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Update No: 050 - (27/06/07)

Back on track?
After a May which mainly marked time, June finally saw much-needed movement on the North Korean nuclear issue. The Banco Delta Asia (BDA) financial snafu was at long last resolved, with the return of some US$25m in DPRK accounts frozen at US insistence in the small Macau-based bank since 2005. A surprise flying visit to Pyongyang - his first ever - by the chief US negotiator, Christopher Hill, raised hopes of renewed momentum. 

On June 25 North Korea's foreign ministry declared that "the issue of de-freezing the [BDA] funds has been settled", and that it will "start implementing the February 13 [six-party] agreement". To that end, International Atomic Energy Agency (IAEA) inspectors were due in Pyongyang on June 26 to discuss closure of the Yongbyon reactor - which should have been shut down by April 14, but for the BDA problem. So June drew to a close in a mood of renewed optimism - but also warnings that the hard part lay ahead.

BDA: Kim Jong-il wins again
Space precludes a detailed account of every twist and turn in the BDA saga, but basically this was another win for Kim Jong-il. The US Treasury Dept (USTD) was sure (though it published no evidence) that at least some of the $25m was tainted: proceeds from money-laundering, drug trafficking or even counterfeiting. Yet it was forced to climb down when the State Department pulled rank, insisting that a nuclear deal trumped such concerns.

Typically, North Korea did not give an inch. It not only demanded and got the full $25m - some of which belonged not to the DPRK government, but to British investors in the joint venture Daedong Credit Bank, which had also got caught up in this - but insisted it be wired back via a foreign bank, to prove that Pyongyang was in good standing with the international financial system. That created a Catch-22. Since USTD has not revoked its designation of BDA - which still protests its innocence - as a primary money-laundering concern under Section 311 of the Patriot Act, banks elsewhere refused to deal with it for fear of incurring Washington's wrath. Various banks and jurisdictions - Wachovia Bank in the US, Italy, et al - were touted as possible intermediaries, only to fall by the wayside.

Russia to the rescue
Finally Russia rode to the rescue - ironically, considering the souring wider atmosphere between Moscow and the West. On June 15 Macau's economy and finance secretary (the Macau authorities took charge of BDA after its targeting by USTD, to prevent a run on it) confirmed that over US$20m from 52 DPRK-linked BDA accounts had been transferred to the US Federal Reserve Bank of New York. From thence it went to Russia's central bank, and then to a DPRK account in Far East Commercial Bank, a private Russian bank. 
Even here there was some last minute hitch in Moscow, whereupon North Korea warned that it would not receive the IAEA inspectors- who by then must have booked their plane tickets - unless it received all the money first. But in the event this was resolved.

So ended a bizarre episode, from which one hopes lessons will be learned. Besides not to make political or financial decisions without checking their technical feasibility, the main moral is the need for joined-up government, co-ordinated policy making, and prioritizing the numerous worries that North Korea raises. USTD's retreat was humiliating; it would surely have been better not to target BDA in the first place, or not just when the six-party nuclear talks (6PT) were getting somewhere. It remains unclear if USTD and State were simply out of sync - or whether Bush administration hawks deliberately pushed the BDA issue to undermine the 6PT and the pro-engagement camp. Either way, it was a mess.

Hill heads for Pyongyang
Since taking charge of the US 6PT team in 2005, the assistant secretary of state for east Asia, Chris Hill, has undertaken several rounds of tireless (but tiring) shuttle diplomacy between all the various capitals involved - Seoul, Beijing, Tokyo, Moscow - except one. That omission was remedied on June 21, when he landed in Pyongyang for a previously unannounced visit. Though brief, this was significant as the first high-level US delegate to North Korea since his predecessor Jim Kelly's ill-fated trip in October 2002. Then, the US charged its hosts with pursuing a second, covert nuclear programme based on highly enriched uranium (HEU), in defiance of the 1994 US-DPRK Agreed Framework (AF). 
This face-off led to the ongoing second North Korean nuclear crisis (see Background). 

Hill had long been keen to visit the lion in its lair, and had a standing invitation from the North Koreans. But in the curious and now crumbling logic of Bushthink, talking directly to your adversary was to be avoided - or at best a concession, to be kept as a reward for good behaviour. Yet even within a multilateral forum like the 6PT, a bilateral boost can help - as in January when Hill met his DPRK opposite number, vice foreign minster Kim Kye-gwan, in Berlin: an encounter which led to the Feb. 13 breakthrough agreement. Hill and Kim have developed a good personal rapport; they even compare notes on what pain-killers work best, to keep their strength up in sometimes gruelling schedules.

So nearly five years after Kelly's HEU confrontation, Hill by contrast was all sweetness and light. In Seoul next day, he described his talks with Kim and his boss, North Korea's recently appointed foreign minister Pak Ui-chun (a former ambassador to Moscow), as "very good". The DPRK's official Korean Central News Agency (KCNA) echoed this, calling the discussions "comprehensive and productive". KCNA added that "both sides agreed to examine the possibility of holding [the next] six-party talks in the first half of July" - an encouraging sign that North Korea will indeed fulfil its pledge to implement the Feb. 13 accord, now that it has its money back.

Obstacles ahead
A more cautious view is that Kim Jong-il could hardly not go through the motions of playing ball at this stage, but will have chances aplenty to drag his feet later on. Several aspects will require watching, the first being how the IAEA inspectors fare. In nuances of the Feb. 13 agreement which some fear may be lost on or unpalatable to North Korea, it may not mind shuttering Yongbyon - as was done under the AF during 1995-2003 - but could prove less keen to disable it or put it permanently beyond use. An alternative view is that this reactor is now decrepit and has done its job - generating enough plutonium for North Korea to get the bomb - so for the DPRK to give it up would be no big sacrifice.

