It is clear that our past efforts to rein in North Korea's nuclear program have failed. Bold action must be taken immediately, and the Senate Banking Committee will move forward to do just that this week.
Today, the Committee will mark up the bipartisan Otto Warmbier Banking Restrictions Involving North Korea (BRINK) Act of 2017, which we authored to impose mandatory sanctions on the foreign banks and companies that facilitate illicit financial transactions for North Korea. The BRINK Act sends a clear and unequivocal message to these banks and firms: you can do business with North Korea or you can do business with the United States, but if you choose to support the North Korean regime or their business associates, you will be held to account.
Critics argue that, for more than two decades, the United States has unsuccessfully employed a mix of sanctions and economic incentives to convince North Korea to abandon its nuclear arsenal and contain the threat. But our sanctions regime against North Korea is not nearly as tough as what we had in place against Iran, in the lead-up to Iranian nuclear negotiations.
Specifically, the United States has not, in a serious way, gone after the foreign banks that provide illicit support to North Korea and extend credit and financial services to companies engaged in illegal trade with the regime. This is a major hole in our sanctions regime, but one that our legislation would close.
The sanctions in the BRINK Act are known as "secondary sanctions," because they apply to non-US entities. They target foreign banks and firms serving North Korean enterprises. This bill is modeled on the same secondary sanctions that helped to bring Iran to the negotiating table over its nuclear program.
The reasons for our approach are clear. North Korea's economy is neither as weak nor as isolated as most people believe. While exact figures are unknown, its annual gross domestic product is estimated to be $40 billion. China accounts for nearly 90% of North Korea's trade, while others, such as Malaysia, still maintain diplomatic ties.
The United Nations found that North Korea evades existing international sanctions and maintains access to the international financial system through a comprehensive network of front companies, many based in China. North Korea relies heavily on this network to directly support its weapons of mass destruction and ballistic missile programs. Our aim is to cut off North Korea's remaining access to the international financial system, deprive Kim Jong Un of the resources needed for his regime's survival, and create the leverage necessary for successful nuclear negotiations.
Our bill also makes an example of those who evade sanctions. These initial sanctions will signal to other banks that the United States is serious about cracking down on entities facilitating business with North Korea. They will dry the flow of funds between Kim Jong Un's regime and the rest of the world. Just as we saw with Iran and in our sanctions policies with other countries, a credible threat of secondary sanctions would have a chilling effect on business with North Korea and encourage due diligence by institutions who wish to maintain access to the US financial system.
Critics of secondary sanctions argue that China may lash out at the United States. Regardless of its reaction, the gravity of the situation compels us to act. Furthermore, in September, Beijing reportedly directed its state banks to suspend accounts held by North Koreans, an action long required under UN sanctions.
Our legislation holds China accountable for its obligations. We believe tough secondary sanctions may finally change China's calculus with respect to North Korea. It is in China's economic interest for its banks to be able to do business with American firms. Moreover, it is in China's security interest to have a denuclearized peninsula, reduced tensions, and greater long-term stability in the region.
North Korea is on track to acquire the capability to strike the US mainland with a nuclear weapon. The United States must use every economic weapon in our arsenal to prevent that from happening. Severing the regime's global financial ties might raise the price of acquiring that capability to a level that Kim Jong Un cannot afford. An aggressive secondary sanctions regime, as a part of a broader campaign of financial pressure and rigorous diplomacy, is our best remaining chance at peacefully resolving the North Korean nuclear threat. We urge the full Senate to pass this critical legislation immediately.