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Kim Jong-un’s dilemma in nuclear talks

Ock Hyun-ju — Mon, 03 Dec 2018 11:30:18 +0000

North Korea needs signs of economic benefits from US to move forward in denuclearization.
he momentum for a second US-North Korea summit early next year and North Korean leader Kim Jong-un’s visit to Seoul has been kept alive through a flurry of diplomacy on the sidelines of the G-20 summit.

But North Korea has chosen to stay mum, which analysts say indicates a deepening dilemma for the young leader under pressure to prove he was right about offering to give up his country’s nuclear weapons program.

The US and South Korea’s often repeated statement that sanctions against North Korea must remain in place until Pyongyang completely denuclearizes could be a reason behind the North’s hesitance in moving forward on denuclearization talks with the US, analysts say.

(Yonhap)

Kim Jong-un’s dilemma

A year after North Korea imposed a de-facto moratorium on nuclear and missile tests, Kim might have expected to win at least partial sanctions relief from the US by now. In reality, denuclearization talks between North Korea and the US have been at a stalemate.

North Korea has not responded to the US’ requests for working-level meetings aimed at discussing the substance of denuclearization since their historic summit in June. Nor has it responded to the US’ offer to hold a senior-level meeting since the North postponed it last month.

North Korea has demanded the US take “corresponding measures” — which seem to include an end-of-war declaration and sanctions relief — to build trust and improve relations before it further denuclearizes.

The US, on the other hand, has demanded North Korea take more irreversible steps toward denuclearization before it receives any rewards.

Without signs of imminent economic benefits from the US, Kim lacks justification to persuade his people to give up the country’s nuclear weapons program, and there is no turning back for Kim, an expert said.

“The young leader may be facing pressure to prove he made the right choice about giving up the country’s nuclear weapons,” said Cho Han-bum, a senior researcher at the Korea Institute for National Unification.

Ending a year of threats and hostilities against South Korea and the US, Kim went on an extensive diplomatic offensive this year, meeting South Korean President Moon Jae-in three times, holding a summit with Trump and trying to mend soured ties with its traditional ally China.

In April, Kim signaled the end of Byungjin policy — the parallel pursuit of nuclear weapons and economic development — and adopted a new policy line aimed at focusing on developing the economy, which experts say was aimed at laying the groundwork for negotiating away its nuclear weapons.

At the June 12 summit with Trump, Kim committed to work toward “complete denuclearization of the Korean Peninsula. He even had Moon address some 150,000 residents in Pyongyang in September, during which Moon reaffirmed Kim’s commitment to denuclearization.

“There are now high expectations within North Korea that an improvement in inter-Korean relations and ongoing negotiations with the US will positively affect the North’s economy,” Cho said.

With the US adamant that sanctions be maintained against the North until substantial denuclearization, Kim faces difficulties in realizing his promise to his people, he said.

“North Korea cannot pull out of negotiations, but it cannot make advances in the denuclearization talks without being confident that it would lead to an economic development,” Cho said. “North Korea might need to see at least a sign of sanctions relief as it takes steps toward denuclearization.”

Kim dismantled a major nuclear test site in Punggye-ri in the presence of international journalists, returned the remains of US veterans killed during the 1950-53 Korean War and repatriated three US citizens who had been detained in the North.

But the measures are not seen as credible steps toward denuclearization in the eyes of Washington, which is why the US remains skeptical and reluctant to make concessions, such as the easing of sanctions.

Kim Young-hui, who defected to South Korea in 2002 and works as a research fellow at a state-run bank, said the third-generation dictator is different from his father and grandfather, and more conscious of how North Korean people see him.

Kim, therefore, needs an end-of-war declaration as well, perhaps more than sanctions relief.

“North Koreans had to endure long years of hunger for the country’s development of nuclear weapons — which was supposed to protect the country from attacks by the US,” she said. “But why should they give them up now? What can they gain in return? North Koreans need to be assured that the war is now over and that they don’t have to be worried about the US aggressions.”

“Kim might be carefully pondering what step he should take next as he feels that there is nothing he can gain from the negotiations.”

Moon and Kim promised to declare an end to the Korean War within the year, but the US has been reluctant to do so without progress in denuclearization. The North has moved away from calling for the end-of-war declaration to demanding the lifting of sanctions.

Why North Korea needs sanctions relief

Experts are divided on the impact of international sanctions on North Korea’s economy largely due to a lack of data, but analysts seem to agree that sanctions have taken a toll on the North to some extent.

North Korea has managed to keep its market prices and foreign currency exchange rate relatively stable, but that could soon be destabilized by a lack of signs of imminent sanctions relief, according to a report by the Institute for National Security Strategy.

North Korea’s foreign currency reserves held by those involved in market activities are keeping the economy afloat and offset the short-term impact of international sanctions against North Korea, according to Lim Soo-ho, a senior research fellow at the INSS.

There are about 450 markets in operation, where North Koreans trade agricultural products and consumer goods, an element of capitalism unofficially embraced by Kim since he took power in 2011.

“Economic players in North Korea are spending their dollars amid the expectation that sanctions could be eased, but foreign reserves in the North are highly likely to begin drying up next year if the deadlock in North Korea-US negotiations continues,” he said.

In the long term, sanctions — which ban imports of machinery and electricity, and limit imports of oil — will put the brakes on the North’s booming construction projects, such as its landmark Wonsan-Kalma coastal tourism project along the country’s east coast, according to the report.

But such a “reckless” way of keeping the economy afloat would not likely last long, according to Ko Myong-hyun, a research fellow at the Asan Institute for Policy Studies.

