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Update No: 051 - (25/07/07)

Yongbyon gone?
The welcome progress in June (after earlier delays) on the North Korean nuclear issue continued into July. International Atomic Energy Agency (IAEA) inspectors, expelled in 2002, returned to verify the closure of the Yongbyon nuclear site. The Six Party Talks (6PT) resumed in Beijing, and proceeded amicably. Yet they set no precise timelines for the next phase in this lengthy process, which may well throw up further difficulties. Quite separately, a major investment by an Egyptian firm in Pyongyang's most modern cement works is a straw in the wind, raising hopes that other companies may now judge it safe to invest in North Korea and begin the long overdue task of economic reconstruction.

The IAEA returns
As its website records, the IAEA has a long and tortuous history with North Korea. The Yongbyon site aroused suspicion ever since the 1980s, and the early 1990s saw many a game of cat and mouse. Under the 1994 US-DPRK Agreed Framework (AF), the agency monitored the shutdown of Yongbyon's 5 megawatt reactor and other facilities - only to be expelled at end-2002 as a fresh crisis blew up (see Background). With Yongbyon back in operation, generating spent fuel for reprocessing into plutonium, four years later in October 2006 Kim Jong-il was in a position to test a small nuclear device - and he did.

In that sense resealing Yongbyon now is to lock the stable door when the horse has bolted already. North Korea's surprising cooperativeness may reflect this. Not only has this site done its job in making North Korea a nuclear power, but Yongbyon is ancient (1950s) graphite-moderated technology, similar to the UK's Windscale. Now in poor condition, its closure - this time, crucially, with disabling and dismantling set to follow - may be no great loss; especially if, as the US suspects, Pyongyang also has a separate covert nuclear programme based on a different technique, using highly enriched uranium (HEU).

A cordial 6PT
Even as IAEA inspectors confirmed the shutdown of Yongbyon's reactor on July 18 and four further facilities a day later, the six-party talks - both Koreas, the US, China, Japan and Russia - resumed in Beijing after a four month hiatus due to the Banco Delta Asia (BDA) affair (see Background). The atmosphere was cordial, with the two principals - Christopher Hill, the US assistant secretary of state for East Asia, and DPRK vice foreign minister Kim Kye-gwan - meeting bilaterally several times, including over lunch. 

Yet the meeting ended with no joint statement, much less the tight timelines that were so notable a feature of the 6PT agreement on February 13 (F13) - but which in the event slipped owing to the BDA affair. It was agreed that five working groups (WGs) created under F13, which have only met once so far, would convene again in August, followed by another 6PT round in September. Hill still professed optimism that the next stage - disabling Yongbyon, i.e. going beyond merely closing it - could be done this year.

The 3D problem
Further progress, as ever, depends on North Korea's attitude. Several potential problems may arise, which can be summed up as the three Ds: disable, dismantle, and declare.

The first two refer to Yongbyon. As in the usefully ambiguous phrase devised for IRA weapons to avoid any hint of surrender in the Northern Ireland peace process, the goal is for Yongbyon to be 'put beyond use' so it can never be switched on again, as fatefully it was in 2002. Hence this time Yongbyon's present, second closure is just a first step, with its disablement and eventual dismantlement as further stages yet to follow.

This raises two questions: what concrete actions are to count, especially as disablement; and what North Korea will get in return. The first question is in part a technical one for experts, as Chris Hill admitted. But like the second it also has a political dimension, with scope for Pyongyang to prevaricate if so minded. At the very least, as the BDA imbroglio demonstrated, North Korea may not budge an inch at any given stage unless and until its demands at that point are fully met. Similarly, not till 6,200 tons of heavy fuel oil (HFO) physically arrived - the first batch of 50,000 tons due under F13 - did Yongbyon actually close. The DPRK speaks of 'action for action', but in practice it likes others to move first.

For the next dismantlement phase F13 commits a further 950,000 tons, making a million in all. But with North Korea's ageing facilities only able to absorb 50,000 tons per month, the US hopes Pyongyang will agree to substitute other forms of aid - otherwise deliveries could drag on into 2009. That will need discussing, as will the precise modalities of what each side will do at each stage: how much disabling for how much HFO or other goodies.

Working groups have much to do
All this guarantees plenty of work for the 5 WGs. Their remits are denuclearization of the peninsula; normalization of North Korea's ties with the US and with Japan; economic and energy cooperation (aid, really) ; and a peace and security mechanism for northeast Asia. Quite how this will work in practice is unclear, since the modalities of the next phase will entail tight coordination between at least two WGs: those on denuclearization and aid.

The two WGs on diplomatic normalization have contrasting prospects. Washington, in its new pro-engagment mood and despite mutterings from Republican hawks, may move quite quickly towards removing North Korea from the State Department's list of nations regarded as sponsors of terrorism, as well as lifting the provisions of the Trading With the Enemy Act (TWEA) which has banned most bilateral trade for over half a century.

