US President Donald Trump is talking tougher to China's Xi Jinping over North Korea. Photo: Reuters

As North Korea’s biggest trading partner, Beijing needs to enforce new UN sanctions on Pyongyang agreed this week or face the threat of being blocked from access to the international dollar system, US Treasury Secretary Steven Mnuchin warned.

Another senior administration official told Reuters any such “secondary sanctions” on Chinese banks and other companies were on hold for now to give Beijing time to show it was prepared to fully enforce sanctions.

The toughest warnings yet from the world’s biggest economy to the second largest came as US President Donald Trump said much more will be needed to deal with Pyongyang’s nuclear and missile program.

The UN Security Council on Monday voted unanimously to boost sanctions, banning textile exports and capping fuel supplies, drawing from Pyongyang a threat of retaliation against the US. North Korea’s sixth and largest nuclear test this month prompted the UN action.

A tougher US draft calling for a full embargo on North Korean oil imports was weakened to win the support of China and Russia, both of which hold UN veto power.

Much of North Korea’s energy is generated from burning domestic coal, but oil is used by the military as well as in transport and agriculture.

Is the UN about to spoil North Korean leader Kim Jong-un’s party? Photo: KCNA via Reuters

China supplies nearly all of North Korea’s crude oil, but no longer reports its shipments to the country, According to South Korean data it ships about 500,000 metric tons of crude a year across its border with North Korea, while the UN says it also exports over 200,000 tons of oil products across the same border.

Analysts said a full oil embargo on Pyongyang could destabilise the country.

“If China cuts off oil supply, North Korea would not survive on its own for three months and everything in North Korea would be paralysed,” Cho Bong-hyun, who heads research on North Korea’s economy at IBK Bank in Seoul, said in a Reuters report in April.

“This could increase the possibility of North Korea’s collapse and have an adverse impact on China as well,” he said.

Read: Japan’s history shows oil embargoes are dance with disaster

Asked if Trump may cut off Chinese banks from the US financial system, White House spokeswoman Sarah Sanders said: “All options are on the table. The president has also said that he wants every country involved to step up and do more.”

Washington so far has held off on new sanctions against China’s banks and other companies doing business with North Korea, given fears of retaliation by Beijing and far-reaching damage to the world economy.

Russia and China both say they respect UN sanctions and have called on the United States to return to negotiations with North Korea.

“Illegal and unlawful”

The North Korean ambassador to the United Nations in Geneva, Han Tae Song, rejected the UN resolution as “illegal and unlawful” and said Washington was “fired up for political, economic, and military confrontation.”

He added: “The forthcoming measures … will make the U.S. suffer the greatest pain it ever experienced in its history.”

Han did not elaborate, but North Korea frequently vows to destroy the United States.

The UN resolution calls on countries to inspect vessels at sea, with the consent of the flag state, if they have reasonable grounds to believe ships are carrying prohibited cargo to North Korea.

Fog shrouds the Friendship and Broken bridges over the Yalu River linking the North Korean town of Sinuiju and Dandong in China’s Liaoning. Photo: Reuters/Damir Sagolj

It also bans joint ventures with North Korean entities, except for non-profit public utility infrastructure projects, and prohibits countries from bringing in new North Korean workers.

US Ambassador to the United Nations Nikki Haley said the sanctions could reduce North Korean annual revenue by $500 million. The United States has said sanctions agreed in August could slash North Korea’s $3 billion in exports by a third.

But Joseph DeThomas, a former State Department official who worked on Iran and North Korea sanctions, questioned whether the new steps would have a major impact.

The labour ban would be almost impossible to police and trade statistics greatly overstated North Korea’s earnings from textiles, he said.

Frustrated US lawmakers called at a House hearing on Tuesday for a “supercharged” response to North Korea and said Washington should act alone if necessary to stiffen sanctions on Chinese firms and any country doing business with Pyongyang.

At the hearing, US officials released intelligence findings that they said showed how North Korea earns income from smuggling coal and other commodities to Russia and China.

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