1998 Congressional Hearings
Special Weapons
Nuclear, Chemical, Biological and Missile





TESTIMONY OF

RUST DEMING

DEPUTY ASSISTANT SECRETARY OF STATE

FOR EAST ASIAN AND PACIFIC AFFAIRS



SENATE COMMITTEE ON FOREIGN RELATIONS

SUBCOMMITTEE ON EAST ASIAN AND PACIFIC AFFAIRS



JULY 13, 1998



Thank you, Mr. Chairman. I greatly appreciate the opportunity to
appear before your Committee today to speak about U.S. policy toward
North Korea. The Secretary and President appreciate your past support
for the Korean Peninsula Energy Development Organization -- KEDO --
and for the Agreed Framework, and hope that you will continue to
support our efforts.


The Korean Peninsula remains one of the most unstable and dangerous
places in the world today. Forty-five years after the armistice,
37,000 American troops, together with their colleagues from the ROK,
face more than a million North Korean troops across the demilitarized
zone. One of the most dangerous moments of that tense history was just
four years ago, in the summer of 1994.


In 1993, isolated by the transformations of its cold war patrons and
facing a southern neighbor with growing economic power and global
stature, North Korea began to bring its efforts to acquire nuclear
weapons to fulfillment. Kim Il Sung's engineers had completed a
large-scale plant to reprocess plutonium from spent fuel produced by
North Korea's Soviet-designed graphite-moderated reactor. In addition,
the North had begun constructing two larger graphite-moderated
reactors, which in addition to being of unsafe design, would be
capable of producing enough plutonium for a significant nuclear
arsenal within a few short years.


Disputes over past production of plutonium and the monitoring of
nuclear facilities by the International Atomic Energy Agency led the
DPRK to announce, in June 1994, its withdrawal from the IAEA; the
North was also on the verge of carrying out its threat to withdraw
from the Nuclear Nonproliferation Treaty, or NPT. When the DPRK
subsequently began to defuel its reactor without the IAEA's presence,
which would make confirmation of past production of plutonium more
difficult, the security situation on the Korean Peninsula was as tense
as it has been at any point since the cessation of open hostilities in
1953. Military forces on both sides were augmented and placed on high
alert. Fortunately, a negotiated solution was found and a crisis
averted.


The result of these negotiations was the 1994 U.S.-DPRK Agreed
Framework. To date, the Agreed Framework has been a success. The
North's indigenous nuclear program at Yongbyon remains frozen, the
canning of the DPRK's spent fuel is now virtually complete and under
IAEA seal, as are the reprocessing plant and reactors. The IAEA
maintains a continuous monitoring presence and Pyongyang has remained
a party to the NPT. North Korea also has acknowledged that it must
eventually dismantle all the elements of its nuclear program and
permit its existing spent nuclear fuel to be shipped out of North
Korea.


In return for the North's nuclear freeze, the U.S. agreed to take the
lead in organizing a consortium to build two modern, safe,
proliferation-resistant light water reactors, known as LWRs, in North
Korea. In addition, the United States agreed to "make arrangements to
offset the energy foregone," with 500,000 metric tons of heavy fuel
oil or "HFO".


That consortium, which became known as the Korean Peninsula Energy
Development Organization or "KEDO", was founded by the U.S., Japan and
South Korea in 1995 to implement both the LWR and HFO aspects of the
Agreed Framework. KEDO has negotiated with the DPRK a Supply Agreement
for the LWR project, six side protocols and a number of other
instruments spelling out how the LWR and HFO aspects of the Framework
would be implemented.


South Korea and Japan have together committed themselves to assume
virtually the entire burden of the estimated $4.6 billion LWR project.
Specifically, South Korea has pledged to fund 70 percent of the
project, and Japan has agreed to provide $1 billion. KEDO has
commenced work on the project and, although work is not yet in full
swing, an important amount of site preparation work has been underway
for almost a year.


With respect to the funding of any shortfall that might occur at the
later stages of the LWR project, discussions among the original three
members of the KEDO Executive Board as well as the European Union,
which just joined as a major contributor, are continuing and, we feel,
are approaching a resolution.


