North Korean Talks Hit Impasse

Paul Kerr

Diplomatic efforts to resolve the North Korean nuclear crisis appear to have hit an impasse only months after six-party talks produced a set of principles for a peaceful solution.

North Korea has not yet agreed to attend the next session of six-party talks designed to resolve concerns about its nuclear weapons program. Pyongyang is angry over recent U.S. actions apparently designed to increase pressure on the regime. For their part, U.S. officials have expressed exasperation with the talks’ pace. “We can’t just sit there, stalemated session after stalemated session.… We need to see progress,” Assistant Secretary of State for East Asian and Pacific Affairs Christopher Hill told the Associated Press Dec. 2.

The six parties, which also include China, Japan, Russia, and South Korea, began the latest round of talks in November, hoping to build on a September statement of principles to guide future negotiations. Although the November meeting made little headway, U.S. officials indicated subsequently that the parties had informally agreed to hold a second session in January. (See ACT, December 2005.)

Since then, however, North Korea’s irritation with the Department of the Treasury’s September designation of a Macau bank as a “money laundering concern” appears to have become a major obstacle to the talks. The United States asserts that Banco Delta Asia provided financial services to North Korean government agencies and front companies engaged in such activities as drug trafficking, counterfeit U.S. currency distribution, and smuggling of counterfeit tobacco products.

U.S. Pressure

Multiple North Korean statements also have expressed anger with harsh U.S. rhetoric about Pyongyang, particularly a Dec. 7 reference to North Korea as a “criminal regime” by U.S. Ambassador to South Korea Alexander Vershbow. Likewise, Pyongyang sharply criticized a speech delivered in Seoul by Jay Lefowitz, the U.S. human rights envoy to North Korea, in which he lambasted the Communist regime’s poor human rights record.

Pyongyang’s state-run Korean Central News Agency Dec. 19 reiterated a previous North Korean position that it cannot discuss abandoning its nuclear program unless the Bush administration ends its “hostile policy” designed to topple the North Korean regime. North Korea argues that this policy, which includes pressuring Pyongyang on its human rights record and taking action against suspected North Korean illicit activities, is inconsistent with Washington’s pledge in the September joint statement to respect Pyongyang’s sovereignty.

North Korea committed in that statement to abandon all of its nuclear programs and return to the nuclear Nonproliferation Treaty (NPT). The other parties pledged to respect Pyongyang’s sovereignty, normalize their diplomatic relations with the North Korean government, and provide North Korea with economic cooperation and energy assistance. (See ACT, October 2005.)

Although a Dec. 16 statement adopted by the two Koreas said that the September agreement “should be implemented at an early date,” North Korea repeatedly said in December that it will not return to the talks unless the United States first lifts what Pyongyang calls “financial sanctions,” a reference to the Banco Delta Asia designation. According to knowledgeable Department of State officials, the North Korean delegation focused almost exclusively on the matter when the six parties met in November.

The Treasury Department has proposed a rule that, if adopted, would bar U.S. financial institutions from opening or maintaining accounts for Banco Delta Asia. U.S. officials have also put pressure on Macau to take action against the bank.

North Korea has said that the two countries should settle the matter through negotiations, but the United States has refused to do so, arguing that it is a law enforcement issue unrelated to the talks. U.S. officials, such as Secretary of State Condoleezza Rice, have said that North Korea can avoid any such punitive actions by the United States by halting its illegal activities.

In lieu of negotiations, Hill during the November meeting offered to arrange a working-level briefing about relevant U.S. regulations for North Korean officials, a State Department official familiar with the talks told Arms Control Today Dec. 12. North Korea has turned down this offer, as well as an effort by U.S. nongovernmental organizations to host a similar briefing, the official confirmed.

Hill said Dec. 20 that the United States remains willing to provide such a briefing, South Korea’s semi-official Yonhap News Agency reported.

A North Korean Foreign Ministry spokesperson offered a different version of events Dec. 2, stating that Hill had actually agreed to discussions between the “heads of the delegations” to “settle the issue of financial sanctions.” Washington “reneged” on the agreement by offering the working-level briefing, the spokesperson added.

Other talks participants have raised concerns that U.S. pressure on North Korea could negatively impact the negotiations. South Korean Foreign Ministry officials have criticized Vershbow’s rhetoric and indicated that Washington should coordinate its efforts with Seoul before taking further measures like the Banco Delta Asia designations.

Future Diplomacy

Although the next six-party meeting has yet to be scheduled, the State Department official said the United States plans to table the same proposal it presented during the third round of talks in June 2004. The official added that Washington is willing to discuss all the elements of that offer, which proposed a two-phase process in which North Korea would freeze, then dismantle its nuclear facilities in return for fuel oil provided by the talks’ other participants, as well as several U.S.-initiated incentives. (See ACT, July/August 2004.)

