WASHINGTON/SEOUL, Feb 23 (Reuters) - The United States said on Friday it was imposing its largest package of sanctions to pressure North Korea to give up its nuclear missile program, and President Donald Trump warned of a "phase two" that could be "very, very unfortunate for the world" if the steps did not work.
In addressing the Trump administration's biggest national security challenge, the U.S. Treasury sanctioned one person, 27 companies and 28 ships, according to a statement on the U.S. Treasury Department's website.
North Korea has been developing nuclear-tipped missiles capable of reaching the U.S. mainland and Trump and North Korean leader Kim Jong Un have exchanged taunts that have raised fears of war.
In August, Trump threatened to go beyond sanctions by bringing "fire and fury like the world has never seen," although his administration has repeatedly said it prefers a diplomatic solution to the crisis.
Key moments in 2017 between US and North Korea
Key moments in 2017 between US and North Korea
NEW YEARS DAY MISSILE LAUNCH
On January 1, 2017, North Korea's leader Kim Jong Un warned that an intercontinental ballistic missile (ICBM) was in the 'final stages' of development.
During a visit to North Korea's border on March 17, Secretary of State Rex Tillerson was unwittingly photographed by a North Korean soldier, who can be seen peering into the room on the right side of the image.
President Trump called North Korean dictator Kim Jong Un 'a pretty smart cookie' in an interview that went viral on April 30.
'At a very young age, he was able to assume power. A lot of people, I'm sure, tried to take that power away, whether it was his uncle or anybody else. And he was able to do it. So obviously, he's a pretty smart cookie,' Trump told CBS News.
The president also said he'd be 'honored' to meet with the North Korean leader.
KIM JONG UN'S LETTER TO CONGRESS
In early May, North Korea said it would continue its nuclear weapons tests and boost force 'to the maximum' in a stark warning to the U.S.
U.N. Ambassador Nikki Haley said North Korea's actions were 'quickly closing off the possibility of a diplomatic solution' and that the United States was prepared to use force 'if we must.'
'PILE OF ASH'
In a bold statement, North Korea threatened to turn the U.S. into a 'pile of ash' on July 12.
US THREATENED WITH 'MERCILESS BLOW'
On July 27, a North Korean spokesperson said, 'Should the U.S. dare to show even the slightest sign of attempt to remove our supreme leadership, we will strike a merciless blow at the heart of the U.S. with our powerful nuclear hammer, honed and hardened over time.'
On December 20, it was reported that North Korea is testing whether its ICBM weapons are capable of carrying anthrax.
Discover More Like This
BACK TO SLIDE
Speaking at a news conference with Australian Prime Minister Malcolm Turnbull, Trump made apparent reference to military options his administration has repeatedly said remain on the table.
"If the sanctions don't work, we'll have to go phase two," Trump said. "Phase two may be a very rough thing, may be very, very unfortunate for the world. But hopefully the sanctions will work."
The sanctions' targets include a Taiwanese passport holder, as well as shipping and energy firms in mainland China, Hong Kong, Taiwan and Singapore. The actions block assets held by the firms and individuals in the United States and prohibit U.S. citizens from dealing with them.
The U.S. Treasury said the sanctions were designed to disrupt North Korean shipping and trading companies and vessels and further isolate Pyongyang. They also are aimed at ships located, registered or flagged in North Korea, China, Singapore, Taiwan, Hong Kong, Marshall Islands, Tanzania, Panama and the Comoros.
Last month three Western European intelligence sources told Reuters that North Korea shipped coal to Russia last year and that it was then delivered to South Korea and Japan in a likely violation of U.N. sanctions.
Treasury Secretary Steve Mnuchin said the new sanctions would help prevent North Korea from skirting restrictions on trade in coal and other fuel through "evasive maritime activities."
"The president is clearly frustrated and rightly so over the efforts that have failed in the past and also over the uptick in testing and the advances we've seen in the North Korean program," a senior administration official told reporters.
At another briefing, Mnuchin stood next to enlarged photos he said showed December 2017 images that revealed ship-to-ship transfers of fuel and other products destined for North Korea in an attempt to evade sanctions.
He said he could not rule out the prospect of the United States boarding and inspecting North Korean ships.
Mnuchin said virtually all shipping currently being used by North Korea was now under sanction and the U.S. government had "issued an advisory alerting the public to the significant sanctions risks to those continuing to enable shipments of goods to and from North Korea."
Mnuchin said the number of sanctions steps taken by the United States against Pyongyang since 2005 was now 450 with approximately half imposed in the last year.
Christopher Ford, assistant secretary of state for international security and non-proliferation, told reporters sanctions already had affected North Korea’s weapons programs and this was shown by the lengths North Korea was going to try to evade sanctions.
Jonathan Shanzer of the Washington think tank Foundation for the Defense of Democracies said Friday's move was "the largest tranche of DPRK (North Korea) sanctions" released by the Treasury Department.
"The only thing missing here today is action against Chinese banks," he said. "We know they continue to undermine our efforts to isolate North Korea."
Tougher sanctions may jeopardize the latest detente between the two Koreas, illustrated by the North's participation in the Winter Olympics in the South, amid preparations for talks about a possible summit between North Korea's Kim and South Korean President Moon Jae-in.
North Korea last year conducted dozens of missile launches and its sixth and largest nuclear test in defiance of U.N. Security Council resolutions. It defends the weapons programs as essential to deter U.S. aggression. It has been more than two months since North Korea's last missile test.
Kim said he wants to boost the "warm climate of reconciliation and dialog" with South Korea, which hosts 28,500 U.S. troops, after a high-level delegation, including his sister, returned from the Olympics.
In an extension of that rapprochement, the North agreed on Friday to hold working-level talks on Tuesday for the Pyeongchang Winter Paralympics on the North's side of the border village of Panmunjom.
In December the United Nations approved U.S.-drafted limiting North Korea's access to refined petroleum products and crude oil, which the North Korean Foreign Ministry said amounted to an act of war. In January Washington announced a round of sanctions and urged China and Russia to expel North Koreans raising funds for the programs.
The U.N. Security Council banned North Korean exports of coal last Aug. 5 under sanctions intended to cut off an important source of the foreign currency Pyongyang needs to fund its nuclear weapons and missile programs.
The new U.S. sanctions were announced while Trump's daughter, Ivanka, is visiting South Korea. At a dinner with Moon at Seoul’s presidential Blue House, Ivanka Trump said the United States wanted to "reaffirm our commitment to our maximum pressure campaign to ensure that the Korean Peninsula is denuclearized."
Moon said North Korea's participation in the Olympics had “led to lowering of tensions on the peninsula and an improvement in inter-Korean relations" and were thanks to President Trump's “strong support for inter-Korean dialog.”
Ivanka Trump's visit to South Korea coincides with that of a sanctioned North Korean official, Kim Yong Chol, vice chairman of the North's ruling Workers' Party's Central Committee blamed for the 2010 sinking of a South Korean navy ship that killed 46 sailors. His delegation will attend the closing ceremony and also meet Moon.
The Blue House has said there are no official opportunities for U.S. and North Korean officials to meet.