* NGOs say European banks won't send money to North Korea
* Main problem was Bank of China move to shut account of
North's Foreign Trade Bank
* Bank of China was key intermediary for fund transfers
* Aid groups say worried donors will withdraw support for
* Indications some European embassies in Pyongyang having
By Megha Rajagopalan
BEIJING, May 23 European aid groups said their
banks in Europe had stopped sending money to North Korea in the
wake of U.S. sanctions on Pyongyang's main foreign exchange
bank, leaving them scrambling for a solution short of
hand-carrying cash into the country.
The biggest problem had been the Bank of China's
recent decision to shut the account of the North's
Foreign Trade Bank, EU officials and non-governmental
organisations said. Money to North Korea was often routed
through China's biggest foreign exchange bank, they said.
Chinese firms doing business in the reclusive state said
they were also finding it difficult because Chinese banks were
becoming increasingly reluctant to deal with their North Korean
counterparts, whether it was the Foreign Trade Bank or other
Washington imposed sanctions on the Foreign Trade Bank in
March after accusing it of helping fund Pyongyang's banned
nuclear weapons programme. The measures prohibit any
transactions between U.S. entities or individuals and the bank.
Experts have said Washington's move was designed to make
international banks that do business in the United States think
twice about dealing with North Korea, in much the same way banks
have become wary about having ties with financial institutions
in sanctions-hit Iran.
All NGOs, U.N. agencies and embassies in Pyongyang have to
use the Foreign Trade Bank, aid workers and other officials have
U.S. officials have urged the European Union to put
sanctions on the bank. EU diplomats have discussed the issue but
are worried about the impact on European aid groups, which form
a significant segment of the humanitarian community in
"We are concerned regarding possible unintended effects of
certain sanctions such as the designation of the FTB, in
particular with regard to humanitarian assistance, and we are
looking into possible means to overcome the unintended effects,"
said a spokeswoman for EU foreign policy chief Catherine Ashton.
European banks had already stopped transfers, officials from
European NGOs told Reuters. NGOs said if it became impossible to
send enough money to North Korea to operate, donors might
withdraw support for their programmes.
French NGO Triangle Generation Humanitaire said its French
bank would no longer send funds for its operating expenses even
though the EU had not yet imposed sanctions, said Anne
Trehondart, desk officer in charge of Asia for the group.
"According to the sanctions, it's not forbidden. This makes
plain that some banks are just reluctant to transfer money
there," said Trehondart, declining to name the French bank.
A representative from another European NGO, who asked not to
be identified because of the sensitivity of the matter, said he
had "little hope" that a recent money transfer would reach North
Korea. He declined to name the group's European bank.
The only alternative would be to send an expatriate employee
on a "cash run" from China to North Korea - a limited option
because Chinese customs only allow foreigners to take a few
thousand dollars out of the country at a time, he said.
Most of the limited number of flights to North Korea
originate in China.
About six European NGOs have offices in North Korea.
American NGOs work in North Korea but none have a permanent
office in the country. Aid groups in North Korea work to
alleviate poverty and malnutrition as well as the impact of
One EU source said there were indications that some European
embassies in Pyongyang were having similar difficulties with
transferring funds. A representative for U.N. agencies in
Pyongyang did not have any immediate comment.
BANK OF CHINA MOVE A BIG STEP
The Bank of China announced it was shutting the Foreign
Trade Bank account earlier this month. It gave no reason for the
An EU document obtained by Reuters said the European
Commission's development branch and diplomatic missions in
Pyongyang were working to find a solution for European NGOs
affected by the Bank of China's decision.
"So far all our bank accounts with North Korea have been
channelled through the Bank of China," said Simone Pott, a
spokeswoman for German development and humanitarian aid group
Welthungerhilfe. "This option is closed now for us."
The Bank of China decision was the first significant step
taken by a Chinese entity to curb dealings with North Korea
following growing international pressure to punish Pyongyang
over its banned nuclear and ballistic missile programmes.
Washington had raised the issue of the Foreign Trade Bank
with China, although Beijing has not commented publicly on the
matter. Japan has imposed sanctions on the bank and Australia is
expected to follow suit.
The latest U.N. sanctions on North Korea don't mention the
bank, but say all countries should freeze or block any financial
transaction or service that could assist Pyongyang's illicit
China has become increasingly frustrated with North Korea.
It agreed to the new U.N. sanctions after Pyongyang conducted
its third nuclear test in February.
The U.S. Treasury Department has said it had no intention of
hindering aid work in North Korea, although NGOs say this is
precisely what is starting to happen.
"We will work through any concerns that arise related to
purchases of humanitarian goods, but it is critically important
that we isolate FTB for its facilitation of proliferation
activities," a Treasury official said, repeating an earlier
statement on the matter.
Aid groups have held talks with EU officials, but say
hand-carrying cash might end up being the only option.
One source familiar with the matter said a possibility being
examined by EU officials was to issue a so-called "letter of
comfort" which would explicitly say funding was for humanitarian
and development use. The idea is this would provide cover for a
bank to make a transaction, said the source, who declined to be
identified because of the sensitivity of the issue.
CHINESE FIRMS SCRAMBLE FOR SOLUTION TOO
Chinese companies involved in joint ventures in North Korea
said Chinese banks had also become loathe to transfer funds to
China is North Korea's biggest trading partner, with annual
trade worth around $6 billion. It is not clear how much trade
between China and North Korea gets cleared through North Korean
banks versus the use of cash and barter deals along their 1,400
km (875 mile) land border.
A source at Shenyang-based Liaoning Wellhope Agri-Tech Co.
Ltd, a mid-sized unlisted producer of livestock feed, said the
company had been unable to send payments to North Korea,
although its feed mill in the country continued to operate.
"We have stopped payments temporarily and are waiting for a
solution," the source said.
The source declined to name the North Korean bank the
A businessman in the Chinese border city of Dandong, which
accounts for as much as 80 percent of China's trade with North
Korea, said sanctions had made conditions worse.
The unwillingness of Chinese banks to deal with North Korean
banks was part of the problem, he said, as were stepped-up
checks by Chinese customs on products headed across the border.
Dandong Bank's main branch, which deals with foreign
exchange, said it had stopped working with North Korea.
Not much is known about the Foreign Trade Bank, whose assets
and investments are a state secret.
"The tricky thing is that the Foreign Trade Bank is the
clearinghouse for all foreign transactions, whether they're
related to weapons or not, so there's a lot of legitimate
business that goes through it," said Andray Abrahamian of the
NGO Choson Exchange, which has trained officials from the bank.
"Sanctioning this bank is going to force more and more