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Update No: 049 - (29/05/07)

Nothing much doing
After a busy April, May was a quiet month regarding North Korea. On the nuclear issue, despite assurances from Washington that a solution to the problem of DPRK funds tied up in the sanctioned Banco Delta Asia (BDA) of Macau was imminent, by late May this was still unresolved. Accordingly, North Korea's Yongbyon nuclear site remained open, six weeks after it was due to be closed under the February 13 six-party nuclear accord. 
Yet the US and other parties still seemed fairly unfazed by this delay - although South Korea delayed promised rice aid, due by end-May, until Yongbyon is actually shut.

Meanwhile the first trains in half a century ran between North and South Korea - albeit not far, and just once. Pyongyang named a veteran diplomat as its new foreign minister, while sources in Seoul claimed to detect changes in the North's murky power structure.

A US bank is asked to take North Korea's money
The BDA issue - for more detail and background, see previous Updates - dragged on for yet another month. In a new twist, it emerged that Wachovia, the fourth largest US bank, has been asked by Washington to accept transfer of the US$25 million in DPRK funds from BDA. Since the latter remains subject to US sanctions, Wachovia is reportedly (and understandably) not keen to do this unless it is guaranteed indemnity from any negative consequences. This may entail a further retreat by the US Treasury Department, already unhappy at having its hand forced by the State Department for the greater good of getting a hoped-for agreement on the nuclear issue.

Swisss doubts over counterfeiting
Meanwhile on May 21 a Swiss police report cast doubt on one of the central claims in the BDA affair, that North Korea has been counterfeiting US currency. According to the Bundeskriminalpolizei, who take a special interest in counterfeiting, North Korea's own currency is of such poor quality that it must be incapable of making high-grade so-called supernotes (fake $100 bills) on old printing presses dating back to the 1970s.

The US Secret Service said it stood by its charges. There is strong evidence linking North Korea to supernotes, as well as drug dealing and other crimes and financial misconduct. Yet the fact remains, as the Swiss also noted, that after an 18 month investigation the US Treasury Dept. has yet to make public its detailed accusations against Pyongyang. While this may be of less consequence now that Washington is busy trying to backpedal on the BDA issue, it all adds to the oddly shambolic air that this business has taken on.

First trains in half a century link North and South
Elsewhere, on May 17 the first trains to connect North and South Korea since the 1950-53 Korean War crossed the Demilitarized Zone (DMZ). Two trains of five coaches, each carrying 50 North Koreans and twice as many from the South, crossed the border for a brief journey: northward from Munsan in South Korea to Kaesong in the North on the Kyongui line near the west coast north of Seoul, and southbound from the North's Mount Kumgang resort along the Donghae east coast corridor.

The South's unification ministry (MOU) waxed lyrical, proclaiming in a headline on its website that "In Half a Century, the National Blood Vessel is Reconnected." Symbolic this certainly was, but the suture may only be temporary. This was just a one-off test run, delayed by over a year, on tracks which have been ready for two years. Parallel roads in each coridor daily take Southern managers to work in the Kaesong joint industrial zone just north of the DMZ, while Southern tourists are bussed to Mt Kumgang in thousands. (Needless to say, there is no matching flow of North Koreans heading South.)

The Northern authorities seem to regard the new roads with equanimity, so it is puzzling why they hesitate to allow trains. Military objections from the Korean People's Army (KPA) are surmised; yet the roads have already turned the front line into a partial front door, so it is uncertain why railways are seen as an additional threat. Regular crossborder services are thus still some way off, much less dreams of an "iron silk road" conveying Southern freight to Europe via the Trans-Siberian railway. That, or indeed passenger services from Seoul to Pyongyang and on to Beijing, would also entail modernizing the North's extensive yet decrepit and mainly single-track rail network; Russian surveys suggest this would cost at least US$3 billion. 

The South will keep pressing, not least because rail would be a far cheaper way to send rice and other aid than by ship as at present. Seoul is also slyly suggesting using the line for Northern workers to commute from Kaesong city to the eponymous zone; this would put the line into use, but without crossing the border. How soon the North lets real trains run regularly across the DMZ will be one touchstone of its wider readiness to open up.

For now, merchant shipping fills the gap. With less fanfare than the one-off trains, May 20 saw the first North Korean vessel in over half a century enter Pusan, the South's major port and second city. It left a day later with 50 empty containers, inaugurating a regular thrice monthly service, run by a Southern firm, between Pusan and Rajin: North Korea's most northeasterly port, close to the borders with Russia and China.

Inter-Korean military talks make little headway
North Korea's wider motives are ambiguous too. At inter-Korean talks between generals on May 8-11, whose main agenda (for Seoul) was to achieve a military guarantee for the train tests, the North insisted on raising the issue of the west coast maritime border: the Northern Limit Line (NLL), imposed unilaterally by the UN command after the Korean War and never formally recognized by Pyongyang. Yet the North's alternative line is a non-starter, since it ignores several Southern-controlled islands near the North's coast. 

