North Korea’s Engagement—Perspectives, Outlook, and Implications

Conference Report

23 February 2001

This conference was sponsored by the National Intelligence Council and the Federal Research Division of the Library of Congress.  Additional copies of this conference summary can be obtained from the office of the National Intelligence Officer for East Asia.

The views expressed in this report are those of individuals and do not represent official US intelligence or policy positions.  The NIC routinely sponsors such unclassified conferences with outside experts to gain knowledge and insight to sharpen the level of debate on critical issues.

 

Introduction
The National Intelligence Council (NIC) held a conference on 23 February 2001 in cooperation with the Federal Research Division of the Library of Congress on “North Korea’s Engagement—Perspectives, Outlook and Implications.”  The conference featured discussion of seven commissioned papers that are published in this report.  Sixty government and nongovernment specialists participated in the conference.  Following is a brief summary of the views of the specialists.

Engagement:  Causes, Status, Outlook
The specialists agreed that North Korea is pursuing greater contact with South Korea, the United States, and other concerned powers stemming from its dire economic need and the importance of international support for the survival of the regime.  Kim Chong-il has so far pursued a controlled opening and not embarked on fundamental systemic change.  He has consolidated his power following the death of his father, Kim Il Sung, and is clearly responsible for the changes in policy and greater opening seen thus far.  International support, especially material assistance from South Korea and other donors, has been a key incentive in North Korea’s pursuit of engagement.

The results have included extensive North Korean contacts with South Korea, the United States and other concerned powers; large-scale donations of food, fertilizer, fuel and other assistance; rail, road, and tourism projects spanning the DMZ; and current and prospective agreements regulating North Korea’s missile and weapons of mass destruction (WMD) programs.  North Korea has become increasingly dependent on foreign support, and the overall danger of war on the peninsula has declined.  Specialists caution, however, that many uncertainties remain, especially regarding North Korea’s intentions and the military standoff on the peninsula that continues without significant change.

Most specialists foresee incremental progress in North Korea’s engagement over the next two years, subject to possible fits and starts because of adverse developments in North Korea or among the concerned powers.  Progress will remain contingent on a range of variables, and could be halted or reversed under some circumstances.  Kim Chong-il has played a key role in North Korea’s diplomatic opening but does not appear to have a “master plan” for engagement.  He is likely to continue to exploit the opportunities presented by South Korean President Kim Dae Jung’s sunshine policy and other international openings.  Because the South Korean leader’s policy is critically important to the current phase of engagement, the end of his term in two years makes longer term projections difficult, according to the specialists.

Many at the conference thought that the engagement process was likely to slow this year because of strong controversy in South Korea over the costs and limited benefits so far of the sunshine policy at a time of uncertainty in the South Korean economy.  Some note that a visit by Kim Chong-il to Seoul later this year could spur the process ahead again. Some speculate that North Korean elites remain divided over the pace and course of engagement and are wary that a US policy review could lead to lower priority for engagement with the North Korean regime.  The central role of the military in North Korean decision making could be a drag on forward movement, though some experts judge that military opposition was offset by the Korean People’s Army leadership’s receipt of financial and other benefits related to the engagement process.

The experts were pessimistic that the North Korean regime over the longer term (five to 10 years) would be able to carry out needed economic changes while sustaining tight political control, as have the communist regimes in China and Vietnam.  North Korea’s pervasive economic weaknesses and hidebound political and economic elite are among major impediments to effective longer term change.

The specialists judge that US policy has played a key role in North Korea’s recent engagement, second only to South Korea’s sunshine policy.  US support for engagement, which several participants note began as early as the Reagan Administration, provides important political backing for Kim Dae-jung in the face of his many domestic critics. It also allows Japanese leaders to provide aid and pursue negotiations with P’yongyang, despite broad skepticism among Japanese elites and public opinion.

Issues in Dispute
The specialists differ strongly over how engagement has affected North Korea’s intentions.  Some argue that North Korean leaders are determined to make substantial changes in order to survive and develop in a new international environment defined by P’yongyang’s increased dependence on foreign assistance and support.  The regime has reached a turning point requiring more economic reforms and nascent moves to ease military tensions.  In contrast, others argue that growing aid dependency and international contacts have not changed North Korea’s long-term strategy to dominate the peninsula by military means.  North Korean changes thus far are the minimum needed to take advantage of the recent and unexpected material benefits provided by South Korea, the United States, and other powers; the changes could be easily reversed under different circumstances.  Those who hold this point of view believe that greater reciprocity must be an aspect of engagement with North Korea.  They especially believe in the need to seek concrete concessions, especially regarding the conventional balance of forces on the peninsula, that keeps in step with additional benefits and concessions for P’yongyang.

Implications
The specialists assess that North Korean engagement will have the following implications for other countries:
China is well positioned to gain from continued gradual North Korean engagement.  Incremental progress supports Beijing’s interests in stability on the peninsula, avoids costly Chinese efforts to shore up the failing North Korean regime, and allows China to pursue ever closer relations with the more powerful and influential South Korean government.  Prevailing trends and easing tensions on the peninsula appear to add to Chinese arguments against US regional and national missile defense programs and undercut the rationale for much of the US military deployments in Northeast Asia.

Japan is poorly positioned to benefit from some recent trends in North Korean engagement, though it does benefit from the reduced risk of war on the peninsula.  Gradual progress in P’yongyang’s relations with South Korea, the United States and others has reinforced North Korea’s deeply rooted antipathy to Japan.  Tokyo fears being called upon repeatedly to support financially and politically US and South Korean arrangements with North Korea that do little to meet Japan’s concerns.  Thus, Japan believes that US efforts to curb North Korea’s long-range missile development do not address Japan’s concern with the immediate threat posed by North Korea’s deployed medium range ballistic missiles.  Japan also worries about the long-term implications of a reunified Korea that is anti-Japan.

South Korea will face deepening debate and political controversy if Kim Dae Jung’s sunshine policy continues to elicit only limited gestures and assurances from North Korea.  The demand for greater reciprocity is likely to increase as opponents jockey for advantage while President Kim’s power wanes as he approaches the end of his term.

The conferees generally believe that the United States probably will see its influence reduced somewhat as North Korea—while still focused on the US connection—seeks military security, economic assistance, and political recognition from a broader range of international players.  US ability to control the pace of the engagement process probably will decline as South Korea, China, and others improve their relations with P’yongyang.

The specialists assess that North Korea’s engagement increasingly challenges the US security paradigm of the past 50 years that has viewed North Korea as a major enemy and military threat.  It complicates the existing rationale for the US military presence in Northeast Asia and challenges US values and norms as American policy provides aid and pursues negotiations with a regime that affronts many US-backed norms.
Because of the multifaceted and complicated array of US policy issues related to engagement with North Korea, several specialists favor a senior US policy coordinator for North Korea, though others oppose such a step as unneeded in the current context.

 

Conference Agenda

Welcome and Ground Rules
Robert L. Worden, Chief, Federal Research Division, Library of Congress, and Robert G. Sutter, National Intelligence Officer for East Asia, National Intelligence Council

Panel One:  Perspectives on North Korea’s Engagement
Mitchell Reiss, William and Mary School of Law—Avoiding Déjà vu All Over
Again:  Some Lessons from US-DPRK Engagement
Daryl Plunk, Heritage Foundation—The New US Administration and North
Korea Policy:  A Time for Review and Adjustment
Donald Oberdorfer, Johns Hopkins University, Nitze School of Advanced
International Studies—North Korea’s Historic Shift:  From Self-Reliance to Engagement

Panel Two:  Perspectives on North Korea’s Engagement (continued)
Nicholas Eberstadt, American Enterprise Institute—commentary

Panel Three:  Implications for South Korea, Japan, and China
Kongdan Oh, Institute for Defense Analyses—North Korea’s Engagement:
Implications for South Korea
Victor Cha, Georgetown University—The Ultimate Oxymoron:  Japan’s
Engagement with North Korea
Jonathan Pollack, Naval War College—China and a Changing North Korea:
Issues, Uncertainties, and Implications

Panel Four:  Implications for the United States:  General Discussion
Michael McDevitt, Center for Naval Analyses—Engagement with North Korea:
Implications for the United States

Conference Coordinator:  Andrea Savada
Library of Congress

 
Avoiding Déjà Vu All Over Again:
Lessons from U.S.-DPRK Engagement

Mitchell B. Reiss
Dean of International Affairs
Director of the Wendy & Emery Reves Center for International Studies
College of William & Mary
 

A little noticed anniversary took place earlier this year.  Nine years ago, in January 1992, U.S. Under Secretary of State for Politics Arnold Kanter met in New York with Kim Young Sun, the Korean Workers Party Secretary for International Affairs, in what was the first-ever senior-level meeting between the United States and the DPRK.  Kanter laid out the seven preconditions North Korea needed to meet if it wanted to normalize diplomatic relations with the United States, including resolving the question of the North’s separation of plutonium for use in nuclear weapons.[1]    Kim promised that the DPRK would sign a safeguards agreement with the IAEA in the next few days and would also implement a bilateral inspection regime in accordance with its December 1991 Denuclearization Declaration with the ROK.

Nine years later, diplomatic relations are still not normalized between the two countries and important elements of the North’s nuclear weapons program remain unresolved.  Relations during the intervening period have oscillated from the high drama of the June 1994 nuclear crisis to the smiling diplomacy of Secretary of State Madeleine Albright’s visit to P’yongyang in October 2000.  In between, we have witnessed mutual recriminations, allegations of bad faith, belligerence, aggression, inattention, and even some cooperation and agreement.

One theme running through this entire period has been misunderstanding – of each other’s decision-making procedures, intentions, motives and sometimes even policy objectives.

How could it be otherwise?  The DPRK, the “Hermit Kingdom,” has long been the most isolated country in the world.  What little interaction P’yongyang had with the international community decreased further with the end of the Cold War.  Its superpower patron and largest supplier of military equipment, the Soviet Union, disappeared.  The North’s other strategic partner, China, advanced its own interests by engaging in a prosperous trade with the ROK and allowing the simultaneous admission of both Koreas into the United Nations.  The DPRK’s fraternal allies in Eastern Europe were all toppled by internal revolutions.

