US Threatens To Cut Off China From SWIFT If It Violates North Korea Sanctions

Tyler Durden's picture

In an unexpectedly strong diplomatic escalation, one day after China agreed to vote alongside the US (and Russia) during Monday's United National Security Council vote in passing the watered down North Korea sanctions, the US warned that if China were to violate or fail to comply with the newly imposed sanctions against Kim's regime, it could cut off Beijing’s access to both the US financial system as well as the "international dollar system."

Speaking at CNBC's Delivering Alpha conference on Tuesday, Steven Mnuchin said that China had agreed to "historic" North Korean sanctions during Monday's United Nations vote. "We worked very closely with the U.N.  I'm very pleased with the resolution that was just passed.  This is some of the strongest items.  We now have more tools in our toolbox, and we will continue to use them and put additional sanctions on North Korea until they stop this behavior."

In response, Andrew Ross Sorkin countered that "we haven't been able to move the needle on China, which seems to be the real mover on this, in terms of being able to apply the real pressure. What do you think the issue is?  What is the problem?"

The stunner was revealed in Mnuchin's answer: "I think we have absolutely moved the needle on China.  I think what they agreed to yesterday was historic.  I'd also say I put sanctions on a major Chinese bank.  That's the first time that's ever been done.  And if China doesn't follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system.  And that's quite meaningful."

And to underscore his point, the Treasury Secretary also said that "in North Korea, economic warfare works. I made it clear that the President was strongly considering and we sent a message that anybody that wanted to trade with North Korea, we would consider them not trading with us.  We can put on economic sanctions to stop people trading."

In other words, to force compliance with the North Korean sanctions, Mnuchin threatened Beijing with not only trade war, but also a lock out from the dollar system, i.e. SWIFT, something the US did back in 2014 and 2015 when it blocked off several Russian banks as relations between the US and Russia imploded.

Of course, whether the US would be willing to go so far as to use the nuclear option, and pull the dollar plug on its biggest trade partner, in the process immediately unleashing an economic depression domestically and globally is a different matter.  So far Washington has been reluctant to impose economic sanctions on China over concerns of possible retaliatory measures from Beijing and the potentially catastrophic consequences for the global economy. Washington runs a $350 billion annual trade deficit with Beijing, while the PBOC also holds over $1 trillion in US debt.

Ironically, the biggest hurdle to the implementation of the just passed sanctions may be the president himself.  “We think it’s just another very small step, not a big deal,” Trump told reporters at the start of a meeting with Malaysian Prime Minister Najib Razak. "I don’t know if it has any impact, but certainly it was nice to get a 15-to-nothing vote, but those sanctions are nothing compared to what ultimately will have to happen,” said Trump who has vowed not to allow North Korea to develop a nuclear ballistic missile capable of hitting the United States.

Separately, at a hearing of the House Foreign Affairs Committee on Tuesday, Republican Chairman Ed Royce said the U.S. should target major Chinese banks, including Agricultural Bank of China Ltd. and China Merchants Bank Co., for aiding Kim’s regime. Russia also came in for criticism. Assistant Treasury Secretary Marshall Billingslea said in prepared remarks to the committee that North Korean bank representatives “operate in Russia in flagrant disregard of the very resolutions adopted by Russia at the UN.”

While China and Russia supported the latest UN sanctions, officials made clear they were troubled by Haley’s comments in the Security Council that the U.S. would act alone if Kim’s regime didn’t stop testing missiles and bombs. They emphasized the world body’s resolution also emphasized the importance of resolving the crisis through negotiations. “The Chinese side will never allow conflict or war on the peninsula,” Foreign Ministry spokesman Geng Shuang said in a statement on Tuesday.

In a soundbite late on Tuesday, Japan's Nikkei quoted prime minister Shinzo Abe who said that "in the end, [the North Korean] problems should be solved through diplomatic dialogue," adding that Japan will "work together with the international community to apply maximum pressure, so that North Korea commits to perfect, verifiable and irreversible denuclearization." For Japan to engage with the regime, he stressed it would have to be "on the condition that North Korea commits to" this complete denuclearization."

Which, of course, won't happen: “sanctions of any kind are useless and ineffective,” Russian President Vladimir Putin told reporters earlier this month at a summit in Xiamen, China. “They’ll eat grass, but they won’t abandon their [nuclear] program unless they feel secure.

