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China Wields Power With North Korea, But Only A Little

Chinese President Hu Jintao. Photo courtesy of AFP.
by Verna Yu
Beijing (AFP) Nov 2, 2006
Threats and incentives from China helped entice North Korea back to international talks on its nuclear program but Pyongyang is no pawn of its powerful neighbor and long-time ally, analysts said Thursday. China, the major source of aid and trade for impoverished North Korea, has been praised by the United States and Russia for its role in convincing Pyongyang to return to the six-nation talks.

Following a year-long boycott of the negotiations and after conducting its first atomic test on October 9, North Korea confirmed Wednesday that it would return to the six-nation forum.

China brokered seven hours of secret talks in Beijing on Tuesday between the US and North Korean envoys that led to the breakthrough.

China hosts the six-nation talks, which began in 2003 with the intention of convincing North Korea to abandon its nuclear goals. The forum brings together North and South Korea, China, Japan, Russia and the United States.

Analysts said China's influence this week over Kim Jong-Il's regime also extended to Beijing raising such issues as deliveries of vital oil, food and other supplies, as well as the flow of money across their borders.

China decided to take its toughest line yet against North Korea because it had become increasingly exasperated at its ally destabilizing the region, first by a series of missile tests in July and then with the atomic test.

An angry message from President Hu Jintao to Kim was likely personally delivered when Chinese envoy Tang Jiaxuan traveled to Pyongyang on October 19.

"North Korea has really upset China this time and presumably Tang Jiaxuan's visit sent a strong message," said Yuan Jing-dong, political scientist at the Monterey Institute of International Studies.

"I think probably a combination of (Chinese) threats and incentives" convinced North Korea to return to the six-party talks, he added.

Yuan said North Korea was acting carefully to ensure it retained the allegiance of China, which has worked unusually closely with the United States in recent weeks in trying to ease the tensions on the Korean peninsula.

"North Korea still needs China, so restoring some 'face' for Beijing is a price Pyongyang is willing to pay," he said.

"Continuing to act in a defiant manner entails more costs -- returning to the talks at least would ease the situation a bit without actually giving up much."

Alexandre Mansourov, a political scientist at the Asia-Pacific Center for Security Studies in Hawaii, agreed that North Korea had not simply buckled under Chinese pressure to return to the negotiating table.

"This move will buy the North Koreans some more time to continue their work on fixing and improving the design of their nuclear device, while allowing them to get the Chinese off their back for a few months," Mansourov said.

"Kim Jong-Il... is a strategic player. He is not China's pawn. I do not believe he will ever give up his country's newly gained nuclear weapon state status."

Others also believed Pyongyang was trying to improve its bargaining position.

"North Korea is responding in part to Chinese pressure... and in part because it intended to return to the negotiations all along," said John Feffer at the International Relations Center in the United States.

Marcus Noland of the Washington-based Peterson Institute for International Economics said: "Having done a test, they can return to the table in a stronger negotiating position."

North Korea is also aware that China is reluctant to slap harsh sanctions on it for fear of weakening its faltering economy and seeing a flood of refugees rushing across the border, analysts said.

earlier related report
Much of NKorea's frozen Macau funds are legal: US expert
Seoul (AFP) Nov 2 - US Treasury investigators have found that up to half of the 24 million dollars in North Korean money frozen in a Macau bank is from legal sources, South Korean media said Thursday.

The US Treasury declined comment on the report, but an official insisted that any decision to unfreeze the money does not lie with Washington.

The future of six-nation talks on scrapping the North's nuclear programme depends on progress in unfreezing these and other funds, according to Pyongyang, which staged its first atomic test last month.

Don Oberdorfer, a Korea expert, told JoongAng Ilbo newspaper that US investigators had found that "at least eight million dollars" of the funds in Banco Delta Asia (BDA) in the southern Chinese territory of Macau were legal.

Oberdorfer was quoted as saying that six million dollars belonging to Daedong Credit Bank, a Hong Kong-based joint venture, had been verified. Also verified was two million dollars paid by British American Tobacco, which does business in the communist state.

Oberdorfer, who could not immediately be reached for comment, said there were growing calls in Washington to unfreeze the legal funds, but the US Treasury Department has yet to decide how to handle the issue.

Yonhap news agency, quoting sources in Washington, said the Treasury investigators had established that 12 million dollars -- half the total -- was from legitimate business activity.

The US Treasury refused to comment on the claim and stressed it was the Macau government which had blocked the accounts.

Spokeswoman Molly Millerwise said BDA was blacklisted under Section 311 of the US Patriot Act "given the illicit financial activity it facilitated for the North Korean regime".

But she added: "Designations under Section 311 do not freeze funds, and any money that has been blocked in BDA has been blocked by the Macanese authorities."

Washington effectively froze the funds by blacklisting the Macau bank in September 2005, almost the same day the six-party talks made an apparent breakthrough.