Perhaps fearful of defections, P’yongyang kept its officials on a short leash; those who were allowed out of the country were not allowed out very often.  At the DPRK’s Mission to the UN in New York City, North Korean representatives have been confined to radius of 20 miles from midtown Manhattan.  They do not have regular contact with U.S. officials or other knowledgeable Americans and have only a rudimentary understanding of how the American political system works.  They have been abysmal at public relations on the few occasions they have attempted to shape U.S. domestic and international opinion.
 
For the United States, the Korean peninsula has always been relatively neglected when compared to the much larger and more powerful Japan and China, which have received far greater time, attention and resources.  With the Asian economic meltdown in late 1998, Indonesia further displaced North Korea on the U.S. diplomatic agenda.  Contributing to this institutional reluctance was the fact that North Korea was a diplomatic black hole.  Few U.S. officials were fluent in Korean, fewer still had ever met with North Koreans, and only a “privileged” few had ever visited the North.

The severe famine in North Korea in mid-decade also contributed to this institutional neglect.  It seemed the game was not worth the candle as Washington came to believe the North was in imminent danger of collapse.  Because the DPRK enjoyed no domestic constituency in the United States and because of Congressional hostility (especially among Republican members) to the October 1994 Agreed Framework nuclear deal, many Clinton Administration officials abjured responsibility for this issue, believing it to be a political “loser” and “career ender.”  Senior officials ignored or delegated the matter to more junior officials, which often amounted to the same thing.  For long periods of time, it appeared as if no one at the State Department was in charge of this issue.  Under these multiple disincentives, initial enthusiasm for American engagement gradually surrendered to complacency.

Unsurprisingly, the resulting record of U.S.-DPRK interaction has been mixed.  Towards the goal of a more stable and secure Korean peninsula, some important progress has been achieved.  Work at the nuclear facilities covered by the Agreed Framework has ceased; this freeze is being monitored by international inspections.  These facilities could have produced a nuclear arsenal of 20-30 nuclear weapons by now.  In addition, the North has agreed to a moratorium on ballistic missile tests.

But serious questions remain over the scope of P’yongyang’s nuclear activities, its ongoing chemical and biological weapons programs, its readiness to eliminate its ballistic missiles and its interest in reducing its forward-based military posture along the DMZ.  Is North Korea really stringing the United States along, willing to agree to meetings in return for food aid but unwilling to relinquish its weapons of mass destruction (WMD) programs?  Does it calculate that diplomatic “fatigue” will eventually allow it to avoid fully cooperating with the IAEA to reveal the complete history of its nuclear program?  Will it balk at confidence-building measures that ask it to withdraw its conventional force deployments along the DMZ?  Will it refuse to make any fundamental changes in the nature of its regime, allowing only a modicum of foreign investment so it can maintain itself in power?

In sum, what are the North’s intentions?  The answer to this question is unknown (perhaps even by many in North Korea).  The new Bush Administration will need to probe the North Korean regime aggressively to learn this answer.

This answer -- and subsequent policy decisions by American officials -- will be influenced by many factors, including the lessons learned and policies adopted by the DPRK.  Consequently, it will be useful not only to review the last nine years of engagement between the United States and North Korea and examine what lessons might be extracted.  It will also be helpful to speculate as to what lessons North Korea may have learned during this period as well.[2]

Strategic Lessons for the United States

1. Be Humble

After almost a decade of interaction, the United States still doesn’t understand North Korea very well.  The country continues to be “the longest running intelligence failure in U.S. history,” in the words of the former American Ambassador to South Korea, Donald P. Gregg.  How are decisions made in the North?  Who’s up and who’s down?  Who makes the decisions?  We simply do not have very good knowledge.

A short list of serious misestimates by U.S. Government officials and outside experts would include the prediction that the “Dear Leader,” Kim Chong-il, would be unable to consolidate his power and rule the country after his father’s death in July 1994.  On the contrary, the past few years have not only demonstrated his tight hold on power, but also his ability to maintain control and prevent social unrest despite a disastrous famine and debilitating economic conditions.  Another example came in August 1998, when the U.S. intelligence community was strategically blindsided when P’yongyang tested a more advanced ballistic missile years ahead of its estimates. [3]   Finally, many observers both in and out of the U.S. Government predicted that the North would collapse in mid-1990s because of food shortages and economic decline. [4]

The lesson should be clear: humility should be our guide.  We need to recognize we still do not understand the DPRK very well.  In this environment, the risk for senior policy-makers is that anyone can assert he or she is an expert.  Therefore the assumptions behind the policy proposals need to be stated explicitly and analyzed with care.

2. Let’s Make a Deal

A second lesson learned over the past nine years is that it is possible to do business with North Korea, even on very sensitive issues.  In October 1994, P’yongyang agreed to freeze its nuclear facilities at Yongbyon and allow them to be inspected around-the-clock by the IAEA.  In September 1999, the North agreed to suspend its ballistic missile tests; this pledge was later upgraded to a ballistic missile moratorium and placed in writing.  And the Korean Peninsula Energy Development Organization (KEDO) project represents an ongoing example of the North’s willingness to enter into a variety of commitments – on direct North-South transportation links, on establishing an independent communications network in the North, on sweeping privileges and immunities for KEDO employees (especially, ROK nationals) working at the nuclear site, and on sending DPRK technicians to South Korea for reactor training.  These agreements, and others, prove that diplomacy can bring tangible benefits.

3. But It Won’t Be Easy

If it has been possible to reach agreement with the North Koreans, a closer examination of the negotiating histories shows that reaching agreement has rarely been easy.  The North Koreans are skilled and experienced negotiators, and consequently like to keep all their options open for as long as possible.

In addition, the DPRK has been much more comfortable than the United States in conducting negotiations in an atmosphere of high tension or even confrontation.  At times, P’yongyang has even tried to generate bargaining leverage for itself by artificially ratcheting up tensions.  Examples are its March 1993 announcement that it would withdraw from the NPT in ninety days and its unmonitored unloading of reactor fuel in May-June 1994.  (In multilateral negotiations at KEDO during the Supply Agreement negotiations, North Korea repeatedly threatened to walk out, terminate the Agreed Framework and restart their nuclear program if KEDO did not relent or capitulate on an issue.)  This type of behavior should be expected. [5]

The United States has done best in these negotiations when it has followed four rules.  First, Washington needs to have a very clear idea of its objectives and priorities.  In the past this was easier said than done, given the broad spectrum of views by key participants in the Clinton Administration.  U.S. policy objectives were also influenced by South Korea and Japan, whose interests and priorities in dealing with North Korea were often similar to, but not identical with, those of the United States.

Second, Washington has done best in these talks when it has insisted on strict reciprocity.  Indeed, the Agreed Framework is structured so that each party must reciprocate in a tangible manner before the other will respond.  The United States has largely followed this “tit-for-tat” approach in its ballistic missile talks with the North, trading a relaxation of sanctions in return for a suspension of tests.[6]   KEDO has also adopted this approach in its dealings with the DPRK.

Third, when dealing with the DPRK, patience is not only a virtue, it confers a tactical and strategic advantage.  North Koreans are culturally very patient -- much more so than most Americans.  Ambassador Stephen W. Bosworth expressed it succinctly: “Never be more eager than the North to reach a deal.” [7]

Fourth, and related to this point, is that the United States should not be afraid to walk away from the table if the North’s position is unreasonable.  The occupational hazard for every negotiator is what might be termed the “Bridge on the River Kwai” phenomenon.  Just as the British colonel, played by Alec Guiness, fired on British commandoes to stop them from destroying the bridge, Washington must never lose sight of its larger objectives in its haste to curry favor or reach agreement.

4. And Will the North Keep Its Side of the Bargain?

As difficult as it is to reach agreement with P’yongyang, an agreement once reached usually sticks.  Under the Agreed Framework nuclear freeze and with KEDO, North Korea has demonstrated that it can keep its side of the bargain.

There are two important caveats here.  First, the North will keep its side of a bargain – up to a point.  For P’yongyang, no contract is immutable.  North Korea has attempted, sometimes successfully, to revisit and renegotiate commitments previously made.  This has been observed in at least two sets of circumstances.  If it believes the other party is not living up to its side of the bargain, it will backtrack on some of its commitments.  And when a commitment has become politically or economically inconvenient, the North often has engaged in highly literal interpretations of the text to weaken or erode completely its responsibilities.  There is not much to be gained from arguing in response about the “spirit” of an accord.  This is a particular hazard for American negotiators trained in the Western legal system. [8]

The second point is obvious, but worth noting nonetheless.  All agreements with North Korea need to be verified continuously, rigorously and comprehensively to ensure strict compliance.

5. U.S. Leadership is Essential

As the most powerful country in the region and globally, the United States has an indispensable role to play on the Korean peninsula.  But American leadership will be neither cheap nor easy.  It will take additional financial resources, which in the past Congress has been reluctant to make available.  For example, Congress has been unwilling to fully fund KEDO’s heavy fuel oil shipments to the DPRK, which are expected to double this year to approximately $120 million.  Needless to say, it demeans the United States and diminishes its influence throughout Asia if Washington is unwilling to adequately fund the terms of an important U.S. initiative.  (At the same time, the United States can also better leverage its European, Persian Gulf and Asian partners to win their financial support for the KEDO project.)

Diplomatically, Washington’s leadership in engaging North Korea can also provide helpful political “cover” for Seoul and Tokyo to do likewise.  Following the U.S. lead, rather than being seen to act independently, can be helpful in dampening criticism from domestic political opponents in South Korea and to a lesser extent in Japan who oppose engagement with the North. [9]

6. But Who’s in Charge?

The past few years have shown that North Korea is too important to U.S. national security interests to be ignored.  P’yongyang poses a number of challenges for American policy-makers, ranging from nuclear issues, ballistic missiles, North-South interaction, conventional forces, humanitarian relief and economic sanctions.  One of the main challenges for any Administration is to bridge the gap between the arms control/nonproliferation experts and the regional/area specialists in the Administration.  Both the defense issues and the politics must be “right.”

