Bank of China cuts off North Korea trade bank

5/7/2013

BEIJING — One of China’s biggest banks said today it has halted business with a North Korean bank accused by the U.S. of financing Pyongyang’s missile and nuclear programs in the latest sign of Beijing’s displeasure with its estranged ally.

The state-run Bank of China Ltd. has notified the Foreign Trade Bank of North Korea that its account or accounts were being closed and all financial transactions suspended, said a bank spokeswoman, reading a brief statement. The spokeswoman for the Beijing-based bank did not identify the number of accounts closed or provide further details.

The move comes after the Chinese leadership, installed last year, has shown growing frustration with North Korea’s young leader, Kim Jong Un, and the nuclear and missile tests his government has conducted, aggravating regional tensions. In recent months, Beijing has displayed willingness to work with Washington to apply pressure, from signing on to U.N. sanctions to issuing a statement with U.S. Secretary of State John Kerry last month urging North Korea to abandon its nuclear programs.

China is North Korea’s economic lifeline, providing nearly all of its fuel and most of its trade. North Korea’s economic dependence on China is rising, following a standoff with South Korea that effectively shut an industrial park that was an important source of hard currency.

The Bank of China’s suspension of business further complicates the ability of the Foreign Trade Bank, North Korea’s main foreign exchange bank, to access a key financial market.

In March, the U.S. Treasury Department imposed sanctions against the Foreign Trade Bank, effectively cutting it off from the U.S. financial system and urged Beijing to do the same.

The department called the bank a “key financial node” in North Korea’s programs to develop weapons of mass destruction. It said the Foreign Trade Bank had financed other banks and companies already targeted by sanctions, including assisting in millions of dollars in transactions for the Korean Mining Development Corp., a major arms dealer.