On May 25, 2009, North Korea conducted an underground nuclear explosion. In response, the UNSC on June 12 unanimously passed Res. 1874, which puts in place a series of sanctions on North Korea's arms sales, luxury goods, and financial transactions related to its weapons programs and calls upon states to inspect North Korean vessels suspected of carrying such shipments. The resolution does allow for shipments of food and nonmilitary goods. As was the case with an earlier resolution, 1718, that was passed in October 2006 after North Korea's first nuclear test, Res. 1874 seeks to curb financial benefits that go to North Korea's regime and its weapons program. This report summarizes and analyzes Resolution 1874. In summary, the economic effect of Resolution 1874 is not likely to be great unless China cooperates extensively and goes beyond the requirements of the resolution and/or the specific financial sanctions cause a ripple effect that causes financial institutions to avoid being "tainted" by handling any DPRK transaction. The resolution "authorizes" seizure of banned items. The Ban on Financial Transactions Related to North Korea's Trade in Weapons of Mass Destruction (WMD) and Weapons of Mass Destruction Technology

North Korea's state trading companies are key vehicles for transferring WMD and WMD technology to other countries and for transmitting the foreign exchange earnings back to Pyongyang. Governments will have to interpret the financial sanctions ban of the resolution liberally in order to apply sanctions to the bank accounts of the trading corporations. This will be dependent on a number of countries cooperating with the United States, particularly in applying the resolution's provision for searching North Korean ships in their ports and denying provisions of fuel and supplies to North Korean ships that refuse to be searched. Inspecting North Korea's Air Cargo

Resolution 1874 is vague in how its air cargo provisions are to be implemented, in contrast to the specific procedures set forth regarding inspecting sea-borne cargo. The key to inspections of North Korea's air cargo is the air traffic between North Korea and Iran. Thus, this sanction will not be enforced unless China's begins to deny North Korea these lucrative trade credits. After U.N. On the surface, therefore, financial sanctions aimed solely at the DPRK's prohibited activities are not likely to have a large monetary effect. Resolution 1874. DPRK trade in small arms and ammunition is relatively insignificant. China's Exports of Luxury Goods to the DPRK
The United Nations Security Council unanimously passed Res. 1874 on June 12, 2009, in response to North Korea's second nuclear test. The resolution puts in place a series of sanctions on North Korea's arms sales, luxury goods, and financial transactions related to its weapons programs, and calls upon states to inspect North Korean vessels suspected of carrying such shipments. The resolution does allow for shipments of food and nonmilitary goods. As was the case with an earlier U.N. resolution, 1718, that was passed in October 2006 after North Korea's first nuclear test, Resolution 1874 seeks to curb financial benefits that go to North Korea's regime and its weapons program. This report summarizes and analyzes Resolution 1874. In summary, the economic effect of Resolution 1874 is not likely to be great unless China cooperates extensively and goes beyond the requirements of the resolution and/or the specific financial sanctions cause a ripple effect that causes financial institutions to avoid being "tainted" by handling any DPRK transaction.
On the surface, sanctions aimed solely at the Democratic People's Republic of Korea (DPRK, the official name of North Korea) and its prohibited activities are not likely to have a large monetary effect. Governments will have to interpret the financial sanctions ban of the resolution liberally in order to apply sanctions to the bank accounts of North Korean trading corporations. A key to its success will be the extent to which China, North Korea's most important economic partner, implements the resolution. A ban on luxury goods will only be effective if China begins to deny North Korea lucrative trade credits.
Provisions for inspection of banned cargo on aircraft and sea vessels rely on the acquiescence of the shipping state. In the case of North Korean vessels, it is highly unlikely that they would submit to searches. Resolution 1874 is vague about how its air cargo provisions are to be implemented, in contrast to the specific procedures set forth regarding inspecting sea-borne cargo. While procedures are specified for sea interdictions, the authority given is ambiguous and optional. Further, DPRK trade in small arms and ammunition is relatively insignificant, and therefore the ban on those exports is unlikely to have a great impact.
Other CRS Reports may be useful in conducting research on this issue: CRS Report RL30613, North Korea: Terrorism List Removal, by [author name scrubbed]; CRS Report RL33590, North Korea's Nuclear Weapons Development and Diplomacy, by [author name scrubbed]; CRS Report R40095, Foreign Assistance to North Korea, by [author name scrubbed] and Mary Beth NikitinCRS Report RL32493, North Korea: Economic Leverage and Policy Analysis, by [author name scrubbed] and [author name scrubbed]; CRS Report RL33324, North Korean Counterfeiting of U.S. Currency, by [author name scrubbed]; CRS Report RL34256, North Korea's Nuclear Weapons: Technical Issues, by Mary Beth Nikitin; and CRS Report RL32097, Weapons of Mass Destruction Counterproliferation: Legal Issues for Ships and Aircraft, by [author name scrubbed].