These issues require consistent attention at a very senior level, preferably by a single person with broad responsibilities.  Implementing the policy – building support within the Administration, winning Congressional backing, and coordinating with key allies – will all be indispensable to engaging with the North.  Mid-level officials, no matter how talented, cannot adequately perform these tasks.

Indeed, it was only after former Secretary of Defense William J. Perry became North Korea Policy Coordinator in November 1998 that the Clinton Administration was able to overcome what one critic termed its policy of “strategic incoherence” towards the North and articulate a clear way forward.

The period leading up to Perry’s appointment proves that if the Executive branch does not aggressively take the lead on a foreign policy issue, Congress may move to fill the policy vacuum.  During the past few years, Congress has passed a variety of legislation, some of which has placed additional constraints on the President’s ability to carry out policy towards the DPRK.  [10]  Much of this was due to Congressional distrust of the Clinton Administration’s stewardship of U.S. foreign policy generally and towards the DPRK in particular.  But Congress has now become a stakeholder in U.S. policy towards North Korea and will likely watch closely the Bush Administration’s actions towards the North.

7. Dynamic Environment, Rapidly Changing

Within the last twelve months, much has changed on the Korean peninsula.  The June 2000 summit between Kim Dae-jung and the “Dear Leader,” Kim Chong-il, was remarkable political theatre.  Following this historic event, the two sides have signed an agreement for a Seoul-to-Shinuiji rail link, P’yongyang has attended ASEAN Regional Forum for the first time, joint de-mining activities continue along the DMZ, North and South Korean defense ministers met on Cheju Island and there has been a dialing down of the propaganda aimed at the South.  (One South Korean wit has claimed that Korea has gone from being the “Land of Morning Calm” to the “Land of Morning Surprises.”)

It is unclear whether these positive developments will continue, but past practice suggests that the situation will continue to evolve in unpredictable, at times even dangerous, directions.  It is useful to recall that only a few short years ago, the South Korean Navy sunk a North Korean patrol boat on the wrong side of the Northern Limit Line, P’yongyang launched a Taepo-Dong I ballistic missile over Japan, North Korean commandoes tried to infiltrate the South by submarine, and the North routinely spewed forth poisonous rhetoric condemning the South Korean leadership and the illegitimacy of the Seoul regime.

At times, the United States has not been able to keep pace with these rapid developments, learning of meetings between the two Koreas or policy changes only after-the-fact.  Washington has at times reacted to events rather than shaped them to U.S. ends.  This lesson supports the arguments expressed above for greater commitment to intelligence gathering, greater attention by senior policy-makers, and greater assertion of American leadership.

8. The United States Can Go It Alone (But It Is Better If It Does Not Have To)

Although the United States must always be willing and able to act unilaterally to defend its interests, it can significantly reinforce its position and advance its policies in Northeast Asia if it works closely with important allies, such as Japan and the ROK.

As an American official once said about NATO, “The trouble with alliances are the allies.”  With any multilateral enterprise, members’ interests overlap but are not necessarily identical; they often diverge in important ways, whether due to shaky parliamentary coalitions, domestic public opinion, financial constraints, or bilateral pressures.  The same reality applies to Northeast Asia.  While Seoul and Tokyo share many of Washington’s interests in dealing with North Korea, their priorities and tactics at times may differ widely.

Although some policy differences can never be completed eliminated, the last few years have demonstrated that often they can be overcome, moderated or minimized in pursuit of a larger common goal.  One institutional example is KEDO, where nationals from all three countries (and the European Union) work closely together to implement the LWR project since 1995.  Moreover, Seoul and Tokyo will bear almost all of the estimated $5 billion financial burden (a price-tag sure to rise as the project encounters further delays).  Indeed, construction of the LWR plants would be impossible without these contributions since Congress passed legislation in 1999 prohibiting any U.S. funds from being used by KEDO to underwrite the costs of LWR construction.

Another example is the highly useful and long overdue Trilateral Oversight and Coordination Group (TCOG), a U.S.-ROK-GOJ mechanism recommended in the Perry Report.[11] Here the United States has worked closely with its allies to forge a common approach to North Korea.  Since P’yongyang has proven skillful in the past at exploiting differences among the three countries, this intensive consultation is crucial.  An option for the Bush Administration is to continue the TCOG, but with an upgrade in status to symbolize the importance Washington attaches to this issue and to ensure that senior-level officials are both informed and involved.

Finally, there is additional “value added” of Washington going forward in concert with its allies.  Should the United States need to reverse course, enhance its deterrence posture or adopt punitive measures against North Korea, it will have a much easier time winning support from Seoul and Tokyo if all three parties have previously worked closely together in their policy approach to P’yongyang. [12]

9. What “Rogue” Regime?

The United States no longer refers to the DPRK as a “rogue” regime or any other of the pejorative labels that passed for policy wisdom for a number of years.  Kongdan Oh and Ralph C. Hassig have written that attempts to dismiss North Korea as a rogue regime offer little insight into North Korean objectives and motivations, and offer little guidance to U.S. policy-makers seeking to bring North Korea into the international community as a functioning participant. [13]  In other words, if Washington truly believed that the North Koreans were rogues, with its imputation of irrationality, then all policy prescriptions would lead to an analytical dead end.  How can you deal with a crazy state? [14]

For this same reason, calling North Korea a rogue regime created a number of domestic problems, not least the difficulty of explaining to Congress and the American public why Washington was meeting and negotiating with P’yongyang.  Avoiding this linguistic shorthand allows the United States greater flexibility to engage diplomatically with the North.  No doubt this was one reason why Secretary of State Albright did an about-face on this issue in June 2000, when she expunged the term from the diplomatic lexicon in favor of “states of concern.” [15]  Some early signs indicate that the Bush Administration will steer clear of this trap and deal with the North on a pragmatic basis. [16]

Strategic Lessons For North Korea

There are obvious limits as to how well we can understand North Korean behavior.  But some thought must be paid to what the North may have learned from the past years of engagement with the United States.  As Washington reviews the past decade, the lessons it divines -- and the policy prescriptions it proposes -- will be influenced by North Korea’s anticipated future behavior.  This behavior will have been shaped by the lessons P’yongyang has learned from recent experience with the United States.  In other words, there will be what political scientists and economists call “strategic interdependence,” where decisions are affected by the dynamic interaction between two actors who find themselves in a “game.”  It is therefore useful to speculate, from an American perspective, what lessons the North Koreans may have learned from the past nine years of engagement with the United States.

1. The United States is Afraid of the North’s Strength

The United States respects the North’s military power.  Whether it is P’yongyang’s nascent nuclear weapons program, ambitious ballistic missile program, or million-man military, the North’s potential to destabilize Northeast Asia (and other regions through ballistic missile exports) attracts Washington’s attention.  Whenever the North has engaged in highly provocative behavior, the United States has responded by immediately re-engaging diplomatically and seeking to address some of P’yongyang’s concerns.  Prominent examples are the North’s March 1993 threat to withdraw from the Nonproliferation Treaty, the unmonitored unloading of spent fuel in May-June 1994 and the August 1998 Taepo-Dong I ballistic missile test.  Within weeks of each event, Washington found itself back at the negotiating table with P’yongyang, thereby acceding to one of the North’s main objectives.  And of course, the preponderance of North Korean conventional force along the DMZ, including artillery that can reach Seoul, acts as a constant threat to the South and U.S. forces stationed there.

For this reason, it is entirely possible the DPRK might apply this lesson to the new Bush Administration, testing them if the North believes it is being ignored.  According to a recent article by Robert Manning: “[D]o not be surprised if P’yongyang tries to provoke a crisis – perhaps threatening to withdraw from the Agreed Framework – in an effort to test the new Administration and put it on the defensive.” [17]

2. The United States is Afraid of the North’s Weakness

As worried as the United States is about the North’s strength, it is also concerned about its weakness.  A so-called “hard landing” by North Korea would result in enormous human suffering and physical hardship in the North and risk destabilizing the Korean Peninsula and perhaps beyond.

To avoid this possibility, the United States has taken the lead in propping up the North Korean regime in an attempt to stave off collapse.  This assistance has taken the form of food and other humanitarian aid.  North Korea is now the largest recipient of U.S. aid in Asia, topping $160 million in 1999 alone, and totaling around $800 million since the mid-1990s.  [18] That this assistance has routinely continued despite periodic North Korean belligerence, provocations and lack of cooperation has sent a powerful signal to P’yongyang, namely, that the United States will feed the North – regardless of the policies it adopts.  For North Korea, it would appear, there has been such a thing as a free lunch.

3. The United States is an Unreliable Partner

For P’yongyang, the United States may appear to be an unreliable partner, often promising more than it can deliver.  The LWR project, which was a centerpiece of the Agreed Framework negotiated by the United States, had a target date of 2003; it now appears the project is at least five years behind schedule.  Further delays may be expected.  It is likely KEDO will claim that these delays will escalate costs, which will contribute to further delays.

Washington has proven unreliable with respect to another element of the Agreed Framework as well – the pledge to deliver 500,000 metric tons of heavy fuel oil (HFO) annually to the DPRK until the first LWR is completed.  For the past three years, this commitment has not been met; the North has had to wait additional months to receive its quota of oil.  This problem may reach a crisis this year, as skyrocketing oil prices will double KEDO’s cost in delivering HFO.

If Washington cannot be trusted to keep its word on a matter of such obvious importance, why should P’yongyang trust it on other matters?

4. The Normal Rules Don’t Apply to North Korea

Whether because of its strength or its weakness, North Korea has not had to honor the same diplomatic and economic rules as other countries.   The United States (and the ROK) have been willing to “encourage” North Korea to attend meetings, such as the four-party talks, to consent to inspections at Kumchang-ri, and to allow family reunions by offering certain inducements.  Often these inducements (or what used to be called “carrots”) have taken the form of food aid or financial assistance.  This U.S. policy of “food for meetings” started in 1996 and lasted through the end of the Clinton Administration. [19]  To use a term from contemporary psychology, the United States has “enabled” North Korea by indulging its bad habits.

