
  • The cost of shipping goods from China to Europe has more than tripled in the past eight weeks, hitting record highs as a shortage of empty containers stemming from the pandemic disrupts global trade. The cost of shipping a 40ft container from Asia to northern Europe has increased from about $2,000 in November to more than $9,000, according to shippers and importers.
    Read more

  • Sadiq Khan, London’s mayor, says the UK’s finance industry has been badly let down by the Brexit deal. There is no getting around the fact that it was effectively a no-deal Brexit for finance, he argues, with the needs of the sector at the heart of UK global competitiveness not only being overlooked, but barely being paid lip-service by the government.
    Read more

  • Gideon Rachman writes on why America’s disarray is China’s opportunity.
    Read more

Tokyo talk

The best trade stories from Nikkei Asia

  • A strong yuan and record-high shipping rates are squeezing China’s small and midsize exporters.
    Read more 

  • Ahead of Joe Biden’s inauguration, China Inc. is testing the incoming president’s stance on Chinese stocks with the $1.2bn initial public offering of e-cigarette maker RLX Technology. 
    Read more

Get alerts on Global trade when a new story is published

Copyright The Financial Times Limited 2021. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article