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Update No: 044 - (20/12/06)

Six-party talks: is a breakthrough possible?
The main event regarding North Korea in December was the resumption of six-party talks - both Koreas, the US, China, Japan and Russia - in Beijing on December 18, after a hiatus of over a year. These had just begun as NewNations went to press, but first indications were that no early breakthrough could be expected. So this month's update will be as much prospective as retrospective: perhaps appropriately, since the end of a year gives an opportunity both to take stock and to try to predict what 2007 has in store. On neither count is there much ground for optimism, unfortunately.

The year North Korea went nuclear
2006 will go down in history - that phrase is no exaggeration, alas - as the year when North Korea went nuclear. Twice within three months - with missile launches in July, followed by the apparent and claimed testing of a small nuclear device on October 9 - Pyongyang thumbed its nose at the international community: brushing off unanimous UN Security Council (UNSC) resolutions and limited sanctions which followed each.

Bush must bear much blame
By definition, this worst-case outcome revealed the failure of all interlocutors' efforts to prevent it. Again, historians will debate where the brunt of blame should be borne. Much, surely, must lie with a US administration which in almost six years has failed either to prioritize North Korea - having bigger fish to fry further west in Asia, most of which seem to be sizzling out of control - or even to agree a single coherent policy approach, being riven with internal dissent between would-be engagers and those who oppose talking to a regime they deem evil: a fatefully absurd category mistake, which Henry Kissinger would never have made. The departure of two of the main hawks - defence secretary Donald Rumsfeld, and John Bolton, the US envoy to the UN - has now tilted the balance of forces in Washington towards dialogue; as has the capture of both houses of Congress by the Democrats. But it is late in the day, and Kim Jong-il may choose to wait out George W Bush's final two years in the hope that from 2009 a future Democrat president - another Clinton, perhaps? - may prove more amenable.

But so must sunshine
But if Bush must bear much of the blame - for substituting posturing for policy, and for lack of any consistent focus - then the very different approach favoured in Seoul, Beijing and Moscow has equally and manifestly failed. When South Korea's then president Kim Dae-jung inaugurated his 'sunshine' policy of avowedly asymmetrical outreach to the North, back in 1998, this could be justified as a 'loss-leader' approach: initial generosity, without demanding immediate reciprocity, so as to build a climate of trust after half a centtury of bitter hostility. Yet today, almost a decade on, this is surely due for re-evaluation. As critics feared, Kim Jong-il simply took the cash - and far too often it was indeed cash, eminently fungible and some of it under the table - and carried on regardless, not least with his nuclear programme. Yet even now, facing a nuclear North which has yielded not an inch on any security issue, Kim's successor Roh Moo-hyun is loth to give up or even suspend joint projects that fund Pyongyang's coffers: tourism at Mt Kumgang, and manufacturing in the Kaesong border zone.

'Axis of carrot': too complacent by half
With China and Russia also preferring carrot to stick, the upshot is that the other five in the six-party talks have always been divided among themselves: a split which Kim Jong-il has not failed to exploit, as adeptly as his late father Kim Il-sung milked the Sino-Soviet dispute in the 1960s and 1970s to get aid from both sides. Although the DPRK's going nuclear was a rude shock, even this has not jolted what to critics looks a complacent 'axis of carrot.' The UNSC resolutions may have been unanimous, but this meant watering down their wording from what the US and an ever tougher Japan, under its new prime minister Shinzo Abe, had wanted. Likewise on enforcing UNSC sanctions, even now the ROK demurs from fully backing its US ally's Proliferation Security Initiative (PSI), with its provision for searches of DPRK vessels on the high seas. Like China, South Korea still fears that provoking the North or backing it into a corner could unleash instability or indeed full-scale conflict on the peninsula. And in Seoul as in Beijing, that is an even worse scenario than a nuclear North Korea.

Importantly, fear in the South of a second Korean War is not confined to the current centre-left government and an increasingly anti-American younger generation. With every prospect that presidential elections in December 2007 will return the right-wing opposition Grand National Party (GNP) to power, one might think this would portend a tougher line towards the North and pari passu less friction with Washington. While a GNP administration would certainly demand more reciprocity from Pyongyang - which excoriates the party as flunkeys and traitors, and so may cold-shoulder it in any case - the party remains committed to engagement. It is telling that almost no one in South Korea wants to go back to the old days of gut hostility and total lack of contact.