This also contradicted longstanding U.S. policy of not using humanitarian assistance as a lever to try to compel political change.  The Clinton Administration approach here attempted to do two things simultaneously and ended up doing neither very well.  First, it wanted to deflect charges of appeasement from its domestic critics who viewed food assistance as providing comfort to the enemy (especially given doubts about how the food was monitored and distributed).   Second, it wanted to promote diplomatic movement with the North.  It came up short in both instances.  Getting the North to the negotiating table was not sufficient to satisfy the Clinton Administration’s critics, especially in Congress.  And “bribing” the North to attend meetings with food aid sent the wrong signal to P’yongyang.  Once the North merely showed up, aid would flow and its primary policy objective was achieved.

This preferential treatment carried over to the economic realm.  Foreign investors (admittedly, mostly South Korean) have acquiesced in highly dubious financial transactions with the North despite the extremely hostile investment environment characterized by the absence of the rule of law, private property rights, or any dispute resolution mechanisms.  These ventures, often assisted by under-the-table payoffs to North Korean officials, promise little if any return on investment.

Moreover, it is not even clear that these investments have achieved this political purpose – such as the promotion of North-South interaction -- that could somehow justify the expense.  To take one example, North Korea is not only reported to receive an estimated $10 million per year from its tourism project with Hyundai, but it still manages to keep its own people insulated from ideological contamination by strictly limiting access to the South Korean tourists.

5. Big Brother is Watching

It is clear that the United States has invested tremendous resources to uncover North Korea’s military capabilities, especially with respect to WMD, and that these resources are quite sophisticated.  This became evident during the 1993-94 nuclear crisis, when the United States shared high-resolution satellite pictures with the IAEA; these pictures showed two undeclared spent fuel sites at the Yongbyon nuclear complex.  In addition, IAEA inspectors trained by the United States were later able to uncover evidence of “irregularities” in the DPRK’s initial declaration to the IAEA concerning the amount of plutonium it had separated.

But the lesson here is more complicated because of the Kumchang-ri episode.  In this case, the United States falsely claimed that the DPRK was building an underground nuclear site thought to house either a reprocessing facility or nuclear reactor.  In fact, U.S. officials who visited the site found no such facility.

So what is the real lesson?  Perhaps that the United States used Kumchang-ri as a pretext for other purposes?  Or that U.S. capabilities are not as good as previously thought?  That the North should continue to conceal and deceive the outside world on nuclear issues as a way to get Washington’s attention and food assistance?  And to the extent P’yongyang understands U.S. detection capabilities, will this lead the North to adopt more sophisticated deception and concealment efforts?

6. The United States Will Support the “Sunshine” Policy

The promotion of North-South dialogue has long been a staple of U.S. policy towards the DPRK; this principle was enshrined in the October 1994 Agreed Framework and was regularly repeated by U.S. officials in their meetings with the North through the rest of the decade.  The culmination of this approach was realized by the June 2000 summit between the two Kims.

Reviewing Washington’s long-time emphasis on North-South dialogue, a lesson the North has learned is that it will be difficult for the Bush Administration to reverse course. [20]   Although early indications suggest that the Bush Administration will continue to support inter-Korean dialogue, it is possible that P’yongyang may still try to leverage its relations with Seoul to compel Washington to re-engage with the North on its timetable, not the Bush Administration’s.

Conclusion

During the past decade, both countries have climbed some way up a fairly steep learning curve.
North Korea and the United States will need to draw upon this experience if they wish to move forward together in securing a more stable Korean Peninsula during the next few years.

For the United States, however, dealing with the DPRK likely to get more, not less, difficult in the next few years.  The North’s recent diplomatic offensive, what their press has termed “magic diplomacy,” may constrain Washington’s future flexibility in ways that are difficult to predict.  As other countries improve relations with the North, there is a risk that preserving good ties with P’yongyang will be seen as an end in itself, or as a better means to an end than issuing threats or demonstrating a robust deterrence through military exercises.  There is already a growing sense in Asia that the best way to work with North Korea now that the hermit kingdom has left its isolation is to broadly engage P’yongyang through coaxing and “incentives” rather than through overt displays of deterrence. These countries, including U.S. allies, may criticize, frustrate or oppose American actions they view as provocative to the North.  Washington will suffer a backlash if it is being perceived as adopting unreasonably harsh measures against P’yongyang.

In fact, Washington has faced this problem before.  In early 1994, as tensions on the Korean peninsula increased, the U.S. Commander in South Korea requested that US/UN forces be reinforced with Patriot missiles.  In the face of strong criticism from Seoul, Washington backed down.  Only in March, after a round of North-South talks ended badly, were the missiles shipped to South Korea.  And during the 1993-94 period, the United States consistently faced resistance at the UN Security Council when it tried to adopt sanctions against North Korea for violating its IAEA and NPT obligations.

With P’yongyang’s expanded contacts and warming relations, this problem will increase.  For example, North Korea’s new friends may now even more harshly criticize any hardening of the U.S. position over negotiating the end of the North’s nuclear weapons and ballistic missile programs.  Attempts by the United States to seek sanctions in the United Nations or reinforce American troops on the peninsula would likely be met with strong criticism from U.S. adversaries and allies alike.  Washington will feel growing pressure to be more flexible, more generous, and more forthcoming.  North Korea may thus be encouraged to raise its asking price, harden its stance, and be more patient in dealing with the United States than before (not a welcome thought).  Under these circumstances, Washington may lose control over the pace and perhaps even the agenda of its negotiations.

In short, the risk is that a subtle shift in the balance of power at the negotiating table may take place.  And no one is more adept than the North Koreans at engineering crises and exploiting differences between the United States and its allies to gain concessions from Washington and others.  American efforts to resolve the North’s WMD programs, missile threats, and the conventional force threat will take longer, cost more, and prove a greater test of alliance relations – and U.S. diplomatic skill -- than before.  In the past, the North Koreans have played a weak hand well.  Now they will have the chance to play a much stronger hand.
 

The New US Administration and North Korea Policy:
A Time for Review and Adjustment

Daryl M. Plunk
Senior Fellow
The Heritage Foundation

Introduction
While most Americans are anxious to see the new Bush Administration achieve forward movement on such domestic issues as tax reform and education, significant foreign policies already confront the United States.  One area that requires early attention is the US-Republic of Korea alliance.  In recent months, new developments in relations between democratic South Korea and communist North Korea require that Washington review its policies toward the North and, where necessary, make appropriate adjustments.

Hopeful but Slow Progress

The hostile, 50-year old standoff between North and South Korea fundamentally was affected by last June’s leaders’ summit in the North’s capital, P’yongyang.  The talks between South Korea’s President Kim Dae-jung and North Korean leader Kim Chong-il were the first such meetings between the two bitter enemies since Korea was divided in 1948. Before departing P’yongyang, President Kim Dae-jung signed a formal agreement with the de facto leader and Defense Commission Chairman of the North that identified concrete avenues toward reconciliation and eventual reunification of the Koreas.

The significance of the summit and the pact cannot be overestimated.  Never before have political talks between the North and South reached such high levels. South Korean President Kim deserves praise for his relentless pursuit of the summit after years of diplomatic stalemate. The next major step in the budding peace process will be the reciprocal visit to Seoul by the North Korean leader.  While a date for that visit has not been set, there are increasing signs that it may take place around April.

US-South Korean Coordination is Essential
Washington should applaud President Kim’s success at negotiating the pact as well as establishing Seoul’s leadership role in the process, a role that the Clinton Administration had downplayed in the past. To sustain the momentum that President Kim’s visit to P’yongyang has sparked, the United States now should execute a careful strategy that keeps Seoul out in front and continues to offer any US benefits to the North on a strict, reciprocal basis.  This principle of reciprocity was rarely enforced during the Clinton Administration and now deserves close scrutiny by President Bush as he and his senior advisors review America’s North Korea policy.

The June 2000 Joint Declaration

The four-point pact signed by Kim Dae-jung and Kim Chong-il in P’yongyang on June 14 is brief and concise, yet broad in its implications:

First, the two leaders declared that on the matter of national reunification, Koreans should play the leading role. This is significant since the Clinton Administration in recent years assumed the lead role. In doing this, it inhibited the North–South dialogue and thus stymied any meaningful progress toward tension reduction on the Peninsula.

Second, the two Korean leaders pledged to negotiate toward a “loose form of federation.” In President Kim Dae-jung’s mind, this would involve a confederation stage during which the two governments would cooperate closely on economic, social and political matters. Defense and foreign policy issues would remain the sovereign domain of the respective governments. After a gradual period of reconciliation under the confederation arrangement, the two sides eventually would negotiate formal procedures for reunification of the nation.

Third, the two leaders pledged to move swiftly to address the plight of more than 1 million relatives separated since the national division of Korea. They agreed to arrange a large separated-family member exchange for National Liberation Day on August 15.

Fourth, the leaders pledged to greatly expand their countries’ economic ties, and even cited several specific infrastructure projects on which the two sides could cooperate.

Tensions Remain High

Despite Seoul’s successful efforts to resume North-South dialogue after a nearly decade-long hiatus, little meaningful progress has been achieved.  A very limited and highly regimented exchange of several hundred separated relatives occurred, and the two sides are wrangling over the next exchange.  Critics of President Kim’s “Sunshine Policy” toward P’yongyang worry that Kim Chong-il simply is allowing for perfunctory North-South interaction in return for stepped up food and financial assistance from Seoul.  The Kumgang-san tourism business, funded mainly by the Hyundai Group, is painted by President Kim’s opponents as an operation that, by some accounts, has generated as much as $25 million in monthly profits for the North.  While the South Korean leader deserves credit for achieving the historic summit, Seoul should take care that a proper degree of North Korean reciprocity also is secured.  Above all, the North must be pressed to begin reduction of its conventional military threat.

In Senate testimony on February 7, 2001, CIA Director George Tenet said that the North continues to pursue a “military first policy” at the expense of other national objectives.  As a result, “the North Korean military appears for now to have halted its near-decade-long slide in military capabilities.”  He concluded that Washington “has not yet seen a significant diminution of the threat from the North to American and South Korean interests.”