The two sides also continue to disagree about the proper sequencing for implementing the joint statement. The United States continues to insist that North Korea quickly shut down its nuclear facilities and prepare a comprehensive declaration of its nuclear weapons, materials, and facilities before receiving any rewards from the United States or other parties.

Throughout the six-party talks, North Korea has continued to operate its five-megawatt graphite-moderated nuclear reactor and related facilities, which had been frozen under a 1994 agreement with the United States. Pyongyang claims to have built nuclear weapons with plutonium obtained from the spent reactor fuel, but the veracity of this claim is unknown.

Additionally, U.S. and South Korean officials expressed concern at North Korea’s Dec. 19 announcement that it would “pursue” the construction of larger “graphite-moderated reactors,” an apparent reference to two reactors whose construction also had been frozen under the 1994 agreement.

North Korean officials had discussed the operation of these additional reactors with Siegfried Hecker, former director of the Los Alamos National Laboratory, and Rep. Jim Leach (R-Iowa). But this announcement was Pyongyang’s most definitive public statement on the matter. The officials told Hecker and Leach that North Korea was conducting work on the smaller 50-megawatt reactor. Pyongyang, however, had not yet decided whether it would resume work on the larger 200-megawatt reactor, according to a presentation Hecker gave in November. (See ACT, December 2005.)

North Korea has demanded compensation for freezing its nuclear facilities, but Hill has repeatedly stated that the United States will neither negotiate for a freeze nor promise rewards to Pyongyang for taking this step alone.

A bilateral meeting before the November talks illustrates this conflict. U.S. officials told the North Koreans that Hill would pay his first visit to the country if it agreed to shut down the reactor, the State Department official said. North Korea rejected the proposal.

The State Department official, however, indicated some U.S. flexibility on the matter, saying that North Korea could receive a reward if it halts the reactor’s operation as part of a broader plan for dismantling the nuclear facilities. North Korea uses the term “freeze” to refer to a temporary shutdown, the official explained.

The North Koreans during the November meeting discussed a plan to dismantle their nuclear program, but citing the Banco Delta Asia designation, they decided not to table a formal proposal, according to the official.

In addition to North Korea’s commitment under the September joint statement, it has previously issued proposals that would have resulted in the dismantlement of the Yongbyon facilities. (See ACT, September 2005.)

Even if the sequencing issue is resolved, reaching agreement on implementation details could prove difficult. According to the State Department official, the parties have yet to iron out the details of such issues as verifying North Korea’s declaration, dismantling its nuclear facilities, and providing energy and other forms of economic assistance to Pyongyang. Administration officials have said that these issues need to be resolved in discussions among groups of experts, but these groups do not yet exist.

U.S. Policy—Another Track?

In addition to its actions against Banco Delta Asia, the Treasury Department exhorted U.S. financial institutions Dec. 13 to take “steps to guard against” future North Korean abuse of their financial services.

The United States has also pursued other methods of curbing North Korean illicit activities.

For example, the administration decided in October 2005 to designate eight North Korean entities as being involved in the proliferation of nuclear, chemical, or biological weapons or related delivery vehicles. This designation, taken pursuant to an executive order President George W. Bush issued in June 2005, freezes any U.S. assets that these entities may have. It also prohibits transactions between these entities and any U.S. citizens or companies.

Whether this action will have any practical effect on these entities is unclear. The Treasury Department cannot disclose whether designated companies have any U.S. assets, a department spokesperson told Arms Control Today Dec. 19. Moreover, these entities’ assets may already be frozen because the Treasury Department similarly designated their parent companies in June 2005. (See ACT, July/August 2005.)

U.S. officials have generally stated in public comments that law enforcement actions taken against North Korean illicit activities are entirely separate from the six-party talks.

But a knowledgeable current State Department official, along with several former State Department officials familiar with the matter, indicated otherwise in interviews with Arms Control Today. They said that targeting North Korea’s illicit activities also was thought to be a mechanism for pressuring North Korea to compromise on its nuclear program.

Likewise, David Asher, who worked on North Korean issues in the State Department until July 2005, indicated a connection between the two tracks during a speech last October. Asher said that Pyongyang’s earnings from its illicit activities have enabled the government to withstand political isolation and to “resist demands” that it end its nuclear weapons program.

The current and former officials interviewed said that U.S. officials began working as early as 2002 to determine the full scope of North Korea’s illicit trade and to improve interagency coordination to stop such activities. These efforts accelerated after Australia seized a North Korean ship carrying heroin about four months before the first round of six-party talks. At that time, several administration officials advocated targeting North Korea’s hard currency earnings to bring Pyongyang to heel. (See ACT, July/August 2003.)

The role of these enforcement actions has been unclear since the six-party talks began. One State Department official said that the department was not consulted about the timing of the Macau bank designation, adding that “these things have a life of their own.”

Other current and former State Department officials described a split in the administration. They said that some officials view targeting North Korea’s illicit activities as a way to augment the talks and persuade Pyongyang to be more conciliatory. Others have come to see such pressure as a tool to change the North Korean regime.