The provision of heavy fuel oil, which is seen by North Korea, our
KEDO partners and the world as principally a U.S. responsibility, is
the most tangible evidence of the U.S. government's commitment to the
Agreed Framework. In meeting this responsibility the U.S. government
has made vigorous efforts to recruit assistance from other countries.
U.S. officials have made direct approaches, in most cases repeatedly
and at a high level, to 37 countries and the European Union for HFO
funding. In general, we have targeted countries with a direct interest
in peace and stability in East Asia as well as those with the ability
and willingness to contribute, whether in funding or in kind, to a
cause that serves global nonproliferation goals.


In 1995 testimony before Congress, then-Secretary of State Warren
Christopher estimated that annual U.S. contributions to KEDO would be
between $20-30 million, based on the conviction that the balance of
funds could be raised abroad. Secretary Christopher's testimony was an
implicit pledge to you that we would make our best efforts to secure
such contributions. The results have been disappointing, but we have
received some help. Australia, New Zealand and Canada, strong
supporters of the Agreed Framework, have made generous contributions
totaling almost $12 million. The European Union has contributed $34.7
million to date. (An additional EU contribution of $16 million is
expected this summer.) Japan has made available a collateral fund of
$19 million for the HFO program, though it has declined our requests
that it turn the fund into a hard contribution; we are continuing to
discuss this issue with the Japanese government. In all, 22 countries
and the EU have made contributions to the HFO program totaling $52
million, whereas the U.S. has contributed approximately $80 million
for HFO (out of a total of $118.5 million for Agreed Framework-related
expenses, including the canning of spent fuel).


We will redouble our efforts, but it is not realistic to think that
the shortfall will be met in the near term by contributions from
abroad. I believe that continued U.S. leadership of and support for
the HFO program, until such time as the first LWR plant is built, is a
small price to pay to reinforce peace on the Korean Peninsula and to
strengthen the global nonproliferation regime.


The implementation of the Agreed Framework is fundamental to U.S.
interests on the Korean Peninsula and in East Asia. As KEDO fulfills
each of its successive steps, North Korea is to take steps to resolve
our proliferation concerns. Following completion of the first LWR
containment building and its electrical generating equipment -- but
before delivery of the nuclear components of the plant -- North Korea
must come into compliance with its full-scope NPT IAEA safeguards
agreement. I cannot overstate the significance of this step. With
full-scope safeguards in place, the IAEA will be permitted to inspect
all of the North's nuclear facilities and materials. The additional
security this will provide will be significant.


The Framework's implementation carries with it associated benefits in
the nuclear area, many of which were not even envisaged at the time of
its signing. We are working with North Korea's nuclear community, for
example, in an effort to foster an independent nuclear regulator for
the LWRs, as well as a general nuclear "safety culture" which would
not otherwise exist.


The Agreed Framework is more than simply a nuclear accord, however. It
is the cornerstone of our efforts to reduce the potential for conflict
on the Korean Peninsula. The Agreed Framework has allowed us to
undertake a dialogue with North Korea that has led to the Four Party
Talks as well as negotiations on missile sales, terrorism and a host
of other concerns. In addition, regular contact between North and
South Koreans is dramatically increasing, in particular at the LWR
site. North and South Korea have begun to take steps to cooperate on
such issues as air traffic and telephone links between the two
countries. Progress has been slow at best in all of these areas, and
North Korea remains a very difficult interlocutor. However, we believe
it is very much in our interest to continue these efforts to reduce
tensions on the Korean Peninsula.


The full implementation of the Agreed Framework, with all the benefits
it should bring, will only be possible if KEDO remains financially
healthy and able to carry out its mission. As I stated before, we are
continuing our international fundraising efforts and working on ways
to address KEDO's financial difficulties, including its debt from past
year oil deliveries. However as I have just noted it is not realistic
to assume that sufficient contributions will be made by other
countries, and we will therefore have to do more. We will continue our
consultations with you and your colleagues in the House in the near
future on our proposals for additional KEDO funding and our strategy
for addressing the organization's financial problems over the long
term.


Let me close by stressing that KEDO and the Agreed Framework remain
central to our efforts to promote peace and stability in Northeast
Asia and to support regional and global nuclear nonproliferation.
KEDO's mission is of utmost importance to the national security of
this nation as well. We must not allow KEDO to fail.


Thank you.



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