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In-depth Business Intelligence
Books on North Korea
REPUBLICAN REFERENCE
Area (sq.km)
120,540
Population
22,224,195 (July 2002 est.)
Capital
Pyongyang
Currency
North Korean won (KPW)
Leader
Kim Jong-il
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Update No: 027 - (27/07/05)
Six-party talks resume
A return to cautious optimism regarding the North Korean crisis, first seen
in June with the revival and planned expansion of inter-Korean ties after a
hiatus of almost a year, continued in July with the welcome resumption of
six-party talks - both Koreas, the US, China, Japan and Russia - on the North
Korean nuclear issue, after an even longer gap of 13 months. On July 9 the DPRK
announced its return to the hexagonal table, and the fourth round of talks
formally began in Beijing on July 26; they are ongoing at the time of writing.
While no one expects swift or easy progress, a new mood of flexibility on all
sides offers hope.
Seminar in New York, dinner in Beijing
This resurrection of a forum some had begun to fear was moribund began with
a nominally unofficial academic seminar in New York on June 30. A visa was
granted to Ri Gun, head of the DPRK foreign ministry's US department, who took
the opportunity for talks with the US special envoy for negotiations with North
Korea, Joseph DeTrani. Though nothing was announced at the time, it seems that
the two sides took each other's measure and agreed in principle to resume the
six-party talks.
Barely a week later, the North Korean and US delegation heads to the six-party
talks - vice foreign minister Kim Kye-gwan, and assistant secretary of state for
east Asia Christopher Hill - had a secret dinner in Beijing on July 9, hosted by
the Chinese government. Over steak and cheesecake, they agreed to relaunch the
six-party process later that month. Just hours later Pyongyang interrupted its
broadcasts with the news, preempting a formal joint announcement the next day.
That such an informal and initially covert meeting could be held at all is
itself encouraging. Hill's predecessor, James Kelly, was never allowed such
leeway to socialize and sound out North Korea in an informal context. The
impression is that Condoleezza Rice, the secretary of state, has been able to
use her closeness to President Bush to argue for a new flexibility, at least in
style; overruling any objections from the Pentagon or the vice-president's
office, which in the past have monitored, restricted, vetoed and even sabotaged
efforts to engage.
Besides facilitating the Kim-Hill meeting, China has been more widely busy
resuscitating a process where it has invested much time and face. A senior state
councillor, Tang Jiaxuan, visited Pyongyang from July 12-14 as a special envoy
of President Hu Jintao. He met Kim Jong-il, who reaffirmed the denuclearisation
of the peninsula as the wish of his late father Kim Il-sung. In North Korean
parlance, to put the matter thus is an encouragingly strong personal commitment
by the dear leader. A state visit by Hu Jintao may follow later this year; North
Korea's return to the six-party process was reportedly a precondition of this.
A pair of curveballs
Lest anyone get too excited, North Korea characteristically bowled a couple
of googlies on the eve of the talks. On July 23rd its government paper Minju
Joson said it "feels no need to sit face-to-face with Japan," which it
described as "a black-hearted filibuster." The same day the Korean
Central News Agency (KCNA) reported that "indignation meetings" were
held throughout the country, "resounding with yelling" anti-Japanese
sentiments. As ever, the bone of contention (all too literally) here is about
the remains of one of several kidnap victim returned last December, which Tokyo
claims tests have shown are false; as well as the wider abductions issue, where
Japan believes Pyongyang has yet to come fully clean.
This hint that North Korea might boycott the six-party talks - in the past it
has called for Japan to be expelled from this forum - was not carried through.
However, Kim Kye-gwan ostentatiously ignored the Japanese delegate's opening
speech, with his eyes closed. For its part, South Korea too urged Tokyo not to
press the abductions issue in this context and risk jeopardizing progress on the
nuclear issue. Whatever the outcome, this is a reminder of two important general
points: the nuclear issue is just one of many worries emanating from the DPRK,
whose various interlocutors are divided on how to treat and prioritize these
threats.
