The Two Koreas: A Contemporary History

by Oberdorfer, Don

  Pyongyang’s threat to leave the talks proved to be tactical, but developments on the nuclear front were real. In mid-May the North announced that it had unloaded its 5-megawatt reactor, “taking necessary measures to bolster its nuclear arsenal,” meaning it had an entirely new load of eight thousand spent fuel rods waiting to be reprocessed, a step that would add to its stock of weapons-grade plutonium. The North was back in six-party talks by July, but by now the talks could no longer hope to stop the DPRK from “going nuclear.” Instead, the negotiators faced the vastly more difficult task of dealing with a declared nuclear-armed state.

  ROK president Roh, who at this point had no illusions about how difficult the North could be to work with, was jarred and angry at Pyongyang’s February announcement that it had developed a nuclear weapon. He was also more concerned than ever that the situation was lurching dangerously off track and that the long hiatus in North-South dialogue had gone on for too long. In June he sent his minister of unification, Chung Dong-young, to Pyongyang with a new proposal, offering the North 2,000 megawatts of electricity if it would return to the six-party talks. Chung also stressed to Kim the importance of a second inter-Korean summit. Not long after, the North did return to the six-party talks, but a summit would have to wait another two years. The delay in achieving the latter frustrated Roh, who rightly believed that he could not move toward summit talks in the absence of significant progress on the denuclearization issue. The South Korean president needed to nudge the North not only back to the table but also into a six-party agreement.

  The 2,000 megawatts of electricity in the South Korean offer was, not coincidentally, exactly the figure the North had been promised from the KEDO reactors. By now, it was clear from the cessation of work at the Kumho construction site and the pullout of most of the workers that the reactor project would never be completed. Proffering the same amount of electricity from the ROK grid was an unmistakable signal that Seoul had finally given up on KEDO, having concluded that continuing to fight with the Americans on that front was unwinnable. The North Koreans, who at some level are essentially pragmatists, probably did not expect to be receiving electricity from the South anytime soon. But allowing Seoul to be seen as spearheading a breakthrough in talks that it could claim were deadlocked because of American intransigence was always a game Pyongyang enjoyed playing. Crucially, however, by accepting the South’s offer, the North did not mean to signal that it had softened its insistence on the “right” to civilian nuclear power. That became clear a few weeks later as the six parties reconvened in Beijing.

  Like the South Koreans, the Chinese were unhappy with Pyongyang’s February 2005 statement on nuclear weapons, and DPRK first vice foreign minister Kang Sok-ju made an unusual trip to Beijing in April for what turned out be rough discussions. Almost certainly, Kang also heard strenuous Chinese arguments that the North had to get back to the six-party talks. Once the multiparty talks resumed in July in Beijing, the rest of the summer was consumed in Chinese efforts to produce, after much pulling and hauling with the United States and North Korea, a declaration of principles to serve as a foundation for what was supposed to be the next step—discussion of concrete implementation measures to halt the North’s nuclear weapons program.

  During the summer’s negotiations, the core North Korean goal—and one Pyongyang made abundantly clear—was to ensure that a reference to light-water reactors made its way into the final document. A prime goal of the hard-liners in Washington, on the other hand, was to make sure that no such reference appeared. The US delegation came to the July talks with strict instructions not to concede an inch on this issue. The South Koreans did their best to work alongside the Chinese to get agreement on the wording of the statement, and if a deal meant a formula that would satisfy the North on the issue of a light-water reactor, then Seoul wanted to find it. Other delegations thought the South Koreans were making an effort not to be seen as lining up with the United States, although whether they were doing so to please their superiors in Seoul or keep on the good side of the North Koreans was not clear.

  As talks bogged down in disagreements over how to deal with the issue of the reactors, the Chinese worked through several formulations. The Chinese diplomats were especially taken by the utility of an old and largely forgotten North-South agreement—the 1992 Joint Declaration of the Denuclearization of the Korean Peninsula, in which the North and South agreed not to possess reprocessing or enrichment facilities but which, implicitly, granted both the right to civilian nuclear energy. In a deft use of the dead document, the Chinese massaged it into a loosely worded, and in some respects admirably ambiguous, sentence. But in the end, it didn’t solve the basic problem: Washington was unwilling to even consider, however vaguely, North Korea’s right to civilian nuclear power.

  The negotiations went down to the wire, with the Chinese finally telling the Americans that if they didn’t bend and agree to the formulation implicitly acknowledging the North’s right to civilian nuclear energy, there would be no deal. The chief ROK delegate, Song Min-soon, blew up while talking to South Korean reporters outside his hotel, warning emotionally that if Washington scuttled the deal by refusing to accept the Chinese compromise wording about LWRs, it could negatively affect US-ROK ties. Finally, the US delegation decided that the best way to break the deadlock was to accept the proposed Chinese language but then have the US, Chinese, Russian, ROK, and Japanese delegations in their final statements lay out the conditions under which the discussions on the LWRs could take place, i.e., the need for the North to become an NPT member in good standing before the others could legally provide assistance to its civilian nuclear program. Ambassador Christopher Hill, who had replaced James Kelly as assistant secretary of state earlier in 2005,* convinced Secretary of State Condoleezza Rice of the wisdom of that position, and she, in turn, had no trouble convincing the Deputies Committee that if the United States was to accept the joint statement’s language on LWRs, the United States should state publicly and unequivocally how Washington interpreted that language.