The US-Korea security alliance remains dominated by the serious military threat posed by communist North Korea, and the Korean peninsula remains the only spot in the world where tens of thousands of American lives are at risk.  Despite its tattered economy, the North’s regime maintains one of the world’s largest standing armies and has used its nuclear weapons and long-range missile development programs to extort support from the US and the international community.  The North’s forward deployed forces require the continued presence of 37,000 US troops in South Korea at a cost of about 3 billion US taxpayer dollars per year.

North Korea Policy:  Past Lessons

The Bush Administration wisely announced early on that America’s policies toward the North would be reviewed and, where necessary, changes would be made.  In this regard, an analysis of President Clinton’s policies and their results is a useful exercise.  How were the past policies conceived, and what did they achieve?  For one thing, North Korea became one of America’s largest recipients of foreign assistance.  Since 1994, around half a billion dollars has been spent by Washington on the North in the form of humanitarian food assistance, payments to the North for the return of US Korean War-era MIA remains and energy assistance required under the 1994 US-North Korea nuclear deal.

Early in his first term, President Clinton grappled with the North’s renegade nuclear weapons program.  After many months of tedious negotiations with the North, the first-ever U.S.-North Korea political agreement was signed in October 1994.  The so-called Agreed Framework offered benefits to the North including improved trade and political ties with Washington, a $50 million per year fuel oil supply and construction of two nuclear reactors valued at about $5 billion.  Together with a consortium of about a dozen nations, the United States is raising funds to support this process, although Seoul has pledged to pick up most of the tab.  In return, the North agreed to “freeze” its current nuclear program, preventing it from processing any more weapons-grade plutonium than it already has.

The Clinton Administration proclaimed that the nuclear threat had been checked.  There were serious holes in this assertion, however.  Washington backed down on its earlier demand that the North provide a full accounting of its enriched plutonium stockpile.  Inspection of its storage sites, which the North is obliged to allow under other international treaty obligations, has been delayed for years to come.  As a result, the North may have already secretly assembled nuclear bombs.   Even senior Clinton Administration officials made this public admission.  This makes the North’s missile technology advances all the more threatening.

As part of the deal, the North promised to resume substantive dialogue with the South in pursuit of tension reduction.  It refused to do this for nearly six years, yet the Clinton Administration downplayed this direct violation of the Framework.

The North continued its ballistic missile development program and exported its missile technology to nations hostile to the US.  P’yongyang’s conventional military threat remains and, considering its missile advances, has become more dangerous.  It is receiving assistance from the US and its allies in return for a so-called nuclear “freeze” that has left all of the North’s nuclear weapons development capabilities in P’yongyang’s hands.  Regarding fundamental US national security considerations on the peninsula, Clinton’s North Korea policies largely have failed.

Why So Far Off Course?
 Clinton Administration officials often answered Agreed Framework critics with the accusation that the policy’s opponents never proposed any viable alternatives.  That simply is not true.  The Heritage Foundation, among others, was promoting a variety of policy options when the nuclear crisis heated up in 1993.  The recommendations in this paper’s conclusion generally are in line with the ones Heritage espoused during that timeframe.  The fact is that the Geneva deal was poorly negotiated and poorly designed.

 The North’s threat and bribery tactics have repeatedly paid off for P’yongyang.  Actually, the most significant “freeze” in play today relates to three key issues.  Unlike the much touted yet illusionary nuclear freeze, these other frozen aspects run decidedly counter to the interests of the US, South Korea and its allies.  They are:

1)  Political and military tensions on the peninsula remain frozen at dangerously high levels.  Indeed, given the profound ripple effects throughout the region of the North’s missile program, tensions are increasing and drawing other nations into the fray.   The Agreed Framework has ironically and disturbingly created more instability and frictions than it has solved.

2)  The US was frozen into a largely fruitless bilateral political dialogue with P’yongyang.  Trapped in a tedious and inconclusive series of talks with the North, the US became the focus of most of the North’s attention and energy.  Lost in the shuffle was anything resembling a clear, forward-looking, comprehensive plan for achieving lasting peace in Korea.

3)  As a direct result of point two, South Korea was frozen out of the point position it once held with respect to peace negotiations with the North.  For decades, the US required that the North deal directly with Seoul since, in the end, only the two Koreas can ink the formal agreements that will be necessary to get the reconciliation process going.  The US position once was that Washington could not solve the stalemate on its own.  That US position was overturned by the October 1994 deal.  Until last June, the North had refused to hold even one formal government-to-government dialogue session with the South.  The June summit had more to do with Seoul’s dogged pursuit of the breakthrough and the North’s frustration with the Agreed Framework than with the US-North Korea deal itself.

Why did our Geneva negotiators not anticipate these problems?  How could they not have suspected that the first political agreement between Washington and P’yongyang would turn the North away from, not toward, productive dialogue with the South?  Did they truly believe that the North was sincere in pledging to give up its nuclear weapons program in return for two power plants?

Misguided Expectations on Both Sides

Some critics of current US policy believe the answers lie in two related factors.  First, perhaps in a rush to contain the crisis and loathe to stand firm in the face of the North’s defiant violation of its NPT obligations, the North’s demand for the light water reactor construction project (LWR) was accepted despite the wholly impractical nature of scheme.  Very serious questions about the viability of the construction project have emerged that seem not to have been anticipated by the Clinton Administration.  One fact is that the North does not have the capacity to distribute the energy that would be produced by the reactors.  There are other technical and legal matters that have emerged which cast long shadows of doubt upon the very concept of building LWRs in the North.

Given this, one can reasonably suspect that President Clinton’s negotiators had other considerations in mind.  With a congressional election looming, they appeared to have been in a rush to sign a deal before November 1994.  The Framework alone would not bring peace to the peninsula, but it would buy time.  It appears, however, that the Clinton Administration may not have assessed that the structure of the deal could in fact worsen tensions.  Another factor may have been those officials in the Clinton Administration who believed that North Korea was well on the way to its collapse.  Buying time would pacify and distract P’yongyang for some months or several years—until the government there slipped into a coma and made a “soft landing.”  The work on the LWRs would not be in vain then as they would be inherited and made viable by prosperous South Korea.

The other side of the coin was the North’s expectations and intentions.  Clinton Administration officials did not realize how divergent the North’s perceptions of the deal were from those of the US.  Just a few weeks after the Geneva deal was signed, senior North Korean officials met with Heritage Foundation representatives.  What the North Koreans said was striking and disturbing.  For one thing, the LWRs were not the focal point of their thinking.  In fact, they seemed to place little importance upon the construction project and its purported future benefits.  Instead, they were elated over the broader implications they saw in the deal.  Three points dominated their analysis:

1)  As the first formal agreement with the US, the Framework was an unprecedented political feather in the North’s hat.  It would afford P’yongyang greatly enhanced stature and legitimacy in the international community and undercut Seoul’s image since the deal broke the South’s monopoly on ties with Washington.
 
2)  The North Korean officials were adamant in their prediction that these political realignments would open the way for the North and the US to conclude a bilateral peace treaty.  That, in turn, would pave the way for the withdrawal of US forces stationed in South Korea.
 
3)  With the lifting of America’s trade embargo, the North would be showered with US aid and lucrative business transactions, thus saving its decaying economy.

It is important to point out that, in defending these predictions, the North Korean officials pointed to the side letter that President Clinton sent to “Supreme Leader Kim Chong-il” on the day the Geneva pact was inked.  In it, President Clinton pledged that the US taxpayer would pay the agreement’s multi-billion dollar price tag in the event that the South, Japan and other allies failed to do so.  To P’yongyang, it was proof that it had finally succeeded in its strategy of isolating Seoul by aligning itself closer to Washington.  The Clinton letter should go down in history as one of America’s most careless and disingenuous diplomatic ploys.

Assuming that the North did indeed wildly misjudge and overestimate the benefits that would flow from the Geneva accord, one can understand its subsequent defiant attitude.  P’yongyang believed the agreement would bolster and protect the North Korean regime and its economy at the expense of the South, and that it could simultaneously try to squeeze all it could out of the US, its allies and the international community.  In the end, Geneva was not about peace.  It was about survival.

August 1998:  The Beginning of the End of the Framework?
August 1998 was a pivotal month for North Korea policy, particularly from the US perspective.  That month, The New York Times first reported on the “suspect site” at Kumchang-ri.  Then, in late August, North Korea shocked the world by successfully testing a long-range missile.  That missile was fired over Japanese territory, sending an unmistakable military warning to Japan and its closest military ally, the US.  Within the space of a few weeks, US attitudes toward North Korea were shaken to their core.  First, there was dramatic new evidence that the North not only posed a missile threat to the South and Japan but also to US territory.  Second, the Kumchang-ri incident, coming four years after the North had pledged to keep its nuclear program “frozen”, solidified the opinion of many that P’yongyang never had any such intention.

South Koreans have lived under the threat of North Korean attack for decades.  The missiles, while clearly a matter for concern, are just more arrows in the North’s quiver in the minds of many South Koreans.  However, from the US perspective, the missile program aims to extend the North Korean military threat right to America’s shores.  First, of course, is the specter of the North possessing missiles tipped with nuclear or chemical weapons capable of reaching western areas of the US.  Next, the missiles have set off a regional chain reaction throughout Northeast Asia.  This in turn is an added threat to American security interests.  Japan was so rattled that its officials reportedly even considered the “preemptive strike” option.  Washington has responded by pursuing a missile defense initiative similar to the one that President Reagan was unable to realize even during the cold war.  This, together with broadening discussions of theater missile defense programs for allies including Korea, Japan and Taiwan, has become a matter of contention between Washington and Beijing.

So, the North has ceased to be simply a peninsular threat.   It is dismaying that some South Korean analyses blame the current debate over changes in US policies toward the North on “hard-line Republicans” or “conservatives.”  But, this is not a debate over whether to be “hard” or “soft” on P’yongyang.  Rather, it is a debate over whether Clinton policies have compounded US challenges instead of solving them.  It is a debate over how to formulate more effective policies.

