North Korea Remittances at Risk After Latest Missile Test, US Says
An estimated 150,000 workers abroad send home as much as $900 million a year.
— -- North Korea's latest missile test has put the unknown amount of money that North Koreans abroad send back to their country at risk.
Over the weekend, North Korea test-fired a ballistic missile from a submarine, a show of defiance at military exercises by the U.S. and South Korea.
Though the U.S. already has strong sanctions in place against North Korea, the U.S., the U.N. Security Council and other nations could potentially exert additional pressure on the country.
"The question is how much more can the screws be tightened for other entities outside of the U.S. that continue to do business with North Korea," Aaron Klein, a fellow at the Brookings Institution, told ABC News.
Approximately 150,000 North Koreans live abroad, mostly in China and Russia, and those workers are believed to send up to $900 million annually in remittance payments, according to South Korea's state-run Korea Institute for National Unification. A State Department official told ABC News that North Korea’s export of labor generates revenue for the North Korean government, thereby enabling the development of its illicit nuclear and missile programs.
President Obama's executive order last month expanded sanctions against North Korea that targets that country's exportation of labor. The State Department official called the executive order "an important tool to escalate pressure as circumstances require." But the U.S. could expand its sanctions further against North Korea to largely block those remittances, effectively depriving North Korea of the money it relies on.
Klein said most of the money sent directly to North Korea likely is in the form of the local currency, the North Korean won. However, the banks that are facilitating these transactions may often subsequently make other transactions in dollars, Klein said.
"If those banks were to face pressure [from the U.S.], they may have to choose between being in the North Korea business or being in other businesses," Klein said.
He added: "Having the dollar as the effective world reserve currency and having a central role in the global payment system gives the United States significant leverage in dealing with rogue nations."
But, Klein added, neither of those two roles -- the dollar as the world’s currency or the U.S.'s central role in payments -- "is set in stone in the long run."
"If those levers are pushed too often, the rest of the world could adapt," Klein said.
China, which is North Korea's largest trading partner, has refrained from applying significant pressure on the country.
Last week, Assistant Secretary of State for East Asian and Pacific Affairs Danny Russel said that if North Korea conducts a fifth nuclear test, the U.S., South Korea and Japan could take unspecified "defense-related measures." Russel's comments followed North Korea's failed missile test earlier this month.
"Like a regimen of medicine, the dosage can be upped when the effects fall short of what's required," Russel told Reuters last week.