Pyongyang's other curveball was to call on July 22 for a formal peace to replace
the 1953 Armistice. (No peace treaty ended the 1950-53 Korean War, so
theoretically a state of war continues.) Although many foreign media used the
word treaty, KCNA's translation of the foreign ministry statement spoke only of
a "peace mechanism." What exactly North Korea intends by this may
become clearer as the talks proceed. It could be a spoiling move, meant to
exclude South Korea and resurrect old demands for a US troop withdrawal. On the
other hand, the idea of a comprehensive rather than piecemeal settlement of all
the outstanding security and related issues on the peninsula, though very
ambitious, also has its attractions.
Human rights ignored
Meanwhile, to general relief, the DPRK chose to ignore another matter which
some feared might jeopardize the six-party talks. On July 19 a large conference
in Washington on North Korean human rights strongly denounced its appalling
record and Kim Jong-il's regime; it also criticized South Korea and China for
aiding and abetting this. While nominally run by an NGO, Freedom House, this
meeting was funded by the North Korea Human Rights Act (NKHRA) passed by
Congress last year. Although the NKHRA aroused predictable ire in Pyongyang,
fears that the conference would do the same have not so far been fulfilled.
In signing the Act into law, President Bush explicitly rejected the legislative
arm purporting to dictate the conduct of foreign policy; so its mandate to raise
human rights at all meetings with the DPRK looks likely to be ignored, at least
for now. Yet on June 13, just three days after receiving South Korea's President
Roh Moo-hyun on a brief visit, Mr Bush welcomed to the White House Kang
Chol-hwan, a North Korean defector and author of a harrowing memoir on his
decade in North Korea's gulag (starting at the age of 9). That was noticed in
Pyongyang, which denounced Kang as "human trash." While North Korea's
human rights abuses are indeed appalling, again the issue is strategy, diplomacy
and priorities. Throwing the book at Pyongyang on all counts simultaneously will
not produce results on any front.
Adding to an air of cautious optimism on the eve of the renewed six-party talks,
most of the delegations arrived in Beijing the previous weekend, and many took
the opportunity to hold informal bilateral talks in advance of the main meeting.
North Korea's Kim Kye-gwan thus met separately both with the US's Christopher
Hill (again) and the South Korean deputy foreign minister Song Min-soon, among
others. All this suggests seriousness of purpose - as does the unusual fact that
no end-date for the talks has been set.
Hopes of a Libyan solution
In terms of desired outcomes, for the other participants the ideal would be
if Kim Jong-il were prepared to emulate the Libyan leader, Colonel Muammar
Qadhafi; agreeing to give up not only any nuclear weapons but also other
suspected weapons of mass destruction (WMD) such as chemical and biological
weapons (CBW), in exchange for large-scale aid and diplomatic recognition.
Unfortunately there seems little prospect of this. North Korea explicitly
rejects the comparison, for one thing; and has no resource comparable to Libya's
oil which it can parlay. CBW and other concerns are not even on the six-party
agenda, so far. A further stumbling block is that North Korea, while openly
boasting of a plutonium-based nuclear deterrent, still denies that it also has a
second, covert nuclear programme based on highly enriched uranium (HEU); it
being this charge by the US which led to the current second North Korean nuclear
crisis almost three years ago.
Another dilemma is to agree on who must move first and how far. The US may be
easing, if only tactically, its mantra of CVID (complete, verified, irreversible
disarmament) from an immediate demand to the ultimate goal. North Korea says
that it will formally respond this time to a plan put forward by the US a year
ago, which despite being detailed and phased is seen by some around the table as
still unrealistically demanding too much too soon.
A further question is what the scope of the talks should be. Their avowed focus
is nuclear, yet the Libyan exemplar suggests the need to deal with WMD of all
kinds. This in turn has obvious links to another issue: missile programmes,
where the US in the Clinton era also sought a deal. Beyond this, North Korea is
seen as raising a wide range of further concerns. Militarily, it has vast
conventional and special forces offensively deployed, and remains on the US list
of nations supporting terrorism (albeit for nothing recent: returning some
ageing Japanese hijackers might suffice to get it off). More broadly, it is
accused of crimes such as past abductions and ongoing counterfeiting and drug
trafficking; while its dire human rights record and refugee flows into China are
yet another bone of contention. At some point all this must go on the table
somewhere; yet how soon or on what terms is far from clear.