Kim Jong-il may just be playing hard to get. At all events, the lack of a military guarantee is also holding up several other joint ventures earlier agreed in principle: fishing, flood prevention on the Imjin river, and extracting sand and gravel in the Han river estuary. All these are due to be raised again when the generals next meet, sometime in July.

No rice aid till Yongbyon is shut?
Before that, the 21st inter-Korean cabinet-level talks since the 2000 summit were due in Seoul from May 29 to June 1. On May 25 the South said the North will attend, despite criticism in Pyongyang of Seoul's decision to withhold promised aid of 400,000 tons of rice until the Yongbyon nuclear site is closed. Shipment had been due to start in May. On May 22 the ROK government approved a budget of US$170 million for this, plus another $80 million for raw materials for the North to make soap, footwear and clothing. 

While the latter is ostensibly linked to rather vague proposed mineral joint ventures in the North, its timing makes it in effect a payment for May 17's train test runs. If Pyongyang insists on being paid for every concession, this will slow progress and erode goodwill.

New foreign minister 
The past month brought both an overt personnel change in Pyongyang, and rumours of reorganization of the power structure behind the scenes. On May 18 North Korea finally named a new foreign minister - more than four months after the death from cancer on January 2 of Paek Nam-sun, who had held the post since 1998. His successor in Pak Ui-chun, aged 75, who served as ambassador in Moscow from 1998 to 2006. 

Such delay is not unusual. In any case the real clout in foreign affairs lies with two of Paek and now Pak's nominal deputies: senior vice foreign minister Kang Sok-ju, who negotiated the 1994 nuclear Agreed Framework with the US, and Kim Kye-gwan, currently similarly engaged in the six-party talks.

On the same day, so perhaps relatedly, North Korea for the first time submitted a defence white paper to the ASEAN Regional Forum (ARF). It joined ARF in 2000, but has not hitherto been an active participant. This may presage a more active multilateralism under a new foreign minister.

A boost for the NDC
Seoul press reports, citing intelligence sources, claimed in May that the North's National Defence Commission (NDC) has been reorganized and is gaining clout. The NDC is the DPRK's highest executive organ of state. Formerly under the Cabinet, since 1998 it has been separate and now outranks the latter, whose remit is purely civilian. Since the late Kim Il-sung remains 'eternal president' despite being dead since 1994, Kim Jong-il runs North Korea as chairman of the NDC. Touching all the bases, he is also secretary general of the nominally ruling Workers Party of Korea (WPK) and commander in chief of the Korean Peoples Army (KPA), the armed forces.

Hitherto the NDC had been a committee of persons whose chief posts lie elsewhere in the hierarchy, mainly in the KPA. But now, if these reports are correct, it has begun to acquire a full-time staff at all levels; becoming a new direct instrument for Kim Jong-il's rule, and an emerging power centre in its own right. Two key figures here are generals Hyon Chol-hae, former vice director of the KPA General Political Bureau, who moved to the post of NDC vice director in 2003; and Ri Myong-su: the KPA's former operations director, recently appointed to the NDC. Both men are close to the dear leader, having regularly accompanied him on his various outings to inspect military and other units over the past decade.

If the NDC has indeed gained power, this has several implications. First, personally Hyon and Ri are names to watch at a time when North Korea's most senior military figure and de facto overall no 2, vice marshal Jo Myong-rok, is thought to be seriously ill. Second, the rise of the NDC looks like a further blow to the WPK, which under Kim Jong-il's odd mix of an avowed military-first policy and partial market reforms has lost power at the centre to both the KPA and the Cabinet; the latter now having more autonomy to run the economy. In almost 13 years of Kim Jong-il's rule no changes to the WPK Politburo have been announced, other than by the ineluctable march of mortality as the old guard die off. Nor is it clear whether the WPK Central Committee meets regularly, or indeed at all.

Third, beefing up the NDC may also regularize to a degree Kim Jong-il's highly personal rule, hitherto conducted mainly via personal ties to a kitchen cabinet of cronies close to him whose formal rank may belie their real clout- as when the foreign minister (at least the previous one) wields less real influence than two of his nominal deputies.

Finally, all this has at least an implicit bearing on the eventual succession to Kim Jong-il: an area where there is no visible movement. Absent any designation of a successor, the suggestion is that if anything happened to the dear leader, the NDC would be in charge; thus reverting to a more orthodox collective leadership, at least in the first instance.

More missiles
As we went to press, Japanese agency reports on May 25 claimed that North Korea that day fired several short-range missiles towards what Koreans call the East Sea, otherwise known as the Sea of Japan. Pending further details, the key word here is short-range. It is neither unusual nor especially threatening for Pyongyang to test small sea-to-sea missiles - as opposed to the larger kind whose launch last July brought widespread condemnation, including from the UN Security Council. But with February's first-stage nuclear accord starting to look frayed, Yongbyon still running and the BDA saga dragging on, firing off a few missiles hardly seemed helpful - if calculated as ever to keep the world on its toes.

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