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April 25, 2013
Notes from the Pentagon

Targeting North Korea's funds
The U.S. government is stepping up efforts to apply financial pressure on North Korea following Pyongyang’s recent bellicose statements threatening nuclear attacks and war.

“The United States has been increasing pressure on North Korea through a variety of means in response to its recent destabilizing actions,” a Treasury official tells Inside the Ring.

“Treasury has been using tools at its disposal to increase financial pressure on the North Korean regime by targeting individuals and entities responsible for facilitating payments connected to North Korea’s nuclear and ballistic missile program, as well as financial institutions such as the Foreign Trade Bank, which has served as a key node for the regime’s foreign exchange.”

The administration is acting under U.N. Security Council Resolution 2094 that expands the power to freeze assets of North Korean entities.

“We are working with governments around the world to aggressively implement this provision,” the official said. “We also expect financial institutions around the world will take steps to protect themselves against the risk of participating in illicit transactions with North Korean entities.”

An intelligence official said there are reports that North Korean leader Kim Jong-un and his family maintain secret bank accounts in Switzerland, Austria and Luxembourg with at least $1 billion.

“In order to cut off North Korea’s funds for developing weapons of mass destruction, we should trace and block the Kim family’s overseas secret funds in addition to calling for creditor companies to call on North Korea to repay its debts.”

Pressuring Pyongyang’s creditors to repay outstanding debts is a new line of covert attack to force the rogue regime to stop developing missiles and nuclear weapons. Estimates put the amount of foreign debt owed by North Korea at $14 billion from some 30 countries.

According to the Treasury official, North Korea owes Japan $400 million, Sweden $330 million, Iran $300 million, Germany $300 million, Thailand $260 million, Switzerland $100 million and Iraq $50 million. Governments from all these states are demanding repayment.

However, several other states, including China and Russia, are not going along with the international debt repayment effort. China, a key North Korean patron, is owed $6.98 billion by Pyongyang and Russia is owed $1.1 billion, mainly from transfers of military and other assistance. Others states that are not demanding repayment include France, owed $280 million; Austria, owed $210 million; Syria, owed $140 million, and Taiwan, owed $86 million.

The intelligence official said these states appear to have given up seeking repayment.

“These countries need to more actively request debt repayments,” the official added.

The Treasury official said North Korea holds no debt to the United States.

“Treasury officials also regularly interact with governments and financial institutions to discuss the importance of identifying and blocking illicit transactions, including those linked to Kim family assets,” the official said.

The Pentagon’s top general this week predicted that the U.S. pivot to Asia and increased support for alliances in the region will produce “friction” with China.

During a news conference Monday in Beijing with China’s military chief, Gen. Fang Fenghui, Chairman of the Joint Chiefs Gen. Martin E. Dempsey pointedly stated that the United States maintains treaty alliances and obligations with Australia, Japan, the Philippines and South Korea.

“We will build and recognize the historic alliances, and there will be points when that creates friction,” he said, alluding to China’s growing assertiveness in pressuring Asian nations to accept its disputed claims of maritime sovereignty over large areas of international waters and resource-rich islets.

The four-star general’s comments were an unusual public admission that U.S. military relations with China remain rocky.

U.S. allies in Asia have been pressing the Pentagon to do more to counter China’s growing military assertiveness in Asia — activities that, they say, are undermining a regional stability that has been assured for decades by forward-deployed U.S. military forces, mainly naval power.

Gen. Dempsey, who concluded a five-day visit to China on Wednesday, said the Pentagon hopes to develop better ties and a “more enduring relationship” with China's army but not at the expense of “other historic and enduring alliances.”

Michael Pillsbury, a former senior Pentagon official in the Reagan and George H.W. Bush administrations, said: “Gen. Dempsey was wise to warn the Chinese at the news conference that there will be ‘points of future friction.’ As far as I recall, this is the first time in three decades of exchanges that an American leader has dared to express this level of frankness.”

As part of the shift to Asia, the Pentagon is deploying 2,500 Marines to northern Australia, basing new coastal combat ships in Singapore, bolstering ties with Japan’s military and working to develop closer military relations with the Philippines.

The Pentagon also developed a new operating concept, called Air-Sea Battle, that better utilizes naval and air power against threats in Asia.

Senior defense officials have asserted that U.S. moves in Asia are not directed at countering China. Privately, however, defense officials have said China is the main target, specifically Beijing’s high-tech weaponry that includes anti-ship ballistic missiles, anti-satellite weapons and cyberwarfare capabilities.

Earlier, Gen. Fang said of the expanding Chinese military power that the Pacific could “accommodate both of us.” Analysts say that statement reflects China’s assertion that the U.S. military will no long be the dominant power in the region.

China’s state-controlled media omitted the remark about impending friction between the two militaries and sought to portray Gen. Dempsey’s visit in more flowery terms.

The often-jingoistic Global Times, an official Communist Party newspaper, quoted Gen. Fang on the visit, saying, “Your visit is an important event in the bilateral military exchange program. We place great importance in it.”

Seven Republican House members wrote to Army Secretary John M. McHugh this week, expressing “serious concerns” that the service’s battlefield intelligence processor designed to digest and analyze reams of data on the enemy may not function properly.

The Distributed Common Ground System is now in use in Afghanistan. It received mixed reviews from soldiers who complained in confidential memos obtained by The Washington Times that the machine is too slow and unreliable.

“We are deeply troubled that the mounting costs associated with the DCGS-A have yet to produce a consistently functional product and places our warfighters in the field at increasing risk,” the Republicans wrote.

The letter was signed by Rep. Mike Pompeo, Kansas Republican, and six others. It states that the Pentagon’s top operational tester concluded the ground system’s newest version is “not operationally effective.”

“It is becoming increasingly clear this program is failing,” Mr. Pompeo said.

Battlefield intelligence has taken on new importance in Afghanistan, where the Taliban, al Qaeda and other insurgents blend in with the population and move in the shadows to plant bombs and conduct ambushes.

Rep. Duncan Hunter, California Republican, is the House’s leading critic of the common ground system. He has uncovered internal memos that show the Army has blocked attempts by commanders to acquire a commercially available data processor in place of the Army-funded system. He wrote to the House Appropriations subcommittee on defense on April 17 urging that funding for the program be eliminated.

The Army will get its chance to defend the system Friday in a briefing to congressional defense staffers. The Army plans to present soldiers who say the common ground system works great.

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