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DATE=7/7/98 TYPE=BACKGROUND REPORT NUMBER=5-40876 TITLE=U-S / NORTH KOREA NUCLEAR BYLINE=STEPHANIE MANN DATELINE=WASHINGTON CONTENT= VOICED AT: INTRO: FUNDING GAPS AND OIL SHIPMENT DELAYS HAVE CREATED PROBLEMS FOR THE 1994 AGREEMENT THAT HALTED NORTH KOREA'S NUCLEAR PROGRAM. HOWEVER, CORRESPONDENT STEPHANIE MANN REPORTS ANALYSTS AND SOURCES CLOSE TO THE ISSUE EXPECT THE AGREEMENT TO PREVAIL. TEXT: IN 1994, THE UNITED STATES AND NORTH KOREA REACHED WHAT THEY CALLED AN AGREED FRAMEWORK. UNDER THAT ACCORD, PYONGYANG WAS TO STOP ITS NUCLEAR WEAPONS PROGRAM, SHUT DOWN OLD GRAPHITE NUCLEAR REACTORS AND OPEN ITS FACILITIES TO MONITORING BY THE INTERNATIONAL ATOMIC ENERGY AGENCY. IN EXCHANGE, A U-S LED CONSORTIUM -- CALLED THE KOREAN PENINSULA ENERGY DEVELOPMENT ORGANIZATION, OR KEDO -- WAS TO BUILD TWO LESS CONTROVERSIAL LIGHT WATER NUCLEAR REACTORS. IN ADDITION, KEDO IS TO PROVIDE THE NORTH WITH 500 THOUSAND METRIC TONS OF HEAVY FUEL OIL EACH YEAR UNTIL THE NEW REACTORS ARE OPERATIONAL. EVERYTHING WAS PROCEEDING RELATIVELY SMOOTHLY UNTIL THIS YEAR. KEDO HAS SHIPPED SOME OF THE HEAVY OIL, BUT IT DOES NOT HAVE ENOUGH MONEY TO SEND THE FULL 500-THOUSAND METRIC TONS AS REQUIRED UNDER THE 1994 AGREEMENT. A U-S SOURCE FAMILIAR WITH THE OIL ISSUE WHO ASKED TO REMAIN ANONYMOUS SAYS KEDO'S CURRENT DEBT IS JUST UNDER 40 MILLION DOLLARS, WHICH INCLUDES PAYMENTS MADE FOR OIL SHIPMENTS IN 1997 AND 1998. // OPT // THE SOURCE SAYS KEDO HAS DELIVERED ABOUT 154 THOUSAND METRIC TONS OF HEAVY FUEL OIL TO NORTH KOREA SO FAR THIS YEAR, AND SHIPMENTS TOTALLING 66-THOUSAND METRIC TONS ARE SCHEDULED TO BE MADE THIS MONTH. THAT MEANS 280-THOUSAND METRIC TONS REMAIN TO BE DELIVERED BEFORE OCTOBER 20TH, AT A COST OF ABOUT 28 MILLION DOLLARS. // END OPT // THE UNITED STATES HAS THE LEAD ROLE IN TRYING TO FIND FUNDING FOR THE OIL SHIPMENTS. SO FAR, WASHINGTON HAS CONTRIBUTED 30 MILLION DOLLARS AND THE CLINTON ADMINISTRATION IS ASKING CONGRESS TO APPROVE FIVE MILLION DOLLARS MORE. STATE DEPARTMENT SPOKESMAN JAMES RUBIN SAYS THE UNITED STATES WILL DO ALL IT CAN TO FULFILL ITS PART OF THE AGREEMENT. // RUBIN ACT // WE ARE WORKING HARD TO HELP KEDO RAISE ADDITIONAL FUNDS FROM OTHER COUNTRIES, BUT SO FAR IT HAS NOT BEEN ABLE TO RAISE SUFFICIENT FUNDS FOR ITS HEAVY FUEL OIL DELIVERIES THIS YEAR. WE BELIEVE THIS AGREEMENT IS AN EXTREMELY IMPORTANT ONE, AND WE REMAIN COMMITTED TO THE SUCCESSFUL IMPLEMENTATION OF THE FREEZE ON NORTH KOREA'S ACTIVITIES -- THE SO CALLED AGREED FRAMEWORK. // END ACT // A KOREA SPECIALIST AT THE UNITED STATES INSTITUTE OF PEACE, SCOTT SNYDER, SAYS THE FUNDING PROBLEM STEMS FROM MISUNDERSTANDINGS OVER THE ORIGINAL 1994 AGREEMENT. // SNYDER ACT ONE // I SEE THIS AS MORE A RESULT OF A MISUNDERSTANDING BETWEEN THE ADMINISTRATION AND CONGRESS, OR AT LEAST AN INABILITY OR UNWILLINGNESS TO FOCUS ON KEDO AS A PRIORITY ISSUE ON THE PART OF THE ADMINISTRATION UNTIL WE'VE REACHED A CRISIS POINT. THE RESASON WHY I SAY THIS IS ORIGINALLY FOLLOWING THE AGREED FRAMEWORK, THE ADMINISTRATION BASICALLY SIGNALLED TO CONGRESS THAT THIS WAS GOING TO BE A LOW COST OR COST-FREE AGREEMENT