Another crux is the attitude of the remaining four parties, besides the two
principals. The US's initial hope, never fulfilled, that all the other five
would unite to press North Korea is even less plausible now, given extraneous
tensions that have arisen between Japan and both China and South Korea. The
latter two, with Russia, may continue to form an "axis of carrot,"
opposing the exercise of too much pressure on North Korea. South Korea's own
sudden reflorescence and planned expansion of relations with the North could
cause tensions with the US. Japan, by contrast, has its own reasons to take a
relatively harder line.
If following Libya is a best-case scenario, then the worst case would be any
evidence of supplying nuclear or other WMD materiel directly or indirectly to
terrorist groups like al-Qaeda. For the US this would surely constitute the
otherwise elusive 'red line,' and have very serious consequences. Another worst
case is if North Korea takes Pakistan or India as exemplars: declaring itself a
nuclear power, outside the Nuclear Non-Proliferation Treaty (NPT) which it left
in 2003, and expecting others to treat this as a fait accompli. Although quite
possibly this has been the de facto situation for a decade or so, it seems
inconceivable that the US or indeed China could formally accept this. While one
hopes that Kim Jong-il is sincere in now declaring that denuclearisation of the
peninsula is his goal (and his father's before him), North Korean statements
earlier this year, if taken at face value, declare both the right and the
intention to have and to keep a nuclear deterrent in any circumstances.
In all probability the latest round of six-party talks will not soon produce a
clear-cut result one way or the other. An acceptable immediate goal may be the
serious resumption of a prolonged process, provided this is not mere
prevarication by North Korea. Meanwhile China and South Korea will keep trying
to use trade and aid to open up the North and make it more amenable. With any
luck the nuclear issue, even if not soon resolved, will continue as at worst a
slow-burn underlying worry rather than a clear and present danger.
Inter-Korean ties forge ahead
Importantly, the six-party talks and nuclear issue are by no means the only
game in town. Inter-Korean relations, whose revival after nearly a year's formal
abeyance was the main theme of June's update, also continued to forge ahead in
July - at least in terms of contacts restored and new ones planned. Thus
inter-Korean ministerial talks in June were followed a fortnight later, also in
Seoul, by the 10th session of the inter-Korean Economic Cooperation Promotion
Committee (ECPC) on July 9-12. Each meeting produced a 12-point agreement; and
while there was some overlap, each contained much that is new. Taken together,
and if implemented - always a big if, given the past history of false dawns -
these and other fresh initiatives suggest that North Korea is at last ready to
do serious business with the South.
Admittedly, much of the ECPC statement involved recommitment to expedite matters
that had been previously agreed but not yet implemented. This includes actioning
no fewer than nine agreements already signed, covering topics like transit
procedures in the two special zones: Hyundai's tourist fief at Mt. Kumgang and
the Kaesong Industrial Zone (KIZ), just north of the Demilitarised Zone (DMZ)
near its western and eastern ends respectively. In practice few problems have
been reported on the ground, so this may be a paper formality.
The ECPC also resolved to expedite the KIZ as such; committing to
"swiftly" building the infrastructure - electric power, communications
and water - for the first phase (of three), and to have factories for all 15
Southern firms in the present pilot phase ready by the end of this year. So far
just three are operational. On July 18 South Korea said it will soon select the
next 25 firms to be tenants of the zone, reportedly from hundreds of applicants.
The pilot area covers 92,400 sq m, and the first tranche of the main zone is
scarcely larger, at 165,000 sq m. The full first phase, slated for completion in
2007, will extend to 3.3 sq km. With two further stages of expansion due by
2012, the eventual complete zone will occupy a substantial 66 sq km. It was also
agreed to open a new office for inter-Korean economic cooperation consultation
in the KIZ; enabling enterprises from North and South to meet, negotiate and
sign deals, without the current inconvenience for both sides of heading to a
Chinese venue such as Beijing, Dandong or Shenyang for this purpose. A joint
preparation team will be formed, with technical discussions due to begin in
early September.
[Not for the first time, it was agreed to share information and conduct joint
surveys of the Imjin river, which flows from North to South. The South fears
that unexpected discharges from Northern dams, both on the Imjin and the
separate Imnam dam near Mt. Kumgang on the upper Han river, may exacerbate
summer flooding south of the DMZ. The North has now agreed to give notice of any
such discharges, as it has occasionally done before. The joint survey too has
been mooted before, but never actually happened; that will be the test. (In the
1980s South Korea feared that the Imnam dam was intended to flood Seoul; and so
built its own "Peace Dam" near the DMZ, at no little expense, to catch
any wall of water.)]