Predictably, North Korea's Foreign Ministry slammed the sanctions saying it “condemns in the strongest terms and categorically rejects” the United Nations adding more sanctions, North Korea’s state-run KCNA reported on Wednesday morning. Instead, North Korea warned it “will redouble efforts to increase its strength” as it seeks to establish “practical equilibrium” with U.S.

And so, not only is the entire geopolitical circle jerk back at square one, but the ball is again back in North Korea's court, while the decision on whether or not to launch another ICBM really depends on whether China will give it the quiet go ahead; a China which responds notoriously poorly to being threatened in the global financial arena, like for example when the US threatens to kick it out of the global dollar system...

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Ranger4564's picture

They already have CIPS, and it was the BRICS who graciously allowed SWIFT to remain relevant... this is a freakin joke. If Munchkin goes through with this, he will absolutely end the era of SWIFT, because the world will just move on with CIPS. It's operational already and functions around the world.

HoyeruNew's picture

funny how you conveniently forget USA has had a central controlled economy since 1913 and it has worked quite well(for some people).

swmnguy's picture

Ah, but you see, to the corporate spin-meisters, a central controlled economy run by corporate interests is so-o-o-o-o much different and better than a central controlled economy run by the government.

It's like the morons saying we can't afford a single-payer healthcare system, as if we aren't right now already paying more for healthcare finance than anybody else in the world pays for single-payer.  Now, there are all kinds of legitimate objections to single-payer healthcare, but cost ain't one of 'em.  For people who work for a living and live off of earned income, it doesn't matter who we pay.  It matters how much we pay.  The corporate interests gain a lot of advantage clouding and distracting from that fact.

Nostradumbass's picture

Bitcoin to the moon?


Let us see...

Justin Case's picture

Little slow on the draw there cowboy.

March 11, 2015
China has developed the International Payment System, the CIPS network.

Russia also has their international payment system in place.

post turtle saver's picture

you know what, even I have my international payment system in place... problem is, I seem to be lacking any meaningful participants...

Russia and China have the same problem... my excuse is I'm some ZH goof sitting in my basement posting on the Internet... what's theirs?

OceanX's picture

Not sure where you've been but, China and Russia started working on that years ago:


AriusArmenian's picture

China didn't take US jobs, the US elites give it to them.

Don't be angry with China, be angry with US elites.

If you blame China then you are putting the noose on the wrong neck.

SubjectivObject's picture

absofuckinglutely this    proles

philipat's picture

You are absolutely correct. In answering the question cui bono? the largest beneficiary is US Corporations. Only a very small part of the EVA is retained by China; the vast majority gets transfer-priced out of China through tax haven countries by US Corporations. China itself benefits through the creation of employment but, of course, labor costs are low. China is a convenient scapegoat but it really isn't at the centre of the problem.

Justin Case's picture

China itself benefits through the creation of employment but, of course, labor costs are low.

merica is getting there. Soon as they get rid of collective bargaining, all avenues are wide open open and the revolving doors for emplyees hired and fired will be spinning full tilt. They can cut COLA, pensions, overtime, vacation, seniority, lay-offs, TFWs, unpaid lunches and no benefits. This is the objective, to level the playing field for competition. Moar profitabble to cut wages down than o raise wages in the third world. merica will be the newest member of the banana repulic soon. Them pesky unions will be out  of the way soon.

philipat's picture

Yes I completely agree. In the interim, some of these jobs may be moved from China (To Bangladesh, India, Vietnam, Indonesia etc.) for "Political face" purposes ("We no longer manufacture in China") during the destruction process in the US which will however accelerate during the next financial crisis; especially on the pensions front.

Justin Case's picture

Nixon got the ball rollin to move the corporatocracy into China, that has a work force many times that of merica and they had been given developing status which allowed many benefits with taxes and duties. mericans were in heaven with the new Walmart stores selling cheaper goods to mericans that were falling behind in real earnings grow, to at least keep up with inflation. Today merican's real wages are equivelent to 1999. Now that mericans pulled their future generations earnings forward a couple generations, they can't even borrow any moar money at zero interest rates. So what's next? Oh ya, it's China's fault, not the administrations all following Nixon's lead. The corporations are in it for the money not a charity organization for merican jobs.