The United States said they were the suspected proceeds of counterfeiting US dollar "supernotes" and other illicit activities by the North.

North Korea boycotted the six-party talks for a year in protest at Washington's freeze and a larger crackdown on accounts elsewhere in Asia.

Pyongyang said Wednesday it would return to the negotiations "on the premise that the issue of lifting financial sanctions will be discussed and settled between the DPRK (North Korea) and the US within the framework of the six-party talks."

The chief US delegate to the talks, Christopher Hill, says Washington will create a "mechanism or working group" to address the issue.

The US financial curbs, not part of any formal sanctions, have shut the North off from much of the international banking system.

The United States has previously said the issue is a law enforcement matter unrelated to the six-party talks, but some analysts suspect Washington used it as a tactic to pressure the North.

An unidentified senior Seoul government official, in a briefing for local reporters, said the US State Department appears to be seeking flexibility on the accounts.

But the Treasury Department maintains that the financial row is unrelated to the nuclear negotiations, the official added.

"Twenty-four million dollars is not a huge sum but it's not small money either, given the size of North Korea's economy," said Dong Yong-Sueng, a North Korea expert at Samsung Economic Research Institute.

Dong told AFP that all dollar-based transactions are firmly under the control of North Korean leader Kim Jong-Il.

"If North Korea were completely blocked from using foreign banks, it would definitely hurt. Even North Korea, which has yet to fully join the international financial network, needs a basic means of business settlement," he said.

In the past year the US Treasury Department has also persuaded banks in Singapore, Vietnam and other countries to shut down North Korean accounts.

"This is not part of any formal financial sanctions but an attempt to apply general pressure to crack down on North Korea's illicit banking activities," Peter Beck, Northeast Asia director of the International Crisis Group, told AFP last month.

"But they have cast such a wide net that they are also catching legal activities."

earlier related report
US envoys to visit Asia to prepare North Korea nuclear talks
Washington (AFP) Nov 2 - Senior US diplomats will travel to Asia Sunday to prepare for a resumption of six-way negotiations with North Korea aimed at ending Pyongyang's newly proven nuclear weapons program, the State Department said Thursday.

The envoys will press Japan, China and South Korea to maintain tough UN-mandated sanctions aginst North Korea in the run-up to the negotiations and to ensure a united front in insisting the talks lead to Pyongyang's full denuclearization, department spokesman Sean McCormack said.

Under pressure from the sanctions imposed after North Korea carried out its first nuclear test explosion on October 9, the Stalinist regime agreed earlier this week to return to the multilateral disarmament negotiations it had been boycotting for nearly a year.

But US officials remain wary of Pyongyang's motives, fearing the unpredictable North Korean leadership could use its new nuclear status as leverage to seek an easing of the sanctions against it while stalling on demands it verifiably give up the arsenal.

"We don't want this just to be about talk, we want it to be about getting some concrete, positive outcomes," McCormack said.

The US team will be led by Nicholas Burns, Secretary of State Condoleezza Rice's senior deputy, and include Robert Joseph, the hawkish head of the State Department's non-proliferation initiative who has been charged with overseeing implementation of the sanctions against North Korea.

They will meet Sunday and Monday with Japanese leaders in Tokyo before heading to Beijing for two days of talks with both Chinese and Russian officials, McCormack said. The pair will visit Seoul November 8 and 9.

China, Japan, Russia, South Korea and the United States are the five parties which have been trying for the past three years to convince North Korea to abandon its nuclear weapons program in exchange for economic incentives and security guarantees.

The two sides reached a framework agreement in September 2005 under which North Korea agreed to give up its nuclear weapons, though the sequencing of the process was left for further negotiations.

Pyongyang walked away from those talks two months later after Washington slapped sanctions on a Macau-based bank accused of laundering money and passing counterfeit US currency on behalf of the North Koreans.

The US action led the bank, Banco Delta Asia, to freeze some 24 million dollars in North Korean assets, believed to include personal funds belonging to North Korean leader Kim Jong-Il and his entourage.

There were also reports at the time that Washington had angered Pyongyang by backing away from a promise to provide North Korea with a light-water nuclear reactor for its civilian energy program as part of the deal.

As part of this week's deal to resume negotiations, Washington told North Korea it was willing to discuss the Banco Delta Asia sanctions as part of the talks.

McCormack reaffirmed Thursday that the six-party talks were expected to resume before the end of the year and that Washington wanted the starting point to be the September 2005 framework agreement.

The mission for Burns and Joseph, he said, was to "create the right conditions, the best atmosphere" for the negotiations.

McCormack said there were no plans for the US envoys to meet with the North Koreans during next week's trip.

"I don't see that happening", he said.

earlier related report
Analysis: N.Korea tour project in doubt
by Lee Jong-Heon - UPI Correspondent
Mt. Kumgang (UPI) North Korea, Nov. 2 - The future of the fledgling inter-Korean tour project has been thrown into deep uncertainty in the wake of the North's recent nuclear test that has heightened geopolitical risks on the divided peninsula.