A standoff with Japan?
With Japan, by contrast, relations could hardly be worse. The Bush administration's shift to engaging Pyongyang has left Japan isolated as the last hardliner in the 6PT. Strangely fixated on the issue of long-past abductions - dreadful, to be sure; but one would imagine Kim Jong-il's missiles posed a more immediate threat - Tokyo is piling on the pressure. Since last year it has banned most trade with North Korea, going well beyond sanctions imposed by the UN Security Council (UNSC) last July and October after North Korea's long-range missile and nuclear tests, respectively. It is now preparing to seize the palatial headquarters of Chongryon - the organization of pro-North Koreans in Japan, so a kind of de facto DPRK embassy - over debt defaults by Chongryon-affiliated banks. 

Naturally Kim Jong-il is not amused. North Korea has queried Japan's right even to take part in the 6PT. On July 21, as he left Beijing for Pyongyang, Kim Kye-gwan warned of "catastrophe" if Japan carries on like this. Yet conceivably Tokyo might change its tune. As of late July there seemed a fair chance that the ruling Liberal Democratic Party (LDP) may lose upper house elections due on July 29. In that case Shinzo Abe, the floundering prime minister who has played up the abduction issue and other nationalist causes, might be forced from office. Any successor, one would hope, will review Japan's DPRK policy, which at present seems based more on emotion than any conception of long-term, future-oriented national interest. Otherwise the fear is that Pyongyang may play Japan as its next BDA, refusing to return to the 6PT unless Tokyo either withdraws or backs down.

They still want LWRs
In another calculated parting shot to the press at Beijing airport, Kim Kye-gwan reiterated the DPRK's longstanding demand to receive light water reactors (LWRs) as a reward for eventual full nuclear dismantlement. In the 1994 AF the US committed to build two such in return for Yongbyon's closure, and set up the Korea Peninsula Energy Development Organization (KEDO) consortium, funded mainly by South Korea and Japan. From 2003 the second North Korea nuclear crisis sounded KEDO's death-knell; its LWRs languish part-built at Kumho on the DPRK's east coast. F13 is silent on LWRs, but an earlier 6PT joint statement in September 2005 did agree (at Pyongyang's insistence) to discuss them "at an appropriate time". Yet the US is on record as opposing any supply of new LWRs, so here again there could be conflict - depending how far, or soon, the DPRK pushes this.

"Over the mountains are mountains", says a Korean proverb. With Mt. Disablement to be scaled first before the final Everest of Mt. Dismantlement, the LWR issue will probably be postponed for now. So may the climactic $64,000 question of asking Kim Jong-il to declare, much less give up, his nuclear weapons. Which brings us to the third and final D.

Nothing to declare?
F13 commits North Korea to provide "a complete declaration of all nuclear programmes …including plutonium extracted from used fuel rods." That raises at least two problems, one being whether this includes itemizing nuclear weapons at this stage. Kim Kye-gwan was studiedly enigmatic on this point after the latest 6PT, riposting to journalists: "What do you think?" Almost certainly this will be left until a much later stage.

Less easy to duck will be the highly enriched uranium (HEU) crux. It was US suspicions - based on revelations by Pakistan's rogue nuclear entrepreneur, Dr A Q Khan - that North Korea was violating the AF with a second, covert nuclear programme based on HEU which led to confrontation in 2002 and the present crisis since. Pyongyang denies pursuing HEU, much less having once confessed it as Washington claims. Yet the US has since admitted that it does not know how far along this activity had progressed.

Given the will, all this can be finessed. North Korea could declare some components, like tubes for centrifuges, without owning up to HEU as such. When Hill made his surprise first visit to Pyongyang in June, it was rumoured that the US might even offer quietly to buy off the HEU programme. But if Pyongyang decides to brazen it out and deny it all, the 6PT could be in trouble again.

Concrete faith, from Cairo
As so often the nuclear issue dominated the news, but at least one other key development must be mentioned. On July 16 Orascom Construction Industries (OCI) - a major global building firm, controlled by Egypt's leading business family, with reported revenues for 2006 of $2.8 billion - announced a $115 million investment to acquire 50% of Sangwon Cement from the state-owned Pyongyang Myongdang Trading Corporation. Sangwon is both North Korea's most modern cement plant, and the closest to the capital.

OCI will invest in the form of a capital increase, upgrading Sangwon's capacity (which it has long operated below) from 2.5 to 3 million tons per year. The facilities acquired also include limestone and gypsum quarries, a coal mine and a hydroelectric power station. Germany's KHD, which built the plant in the 1980s for $140 million - cash, in view of the DPRK's default record - is among three bidders now to rehabilitate it for OCI.

OCI is also exploring opportunities in the mining and power sectors, as well as a potential economic trade zone in northern North Korea. At Sangwon it claims to have negotiated a Western-style shareholders' agreement, with governance and technical control assurances - and even permission to bring in personnel from the US if necessary.

All this would be normal elsewhere in the world, but in North Korea it is a breakthrough. This may be the first confirmed, substantial, transparent, wholly commercial investment ever in the DPRK by a world-class firm with no ulterior geopolitical axe to grind - as is the case for Chinese and South Korean firms. Evidently, Orascom regards business and political conditions in North Korea as now ripe for market entry for a major joint venture. One can but hope they are right, and that where Egypt leads others will follow.

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