North Korea – Back to the Talks

The road to forcing Pyongyang to abandon its nuclear weapons program is littered with so many landmines that it is much too early to celebrate despite North Korea’s belated collection of the US$25 million that had been blocked in a Macau bank. In fact, the road to denuclearization is just beginning.

According to US assistant secretary of state Christopher Hill, who has spent years negotiating with the North bilaterally and also through the six-party talks in Beijing, the North will open its Yongbyon nuclear facility to international inspections and shortly agree to shut down its 5-megawatt reactor – the nucleus of its weapons program – in July. That may well be the case, but Hill should make prudence the better part of his judgment.

In Washington, Hill has sown new seeds of controversy over the way he thawed and transmitted the North’s frozen accounts in Macau’s Banco Delta Asia. With the Bush administration having said the money was tainted by money-laundering and counterfeiting, Pyongyang refused to withdraw it in cash because dictator Kim Jong Il wanted a “legitimate” way of receiving it through the international financial system. His stalling action allowed the regime to drag its feet on shutting down its nuclear reactor (presumably buying more time to conceal his program), and it complicated the US position of helping to extricate the money while keeping the North under the money-laundering designation.

In the end, that scheme never worked. The US managed to unblock the North Korean funds, which it designated in September 2005 as dirty money, by passing them through its official channels: the New York Federal Reserve for transfer to a Russian official bank in Vladivostok, for the final transmission to a North Korean account in a Russian commercial bank. The arrangement absolved the middleman’s role played by the Russian commercial bank from any criminal liability, while freeing the North Koreans from similar potential charges. It in effect led to the US letting the North off the hook for money laundering.

As a result, the Bush administration faces a barrage of criticism from furious right-wing Republicans for using the US central bank for dubious diplomatic purposes. According to a Bloomberg dispatch, the deal has Fed Chairman Ben Bernanke involved in a “complicated diplomatic game that has nothing to do with its legal responsibilities.”

But the implications for that political storm will be nothing compared to what could arise in the talks between the US and South Korea on the one hand, and North Korea on the other in the weeks and months ahead.

For now, Pyongyang is striking a hopeful note by inviting a team of International Atomic Energy Agency officials to inspect and seal the five nuclear facilities in Yongbyon as agreed under a February 13 deal reached in the six party talks in Beijing. One of the first problems is to shut down the 5-megawatt reactor and determine how much plutonium has been extracted so far. It an open question just how cooperative the North will be. The question of exactly how much plutonium has been stored so far will indicate exactly how much bomb-making raw material they have. But the two sides are not even in agreement on what a reactor “shutdown” means. The US and South Korea say it means a “permanent disablement,” while the North implies it’s a temporary “suspension.”

Some US officials estimate the North’s plutonium extraction could be as high as 50kg, enough for producing a dozen atomic bombs. Given the North’s history of deceit, few officials in Seoul and Washington are confident Pyongyang will be forthcoming on the plutonium or its storage sites. Nor is anyone sure about Pyongyang coming clean on its uranium-enrichment project, which first came to light when a secret shipment of centrifuges by Pakistani scientist Abdul Qadeer Khan was revealed. Indeed, the North flatly denies having a uranium-based bomb plan, despite outside evidence. Is Pyongyang ready to open itself to IAEA inspectors on this as well as on plutonium project? The answer is: unlikely.

While these doubts will likely bedevil future talks, North Korea’s continuing economic meltdown appears too serious even for Kim to ignore. For years now, he has relied on shipments of fertilizer and rice from the South to survive. International donor agencies have issued a new warning of imminent starvation – especially among children and the elderly –without outside aid. With China cutting back on its aid in recent months and South Korea having suspended most rice shipments until there is nuclear progress, Kim is said to be unable to hold on much longer. The talks and reactor shutdown are literally a life line.

The February 13 agreement opens up a whole new road to survival for his embattled regime. For a starter, Pyongyang can expect a huge economic aid package: Within weeks of the Yongbyon inspection and reactor shutdown, South Korea will begin providing the first shipments of 50,000 tonnes of heavy fuel oil as promised under the Beijing accord.

In parallel, Seoul will be sending 400,000 tons of previously suspended rice aid as part of its annual economic aid while a separate shipment of 15,000 tons of rice will be sent for emergency relief for the latest flood victims. Another 50,000 tons of maize and other grains will be provided through the World Food Program, according to an announcement last week.

Between the shutting down of Yongbyon and the verifiable abandonment of all its nuclear programs, the US, Japan, China and Russia are committed to delivering energy and other forms of aid equivalent to 950,000 tons of heavy fuel oil over the remaining period of the engagement process. The process will involve not only the North giving up its nuclear option, but also starting talks for diplomatic recognition by all major powers including the United States, Japan and South Korea.

In short, the agreement provides a life-saving package for the Kim regime. The big question is what will follow from this. Will Kim take this as a starting point for real reform and opening, or will he clam up to maintain his absolute control?

Growing rumors of his bad health –reports from Tokyo say he recently underwent heart bypass surgery – have triggered renewed speculation he may be grooming one of his three sons to take over, in a repeat performance of his own dynastic succession. Whether the military establishment will accept another Kim in power, particularly during a period of tricky denuclearization, is not at all certain at this stage.

But the all-important question of how seriously the North is ready to exchange its nuclear program for an economic survival package from the five surrounding nations will be tested in the coming weeks and months. At stake is Kim’s own political future.