PYONGYANG, 22 SEPTEMBER 2017 (FINANCIAL TIMES) — North Korea has threatened to detonate a hydrogen bomb in the Pacific, after Kim Jong Un warned that Donald Trump would “pay dearly” for his threat this week to “totally destroy” North Korea if America was forced to defend itself and its allies.

Ri Yong Ho, the North Korean foreign minister, told reporters in New York that Kim’s earlier warning of the “highest level of hardline countermeasure in history” could mean a hydrogen bomb such as the one Pyongyang said it tested on September 3, according to South Korean media.


“It could be the most powerful detonation of an H-bomb in the Pacific,” Ri was quoted as saying by Yonhap, the South Korean news agency. “We have no idea about what actions could be taken as it will be ordered by leader Kim Jong Un.”

The US and North Korea are engaged in an escalating war of words over Pyongyang’s fast-developing nuclear and ballistic weapons programmes, with both the UN and the US imposing successive rounds of economic sanctions on Mr Kim’s regime.

Financial markets have had only a muted reaction to the dispute in recent months, but on Friday assets regarded as havens for investors jumped immediately after the news of North Korea’s latest H-bomb threat.

In a statement hours after the US imposed more sanctions on Pyongyang Kim called Mr Trump “mentally deranged”, a “dotard” and a “gangster fond of playing with fire”, who was “unfit to hold the prerogative of supreme command of a country”.

The North Korean dictator said Trump’s speech to the UN general assembly — where the US president declared that “Rocket Man is on a suicide mission” — had convinced him that his decision to continue developing nuclear weapons was the “correct path”.

Earlier on Thursday, the Trump administration unveiled new measures designed to force countries and companies to stop trading with Pyongyang.

Trump signed an executive order that enhances the Treasury’s power to impose sanctions on foreign financial institutions that facilitate trade-related transactions with North Korea.

The order would also impose other restrictions, including on shipping companies and ports that facilitate trade with North Korea. The measures follow two rounds of tough sanctions by the UN Security Council in recent weeks.

“For far too long, North Korea has evaded sanctions and used the international financial system to facilitate funding for its weapons of mass destruction and ballistic missile programmes,” said Steven Mnuchin, US Treasury secretary. “No bank, in any country, should be used to facilitate Kim Jong Un’s destructive behaviour.”

The new measures come on the heels of warnings from the Trump administration to China to implement existing UN sanctions and clamp down on Chinese companies and banks that deal with North Korea. Mnuchin said he had informed Zhou Xiaochuan, the Chinese central bank governor, about the latest action.

Earlier,  Trump welcomed a move by the Chinese central bank to order banks to halt business with North Korea. The move appeared to signal a breakthrough for US diplomacy after months of urging China to stem the trade finance that allows North Korea to source hard currency.

Mnuchin said the executive order would enable the Treasury to impose a range of sanctions that would include limiting access to the US financial system. “Foreign financial institutions are now on notice that they can choose to do business with the United States or with North Korea, but not both,” he said.

The order would also ban ships and aircraft that have visited North Korea from the US for 180 days, including vessels that did not visit North Korea but facilitated cargo transfers at sea for its ports.

“Finally, we are beginning to apply maximum pressure on Kim Jong Un,” said Ed Royce, the Republican head of the House foreign affairs committee. “This executive order to further tighten sanctions on North Korean shipping and trade, along with Beijing’s reported decision to comply with existing measures, is important progress.”

In addition to the existing UN measures — which affect 90 per cent of North Korean exports — the US has this year placed unilateral sanctions on an array of North Korean entities and placed “secondary sanctions” on Chinese and Russian firms that facilitate North Korea’s nuclear and missile programmes.

Tensions over the nuclear crisis on the Korean peninsula mounted this week after Mr Trump warned Mr Kim that the US would “totally destroy” North Korea if it was forced to defend itself or its allies.

Trump met South Korean president Moon Jae-in for a show of solidarity at the UN on Thursday. He generated laughter when his counterpart referred to the “deplorable” actions of North Korea and Trump called it a “lucky word for me” — a dig at Hillary Clinton labelling his supporters “deplorables” which was widely viewed as a campaign gaffe.

The day after Trump ridiculed Kim as “Rocket Man”, Ri Yong Ho, North Korea’s foreign minister who was also at the UN, mocked him back, saying: “If he was thinking he could scare us with the sound of a dog barking, that’s really a dog dream.”

Former president Barack Obama warned Trump last year that North Korea would be his biggest foreign policy challenge. The Trump administration has since stepped up a campaign started by the Obama administration to urge countries to place economic pressure on the regime to force Kim to the negotiating table.

In June, the US Treasury told Bank of Dandong, a small Chinese bank based near the border with North Korea, that it would be cut off from the US financial system because of allegations that it helped Pyongyang launder money. Last week, Mnuchin warned Beijing that the US would target other Chinese banks if it did not take more action to enforce current sanctions.

The impetus to tackle the threat from Pyongyang has risen as it has made faster than expected progress towards being able to hit the US with a nuclear weapon. In July, it undertook its first two tests of intercontinental ballistic missiles with a range capable of hitting the US. Early this month North Korea conducted its sixth, and most powerful, test of a nuclear weapon.

Some US intelligence analysts believe it has already developed the ability to miniaturise a nuclear warhead to fit on a missile. But it has not proved it can successfully guide a missile back into the atmosphere without the re-entry vehicle burning up.

The US has backed up its diplomatic campaign with warnings that “all options are on the table”. The vast majority of defence experts and many retired military officers argue that there is no viable military action that would not risk provoking a massive retaliation that could devastate South Korea.

But Jim Mattis, US defence secretary, this week hinted that the Pentagon believed it had options that would not incur such a risk.pacnews [/restrict]