The South Korean government has decided to keep tours to the North's Mt. Kumgang on track despite U.S. concerns they may financially benefit the communist country.

But the government had to cut off its subsidies for local tourists traveling to the mountain resort to ease U.S. criticism that the cross-border project may have served as a cash cow for the North's programs for weapons of mass destruction.

The suspension of government subsidies would deliver a major blow to Seoul's Hyundai Asan, which runs the package tours and is already suffering from a decreasing number of tourists in the aftermath of the North's nuclear test last month.

"Our project on Mt. Kumgang will face serious trouble this winter when fewer South Korean join the tour," Jang Whan-bin, Hyundai Asan's senior vice president for investor relations, told United Press International during a visit to the North's mountain resort.

The number of South Koreans visiting Mt. Kumgang has nearly halved since the North carried out a nuclear weapon test on Oct. 9 and missile launches on July 5.

"More than 40,000 people a month have joined the tour during the peak season of late summer and autumn, but the number has plunged to some 20,000 in recent months," said Kwon Sung-woo, a Hyundai Asan manager.

Amid mounting tensions, South Koreans were reluctant to travel to the North Korean territory largely due to fear of possible detention as well as long travel time.

"Twenty-two people from my village booked the trip (to Mt. Kumgang), but after (the North's nuclear test) 14 of them canceled for fear of safety," said Kim Chun-soo, a 66-year-old tourist from the South Korean city of Kimcheon.

Hyundai Asan has long suffered from financial woes due to the money-losing tour program because of lack of tourists, which encouraged the Seoul government to pay subsidies to cover part of expenses for students, war veterans and people with physical disabilities traveling to the North's resort.

In 2002, the government paid a total of 21.5 billion won ($22.9 million) in subsidies, but the amount dropped to about 3 billion won ($3.2 million) in 2004 and 5 billion won ($5.3 million) in 2005, according to Seoul's Unification Ministry. The government has hailed the tour program, a main achievement of the inter-Korean summit in 2000, as a landmark project to promote cross-border cooperation.

Thanks to the government subsidies, Hyundai Asan swung to a profit last year. It posted an operating profit of 6 billion won ($6.4 million) for 2005, the first profit since it launched the tour program in 1998. "But it will be very difficult to break even this year because of the cut-off of subsidies and lack of tourists," Jang said.

Hyundai Asan has already paid North Korea $452 million in royalties to operate the tours. It has also invested $210 million to build facilities in the mountain resort, such as hotels, restaurants and tour roads.

State-run Korea National Tourism Organization has also invested $93 million to improving facilities there. A South Korean company is pumping $72 million to build a golf course near the mountain resort, and other South Korean companies have invested $25 million there, part of which was paid to North Korean workers.

North Korea has also been given $10 million for an acrobatic show and $2.7 million for telecommunications charges, according to Hyundai Asan.

But Seoul media said South Korea spent a total of 558.8 billion won ($595.7 million) to run the tour program. Seoul's main opposition Grand National Party said much of the cash has gone to the North's ruling Workers' Party led by "Dear Leader" Kim Jong Il.

The United States has raised concerns that the funds from the tours could be used to support Pyongyang's nuclear weapons ambitions. U.S. Assistant Secretary of State Christopher Hill said the tour program seems to be "more designed to give money to North Korean authorities."

The United Nations Security Council resolution adopted last month also prohibits the transfer of financial resources or other materials that could benefit the North's weapons programs.

In order to cut currency inflows to Pyongyang, South Korea sought to pay the North in goods instead of cash, but the North rejected any change in the payment formula, warning of "stern measures," possibly referring to the shutdown of the cross-border project.

"We will always treasure the hope and wishes of the South Korean people toward Mt. Kumgang, but we make it clear that we would have no choice but to sternly take corresponding measures if an irreversible situation is created," the North's Asia-Pacific Peace Committee that handles business ties said on Wednesday.

The North's Committee for the Peaceful Reunification of the Fatherland has also warned that South Korea would "pay a high price" if it joins international sanctions against the communist country.

A North Korean official who oversees the tours also indicated his country may suspend the tour program.

"General Kim Jong Il generously allowed South Koreans to travel to this scenic mountain. South Koreans should appreciate it," he told UPI on a steep stairway to a mountaintop.

Source: United Press International

Source: Agence France-Presse

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Iran Fires First Longer-Range Missiles In War Games
Tehran (AFP) Nov 2, 2006
Iran fired its longer-range Shahab-3 ballistic missile for the first time Thursday as it began 10 days of war games amid a mounting standoff with the West over its nuclear program, official media said. The hardline Revolutionary Guards fired the missiles, which have a range of up to 2,000 kilometres (1,200 miles) -- sufficient to threaten US bases in the Gulf -- during the first phase of military maneuvers in the central desert, state television reported.







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