Another obligation for North Korea is to provide a full account of its nuclear inventory - which raises HEU again. Pyongyang continues to deny doing this, while the US - though sure the DPRK bought related materials from Pakistan's A Q Khan - now admits it does not know how far along (let alone where) North Korea's HEU programme really is. If Kim Jong-il decides to brazen this one out and keep denying everything, that will put the US and other interlocutors in a spot. There are intriguing suggestions that the US may quietly offer to buy up the relevant materiel, without North Korea having to come clean.

Heart op for dear leader?
As ever the nuclear issue is not the totality of North Korea, and a few other events should be noted. Amid persistent rumours about Kim Jong-il's health - his appearances so far this year are down by half on 2006 - Japanese sources in June claimed that doctors from Berlin performed a heart bypass operation on him in mid-May. A German medical team did indeed visit Pyongyang - two were awarded DPRK honorary degrees; for services rendered? - but claims to have treated ordinary workers, both versions of course could be true;. A plausible variant is that their patient was indeed the dear leader, but they found him in quite good shape - with just one clogged artery. At all events Kim Jong-il was back in action by June 7.

Japan is left isolated
The new warming of US-DPRK ties was looked at askance in Tokyo. Japan is now alone in its hardline stance towards North Korea, based on prioritizing above all else demands for a full account of past kidnapping of Japanese citizens. While North Korea's acts were outrageous, realistically what Japan has already gained - a unique admission and apology by Kim Jong-il to Japan's former prime minister, Junichiro Koizumi, and the return of five surviving victims - may be the best that can be hoped for in an imperfect world.

Playing on public anger on this issue - justified, yet fanned by the same rightist forces who still laud Japan's pre-1945 record in the region, and revise school history textbooks accordingly - helped propel Japan's current premier, Shinzo Abe, to power. But in office Abe has proved a disappointment, and may lose his job if his Liberal Democratic Party (LDP) fares as badly as polls predict in elections at the end of July. His successor may ponder whether isolation in the 6PT is wise, and if North Korea's nuclear and especially missile threats are not more important to Japan than abductions which are now history.

Curtains for Chongryun?
But meanwhile the DPRK-bashing continues. Having already imposed sanctions going beyond those ordered by the UN Security Council last year after North Korea's missile and nuclear tests, reducing trade to a trickle - Japan was long the DPRK's no 2 partner and main source of hard currency earnings - Tokyo now has another target, at home.

On June 18 the Tokyo District Court ruled that the pro-Pyongyang General Association of Korean Residents in Japan - Chongryun in Korean, Chosensoren in Japanese - must pay 62.7bn yen (US$508m) to a government-run bad loan agency to cover unpaid debt. 
Failing that, the Resolution and Collection Corp., which took over non-performing loans issued by Chongryun-affiliated banks, may seize the group's headquarters, which sits on prime Tokyo real estate and would become the DPRK embassy if diplomatic ties are ever established. A mysterious bid to buy the property by a former head of Japan's domestic spy agency, who thinks pressing North Korea is a bad idea, fell through for lack of funds.

Chongryun banks and credit unions, like others in Japan, were bailed out during the post-bubble 1990s. As with BDA and USTD, the official line is that this is a financial matter with no political motives, But Chongryun members - a dwindling band, whose loyalty was sorely tested by Kim Jong-il's kidnap admissions and who have suffered decades of discrimination in Japan; in a further irony, almost all hail originally from southern Korea - view this as Abe's latest hostile act against them and the DPRK, of which technically they are citizens. It remains to be seen whether some compromise can be found.

Human rights abuses are highlighted, again
In a sad but maybe inevitable quirk of diplomacy, progress on the nuclear front - with its corollary of the need to engage Pyongyang and focus on the main issue - is bad news for those concerned to press North Korea on its dire human rights record. Despite the dearth of hard data, there now exist several substantial reports on this; they make grim reading,

On June 19 the UK-based NGO Christian Solidarity Worldwide (CSW) added another to the pile. Based on interviews with 80 former political prisoners and guards, CSW told a horror story familiar to specialists, yet largely unknown or ignored more widely. As they summarize it, in North Korea "there is a prima facie case for the commission of crimes against humanity… murder, extermination, enslavement/forced labour, forcible transfer of population, arbitrary imprisonment, torture, persecution, enforced disappearance of persons, other inhumane acts and, perhaps, rape and sexual violence." CSW also sees indications of genocide against religious groups, specifically Christians, especially in the 1950s-1960s. Given the DPRK's strict hierarchy, CSW holds "the political leadership, and in particular Kim Jong-Il, … responsible for the commission of such crimes."

Meanwhile, other activists claim that both sides are tightening up on the Sino-DPRK border: hitherto an escape route for political refugees and the more numerous economic migrants. (Both are liable to harsh punishment, which can turn the latter into the former.) As the Beijing Olympics draw nearer, state crackdowns may well be countered by human rights groups seizing this unique opportunity to highlight the plight of North Koreans in China. While it must be right for other states to engage the Kim Jong-il regime on nuclear and similar concerns, finding a way to do this without neglecting and sacrificing the dear leader's longsuffering subjects and victims is a challenge that diplomacy has yet to meet.

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