Now they're motoring
Cross-border road and rail links are another ongoing project, albeit at
variable speeds. New trans-DMZ highways now link both Kaesong and Mt Kumgang to
the South, and both are increasingly used: between January and April traffic
almost tripled from just under 4,000 to nearly 11,000 vehicles per month.
Hitherto North Korea had been oddly unready to baptize this reality with an
official opening ceremony. It has now agreed to this, but not set a date.
Parallel rail links in the same two corridors - Kyongui (Seoul-Sinuiju) in the
west, and Donghae (East Sea) - have proceeded more slowly. The ECPC resolved to
expedite this by "swiftly" completing boundary station buildings and
installation of technical equipment; followed by a joint roadbed survey in
August, trial train runs "around October," and an opening ceremony
"within this year" as soon as military security can be assured.
As with the roads, the key question is how soon these railways will actually be
used. The Kyongui line is physically ready now. In theory, trains could already
run from Pusan to Beijing (and on to Berlin), via Pyongyang; albeit not very
fast, until North Korea's whole decrepit track network gets an expensive and
long overdue upgrading. The exact physical status of the Donghae line is less
clear; the North had been slow to complete a substantial gap in the track. This
is a branch line of less economic significance, both in itself and in leading to
the stagnant Russian far east rather than dynamic China. In any case, the main
line from South Korea to Russia would involve relinking a third line northeast
from Seoul to Wonsan in the middle of the peninsula; but there seems to be no
suggestion of this.
Unless Kim Jong-il is ready for a 'big bang' opening, slow progress will remain
the norm. Even the fairly busy cross-border roads are limited and in effect
one-way. Authorized South Koreans can commute to Kaesong as workers, or to Mt.
Kumgang as tourists; but they may not proceed beyond these two enclaves, nor of
course can North Koreans visit the South (except a few official delegations to
meetings). The Korean Peoples' Army (KPA), already reportedly worried by the
trans-DMZ corridors, will raise security objections to further or faster
opening. Counteracting this is the lure of transit traffic, especially between
China and South Korea. North Korea could charge useful rent for this, or if
bolder boost development of the whole line of rail from Kaesong to Pyongyang and
on to Sinuiju. This clash between security and business priorities (or past and
future) will need settling politically.
[Another transport provision, marine this time, is that from August 15 Northern
merchant ships may pass through the Jeju strait between the eponymous
southwestern island province and the Southern mainland. This will shorten
sailing times from Nampo and other Northern west coast ports to Japan and to the
North's east coast. A meeting at Munsan in the South on August 8th-10th will
sort out the technical details. Four years ago, in June 2001, North Korean
vessels started cheekily taking this and other short cuts through Southern
waters without warning or permission. They went unmolested, by political order,
until the rising fury of Southern conservatives allowed a by now itching ROK
navy to fire warning shots.]
Both sides also agreed to exchange economic inspection teams in November. The
scope of these was not specified. When a DPRK team last came south, in 2002, it
included both Jang Song-thaek - a vice-director of the Central Committee of the
ruling Korean Worlers' Party (KWP), but more importantly Kim Jong-il's
brother-in-law and key confidant - and a then obscure chemical industry
minister, Pak Pong-ju. Whereas the former overslept (none of his compatriots
dared wake him), the latter impressed his hosts as well-informed and keen to
learn; regretting rhetorically that he lacked an extra pair of eyes to drink it
all in, as they toured chaebol plants and other business facilities. That trip
had consequences. A year later Pak was appointed North Korea's premier: now
closer to the dear leader and ranked higher than past holders of this post, he
is spearheading the North's radical - if so far dubiously effective - market
reforms. Jang, by contrast, was purged last year: by different accounts, either
for opposing opening, or for forming his own power base to push his adopted son
Kim Jang-hyun - in reality an illegitimate offspring of the late Kim Il-sung,
hence his claim - as a potential successor to Kim Jong-il and a rival to the
latter's own three warring sons.
Fishing, farming and investment
Besides expediting projects already ongoing, the two latest inter-Korean
agreements also envisage fresh or deeper cooperation in several new areas. The
ministerial talks agreed to set up new joint panels in both fishing and farming.