How the Framework Has Failed
It should be recalled that Section III of the Agreed Framework stipulated, “The DPRK will consistently take steps to implement the North-South Joint Declaration on Denuclearization . . . and the DPRK will engage in North-South dialogue, as this Agreed Framework will help create an atmosphere that promotes such dialogue.”

The Clinton Administration’s attempts to coax P’yongyang to the bargaining table with the South were, in the end, ineffective.  The North, mired in a staggering economic crisis, repeatedly has demanded commitments of massive food aid from the United States and South Korea as a precondition to negotiations.  Seoul, Washington and the international community have provided enormous amounts of humanitarian assistance.  Still, the P’yongyang regime consistently refused to engage Seoul in political dialogue (until President Kim’s June initiative) – violating the promise it made in writing in Geneva in 1994.

The U.S.-North Korean Agreed Framework of October 1994 was hailed by the Clinton Administration as an historic opportunity to end the state of war that had lingered on the peninsula since the 1953 Korean War cease-fire.  Instead, military tensions on the peninsula remain high, no progress has been made in easing the North’s conventional threat, the North’s economy is in a free fall and many of its citizens are starving.  Also, under the agreement, the North was allowed to keep its nuclear card for years to come.  It technically is obliged to allow for full nuclear transparency just before completion of the two reactors which, at this point, will not happen for many years.

Also, in order for the Clinton Administration to coax concessions from the North, a pattern of payments and concessions emerged.  The 1999 Kumchang-ri is an embarrassing example of this.  Early that year, the US announced that an underground site had been identified in North Korea that was suspected of being used for nuclear weapons development purposes.  When the site became public knowledge, and thus a political bone of contention with respect to the purported nuclear freeze, the US demanded inspections.  The North offered to allow inspections for $300 million.  In the end, P’yongyang got most of what it demanded, and the US got much less.  The food assistance that Washington announced just weeks before the March 16, 1999, “US-DPRK Joint Press Statement” was valued in the $200 million range.  Secretary of State Albright proclaimed that the North had agreed to “multiple site visits” by US officials to Kumchang-ri.  Actually, what the US received was an “invitation” by the North to have a single inspection in May 1999.  Any reasonable person would question this failure to secure immediate inspections.  The inspection turned up nothing, and observers wondered whether it has been sanitized or simply had been used by the North as an extortion tool.  Consider the March 18, 1999 commentary published in the South Korean daily newspaper, Choongang Ilbo:

“In effect, North Korea traded a cave for gifts equivalent to a third of its annual trade…The US came away with nothing, not even face [emphasis added]…The US backed away big time, too, from its original refusal to pay any compensation to the North.  The US-North Korea agreement, to be sure, contains no mention of compensation, but nobody is fooled by that.  The agreement is a straightforward exchange of assistance for visits.  Meanwhile, of course, North Korea has carted away any evidence at Kumchang-ri and US ‘visits’ are unlikely to turn up anything.”

The North has a growing missile arsenal that is acquiring intercontinental capabilities.  Furthermore, it is becoming one of the world’s most prolific salesmen of missile technology to rogue nations.  It is not widely known that, in recent years, the Clinton Administration discovered not one but two sales of North Korean missile technology.  In 1996, P’yongyang sold SCUD mobile missile launchers to Iran.  The next year, the Clinton administration, in a low-key, official notice, published in an obscure government document, admitted that the North had been caught yet again selling missile technology.  In both cases, Washington was forced under existing US law to impose additional (though meaningless) trade sanctions upon North Korea.  In neither of these cases did the administration take the initiative of speaking publicly about the North Korean sales and so neither the US press nor the Congress came to know the full story of these incidents.  The Clinton administration established a pattern of downplaying or ignoring serious hostile actions taken by P’yongyang, actions that one could conclude violated the spirit if not the letter of the Agreed Framework.

America’s economic, political and security stakes in Northeast Asia are very high.  Should the North attempt to make good on its infamous threat to turn the South into a “sea of flames,” the entire region would be destabilized.  In this context, the Agreed Framework process has not eased Korean tensions.

Clinton policies have done little more than paper over the threat and entice P’yongyang to engage in talks with the United States by offering it a multi-billion dollar energy infrastructure construction along with pledges of limited U.S. aid and political ties.  Now, the United States and other nations are responding to the North’s economic crisis with food aid.  For the first time, the North openly admits to its economic woes and is publicly appealing for international support.  P’yongyang continues its strategy of extracting concessions from the United States and its allies.  But, this is a futile game.  The North’s needs are much greater than Washington and the international community are willing to provide.  Massive aid to a nation that poses a clear and present military threat is hardly an acceptable option.  As the North continues its slide toward economic collapse, it can expect only limited aid under the current circumstances.  The multi-billion dollar bonanza it has been promised – the nuclear reactors – won’t materialize for years.

The Geneva Deal’s Basic Flaws

The General Accounting Office (GAO), a research arm of the US Congress, has published several reports highlighting the Framework’s multiple flaws.  It has found that the Agreed Framework is “not legally enforceable”, either under U.S. or international law.  The GAO determined the document was not a formal treaty of any sort but rather a “nonbinding political agreement.”  Such a document does not require prior US congressional approval.  It is reasonable to assume that this was precisely the aim of the Clinton administration.  Still, the Congress has been compelled to appropriate many millions of dollars to fund the Clinton deal.  So, the Congress has been something of a hostage in this process.  The GAO concluded that the Agreed Framework “can have the effect of pressuring the Congress to appropriate moneys to implement an agreement with which it had little involvement.”  One could conclude that “no involvement” would have been a more accurate description of the congressional role.  Also, the report pointed out that the Congress must eventually approve transfer of any significant nuclear technology to the North, despite the fact that it was not consulted.

The GAO study found that the North eventually would have to purchase expensive nuclear liability insurance to protect KEDO participants, including Americans.  Also, the North’s existing power grid or infrastructure is not nearly capable of distributing the power that will be generated by the new reactors.  The GAO quotes State Department sources as saying that this grid will cost about $750 million, a figure that is considered a very conservative estimate.  The US and its allies understandably say they will not pay for this enormous project.  Given its economic crisis, it is certain that the North will not soon be in a position to pay this price.  The GAO states that “North Korea could exert pressure on others to pay for the grid.”

The most recent GAO report on these issues was released in July 1998.  Among other things, it stressed that the International Atomic Energy Agency (IAEA) “identified several problems affecting its ability to determine whether North Korea is complying fully with…aspects of the nuclear freeze.”  One specific problem is that the North “has not allowed the IAEA to implement required safeguards measures on the liquid nuclear waste tanks” at the Yongbyon facility.  Furthermore, “the Agreed Framework allows North Korea to continue operating certain nuclear facilities not covered by the freeze,” the report found.  The GAO report notes that a December 1996 State Department cable expressed “deep concern about whether North Korea will fulfill critical components of the Agreed Framework.”

During talks with the North in 1993 and 1994, U.S. policy makers spoke of a “package deal” under which P’yongyang would reap substantial rewards for giving up its nuclear ambitions and pursuing a lasting peace on the peninsula.  At that time, The Heritage Foundation, among others, supported this approach and called for an attractive trade and aid package from the United States, South Korea, Japan and other concerned parties in return for P’yongyang’s cooperation.  Instead, the Clinton Administration offered a power plant construction scheme.  What the North desperately needs now is financial assistance and economic reform, not the prospect of enhanced electric power capabilities 10 years from now.  What the US urgently needs now is an unambiguous end to the North’s nuclear threat and rapid tension reduction in Korea.

Current North Korea policy should be changed to address these critical needs.  While this will require careful diplomacy, there are no legal barriers to such action.  After all, the GAO report to Congress found that the Agreed Framework is not legally binding or enforceable under either U.S. or international law. The study quotes State Department officials as admitting that the deal was structured in this manner since “the United States wanted the flexibility to respond to North Korea’s policies and actions . . . .”  Now is the time to respond.

Sunshine Policy to the Rescue?
Within days of assuming office, President Kim Dae-jung sounded some hopeful notes with respect to North Korea policy.  Particularly noteworthy was his contention that the South should resume its front-and-center position in dealing with the North.  Seoul’s primacy is essential to success, but Washington largely bartered its point position away in the Geneva deal.

Over the course of his first year in office, President Kim fleshed out what he calls his “Sunshine Policy.”  It has become a matter of domestic Korean political controversy since some accuse President Kim of not requiring enough “linkage” in return for South Korean assistance.  Still, his policies embrace the fundamental principles necessary for turning our concerted efforts away from the current, feckless track and moving them in directions that can eventually produce positive results.

President Kim speaks of an appropriate measure of reciprocity, a concept that would link North Korean good behavior to incentives that would be offered by Seoul and its allies.  In this, there could be the makings of a comprehensive “carrot and stick” package deal that the Clinton administration chose to abandon in 1994.  This is the sort of approach Seoul should follow, taking care that the principle of reciprocity is enforced against the North.  It is important for Seoul to resume the point position in dealing with North Korea.  Real progress toward tension reduction must be achieved primarily by the Koreans, with the US, Japan, China and other concerned nations playing important but supporting roles.
 

Conclusion
The Cold War may have ended, and North Korea may no longer have China and the Soviet Union standing by ready to support its military aggression toward the South. But, even as its economy crumbles, the North continues to pose a daily threat to the security of South Korea, as well as to the interests of the United States and the South’s other allies.
The time has passed for simply offering reasonable incentives to P’yongyang to produce reasonable behaviors. The North must now show substantive efforts and make rapid progress toward achieving peace and stability on the Peninsula. President Kim’s North-South summit initiative gives rise to considerable hope that this process has begun and that the two Korea’s are implementing a practical, step-by-step journey toward peace and reunification. Washington should step back, support the South in its efforts, and ensure that future aid is tied to real reciprocity on the part of the North.