  After the fact, the American participants of the talks in Beijing remember their role as working to find a solution during this fifth session. The other parties remember mainly Washington’s intransigence on a number of issues. There is, however, also a general sense by the participants that, in the end, all six of the delegations (including the North Koreans) worked together, creating a momentum toward a final resolution that no one who was not sitting in the room at the time could quite understand.

  Although the joint statement that finally emerged was only meant as an initial declaration of principles, in the public mind, and in the minds of many officials in Washington, it quickly morphed into a hybrid of principles and concrete commitments, the most important of which was the commitment of the North to get completely out of the business of producing nuclear weapons. For the Americans, the various parties’ commitments in the joint statement were set forth in order of importance, and to some extent in the sequence the United States wanted them to occur as well—with the North Korean pledge on denuclearization listed first and foremost. The North Koreans insisted the list was simply that, a list, with no implementation sequence agreed or implied. As far as Pyongyang was concerned, the mention of the light-water reactor in the joint statement’s first article was the key to the deal, a sine qua non if ever one existed.

  The first article of the September 19 joint statement included the following points:

  The DPRK committed to abandoning all nuclear weapons and existing nuclear programs and returning, at an early date, to the Treaty on the Non-Proliferation of Nuclear Weapons and to IAEA safeguards.

  The United States affirmed it had no intention to attack or invade the DPRK with nuclear or conventional weapons.

  The ROK reaffirmed its commitment not to receive or deploy nuclear weapons in accordance with the 1992 Joint Declaration of the Denuclearization of the Korean peninsula, while affirming that there exist no nuclear weapons within its territory.


  The 1992 Joint Declaration of the Denuclearization of the Korean Peninsula should be observed and implemented.

  The DPRK stated that it had the right to peaceful uses of nuclear energy. The other parties expressed their respect and agreed to discuss, at an appropriate time, the subject of the provision of light water reactor to the DPRK.

  On September 19, the final day of the session, Assistant Secretary Hill read a closing US statement sent to him overnight from Washington. The delegation had sent off to Washington for clearance a proposed closing statement. What came back, with Hadley’s and Rice’s approval, was very different, so different that on its receipt the normally soft-spoken US legal adviser was, in the words of one member of the delegation, “apoplectic.” The new text, which spelled out the US interpretation of what the term appropriate time meant, had been drafted by the NSC—split, as always, between the hard-line nonproliferation section and the less hard-line regionalists. After the work was done and one of the drafters, Michael Green, had left town, he received a call informing him that the statement had been rewritten. He was given an opportunity to review the revised message, but working out the new language proved difficult because the classified phone connection was bad and time was short. The end result, what Hill finally read, fulfilled the marching orders from the Deputies for an explicit US closing statement but was wrapped in the tone and rhetoric chosen by the hard-liners. It asserted that the “appropriate time” for discussion of LWRs would not come until the North had “eliminated all nuclear weapons and all nuclear programs, and this has been verified to the satisfaction of all parties by credible international means, including the IAEA; and when the DPRK has come into full compliance with the NPT and IAEA safeguards, and has demonstrated a sustained commitment to cooperation and transparency and has ceased proliferating nuclear technology.” The formulation had a “when pigs fly” ring to it, unmistakable to the North Koreans and to everyone else in the room.

  To drive home the point of how dead the prospects were for light-water reactors, the drafters in Washington had added that “the United States supports a decision to terminate KEDO by the end of the year.” The news earlier that summer of Seoul’s offer to supply the North with electricity had been met with gloom in KEDO as a sign that the organization’s days were numbered. That was nothing, however, compared to the thunderbolt of the first press reports of Hill’s statement, revealing that the United States was publicly advocating the termination of the organization by the end of the year. KEDO officials at first thought it must have been the result of misreporting and that there would soon be some sort of clarification. KEDO still had a great deal of equipment, not to mention more than a hundred workers in North Korea, workers whose safety would now be at risk if the reports were accurate. Like KEDO headquarters in New York, none of the other three governments involved—all of which had spent considerable political capital and funds on the project—had been informed in advance.

  Ambassador Hill realized the statement might provoke the North Koreans and risked derailing what he had accomplished; it made him uncomfortable, yet he did not attempt to get it amended or revised. Several others in the US delegation hoped the North Koreans would shrug off Hill’s remarks as “simply words.” At least one of the other delegations, noting the American’s sharp tone, felt that the momentum of the talks, with the cooperation that had emerged among the six delegations to produce the final joint statement, would carry the process over this hump.

