In late 2005 and the opening weeks of 2006, North Korea reacted sharply to months of increasing pressure from the United States aimed at pushing Pyongyang to constrain its nuclear activities and, in particular, to implement the joint “Statement of Principles” adopted at the September 19, 2005, session of the Six-Party Nuclear Talks. The talks, which also include China, Japan, Russia, and South Korea, are aimed at ending North Korea’s nuclear weapons program. Under the Statement of Principles, North Korea “committed to abandoning all nuclear weapons and existing nuclear programs and returning, at an early date, to the Treaty on the Non-Proliferation of Nuclear Weapons and to IAEA [International Atomic Energy Agency] safeguards.” [1] As the principles were being negotiated, Washington had already begun to implement a new round of sanctions – which North Korea views as part of a strategy aimed at changing the regime in Pyongyang.

New U.S. Sanctions
On September 15, 2005, the U.S. Treasury Department designated Banco Delta Asia as a “primary money laundering concern” under Section 311 of the USA PATRIOT Act. The Macao-based bank was sanctioned for having provided financial services to a number of North Korean firms engaged in illicit activities. The alleged activities include narcotics trafficking and the distribution of counterfeit U.S. currency. [2] The sanctions were said to have an immediate impact on North Korea’s foreign trade and resulted in a bank run that required a government takeover of bank management. Banco Delta Asia subsequently suspended all business with North Korean companies. [3]

On October 21, 2005, the U.S. Treasury Department leveled sanctions against eight North Korean entities for the proliferation of WMD and their delivery systems. The sanctions freeze all assets they may have had in the United States and prohibit transactions between the North Korean firms and U.S. firms or persons. [4] The Treasury sanctions followed President Bush’s Executive Order 13382 of June 29, 2005, which sanctioned two North Korean trading firms and a North Korean commercial bank. [5]

Although the October sanctions were largely symbolic, as North Korean firms have long been barred from doing business in the United States, the timing of those and the more potent September sanctions, along with tough statements in December 2005 by U.S. Ambassador to South Korea Alexander Vershbow and Undersecretary of State for Arms Control and International Security Robert Joseph, led Pyongyang and many analysts to perceive Washington as shifting to a harder line towards North Korea and the six-party process. Vershbow referred to Pyongyang as a “criminal regime,” and Joseph insisted that sanctions on North Korean firms would not be lifted for the sake of diplomacy. [6]

Pyongyang Responds
By mid-November 2005, following the fifth round of the six-party negotiations, Pyongyang responded to the growing list of sanctions by asserting that its further participation in the Six-Party Talks would be contingent upon the United States ending the new financial penalties. Vice Minister of Foreign Affairs Kim Kye-Gwan, North Korea’s head of delegation to the Six-Party Talks, stated that the talks would not progress unless Washington lifted its financial sanctions first, declaring, “To lift sanctions is not something to be implemented conditionally, but something already agreed on.” [7]

U.S. spokesmen have insisted, however, that the “sanctions have nothing to do with the [six-party] talks” [8], arguing that the sanctions, with their focus on narcotics trafficking and counterfeiting, are a law enforcement matter. Washington has pressed North Korea to join the next round of negotiations slated for January 2006, as planned. [6] In early December 2005, U.S. officials offered to brief North Korean officials on Washington’s measures to address Pyongyang’s alleged illicit activities. [9]

Directly countering the U.S. stance, on January 9, 2006, a North Korean Foreign Ministry spokesman stated, “The financial sanctions against the DPRK are an issue directly related to the Six-Party Talks.” [10] According to the spokesman, the two countries had agreed in the September 19 Statement of Principles to “respect each other and co-exist in peace with a view to denuclearizing the Korean Peninsula.” Therefore, he continued, the United States was “in gross violation” of this undertaking, because it was applying financial sanctions “to destroy the system in the DPRK by stopping its blood [finances] from running.” [10]
By the end of 2005, the sanctions debate had spilled over into bilateral relations between Pyongang and Seoul. At the 17th inter-Korean ministerial talks in December 2005, South Korea repeatedly urged North Korea to implement the September agreement. The North Korean delegation “reaffirmed its will to implement the September agreement and cooperate actively for the peaceful resolution” of the nuclear issue, but insisted the six-party talks would be suspended indefinitely because of the U.S. sanctions. [11] Following Washington’s line, South Korea’s Unification Minister Chung Dong-young and Foreign Minister Ban Ki-moon declared not unexpectedly that U.S. financial sanctions were a separate bilateral issue between the United States and North Korea and should not be included in the six-party discussions. [12]

Most recently, Chinese Vice Foreign Minister Wu Dawei together with Japan’s Vice Foreign Minister of Asian and Oceanian Affairs Kenichiro Sasae, intensified the pressure on Pyongyang, by echoing this stance and declaring the Six-Party Talks should not be linked to U.S. financial sanctions. [13] China’s stance was noteworthy, given its independence from Washington and its general dislike for U.S. sanctions, of which it has sometimes been a target.