Home for Christmas?
Where does all this leave the newly resumed six party talks? Christopher Hill, who as assistant secretary of state for east Asia leads the US delegation - he is also expected to take on the new role, mandated by Congress, of policy coordinator for North Korea - told reporters that he hopes to be home for Christmas. If he is serious, then barring a miracle that means this first week of talks will either be truncated - like the last round, in November 2005 - or a mere formality and first statement of positions, recessing to reconvene more substantially in the new year. Other sources, however, suggested no cut-off date had been set, and the talks would continue for as long as necessary.

Kim's laundry list
Most expectations were low as the talks reopened; the more so after the chief DPRK delegate, vice foreign minister Kim Kye-gwan, failed to show for a planned bilateral meeting with Hill before the main session. When the full talks began, Kim presented a "laundry list" or (as some put it) a "department store" of wide-ranging demands. Full details were not immediately available, but this is not necessarily a bad thing. It is surely better to have all cards on the table from the outset, than for Pyongyang to suddenly play fresh jokers as has been its habit in the past. Also, a maximalist initial position may just be a ploy from which one can later retreat by making concessions.

That said, some of Pyongyang's positions are non-starters. To insist (so it is said) on the lifting of all UN sanctions is clearly beyond the remit of the six-party forum, even though this includes three of the UNSC's five permanent members. Another reported demand, for a new light water reactor (LWR) and interim energy support, sounds like a rerun of the 1994 US-DPRK Agreed Framework (AF) under Clinton, and the KEDO (Korean Peninsula Energy Development Organization) consortium created thereby to build two new LWRs: a project officially wound up earlier this year, although KEDO itself remains nominally in existence (www.kedo.org). Since Republicans were from the start vocal critics of the AF, it strains credulity to imagine even a more chastened George W Bush following such a path; in effect admitting Clinton was right all along.

More than nukes alone
Crucial as the nuclear issue is, it is not and has never been the only concern raised by North Korea's stance and behaviour. How to prioritize among the many bad things that Pyongyang does - which, besides its manifold security threats, include criminal activities and gross human rights abuses - has always been a further problem for its interlocutors. So while a grand package solution to the North Korea question overall might seem impossibly ambitious, this is arguably the right approach. Otherwise, even if the nuclear issue were settled (a huge if), this would just be one tick off a very long list. In the security sphere alone, never mind crime or human rights, one would next move on to missiles - hardly a separate matter. Then there are the DPRK's chemical and biological weapons (CBW), never yet been formally discussed; and so on and on.

An easing of financial sanctions?
Wittingly or not, the US has ensured that at least one non-nuclear issue would appear on the six-party agenda. In September 2005, just as an earlier round of six-party talks had painfully reached an agreement of principles, the US Treasury department chose to target a Macao bank, Banco Delta Asia (BDA), which was North Korea's principal conduit to the global financial system. The squeals from Pyongyang were predictable, as was its refusal to return to the hexagonal table until these sanctions are lifted.

The initial US stance, that this is a wholly separate matter from the nuclear issue, has proved hard to sustain. It now forms part of a wider paradox. Since North Korea's nuclear test prompted a UNSC resolution and sanctions, the US and Japan have been the two states keenest to be seen to be punishing Pyongyang. Yet in reverting to six-party mode, where negotiation and an ultimate agreement are the name of the game, there obviously has to be give and take. No regime, much less one as prickly as the DPRK, is simply going to give up its nuclear programme without some quid pro quo.

Unfreezing legitimate business?
Hence in over a month of shuttle diplomacy in various permutations (including what in all but name were bilateral talks between Hill and Kim Kye-gwan in Beijing) since it was announced in early November that North Korea would return to the six-party talks, speculation has been rife as to what kind of deal might in principle be done. Two ideas have been canvassed, by no means mutually exclusive.

One is that the sanctions on Banco Delta Asia might be partly lifted, so legitimate business could continue. The 50-odd DPRK accounts frozen there are worth some US$24 million in total: not a huge amount, but evidently important to Pyongyang. Moreover, some of this is foreign money. According to the Financial Times, $7 million belongs to Daedong Credit Bank: a British-owned joint venture which in the first nine months of 2005 (before the freeze) transmitted $49.26 million via BDA. Almost half of this $7 million in turn belongs to British American Tobacco (BAT), which has an initially unpublicized joint venture cigarette plant in Pyongyang.