  But after two years of fruitless negotiations, and particularly after the difficult six-party sessions over the summer to find the exact words to express a series of principles around which future diplomacy might be organized, the statement Hill read was not the sort of thing that would smooth the way forward. Putting on the record different shadings of meaning after reaching agreements is not unusual, and in the past US and North Korean negotiators had often come out of meetings to give briefings highlighting their own interpretation of the results. Often, the chief negotiators discussed with each other ahead of time what they planned to say in order to avoid unpleasant surprises. These unilateral interpretations, it was generally understood, were modulated in nuance and tone for the audience back home, but were not meant to undermine the core of whatever agreement had been reached.

  There was nothing nuanced in this American presentation. It was aimed squarely at the issue of light-water reactors for North Korea and, by design, blew away the carefully ambiguous formulation the joint statement had employed to deal with the issue. Not surprisingly, as far as North Korea was concerned, Washington’s “words” virtually nullified the joint statement. The North Korean delegation sitting across the room said nothing directly in response to what the American negotiator read. Kim Gye Gwan, the chief DPRK delegate, had no instructions on how to reply to anything so unexpected from Washington. His only observation, bitterly poetic, was that he had thought they had climbed the mountain, but now he saw that there were still more mountains ahead. There was no poetry the next day, the twentieth, when the DPRK Foreign Ministry issued its own statement warning that if the United States was pulling back on the LWRs, then it should not expect the North to move forward on any of the items of interest to the United States.

  The North’s statement was widely interpreted in the Western press as Pyongyang retreating from what it had agreed to in the joint statement. Few people saw it for what it was—a reaction, and a very predictable one, to the provocative message that Hill had read. In Washington the State Department’s press spokesman tried to thread his way around the problem, saying that different interpretations were normal in the process of negotiations. Indeed, some differences are normal, but these were not, nor was the US action that followed.

  Part of Ambassador Hill’s closing statement had noted “for the record that the United States will take concrete actions necessary to protect ourselves and our allies against any illicit and proliferation activities on the part of the DPRK.” This pointed directly to a time bomb that had already been announced by Washington, but one that so far had been overshadowed by the six-party talks and was still waiting to explode—a US Treasury Department notification on September 15 signaling that Washington had set in motion steps that would amount to international banking sanctions against North Korea.

  The same day as the North’s statement, the Federal Register published a notice that the secretary of the Treasury “finds that reasonable grounds exist for concluding that Banco Delta Asia SARL (Banco Delta Asia) is a financial institution of primary money laundering concern.” This small Macau bank was not really the issue. The real target of the Treasury action was North Korea. Underlining that point, the notice stated that “government agencies and front companies of the Democratic People’s Republic of Korea (DPRK or North Korea) that are engaged in illicit activities use Macau as a base of operations for money laundering and other illegal activities. The involvement of North Korean government agencies and front companies in a wide variety of illegal activities, including drug trafficking and counterfeiting of goods and currency, has been widely reported. Earnings from criminal activity, by their clandestine nature, are difficult to quantify, but studies estimate that proceeds from these activities amount to roughly $500 million annually.”

  The finding meant that any bank dealing with Banco Delta Asia, or in fact with North Korea itself, was now possibly subject to Section 311 of the USA PATRIOT Act, which had been passed by Congress within weeks after the attacks on 9/11. Under this section of the act, US financial institutions were required to take steps that would, in effect, stop their dealing with any foreign institution that itself had links with an entity named in the relevant Treasury finding. The Treasury Department’s press release on section 311 says simply that “taken as a whole, Section 311 of the USA PATRIOT Act provides the Secretary with a range of options that can be adapted to target specific money laundering and terrorist financing risks. These options provide the Treasury Department with a powerful and flexible regulator
y tool to take actions to protect the U.S. financial system from specific threats.”

  It turned out to be a classic case of a tool meant for one purpose being used for something entirely different, with correspondingly unforeseen results. Washington tried to pass off this blow to the six-party talks as a simple legal action by the Treasury, divorced from the diplomacy and, most especially, not linked to the September 19 statement. The full explanation for the Treasury Department’s decision to institute the financial sanctions at this very moment—as nearly as can be determined—is tangled, even as the results were painfully clear. The two policies—new financial measures against the North and the six-party agreement—put on the same track at the same time and heading toward each other could have only one result: a train wreck.

  For more than a year, US law enforcement agencies had been working on leads about various North Korean illegal activities, of which there were many. President Bush made it clear that measures to protect the United States against these activities were not to be compromised or diluted in order to make way for diplomatic progress. The issue of what to do, and when, came to a head in the summer of 2005, around the same time as the wrangling in Beijing over the statement of principles for the six-party talks. US officials from several law enforcement and foreign-policy agencies had to decide whether to approve the Treasury action before or after the diplomatic efforts in Beijing moved off dead center (and at that point, it was not clear they would actually succeed). The decision was made—one participant says it was unanimous—to keep strictly with the president’s orders and push ahead on what was conceived as the defensive-legal front. No one at that point thought the Treasury action would end up being the tsunami in the international financial community it turned out to be.