Raising the Stakes
On December 19, 2005, Pyongyang escalated the confrontation with Washington by announcing it would resume construction of its uncompleted graphite-moderated reactors (GMRs), a 50 megawatt unit at Yongbyon and a 200 megawatt unit at Taechon. [14] Completion of the facilities could greatly increase Pyongyang’s plutonium production capacity, permitting manufacture of as many as 55 weapons annually, in contrast to the one or two weapons per year it reportedly can now produce. [15] Construction of the reactors had been halted in 1994 under the U.S.-North Korean “Agreed Framework,” but that arrangement collapsed after the U.S. determined that Pyongyang was secretly pursuing a program for enriching uranium, a second route to nuclear weapons.

Under the 1994 deal, the United States was to facilitate the construction of two light-water reactors (of the type used to produce electricity around the globe) in North Korea. After the collapse of the Agreed Framework, the international consortium which had begun construction of those facilities suspended work on the project and, in November 2005, formally ended the initiative. North Korea stated that the termination of the effort required it to recommence construction of its indigenous GMRs. It left little doubt, however, regarding the military potential of the facilities, asserting that it would “bolster its nuclear deterrent” in response to the Bush administration’s “arrogant, self-justified and high-handed practices.” [16]

North Korea has repeatedly stressed its urgent need for energy, and in 2004, Yongbyon Nuclear Laboratory Director Ri Hong-sŏp told then visiting Siegfried Hecker, former director of Los Alamos National Laboratory, that the electricity generated by the 50MW(e) GMR would go into North Korea’s power grid. Responding to a question from Hecker, Ri reportedly acknowledged, however, that such GMRs are not very efficient for generating electricity but make excellent weapons-grade plutonium. [17] While North Korea has a serious energy supply problem, the announcement regarding the restart of reactor construction was clearly a signal to Washington that Pyongyang can also apply pressure by worsening the outcome for the United States in the event that the six-way talks collapse.

Pyongyang’s separate announcement that it would also build light water reactors on its own was somewhat surprising because analysts believe North Korea does not have the indigenous technology to manufacture such facilities. Furthermore, because this type of reactor requires enriched uranium fuel, the announcement appears to contradict Pyongyang’s denial that it has a uranium enrichment program. A uranium enrichment capability can be used to provide low-enriched uranium for nuclear power plant fuel, but can also be used to enrich uranium to the high levels needed for nuclear weapons. During talks with the United States in October 2002, prior to the collapse of the Agreed Framework, North Korean negotiators acknowledged possessing a uranium enrichment program, but Pyongyang has since denied it is pursuing such an effort.

Whatever the prospects for North Korea’s development of light water reactor technology, its restart of construction on the reactors at Yongbyon and Taechon, with their significant plutonium production apabilities, means that the North has introduced an additional obstacle to fulfillment of the September Joint Statement of Principles. While Pyongyang, in September, “committed to abandoning all nuclear weapons and existing nuclear programs,” its nuclear activities are expanding, not contracting, as the confrontation with Washington continues.