The ECPC bruited a third, for science and technology. Most excitingly, the ECPC
also agreed for South Korea to invest in North Korean minerals, in exchange for
supplying raw materials "urgently" needed for daily necessities. While
it is too soon yet to know what precise form all this will take, there is a real
sense of expansion and momentum. With working meetings already being arranged to
take each of these areas forward, for once this does seem to be more than just
talk.
Thus a first consultative meeting on fishing cooperation, held on July 25-27 in
Kaesong, agreed in principle to create a joint fishing zone in the West (Yellow)
Sea: an area which in the past has seen frequent summer clashes in the blue crab
fishing season, leading to fatal firefights in 1999 and 2002. Reflecting this,
precise details are to be worked out later, in military talks. One potential
stumbling-block is that the DPRK officially does not accept the Northern Limit
Line (NLL), the de facto maritime border between the two Koreas.
Separately, a new inter-Korean agricultural cooperation committee, at
vice-minister level, is to be set up under the ministerial talks rather than the
ECPC. This too was meant to start work in Kaesong in mid-July, but seems not to
have yet. Unlike the fishing panel, no hint was given of its scope. Presumably
the idea is not only to put food and fertiliser assistance on a regular footing,
but also to go beyond mere aid to promote long-term development and
rehabilitation. This has long been the DPRK's goal; as seen in the Agricultural
Recovery and Environmental Protection (AREP) project initiated by the United
Nations Development Programme (UNDP) in 1996, but virtually stillborn for lack
of funding. As North Korea's food shortage reflects both unsuitably mountainous
terrain and disastrous policies, it is not clear how the new committee will
proceed. For that matter, South Korean farmers too are globally uncompetitive
and threatened by market opening. The US expert Marcus Noland has argued that it
is not economically rational to grow food in any part of the peninsula.
The most recent and so far vaguest of the three proposed new joint panels is a
new clause in the ECPC agreement (it was not mentioned at the ministerial talks)
pledging cooperation in science and technology, and leading "later" to
a working-level consultative committee in this area. Concretely, this could mean
almost anything. Sensitive and dual-use technologies will doubtless be avoided,
since South Korea is a signatory to the Wassenaar arrangement; the US would also
look askance. The South's stem-cell pioneer, Hwang Woo-suk, has said he would
like to cooperate with Northern colleagues, who have cloned the odd rabbit.
Soap for coal
Encouragingly, the first clause of the ECPC agreement commits both Koreas to
cooperate "in a new manner by combining their … elements such as
resources, capital, technology, etc … to achieve balanced development of the
national economy." They will also explore ways gradually to expand such
cooperation. Specifically and first, the South will provide raw materials to
produce goods like clothing, footwear and soap which the North "urgently
needs" (in itself a rare candid admission that it lacks such basic
necessities). In return, the South will be allowed to invest in and export
Northern minerals such as "zinc, magnesite, apatite concentrates, coals,
etc." A meeting in Pyongyang in August will discuss details.
This could be the beginning of a long-overdue process. South Korea is now
streets ahead of the North in almost all fields, but minerals are one Northern
area of comparative advantage. Like everything else in North Korea, mines badly
need new investment to replace worn-out or outmoded facilities. Many coal mines
in particular have yet to recover from flooding up to a decade ago. South Korea
has moved away from coal as an energy source, but there should be markets in
China and indeed in the North's own power stations - which in turn may help
mitigate a chronic shortage of electricity.
Power play
That power shortage is also addressed by an offer of aid on a far larger
scale than any of the above proposals. Besides the two post-meeting 12-point
agreements, it has emerged that when the ROK unification minister Chung
Dong-young met Kim Jong-il in Pyongyang in June, he offered aid in seven fields
- energy, rivers, railways, harbours, tourism, farming and reforestation - which
could begin even while the nuclear issue remains unresolved. Two of these
(railways, tourism) are already happening, while two more (rivers, farming) are
now envisaged in the new inter-Korean agreements.
As for energy, hints in Seoul of much larger-scale plans - a "special
proposal" comparable to the US' post-1945 Marshall aid in Europe - were
finally unveiled in mid-July. Provided the nuclear dispute is settled, South
Korea is prepared to supply the North with an annual 2 million kilowatts of
electricity, starting from 2008 (because it would take that long to build
transmission and related facilities). This is about as much power again as North
Korea now produces; though its nominal capacity is 7.7m kW, actual generation is
thought to be less than 30% of this, due to the dilapidated state of both power
stations and transmission lines. South Korea, with a generating capacity seven
times greater, expects to have excess output of 5m-6m kW by 2008, even after
setting aside mandatory reserves of 17%.