 

North Korea’s Historic Shift:
From Self-Reliance to Engagement

Don Oberdorfer
Johns Hopkins University, Nitze School
Of Advanced International Studies
 

The North-South summit meeting of June 2000 has brought dramatic change to the Korean peninsula. In political terms, it is the greatest change since the Korean War half a century ago. The resulting engagement, if sustained, has the capability of the inaugurating a fundamentally new era in Korea and Northeast Asia.

How did this surprising engagement come about?  What are its essential characteristics?  Where is it leading?  What are the prospects of success?

This paper is a modest effort to explore some of those questions, even though much essential information about the origins and inner workings of the transformation remains unknown.  I have always been fascinated with historical turning points:  my first book, Tet! (1971), was about the turning point of the Vietnam War; my second book, The Turn: From the Cold War to a New Era (1991), described the negotiations which ended the global struggle between the United States and the Soviet Union.  I find the current shift on the Korean peninsula no less fascinating or less historic, even though the final result is still beyond our grasp.  Whatever the developments to come, whether they bring the renewal of Kim Chong-il’s regime or its demise, I am convinced that the future of the Korean peninsula will be different from the past.  Thus, the developments which came to fruition in the year 2000 will be long remembered.

As is clear from the paragraph above, I do not believe the North-South summit meeting in P'yongyang in June or the events which followed were mere symbolism without substance, as some in Washington and elsewhere have contended.  Compared with the past, the events since the June summit have been nothing short of startling.  They are already bringing important changes to the relationship between the two regimes that share the Korean peninsula, and they are likely to bring notable changes to the relationship between the two Koreas and United States and a host of other nations.

Since the June summit, North and South Korea have held four rounds of formal ministerial talks on the differences between them and agreed to four North-South pacts to encourage trade and investment. [21] Defense ministers of North and South have held one round of talks to discuss security arrangements, and lower-level military working groups from the two opposing armies have held five meetings. Two sets of emotional meetings to reunite 100 families on each side have been held, and a third is scheduled for late February.  The athletes of North and South Korea marched together under a single flag in one of the most memorable moments of the 2000 Sydney Olympics, in sharp contrast to their bitter disputes over the 1988 Seoul Olympics.  The two sides have agreed on plans to repair and reconnect the severed North-South railroad that ran through the peninsula until the country was divided more than half a century ago, and to build a highway alongside the tracks to facilitate commerce and other exchanges. Rail reconstruction and mine clearing has begun, to make possible the new links through the heavily fortified DMZ. In a development which started earlier, South Korean and foreign tourists have continued to visit North Korea's Diamond Mountain by the thousands.  North Korea and South Korea's Hyundai Corporation have continued discussions on the establishment of an export processing zone at Kaesong, a historically important city in the center of the militarily sensitive area just north of the DMZ.  Many of these items represent interactions which are incomplete and in some cases have run into problems.  But every one of them is unprecedented in the 50-year struggle between the rival regimes that inhabit the Korean peninsula.

In the international area, the North Korean dogma of juche has given way to an almost dizzying drive for engagement.  Kim Chong-il sent Vice Marshal Jo Myong Rok, widely regarded as the  second most powerful figure in the regime, to see President Clinton in Washington, carrying unexpectedly sweeping proposals to virtually eliminate North Korea's long-range missile programs.  Secretary of State Madeleine Albright and a team of high U.S. officials flew to P'yongyang to negotiate further about the missiles, but were unable forge agreement on a deal before the Clinton administration left office.  North Korea resumed normalization talks with Japan in April 2000 after a hiatus of eight years.  In July P’yongyang joined its first regional security organization, the Asian Regional Forum sponsored by Southeast Asian nations.  A month later it renewed its application for membership in its first international financial organization, the Asian Development Bank. Meanwhile, Kim Chong- il held summit meetings with the leaders of China and Russia. In September his government sent letters to the European Union and every European country proposing the opening of relations. Since January 1, 2000, North Korea has established diplomatic relations with Italy, Australia, the Philippines, Great Britain, the Netherlands, Belgium, Canada and Spain and has moved toward full relations with several others. Nearly all of these developments are also unprecedented.

In Pursuit of a Summit

In examining the motive forces behind these changes, the central focus must be on North Korea.  Although Kim Dae-jung’s Sunshine policy was a key factor in the developments, it brought few results during its first two years because Kim Chong-il was not ready fully to engage.  From 1972 to 1994 South Korean presidents from Park Chung Hee through Kim Young Sam had tried at one time or another to establish serious relationships with Kim Il-sung, their counterpart in the north, and all except Park ardently sought summit meetings, but with only minimal success.  Kim Dae-jung was more determined and more consistent than his predecessors and deserves much credit, but even his extensive efforts came to little until a decision was made in P'yongyang to respond in kind.

For most of the half century since the creation of the regime, North Korea's role on the world scene was that of menace to the peace. Its attack across the 38th parallel that started the Korean War, its massive and forward-deployed post-war military force, its practice of terrorism and its bristling vocabulary of threats made it a pariah state to be dealt with disapprovingly and as little as possible by most of the nations of the world. Beginning with the death of Kim Il-sung and the evidence of its poverty and deprivation in the middle 1990's, North Korea was seen less as a threat and more as an economic basket case and the object of humanitarian assistance.  Beginning with the June 2000 summit meeting, North Korea and its leader began to be accepted for the first time in terms befitting a normal state.  What had been shrouded in mystery began to be explored; what had been cause for either anxiety or pity began to be engaged diplomatically and examined at high levels by many of the world's democratic governments.

In exploring Kim Chong-il’s turn toward engagement, it is necessary first to understand that it did not come out of the blue.  His father, Kim Il-sung, the founder of the state, sought on several occasions to engage South Korea for his own purposes and on his own terms. These efforts go all the way back to 1948, when he invited the nationalist leader Kim Koo to meetings in P'yongyang, although under conditions which were intended to establish Kim Il-sung’s superiority.  In 1972, while exploring the initiative of Park Chung Hee that led to the first North-South joint declaration, Kim Il-sung endorsed meetings and frequent contacts between " the authorities," "political parties and social organizations" and even the "rulers" of the two Koreas as part of efforts to eliminate misunderstandings and achieve unification. [22]  The Great Leader, as he was known in North Korea, and undertook secret talks, including discussion of summits, with South Korean presidents Chun Doo Hwan and Roh Tae Woo  Moreover, in 1994, he agreed to have a full-scale summit meeting in the North with Kim Young Sam and was actively preparing for it on the very day he died. [23]

When in 1995 I asked Kim Yong Sun, a senior aide to both North Korean leaders, whether Kim Il-sung had engaged in internal discussions before offering the 1994 summit, he responded that this was unnecessary because advocating a North-South summit was a “long established position,” but that the South had always found a way to thwart it in the past.  Later I asked Hwang Jang Yop, who had been a senior aide to Kim Il-sung in 1994 but who defected to the South in 1997, why the Great Leader had agreed to the 1994 summit meeting.  He responded that there were three reasons:  to avoid war in a dangerous situation; to obtain South Korean money to overcome the North’s economic crisis; and to build up the pro-North Korean factions which still existed in the South.

In the immediate aftermath of Kim Il-sung’s death, his son and heir appeared ready to move ahead to an early summit.  In a meeting in connection with his father's funeral, Kim Chong-il told Park Bo-hi, a close aide to the cult leader the Reverend Moon Sun Myung, that he wished to hold summit talks with Seoul, which Park described as sure to take place in "just a matter of time."  [24] This, however, was before President Kim Young Sam, the South’s incumbent leader, refused to express condolences at Kim Il-sung’s death and placed his military on full alert instead.  Kim Young Sam’s actions and his belief that the collapse of the DPRK was near deeply offended the authorities the North, who had little to do with him for the rest of his time as president.

The coming to power of Kim Dae-jung as South Korea's president in February 1998 was a crucial factor in bringing about the North-South summit.  Not only did it eliminate the impediment of Kim Young Sam, but more importantly, it brought to the leadership in Seoul a person ready to deal. To my personal knowledge—gained in talks with him since I first met him in 1973—Kim has consistently advocated peaceful coexistence and the easing of North-South tensions throughout his entire career. [25]  He was red-baited for these positions by a succession of South Korean politicians and presidents, but he never gave them up.  In his inaugural address on February 25, 1998, he declared the essence of his engagement, or Sunshine, policy:  "First, we will never tolerate armed provocation of any kind.  Second, we do not have any intention to harm or absorb North Korea.  Third, we will actively push reconciliation and cooperation between the South and North beginning with those areas which can be the most easily agreed upon."  These were remarkable statements for a South Korean president.  In the months that followed Kim initiated gestures and declarations to follow through and prove his sincerity.

North Korea responded warily at first, harshly criticizing Kim and his policies, although in notably less vitriolic words than had been used regarding his predecessor.  Despite the frustrating absence of positive responses, Kim persisted in his policies and insisted that eventually they would succeed.  This unwavering persistence was a key element in his success.

When I first saw Kim as president in March 1998, a month after his inauguration, he told me, "We're now waiting for the North Korean attitude.  I think there is discussion among the North Korean leadership about how to change their policy toward South Korea.”  When I saw him next nearly a year later in February 1999, there was growing criticism in Seoul of the Sunshine policy because of the absence of a visible response.  Nonetheless, Kim stood firm, saying, "We have had some positive responses—the four party talks, talks on the underground [suspect] facility, missile talks, general officers’ talks, Kim Chong-il’s meeting with [Hyundai founder] Chung Ju-yung as a result of the separation of politics from economics, and 30,000 South Korean tourists visiting the North.  I consider those things to be indirect responses to my policy.”  He added, "I don't think the engagement policy is perfect or is certain to bring success—but it is the best we can devise.”  By the time of our third meeting during his presidency in January 2000, Kim was beginning to receive secret hints of more direct North Korean responses, but he did not tip his hand.  Asked about the lack of a clear-cut response to his overtures, Kim told me, "We told North Korea when they respond to our efforts for peace, we will respond.”  He expressed the belief that the activities of former Secretary of Defense William Perry and the growing solidarity of the United States, South Korea, and Japan would have a positive influence on North Korea.

