Washington Frustrated over languishing diplomatic campaigns against Iran and North Korea, U.S. officials are finding their backup strategy of financial sanctions has been surprisingly effective against those remaining members of President Bush's "axis of evil."
Over the past year, the Bush administration has persuaded bankers across Europe and Asia to choke off some Iranian and North Korean access to the world financial system, using the taint of terrorism and corruption as leverage.
Treasury Secretary Henry Paulson and others have made the case directly to bankers and government officials around the world in low-profile but remarkable presentations.
Their success so far owes more to the self-interest of banks than to the foreign policy goals of Washington, which accuses both nations of rogue behavior from counterfeiting U.S. money in Pyongyang to hiding a nuclear weapons program in Tehran. U.S. officials say banks have more to lose from rubbing shoulders with foreign banks, trading companies or governments linked to criminal behavior or terrorism.
"What we're trying to do is think of how to use the private sector's natural inclinations to want to ... avoid bad conduct and make sure their reputations are clean," said Treasury Undersecretary Stuart Levey. "We want to figure out how to work with the private sector so they amplify what we want to have happen."
The United States alone can't prevent a foreign entity from doing business with alleged bad guys. But by taking relatively small steps to blacklist two banks that do business with North Korea and Iran, the Bush administration has introduced a whiff of scandal to transactions with those banks or governments.