Washington is slow with proof
Again according to the FT, Daedong's British owners have sent copies of its financial records, including details of remittances through BDA, to the US State and Treasury departments to show that all monies were legitimately earned. To their chagrin and to analysts' perplexity, evn after 16 months Washington has yet to produce a report or publish its evidence for accusing BDA (among other things) of being a prime money-laundering concern. Moreover, while these issues are due to be discussed in a working group on the edge of the six-party talks, the Treasury under-secretary in charge of the probe, Stuart Levey, is not himself attending the meeting. On December 11 Levey was quoted as saying - not for the first time - that the global community should block all financial activities by rogue states, whether "seemingly legitimate or illicit." That will surely be read in Pyongyang as pouring cold water on prospects of a resolution.

Gold, too
Complicating matters is fresh evidence that BDA was an even more important conduit for the DPRK's finances than had been thought. In an October 18 filing by its lawyers to the US Treasury Department, reported in the press in December, the bank admitted having bought "a large share" of North Korea's gold bullion in recent years. A Macau magazine quantified this as 9.2 tonnes in the three years to September 2005, earning US$120 million for Pyongyang. While there was nothing illegal in this per se, BDA's lawyers admitted that "money could have been laundered" - but said there was no evidence the bank knew this, "nor that it facilitated any criminal activities;" although it admitted paying "insufficient attention to maintaining its own books."

Blame the tech
BDA also admitted providing services to the DPRK's Tanchon Commercial Bank until just before the September 2005 suspension. The US had blacklisted Tanchon three months earlier, calling it "the main North Korean financial agent for sales of conventional arms, ballistic missiles" and related goods. BDA blamed this oversight on outdated technology. Be that as it may, the remark by Levey quoted above implies that those in Washington who believe they have found a smoking gun at BDA may be loth to take the heat off Pyongyang now, even for the larger goal of a nuclear deal.

A peace treaty, at last?
The wider suggestion, as indicated earlier, is that the US and other interlocutors might dangle further incentives for Kim Jong-il. From Washington this includes the prospect of diplomatic relations - but only after nuclear disarmament. (Over a decade ago the AF already envisaged an exchange of liaison offices, which never happened due to hesitations on both sides.)

A bolder suggestion is that the US might offer the DPRK what it has long sought: a formal peace treaty to end the 1950-53 Korean War, technically still ongoing (there was only an armistice). Startlingly, the right-wing Seoul daily Chosun Ilbo reported George W Bush as telling Roh Moo-hyun at the APEC summit in Hanoi in November that he was ready to sign an agreement with Kim Jong-il, if the dear leader dismantles his nuclear programme. In the past Bush has called Kim a "pygmy", so the idea of them shaking hands - or even in the same room - would be a U-turn indeed.

North Korea demands nuclear acceptance
These wider issues aside, for some - especially Japan - it sticks in the craw even to accept October's fait accompli and recognize North Korea formally as the nuclear power which, of course, it defiantly declared itself to be in the six-party talks' opening session; even threatening to increase its nuclear deterrent if its demands are not met. All in all, it is hard to have hopes of a swift or positive outcome in Beijing. Yet North Korea is full of surprises, so at the season of peace and goodwill one lives in hope.

The bigger picture
It would be wrong, however, to conclude without a glance at wider issues. As North Koreans shiver through yet another bitter winter, with less food in the pipeline due to curbs placed on the UN World Food Programme (WFP) and Seoul's withholding of its usual 500,000 tonnes of rice after last July's missile tests, it would be unwise to assume their hearts are all necessarily warmed by their rulers' glow of pride in having joined the nuclear club; nor that they will indefinitely accept, as most still seem to, the official propaganda that all their privations are to be blamed on US imperialism.

What goes for the grassroots applies equally in the palace. Next February Kim Jong-il will turn 65 (he may really be 66). Reports suggest his health is not what it was, yet no successor has been designated among several sons and others said to be vying for this crown. If the dear leader dropped dead tomorrow, all bets for North Korea would be off - nukes or no nukes. One good thing about October's nuclear test will be if it has jolted Beijing into a position where it might discuss with Washington and Seoul (secretly, of course) contingency plans for such a scenario. North Korea after Kim Jong-il will be chaotic enough as it is without great power rivalries being fought out on the peninsula once more, as they fatefully were a century ago when Korea became a Japanese colony - and again in 1945 when the peninsula was divided.

The North Korea endgame draws inexorably nearer, though no one yet knows how or when it will come. Nuclear weapons may buy Kim Jong-il time and afford him a little extra protection and bargaining power. But to more fundamental questions of regime and even state survival in the long term, they are no answer. If the dear leader is smart enough to grasp that, the latest round of six-party talks might yet bear fruit after all.

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