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US Welcomes North Korean Pledge On Nuclear Shutdown

In its second such message in a week, North Korea vowed Friday to invite UN atomic agency inspectors into the country the moment it can confirm that its funds, which had been frozen in a Macau bank as a result of US sanctions, have been unblocked.

SKorea and Germany to discuss missile deal
Seoul (AFP) April 20 - German Defence Minister Franz Josef Jung arrived Friday in South Korea to discuss the proposed sale of second-hand Patriot missiles and other military issues, officials said. The German minister is scheduled to hold talks with his South Korean counterpart Kim Jang-Soo later Friday on regional security and expanding defence cooperation. "The two sides are preparing to strike a deal soon on the price of Patriot missiles," said Kim Jung-Sup, director of the defence ministry's international defence policy division.

South Korea, facing a potential military threat from nuclear-armed North Korea, wants to replace its ground-to-air Nike missiles introduced 40 years ago with 48 Patriot missiles from Germany starting next year. The deal is expected to cost 1.1 trillion won (1.2 billion dollars). The South Korean military had planned to buy 48 Patriots from its main ally the United States in 2000 but the plan was scrapped because of a dispute over the cost.

The United States, which has 29,500 troops stationed here, has eight batteries of Patriot missiles at four air bases throughout South Korea. North Korea last July raised regional tensions by test-firing missiles and in October staged its first underground nuclear weapons test. It is not known whether it is capable of miniaturising an atomic weapon to fit on a missile warhead. Kim, quoted by Yonhap news agency, said the two ministers will also discuss conditions in Afghanistan and Lebanon, where Germany has troops.

South Korea has stationed a 205-member engineering and medical military force in Afghanistan since 2002. It plans to send troops to Lebanon in June to join a United Nations peacekeeping force. Germany is a main source of South Korea's submarine imports. Eurocopter, a Franco-German firm, is South Korea's partner for the development of advanced military transport helicopters. Jung paid a courtesy call on President Roh Moo-Hyun, who told him that closer bilateral defence ties would contribute to peace and stability on the Korean peninsula.

by Staff Writers
Washington (AFP) April 20, 2007
The United States welcomed a renewed North Korea pledge to start shutting down its nuclear program once a banking dispute is settled, but urged the communist state to act quickly.

"The statement is positive," State Department spokesman Tom Casey said following North Korea's promise to honor the terms of a six-nation, February 13 agreement to begin abandonining its nuclear weapons program.

"Glad to hear that they are on record again as saying not only do they support and intend to fulfil their obligations under the February 13 agreement, but that they intend to do so quickly," Casey said.

"The key now is that they finish out the arrangements with their bankers and actually move forward with the actions required," he said.

In its second such message in a week, North Korea vowed Friday to invite UN atomic agency inspectors into the country the moment it can confirm that its funds, which had been frozen in a Macau bank as a result of US sanctions, have been unblocked.

A multinational agreement on scrapping the nuclear program is in limbo because of the dispute over the 25 million dollars in Banco Delta Asia (BDA).

The US Treasury blacklisted BDA in September 2005, alleging that some of the North Korean accounts there contained the proceeds of money laundering and counterfeiting.

In an effort to make progress on the nuclear issue, Washington announced last week the money is available for collection or transfer. But foreign banks are reluctant to accept the transferred cash for fear of being tainted by suspect money.

Casey reiterated US denials that Washington had any role in holding up the release of the funds.

"Clearly they have not finalized it yet, but certainly we think there is every reason that they should be able to do so," he said.

earlier related report
Analysis: N. Korea's offshore funds
by Lee Jong-Heon
Seoul (UPI) April 20 - North Korea is still using its funds in a Macao bank -- now unfrozen by the United States -- as an excuse to delay denuclearization.

After months of haggling, the cash-strapped country is now free to withdraw the assets. The United States has recently unblocked $25 million in North Korea-held accounts at Banco Delta Asia, swallowing its pride as a global financial police force, to resolve the years-long nuclear standoff with the defiant communist country.

But Pyongyang has yet to make any moves to resolve the banking impasse even though the April 14 deadline for initial denuclearization steps has already passed, fueling doubts about the hard-won disarmament process on the Korean peninsula.

So, why is the North resisting the U.S. proposal? The question also remains unanswered as to why the country has stuck to the demand on the Macao funds at the risk of a possible rupture of international talks on its nuclear drive, which could threaten tougher sanctions.

North Korea had boycotted the six-nation nuclear talks after the United States, in late 2005, slapped restrictions on the Macao bank, accused of laundering money for Pyongyang. Under the U.S. measure, the bank has frozen some $25 million of the North's holdings in about 50 accounts and cut off transactions with the communist country.

After its nuclear test in October last year, the North returned to the six-party nuclear talks and agreed on an aid-for-arms deal in February. But it has again threatened to back away from the nuclear accord unless the financial issue was fully resolved.

To understand why North Korea sticks to the demand, it is necessary to explore the needs of North Korean leader Kim Jong Il, who is believed to use part of the offshore funds for personal luxury.

By and large, the longevity of a dictator is a function of power and consumption. That is to say, a dictator stays in power by funneling his available resources into the maintenance of his power and his personal consumption. Some dictators tend to reduce personal consumption to maximize power, like those in the former communist countries, whereas others, like Somoza of Nicaragua and Marcos of the Philippines, concentrate available resources on personal consumption by keeping its power at the minimum level necessary. By the same token, the Kim Jong Il regime is spending the North's national resources on personal luxury and the maintenance of power.

Kim Jong Il apparently puts more emphasis on personal consumption than his father, Kim Il Sung, who faced many challenges in the process of founding a state and establishing a monolithic leadership system.

Kim has maintained Offices No. 38 and No. 39 of the country's ruling Workers' Party for managing his private funds and purchasing luxury goods, according to South Korean intelligence sources.

A large portion of the slush funds stashed away in overseas accounts, including the $25 million frozen at BDA, seems designed to buy luxury goods for Kim and his royalists, and thus these funds directly affect Kim's personal utility.

As long as he is confident he can maintain his power, Kim will not lower his own utility by giving up his personal consumption. That is why he did not stop spending on luxuries in the mid-1990s, when North Koreans were starving to death, and that is why he insists on the Macao funds.

To ensure maintaining the private funds, Pyongyang has called for the Macao assets to be transferred to another bank, a move to rebut suspicions that the funds were linked to illicit activities, such as money-laundering or counterfeiting.

By transferring the funds to another offshore bank, the North wants to see the money accepted internationally and to keep using the international banking system to manage its overseas funds.

The blocked money is less than 1 percent of North Korea's budget this year of 433 billion North Korean won, or $3.9 billion by the official exchange rate of one dollar to 141 won. But given that one dollar buys some 3,000 North Korean won in the North's black market, more than 20 times the official rate due to tremendous inflation, $25 million accounts for more than 17 percent of North Korea's annual budget, estimated at $144 million.

Source: Agence France-Presse

Source: United Press International

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