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Washington, Apr 18, 2007 - Rep. Royce issued the following remarks during the Joint Terrorism, Nonproliferation, and Trade Subcommitte Hearing:

I thank the Chair for calling this important hearing.

The United State has long wrestled with North Korea's nuclear program. Many approaches have been tried, but none has had a more dramatic impact than the Bush Administration's decision to squeeze Banco Delta Asia.

In September 2005, the Treasury Department imposed Patriot Act Section 311 sanctions against this small Macau-based bank. As Treasury then stated, this financial institution was a "primary money laundering concern" because "senior officials in Banco Delta Asia are working with [North Korean] officials to accept large deposits of cash, including counterfeit U.S. currency, and agreeing to place that currency into circulation." A top Treasury official even called it a "willing pawn for the North Korean government."

This targeted action did more than get Pyongyang's attention. It set-off a chain of events that showed the power of the market, and caused the North Koreans to come back to the nuclear negotiating table. There was a run on the bank, forcing the Macau government to seize control and freeze approximately $25 million in North Korean assets. Perhaps of greater consequence was the message that was sent to bankers throughout the region about the pitfalls of dealing with the North Koreans, leading several to cut ties. Pyongyang came back to the table wanting to talk about one thing: money. United States willingness to discuss Banco Delta Asia led to the February 13th agreement.

In recent testimony before the Foreign Affairs Committee, Assistant Secretary Hill testified regarding the six-party talks that, "we have not, and will not, trade progress on denuclearization by turning a blind eye to some of these [illicit] activities." It appears, however, that we have done just that. In the past few weeks, the United States has gone from willing to return legitimate portions of the $25 million, to offering to return the funds to North Korea "for the betterment of the North Korean people," to returning the ill-gotten proceeds carte blanche. Kim Jong-Il knows that he is getting his $25 million back, but as of this moment, I'm still not sure what the United States is getting. The Dear Leader has also gotten the signal from the United States that there will be no price to pay for his counterfeiting, and as long as he puts forth promises on his nuclear program, the United States will bend on its laws.

Concessions to North Korea on the financial front come as we are having some similar success against the regime in Tehran, and are finally considering turning up the financial heat on Sudan, which is engineering a genocide.

The Treasury Department's campaign to explain to leading European financial institutions the risk of doing business with Tehran has induced many to significantly scale back or terminate their Iran-related business. As a consequence, Iran is having a harder time moving hard currency around the globe, harming its economy and hopefully undermining support for its nuclear program.

The private banking sector has been quicker than parent governments to comprehend the threat posed by Iran. That's perhaps best exemplified by the European stance on their export-credits to Iran. These are European subsidies to investments that otherwise wouldn't be made. The latest U.N. resolution urges countries not to enter into new commitments for grants and financial assistance to Iran. But given the British experience -- who found no takers when they asked their fellow Europeans to scale back on export-credits during the hostage crisis -- this will be an uphill climb.

Given this outlook, many in Congress prefer the approach of pressing sanctions against Europeans energy companies that continue to invest in Iran's oil and gas sectors. While it is unfortunate that the Administration has not taken full advantage of all the tools at its disposal, it is worth noting that many of the loudest voices in Congress pressing unilateral actions have ceaselessly charged the Administration with "unilateralism" on a whole range of issues. Other nations are rising as key economic and financial players, so in these cases, international backing is critical.

The financial measures the United States has employed to face the challenges posed by Iran and North Korea have been potent. Yet, we'd be naive to think that there is a single silver bullet, or a cookie cutter sanctions approach, when it comes to facing such complex challenges as Iran, North Korea and elsewhere.