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North Korean leader Kim Jong Un at the People's Theatre in Pyongyang in this photo released by North Korea's Korean Central News Agency (KCNA) on February 23, 2017. KCNA/via REUTERS

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By David Brunnstrom and Matt Spetalnick

WASHINGTON (Reuters) - Despite sending a naval force to the Korean peninsula, the Trump administration is focusing its North Korea strategy on tougher economic sanctions, possibly including an oil embargo, banning its airline, intercepting cargo ships and punishing Chinese banks doing business with Pyongyang, U.S. officials say.

U.S. President Donald Trump has approved a preliminary broad approach on North Korea and asked his national security team to craft a more detailed framework for new international sanctions and other actions to counter Pyongyang's nuclear and missile programs, one official said.

"There's a whole host of things that are possible, all the way up to what's essentially a trade quarantine on North Korea," the official told Reuters on Wednesday, speaking on condition of anonymity.

The U.S. officials said the administration is considering an array of stiffer sanctions that could be applied on a "sliding scale" proportionate to North Korean actions. Some steps could be applied unilaterally, and others through the United Nations, where China has a Security Council veto.

The U.S. show of force, sending what Trump called an "armada" of military vessels toward the region, and North Korea's angry response, has raised fears of a military confrontation.

Though U.S. officials insist that military options remain on the table, pre-emptive strikes on North Korea remain a last resort, and they stressed that - for now, at least - the Trump administration is stressing economic and diplomatic measures.

U.N. economic options include an embargo on oil supplies to North Korea; a global ban on Air Koryo, its national airline; and interdiction of North Korean freighters on the high seas, a step that would go beyond an existing requirement for nations to inspect ships transiting their territory, the officials said this week.

The United Nations also could prohibit the use of North Korean contracted labour abroad and expand the restrictions on North Korean coal exports to a total ban, the officials said.

Another step could be a ban on North Korean seafood exports, Pyongyang's fourth-largest export to China, its main trading partner, and expanded efforts to seize assets of North Korean leader Kim Jong Un and his family.

U.S. administration officials said final decisions on specific sanctions targets have yet to made, but they privately expressed doubts about how much further Beijing is willing to go to bring its defiant ally to heel - in spite of increasing Chinese concerns that North Korea might soon conduct a sixth nuclear test or new missile launches.

A phone call between Trump and Chinese President Xi Jinping on Wednesday was intended to reinforce U.S. pressure on Beijing to curb Pyongyang's nuclear and ballistic missile programs, a U.S. official said.

On Wednesday, Trump, who met Xi at a first summit in Florida last week, praised China for sending coal ships back to North Korea under existing U.N. sanctions. Trump said he thought Xi wanted to help, but added: "We'll see whether or not he does."

MULTIPLE SANCTIONS TARGETS

While Trump emphasized the warmth of his interactions with Xi, he warned the Chinese leader last week that new sanctions could include penalties against Chinese banks and companies doing business with North Korea if Beijing did not step up pressure, one U.S. official said.

"If that's the only option the Chinese leave us, there's a real possibility that Chinese entities will get hit," the official said.

The U.S. aim would be to tighten the screws on North Korea in the same way it pressured Iran to open negotiations on its suspected nuclear weapons programme – by penalising all foreign firms dealing with the country.

"The amount of pressure that has been brought to bear economically on North Korea is far short of what was brought to bear against Iran," another senior administration official said.

Some analysts cautioned that targeting Chinese entities with so-called "secondary sanctions" could backfire and make Beijing less willing to cooperate, and that dealing with a country that already has nuclear weapons differs from dealing with one accused of trying acquire them.

"If you want to rely on sanctions to achieve your goal, you have to find a way to persuade or force the world into going all the way to a near full embargo or at least an embargo on key commodities like petroleum and on North Korean hard currency export earnings," said Joseph DeThomas, a former State Department official who worked on Iran and North Korea sanctions.

"Only if the regime sees continuation of sanctions as fatal will it consider change," he said.

In a sign of Beijing's growing frustration with North Korea, China's Global Times newspaper said on Wednesday that North Korea should halt any nuclear and missile activities "for its own security" - a reference to the approaching U.S. naval force.

It said that if North Korea made another provocative move, "Chinese society" might back unprecedented sanctions "such as restricting oil imports."

While run by the ruling Communist Party's official People's Daily, the Global Times does not always represent government policy.

(Reporting By Matt Spetalnick and David Brunnstrom; Editing by Bill Rigby)

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