Treason Season's picture

And who RMN's boss? Nelson Rockerfeller!

HRClinton's picture

The hidden (((Beneficiaries))), the true (((Beneficiaries))) will be the same (((Parasites & Usurpers))) we've had for >100 years:

The (((Global-Lusts))). 

duckandcover's picture, intellectual property, and economic growth. 


FarCanal's picture

But who are the Paper Tiger's? Smacks of desperation and noise to me.How much US debt does China own, Oh just $1.1 Trillion, nothing really.. is that talking from a position of strength? China has more trade within the New Silk Road than with the US don't need SWIFT for that,CIPS anyone.

ZorroHedge's picture

Sure, man. Like the US has never stolen intellectual property from nobody. They stole the speech recognition technology from Lernaut & Hauspie. You sir, are a hypocrite.

SoDamnMad's picture

June 2008

North Korea to blow up cooling tower at nuclear reactor site and halt weapons development in exchange for food and energy.

Just negotiate with North Korea until your blue in the face. Russia and China there in the negotiations but do nothing thereafter (like always)

xtaxpayer's picture

Now that was totally accurate!

LostandFound's picture

Thanks for the belly laugh. 

Slippery Slope's picture

Munchkin is about to go full retard.

Putrid_Scum's picture

Sitting in downtown Shanghai I must say, I'm bemused, and quite surprised. There's going to be countermoves Munchin, which you won't like.

Secretary Xi must be quivering in his boots. Oh Munchin, he's so scared. [chuckle]

Last time I checked, Russia and China had an intergrated alternative payents system that's ultimately back by GOLD. 

What's your currency backed by? He he...

Back to the bigger picture, we're on the brink of World War. Though it will be unlike any War ever fought. Just finished the latest war game for The Reset, with the BIS in mind, and I must say, you may want to read it: Ha!

But many won't, just lack the courage I guess. Told you last year Trump was being protected by the Rothschild Family, many listened, many didn't. Told you in April The Families had permitted Cryptos, many listened, many didn't.

My bet is that a lot of Americans are going to be turned into hamburger meat, those that can't learn that is. No courage I guess, the elites say it takes courage to change your beliefs after 40---Just human nature.

Good Luck,



FarCanal's picture

In extreme situations, it only takes 3 days for someone to lose their convictions and switch into survival mode.I just hope that those that have lead us to where we are ,face justice someday.

DaBears's picture

Dude you live in a city with 50 million other people all concentrated in a 18km by 18km area. That's like 20 Mexicans living in a 2 bedroom apartment in Latino town, I'm sure it's soupped up, but damn it's insanely crowded and the air is shit.

Putrid_Scum's picture

I know the signal to watch for.

When I see it---and it doesn't matter if I'm eating dinner or having sex with the hottest chick I've ever seen---I'll stand up, put on my sunglasses, and walk toward the nearest door.

The first sentence I'll utter is: "Airport."


Rock On Roger's picture

I have a feeling that I may not be as quite awake as I thought I was.

Putrid_Scum's picture

The Human Mind----Where the dream is infinitely better and more real than reality.

Stinkytofu's picture

"Last time I checked, Russia and China had an intergrated alternative payents system that's ultimately back by GOLD. "


last time i checked, russia and china had playmoney just like the us-of-a.


and what's this "ultimately" backed by gold nonsense?

you may use your yuan to buy gold, much like you may

do with most any other currency.

you may also use your yuan to buy cardboard-filled baozi,

so does that mean the yuan is ultimately backed by

little steamed buns?


BigJim's picture

Exactly. These idiots think because they can exchange these yuan oil contracts for physical gold it means the yuan is "backed" by gold.

Er, no. Sorry kids, for a currency to be "backed" by gold it has to be limited in its supply by the amount of gold held by the issuing bank(s).

The yuan is no more "backed by gold" than the USD. And what's more - will continue that way unless there's a major monetary breakdown. And all the evidence is that's still years away.

When we see Venezuela-style inflation in Europe, the UK, Japan, China and the US, then a return to gold is a possibility.

Do you see that yet? I don't.

 Or if OPEC start demanding gold for oil. But as they're unpopular dictatorships that rely on foreign militaries to stay in power, and the US is STILL the preeminent military power on this planet, that's not happening anytime soon either.

I own gold and silver but I've given up any hope of seeing them rise substantially for at least 5 - 10 years.