SOURCES:
[1] “Joint Statement of the Fourth Round of the Six-Party Talks,” Beijing, September 19, 2005, http://www.state.gov/r/pa/prs/ps/2005/53490.htm. [View Article]
[2] “Treasury Designates Banco Delta Asia as Primary Money Laundering Concern under USA PATRIOT Act,” U.S. Department of the Treasury, Press Release JS-2720, September 15, 2005, http://www.treas.gov/press/releases/js2720.htm. [View Article]
[3] “U.S. Slap against Bank Stuns Foreign Business in N. Korea,” Japan Economic Newswire, September 19, 2005, in Lexis-Nexis; “Macau Government Takes over Banco Delta Asia, Accused of Money Laundering for North Korea,” Associated Press, September 28, 2005, in Lexis-Nexis; “U.S. Official Cautiously Welcomes Macao Action on Money Laundering,” Kyodo News Service, October 26, 2005, in Lexis-Nexis; “North Korean Company Withdraws from Macau: Report,” Agence France Presse, December 19, 2005, in Lexis-Nexis.
[4] “Treasury Targets North Korean Entities for Supporting WMD Proliferation,” U.S. Department of the Treasury, Press Release JS-2984, October 21, 2005, http://www.treas.gov/press/releases/js2984.htm.
[View Article]
[5] Korea Mining Development Trading Corporation and the Korea Ryonbong General Corporation were sanctioned by the U.S. on June 28, 2005, under E.O. 13382 for their support of proliferation. The eight entities sanctioned on October 21, 2005, were subsidiaries controlled by those two companies. See “Executive Order 13382 of June 28, 2005: Blocking Property of Weapons of Destruction Proliferators and Their Supporters,” Federal Register, Vol. 70, No. 126, July 1, 2005, http://www.treas.gov/offices/
enforcement/ofac/legal/eo/whwmdeo.pdf.
[6] Kelly Olsen, “U.S. Calls North Korea ‘Criminal Regime’,” Associated Press, December 7, 2005, in Lexis-Nexis; Lee Joo-hee, “U.S. Envoy Says No End to Sanctions on N. Korea,” Korea Herald, December 8, 2005, in Lexis-Nexis; Jae-soon Chang, “U.S. Ambassador Urges North Korea to Return to Nuclear Talks without Conditions,” Associated Press, January 4, 2006, in Lexis-Nexis.
[7] “N. Korea Insists on End to US Sanctions,” AFX News, November 13, 2005, in Lexis-Nexis.
[8] Lee Dong-min, “Sanctions Dispute No Excuse for NK to Skip Nuke Talks: Ereli,” Yonhap News Agency, December 7, 2005, in Lexis-Nexis; William C. Mann, “U.S. Holds to Tough Financial Sanctions Despite North Korean Threats to Quit Nuclear Talks,” Associated Press, December 14, 2005, in Lexis-Nexis.
[9] “US Plans to Brief North Korea on Counterfeiting Crackdown,” Agence France Presse, December 2, 2005, in Lexis-Nexis; Minju Chosŏn, December 13, 2005, in “DPRK Cabinet Paper Warns US of Impact of ‘Sanctions, Attitudes’ on 6-Way Talks,” FBIS document KPP20051213051005; Lee Dong-min, “Sanctions Dispute No Excuse for NK to Skip Nuke Talks: Ereli,” Yonhap News Agency, December 7, 2005, in Lexis-Nexis.
[10] “DPRK Foreign Ministry’s Spokesman Urges U.S. to Lift Financial Sanctions against DPRK,” Korean Central News Agency, January 9, 2006.
[11] “North Korean Delegates Stage Silent Protest at Talks with South,” Agence France Presse, December 16, 2005, in Lexis-Nexis; “Koreas Agree on Joint Efforts to Resolve Nuclear Tension,” Yohhap News Agency, December 17, 2005, in Lexis-Nexis; “Chosŏnjung’angt’ongsinsa ronp’ŏyng 6 chahoedamp’agoe’rŭl norin pŏmjoe’hangwi [KCNA Editorial: Criminal Acts to Destroy Six-party Talks],” Korean Central News Agency, December 19, 2005.
[12] Jae-soon Chang, “U.S. Ambassador Urges North Korea to Return to Nuclear Talks without Conditions,” Associated Press, January 4, 2006, in Lexis-Nexis; “‘U.S. Sanctions on N. Korea is Bilateral Issue’,” KBS Global, December 6, 2005, http://english.kbs.co.kr/news/newsview_sub.php?menu=8&key=2005120632.
[View Article]
[13] Agence France Presse, January 9, 2006, in “China, Japan Reject Sanctions Link to N Korea Talks,” FBIS document CPP20060109079036.
[14] “Chosŏnjung’angt’ongshinsa sangbo migukŭn chomigibonhapŭimun p’agich’aekim’esŏ pŏtsŏnalsu ŏpsŭmyŏ pissan taegarŭl ch’irŭge toelgŏtsida [KCNA Report: U.S. Unable to Avoid Responsibility for Scrapping Agreed Framework; Will Have to Pay High Costs],” Korean Central News Agency, December 19, 2005; “KCNA Urges U.S. to Compensate for Losses Caused by Scrapping AF,” Korean Central News Agency, December 19, 2005; “U.S. Concerned by Pyongyang’s Talk of Constructing New Reactors,” States News Service, December 21, 2005, in Lexis-Nexis.
[15] “U.S. Concerned by Pyongyang’s Talk of Constructing New Reactors,” States News Service, December 21, 2005, in Lexis-Nexis.
[16] “N. Korea to Resume Nuclear Plans,” BBC News, December 20, 2005, 12:13 GMT, http://news.bbc.co.uk/2/hi/asia-pacific/4545056.stm. [View Article]
[17] Glenn Kessler, “North Korea Rushes to Finish Reactor; Increased Plutonium Capacity Could Enhance Bargaining Position at Talks,” Washington Post, November 9, 2005, in ProQuest.