The Decisions of 1998

In retrospect, according to senior figures involved in North Korea policy in both Seoul and Washington, August and September 1998 appears to have been the period when new decisions began to emerge in P'yongyang that led eventually to serious engagement.  Paradoxically, the developments of those crucial weeks seemed at the time to be pointing toward intensified conflict with the United States, Japan, and other nations.

In North Korea military and political leaders were summoned to P'yongyang for two related events:  the 50th anniversary of the founding of the Democratic People's Republic of Korea, and the first meeting since Kim Il-sung’s death of the Supreme People's Assembly, in theory the highest legislative authority in the country.  The SPA meeting amended the constitution, introducing elements of a Chinese-style socialist market economy, bringing younger, more pragmatic bureaucrats to positions of power to replace elderly figureheads, and centralizing governmental authority in a cabinet system to operate under the direct control of Kim Chong-il.  Four years after his father's death, Kim Chong-il was officially designated the nation’s leader as chairman of the National Defense Commission, a position which was declared to be "the highest post of the state." Kim Chong-il’s choosing to rule from a military post and the increasing prominence of military leaders in the Assembly–including the fast-rising Vice Marshal Jo Myong Rok, who was given the honor of nominating Kim Chong-il to an assembly seat–suggested to many observers that North Korea was rapidly becoming an even more militarized regime.

Since his father's death and especially since 1997, Kim had been spending a great deal of time establishing and improving close relations with the North Korean military.  He was preparing to be designated general secretary of the ruling Workers' Party, a long awaited event which took place in October that year.  A visitor to P'yongyang in 1997 noticed some of the extraordinary ways in which he was garnering military support.  Large numbers of officers had been promoted. General officers, of whom there were now many, were being driven around the capital by uniformed drivers in new Mercedes and BMW limousines.  Despite the famine in the countryside, a special floor of the Koryo Hotel, the capital's best, had been set aside for the lavish wining and dining of senior military officers.  Outside the capital, Russia-style dachas or recreational residences were springing up for the use of military leaders.  As it turned out, Kim Chong-il’s’s new post as chairman of the National Defense Commission in 1998, with the veteran Jo Myong Rok, former chief of the Air Force, at his side, cemented his grip on power, including power over the military, and set the stage for greater diplomatic flexibility.

The domestic maneuverings over the new constitution and new posts for Kim Chong-il and younger technocrats were overshadowed for the rest of the world by a spectacular event with international repercussions, which apparently was intended to celebrate Kim’s ascendancy:  the launching on August 31 of a three-stage rocket known as Taepodong I from a testing area on the country’s East Coast. Participants in the giant 50th anniversary celebration flashed cards in unison which portrayed a rocket rising in the air, a display probably created and rehearsed weeks, if not months, in advance.  The announced purpose of the rocket was to launch a satellite in space broadcasting the revolutionary hymns, “the song of General Kim Il-sung and the song of General Kim Chong-il" as it flew in orbit around the earth. U.S. officials said, however, that the satellite failed and fell into the ocean.

Notwithstanding the satellite’s failure, the rocket had a solid fuel third state and a greater range than had been expected, giving it enhanced potential to become a formidable military missile carrying a deadly payload.  The Taepodong test was front-page news, far overshadowing the domestic governmental changes which were hard to assess. In the most dramatic physical threat to Japan since World War II, the rocket flew over the Japanese islands, alarming the Japanese people and also causing great concern in Washington, where it added punch and power to the drive to create a national missile defense. An American official who was in close touch with P'yongyang at the time believes the North Koreans did not anticipate the powerful political impact of the launch.

North Korea had not tested a potential ballistic missile since 1993, and that one a Nodong rocket of much shorter range.  P'yongyang apparently prepared for a test of its longer-range projectile in October 1996 but postponed it after U.S. representations.  In June 1998, North Korea publicly offered to negotiate with the United States an end to missile sales and perhaps to deployments, but Washington did not respond.  Preparations for a test were resumed in August 1998 while military and political leaders were being summoned for the meeting of the Supreme People’s Assembly.

The Taepodong test, which was a total surprise to all but a few experts in the outside world, resurrected the perception of North Korea as a military threat after years of being seen primarily as an area of humanitarian disaster.  The tests came only six weeks after a congressionally sponsored commission to assess the ballistic missile threat to the United States, headed by former Secretary of Defense Donald Rumsfeld, reported that the threat was greater and more imminent than the executive branch had acknowledged.  The North Korean launch seemed tailor-made to prove the point.  The launch also came just weeks after the public revelation that U.S. intelligence suspected North Korea of preparing to cheat on the 1994 nuclear-weapons accord by digging a giant hole in the ground to house a clandestine nuclear facility.

All this greatly strengthened the hand of conservatives in Congress, who had never liked the 1994 Agreed Framework nuclear deal, which created the first non-hostile U.S. relationship with the DPRK and accorded legitimacy to the North Korean regime.  The possibility that North Korea was preparing to cheat on its nuclear obligations while testing threatening missiles was of grave concern even to those who had been backers of the Agreed Framework inside and outside the Clinton administration.  To save the nuclear accord and the tenuous U.S.-North Korean relationship from being scuttled by Congress, President Clinton named former Secretary of Defense William Perry as North Korea policy coordinator to make a full-scale study and recommendations about what to do regarding North Korea.  Although no one guessed it at the time of their inception, Perry’s activities would become an important element in North Korea’s turn toward engagement.

The Aid-based Regime

Nearly everyone who has examined Kim Chong-il’s turn toward engagement has identified economic necessity as the principal motive force.  Kim Dae-jung, for example, told a dinner meeting of Korean experts in New York on September 7, 2000, that "North Korea's desperate situation, [its] economic travail," was the most important reason behind Kim Chong-il’s agreement to the June summit.  The North Korean leader realized, according to Kim Dae-jung, that without improved relations with South Korea, "others won't help" the North in its economic quest.  This was especially true of the United States, Kim told the dinner meeting.  North Korea wished to sideline South Korea while responding to the United States, he said.  But "the United States clearly rejected this," he said.

Because authoritative data is missing, there is much dispute about the precise state of North Korea's economic output.  It is almost universally agreed by outside observers, however, that the economy had been on a sharp downward path beginning with the collapse of the Soviet Union in 1991 and especially since the death of Kim Il-sung in 1994.  There is also a strong consensus that the economy began to "stabilize" around 1998 or 1999 at a very low level, which was close to an economic collapse.  The South Korean central bank, the Bank of Korea, went so far as to announce a 6 percent gain for North Korean national income in 1999, but this figure is widely disputed. [26]  Whether North Korea's economy stabilized, hit bottom, or actually turned around near the end of the decade, it seems likely that the relative improvement enabled Kim Chong-il to experience enough of a breather to experiment with external economic support of a more fundamental nature than mere humanitarian food aid for subsistence purposes.  It is also possible that he realized that humanitarian aid to starving people was not likely to continue forever.  Donor countries and aid groups, weary from years of coping with a mostly man-made famine in which as many as a million or more people may have died, were beginning to be afflicted with fatigue.

Starting with the reports of extreme famine in outlying areas in the mid 1990's, the international community began supplying humanitarian assistance, principally food and medicine, into North Korea.  The aid through foreign government grants, the UN’s World Food Program, private aid agencies, and the heavy fuel oil provided by the United States through the Korean Peninsula Energy Development Organization (KEDO) under the 1994 nuclear accord produces about $400 million annually, according to Marcus Noland, the most careful independent record keeper of such data.  This aid has come from 49 different countries, with the United States, South Korea, China, Japan, and the European Union being largest contributors.  In addition, North Korean income from missile sales and illicit activities such as counterfeiting and the drug trade adds up to nearly as much, Noland has estimated.  [27] Altogether these sums are roughly equal to the aggregate value of all of North Korea's recorded exports of slightly less than $1 billion per year.

Aside from China, which wishes to keep North Korea afloat for security and ideological reasons, the most likely source of immediate economic assistance is South Korea, many of whose citizens originated in the North and whose businessmen speak the same language.  North Korea's largest and most important individual benefactor these days is South Korea's Hyundai group, the country's largest industrial combination, whose 85-year-old founder, Chung Ju Yung, was born in North Korea and has always wished to aid the people he left behind.  In October 1998, a month after becoming head of the government, Kim Chong-il played host to the visiting industrialist in P'yongyang.  They agreed to a deal under which Hyundai would pay North Korea $25 million per month to bring tourists from South Korea and, eventually, from other countries to the famed Diamond mountains just north of the DMZ.  The enormous potential of this connection in Korean terms is suggested by the fact that the Hyundai group’s combined sales in 1997 exceeded $90 billion—more than five times the national output of North Korea.  Hyundai’s payments of $150 million in the first six months of Diamond Mountain tourism might be a modest sum in international financial terms, but it was close to the total sales of North Korea's largest export, textiles, in 1997.  Hyundai claimed when the deal was struck that it would be self-supporting, but it has turned out to be a big money loser.  The company, now in growing economic trouble, has asked North Korea, so far unsucessfully, to permit it to slash its payments in half.  The deal remains controversial in Seoul, especially since Hyundai has been making its payments in cash to a North Korean bank account in Macao, which reportedly benefits Kim Chong-il and his ruling elite but not the North Korean people.

Although Hyundai’s dealings with North ostensibly are the workings of private business, in fact the Kim Dae-jung government has played a critically important role.  In 1989 Chung Ju-yung was the first important South Korean industrialist to visit the North, but the disapproval of the Kim Young Sam government prevented him from returning to negotiate possible deals.  Kim Dae-jung, on the other hand, encouraged Hyundai’s activities with the North under his policy of separating politics from business.  The Diamond Mountain tourism deal was widely hailed as the first fruit of Kim Dae-jung’s Sunshine policy.  There have been widespread suspicions that Kim’s government has acted to protect the ailing conglomerate from its creditors in order to further the North-South relationship.  A senior aide to Kim described Hyundai’s dealings with the North as an important part of a confidence-building process, especially in late 1998 and early 1999.  That the Diamond Mountain payments continued even during periods of increased tension between the two governments was an important lesson for P'yongyang, according to the aide. “They began to trust us,” he said.

Looking at these developments, Marcus Nolan