Fiat still rules.


Putrid_Scum's picture

It amazes me that people can spend thousands of hours reading Zerohedge, and still not see the bigger picture.

You really need to read The Reset, come back to me after you have.


Not My Real Name's picture

Your claim (in the link) is patently false: "Capitalism is a Usury driven system of growth which demands that future production is always greater than past production."

Capitalism requires no such thing. Our current debt-based monetary system certainly does ... but that is not capitalism.

There is no need for growth. Under TRUE free market capitalism, society can improve its standard of living and wealth via increases in productivity and technological advancements. Infinite growth is NOT requried.

BandGap's picture

No, he was handed a script and he's doing as told.

This is so contrived as to be laughable.

remain calm's picture

We have had Faggots in the WH for 20 years. Time to kick ass again

abyssinian's picture

who needs Swift when you have Bitcoins... and most of the BTC miners are in China. Fuck the USD now!

Rapunzal's picture

Mnuchin the Hollywood, Bankster, Mobster. Part of the NYC Wall Street mafia. What a joke he is and how he is working for his overlords the Rockefeller/Rothschilds criminals the puppet masters of NYC and London.

Mustafa Kemal's picture

Its almost if they really wish for the death of the petrodollar. Its like they are asking for it.

an oz of Au arrives in the mail tomorrow. Turn those $ into Au

veritas semper vinces's picture

Well,the petrodollar is ,in fact,dead.It has not been officially decleared so.

China and Russia will change the financial system through trade(they control it).They will not try to beat the western bankers at their own game. They will force them to accept the new system(see future oil contracts,denominated in yuan,backed by gold,or gold notes).The system is in place. It will be accelerated now that is clear that America is " agreement incapable"

Let's see how America is going to close the 600 Bil $ /year trade deficit. It's going to be amusing only when the Chinese announce how much GOLD they REALLY have.

Do you think that Munckin's recent trip to Fort Knox ,seen in this context, is telling us something?

chiswickcat's picture

This would end up looking like the US shooting itself in the head. Twice. Just to annoy China. Dumb fucking move morons.

halcyon's picture

And then you morons complain when the BRICS want to develop their own independent SWIFT system replacement? Fucking idiots, just do it and hasten the demise of USA. 

Rapunzal's picture

This is all the plan by the NWO and their minion politicians. The goal was and still is to destroy the US. To create a one world government the US has to go. Even more so because the citizens didn't give up their arms and that with all those government organized false hoax shootings. We will pay back big time. They really hate us and they will make the rest of the world hate us.

Putrid_Scum's picture

Yeah, you're getting close, but you don't know why. Read The Reset, sixth edition.

Cash2Riches's picture

This is an empty threat and they know it. This would plunge the global economy into a massive economic collapse. Maybe that is what the elites want however? Unfortunately for them, this is now only going to accelerate the decline of the US Dollar, and is just one more nail in it's coffin.

jmack's picture

please please please, ban them from swift... then there will be a swift alternative.

HattoriHanzo's picture

Pretty sure there is already an alternative called the Cross-Border Interbank Payment System

MsCreant's picture

Rickard's thing about SDRs going crypto, with "ledgers" is on the horizon. THEY DON'T NEED OUR FUCKING DOLLARS OR OUR SYSTEM. THIS GIVES THEM MORE PERMISSION TO ABONDON IT AS A FRAUD!!!

This is dumber than dumb.


The stupid won't stop.

Trump, drop this schlump, in the dump!

MsCreant's picture

...unless this IS the plan.

Pinche Caballero's picture

... Unless this IS the plan.

I certainly hope so, and right under the noses of the uncooperative Deep State, too. Could the Trump administration be working so hard to crash the current system otherwise?

Remove the debt limit, continue blowing up the debt bubble, continue hammering the dollar, force Russia and China to aggressively defend their own economic and commercial interests, i.e., de-dollarization and international settlements outside of SWIFT, and inform the world that the U.S. Gold reserves are safe?

All for what purpose? A significantly lower renegotiated U.S. debt? Or, an entirely new monetary system? A reset for the people with Trump leading the way? Or, are we possibly being sold out?

I have been wondering the same, Ma'am. I suppose only time will tell.

Mustafa Kemal's picture

Its almost as if they reallly want the death of the petrodollar

Pinche gringo