BETWEEN THE U-S AND THE D-P-R-K (NORTH KOREA), AND THAT IN FACT, SOUTH KOREA AND JAPAN WOULD BE TAKING OVER THE BULK OF THE COSTS. // END ACT // MR. SNYDER SAYS THE CURRENT SITUATION COULD BE INTERPRETED AS A CASE OF THE UNITED STATES NOT LIVING UP TO ITS COMMITMENT UNDER THE 1994 NUCLEAR ACCORD. HE SAYS THE AGREEMENT DOES NOT EXPLICITLY SAY THE UNITED STATES IS RESPONSIBLE FOR RAISING HEAVY FUEL OIL MONEY, BUT IT SAYS THE UNITED STATES WILL ARRANGE, THROUGH KEDO, THE DELIVERIES OF FUEL OIL TO NORTH KOREA. MR. SNYDER SAYS NORTH KOREA HAS MADE KNOWN ITS DISPLEASURE OVER THE DELAY OF FUEL OIL SHIPMENTS, BY INCREASING ACTIVITY AT ITS CLOSED NUCLEAR PLANT. // SNYDER ACT TWO // THEY'VE ANNOUNCED THAT THEY ARE GOING IN AND I GUESS CLEANING UP THE AREA OF THE REPROCESSING PLANT. AND SO, THUS FAR, THEY HAVE NOT ACTUALLY VIOLATED THE AGREED FRAMEWORK. HOWEVER, THIS NEW ACTIVITY IS CERTAINLY INTENDED, I THINK, TO SEND A SIGNAL THAT IF INDEED THE HEAVY FUEL OIL IS NOT PROVIDED ON TIME, THAT THE D-P-R-K MIGHT TAKE STEPS THAT WOULD BE DEEMED A VIOLATION OF THE AGREED FRAMEWORK. AND OF COURSE THAT WOULD PUT US BACK INTO A SIMILAR SITUATION TO THE ONE THAT WE WERE IN IN 1994 WHEN THE FRAMEWORK ITSELF WAS NEGOTIATED. // END ACT // STATE DEPARMENT SPOKESMAN JAMES RUBIN SAYS NORTH KOREA HAS MADE SUCH SUGGESTIONS FROM TIME TO TIME. SO FAR, HE SAYS PYONGYANG IS IN COMPLIANCE WITH THE 1994 AGREEMENT. HOWEVER, IF THERE IS EVIDENCE THAT NORTH KOREA IS IN VIOLATION OF THE ACCORD, MR. RUBIN SAYS THE UNITED STATES WOULD TAKE THE MATTER VERY SERIOUSLY. SCOTT SNYDER SAYS HE EXPECTS THE CLINTON ADMNISTRATION TO WIN AGREEMENT FROM CONGRESS FOR THE NECESSARY FUNDING TO CONTINUE OIL SHIPMENTS. BUT HE SAYS IT REMAINS TO BE SEEN IF THE NEXT U-S ADMINISTRATION, WHICH WILL COME TO OFFICE IN 2001, WILL BE AS COMMITED TO THE NORTH KOREAN NUCLEAR ACCORD. // REST OPTIONAL // MEANWHILE, PREPARATIONS FOR CONSTRUCTION OF THE TWO NEW LIGHT WATER REACTORS IS MOVING FORWARD. SOUTH KOREAN CREWS HAVE BEEN IN THE NORTH BUILDING THE INFRASTRUCTURE NEEDED BEFORE WORK ON THE NUCLEAR PLANTS THEMSELVES CAN BEGIN. THIS INCLUDES ELECTRICAL AND WATER FACILITIES, ROADS AND A MEDICAL CENTER FOR THE WORKERS. BECAUSE OF CURRENCY DEVALUATIONS, THE ESTIMATED COST OF THE TWO PLANTS HAS BEEN REDUCED FROM MORE THAN FIVE BILLION DOLLARS TO FOUR-POINT-SIX BILLION DOLLARS. SOUTH KOREA AGREES TO PROVIDE 70 PERCENT AND JAPAN IS PLANNING TO CONTRIBUTE ONE BILLION DOLLARS. THAT LEAVES A GAP OF A FEW HUNDRED- MILLION DOLLARS. KEDO POLICY ADVISOR JASON SHAPLEN SAYS THE CONSORTIUM MEMBERS HAVE HELD FOUR OR FIVE ROUNDS OF TALKS TO WORK OUT DETAILS OF THE COST SHARING. // SHAPLEN ACT // SOUTH KOREA AND JAPAN, DESPITE THEIR ECONOMIC DIFFICULTIES, HAVE MAGNANIMOUSLY REAFFIRMED THEIR COMMITMENTS TO PLAY A CENTRAL AND SIGNIFICANT ROLE, RESPECTIVELY, AND THE TALKS ARE NOW FOCUSING ON HOW TO TRANSLATE THOSE COMMITMENTS INTO PERCENTAGE OR DOLLAR TERMS (AND) ON HOW TO FILL ANY GAP FOR THE REMAINDER OF THE COST ESTIMATE. // END ACT // MR. SHAPLEN SAYS KEDO MEMBERS ARE HOPEFUL THE ISSUE WILL BE RESOLVED SOON. (SIGNED) NEB/SMN/WFR/RAE 07-Jul-98 3:31 PM EDT (1931 UTC) NNNN Source: Voice of America .