This proposal, credited in Seoul with luring North Korea back to the six-party
talks, has the support of the Bush administration: presumably cleared on recent
visits to Washington by President Roh Moo-hyun and minister Chung. This
unexpected but essential endorsement may reflect not only a softening of US
tactics, but also the new plan's funding. South Korea says that it will find the
estimated cost of US$1.5bn from funds hitherto earmarked for the Korean
Peninsula Energy Development Organisation (KEDO) consortium. KEDO was building
two new light water reactors (LWRs) in Kumho in North Korea under the 1994
US-North Korea Agreed Framework (AF), until work was suspended in 2003 as the
current nuclear crisis unfolded. The Bush administration never liked the AF,
LWRs, or KEDO, all inherited from the Clinton era; but South Korea hitherto had
resisted moves to formally end KEDO. This new proposal, essentially of an
alternative non-nuclear power source (or rather power sourced outside North
Korea) looks like a tacit admission that KEDO has no future.
Not a done deal
Despite much excitement in Seoul, it would be premature to regard this as a
done deal. For a start, North Korea has yet to accept it. Urgent as the North's
needs are, and although the amount of power pledged is equivalent to what the
LWRs would have produced, Kim Jong-il may resist politically any formal bid to
kill off KEDO. It also seems very implausible that North Korea would accept
dependence on the South for so critical a resource. Ideological boasts of
self-reliance apart, neither Korea forgets that in 1947 - soon after partition,
when the boot was on the other foot: Northern hydroelectric plants built by
Japan supplied most of the peninsula's power - the North abruptly pulled the
plug, causing chaos in the South. North Korea is thus likely to counter-propose
that new plants be built on its own territory.
Also, by 2008 the conservative opposition Grand National Party
(GNP) may hold power of another kidney in Seoul. The GNP is divided on the
electricity plan, as it is over sunshine in general; putting it on the defensive
currently, to the satisfaction of the ruling Uri party. Kim Jong-il will surely
not become a hostage to such risk. (South Korea already pipes power to Southern
firms in the Kaesong zone, but that is both marginal and based on
self-interest.)
Besides political problems, there are technical ones. Sources within Kepco
(Korea Electric Power Co, the state-owned generator and distributor which would
have to implement this), have given contradictory opinions on its feasibility.
Blithe optimism seems less convincing than caution; especially given the
decrepit state of North Korea's grid, with perhaps 30% of power generated lost
in transmission. There may also be blowback risks in connecting two such diverse
systems, with little detail known about the Northern one: some in Kepco fear a
simultaneous or knock-on blackout, as seen in the US not long ago. This was also
KEDO's Achilles heel: in a project driven more by diplomacy than technology,
even if the LWRs were finished it would be unsafe to hook them up to the wider
Northern grid as it stood.
As with KEDO, the real significance of this may be more political and symbolic.
Just as the offer of LWRs - and interim heavy fuel oil (HFO), which the North
may demand as well - defused the first North Korean nuclear crisis a decade ago,
so this new proposal in turn may serve a valuable short-term diplomatic purpose
whether or not it comes to practical fruition. If KEDO's subsequent history and
likely eventual fate shows the pitfalls of such strategies, at least this time
there is a much better chance both that South Korea will provide wider aid, and
(in view of its recent change of attitude) that North Korea will respond
constructively.
In sum, as of late July the political weather on the peninsula looks sunnier
than would have seemed possible a few months ago. While the six-way talks may
not make quick progress, inter-Korean ties could conceivably be at an historic
turning-point; amid signs that North Korea is at last ready for serious and
sustained, as opposed to marginal and intermittent, cooperation with the South.
If so, the exciting prospect looms of business links in particular developing
towards the density and pragmatism which China and Taiwan have attained -
despite their continued political hostility and security concerns - in recent
years. This could mark the start of not only North Korea's economic revival,
little in evidence so far; but also the emergence of an integrated Northeast
Asian economic region, with North Korea in hub position - lying as it does
between South Korea, China and Russia. But we shall see.
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