“North Korea is recklessly running its economy by using foreign reserves to promote domestic spending to minimize the negative impact of international sanctions against it,” Ko said.

This year, North Korea’s annual growth was negative 3.5 percent, according to figures released this July by the Bank of Korea. Annual growth is expected to be negative again next year.

North Korea has increasingly shown its frustration about sanctions. Through state-controlled media, North Korea even hinted at a return to the Byungjin policy, amid the continued diplomatic deadlock.

“It seems difficult for North Korea’s economy to be maintained in the coming years without sanctions relief. What is also worrying for the North is that it will take some time for sanctions relief to take effect,” Ko said. “For now, Kim appears to be waiting for Trump to get back to him with a better offer.”

Source: http://www.koreaherald.com/view.php?ud=20181203000688

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Moon faces toughest challenge yet in third summit with Kim

AP via CNBC — Sat, 15 Sep 2018 09:51:39 +0000

South Korean President Moon Jae-in and North Korean leader Kim Jong Un are scheduled to hold a third summit next week in Pyongyang.

Pool | Getty Images News | Getty Images

North Korean leader Kim Jong Un (L) and South Korean President Moon Jae-in (R) embrace after signing the Panmunjom Declaration for Peace, Prosperity and Unification of the Korean Peninsula during the Inter-Korean Summit at the Peace House on April 27, 2018 in Panmunjom, South Korea.

The first inter-Korean summit of 2018, a sunny spectacle in late April, reduced war fears on the peninsula. The second, an emergency one in May, helped ensure a historic meeting between North Korean leader Kim Jong Un and President Donald Trump came off.

Now, at his third summit with Kim next week in Pyongyang, South Korean President Moon Jae-in faces his toughest challenge yet: delivering something substantive that goes beyond previous vague statements on denuclearization and helps get U.S.-North Korea talks back on track.

Negotiations between Washington and Pyongyang have sputtered in recent weeks, raising doubts about whether Kim is truly willing to relinquish his nuclear arsenal and putting pressure on Moon to broker progress once again.

The result will likely be a crucial indicator of how the larger nuclear negotiations with the United States will proceed. Moon will try to get Kim to express more clearly that he’s prepared to abandon his nuclear weapons, which could create momentum for a second Kim-Trump summit.

Whether Moon succeeds, fails or falls somewhere in between, the third inter-Korean summit could help answer a persistent question: When Kim says he supports the “complete denuclearization of the Korean Peninsula,” what does he actually mean?

Denuclearization debate

Moon heads to Pyongyang on Tuesday facing lingering questions over his claim that Kim, during his conversations with South Korean officials, has privately expressed a genuine interest in dealing away his nuclear weapons and missiles.

The wave of optimism that surrounded the first two inter-Korean summits in April and May and the Singapore meeting between Trump and Kim in June conveniently overlooked disagreements about what exactly Kim had committed to.

“The third summit will bring more clarity to what North Korea means with the complete denuclearization of the peninsula,” said Kim Taewoo, former president of Seoul’s government-funded Korea Institute for National Unification. “If the North has been negotiating with goodwill all this time, Moon will be able to return with good results. But, regrettably, I see that possibility as low.”

He said it will be crucial for Moon to get Kim Jong Un to give a clearer signal that he is willing to accept credible actions toward denuclearization, such as providing a detailed description of North Korea’s nuclear program, a key first step toward inspecting and dismantling of it.

At his meetings with Moon and Trump, Kim signed statements pledging the complete denuclearization of the peninsula. But the North for decades has been pushing a concept of denuclearization that bears no resemblance to the American definition, vowing to pursue nuclear development until the United States removes its troops from South Korea and the nuclear umbrella defending South Korea and Japan.

The differences prompted Trump to cancel Secretary of State Mike Pompeo’s planned visit to North Korea last month. After an earlier Pompeo visit, Pyongyang accused Washington of making “unilateral and gangster-like” demands on denuclearization and bristled at the idea that it must take significant steps toward dismantling its nuclear program before a peace treaty is signed or international sanctions are lifted.

Moon, the son of North Korean war refugees, is eager to keep the nuclear diplomacy alive, not just to keep a lid on tensions, but also to advance his ambitious plans for engagement with the North, including joint economic projects and reconnecting inter-Korean roads and railways. These projects are held back by the sanctions against North Korea.

“What the South and North now needs is not just another joint declaration, but finding ways to substantially develop relations,” Moon said in a Cabinet meeting Tuesday. “We cannot cease our efforts to mediate and facilitate talks from the middle until dialogue and communication between North Korea and the United States flow smoothly.”

Getting it in writing

The issue of declaring a formal end to the 1950-53 Korean War will be high on the agenda in Pyongyang. The fighting stopped with an armistice that has left the peninsula technically at war.

Both Koreas are calling for a declaration by the end of the year, but the U.S. wants to see more concrete steps toward denuclearization first, and some analysts say a declaration could put pressure on the U.S. to withdraw its troops from South Korea.

“With the declaration, North Korea’s trying to put itself on equal footing with the United States so it could turn the process into a bilateral arms reduction negotiation between two nuclear states,” Kim, the security expert, said. “The process can’t have anything to do with a plan to denuclearize unilaterally.”

Chung Eui-yong, Moon’s national security adviser, met Kim in Pyongyang earlier this month, and said the North Korean leader told him that an end-of-war declaration would not weaken the U.S.-South Korea alliance or lead to a withdrawal of U.S. troops. Chung also said Kim wishes to realize denuclearization before the end of Trump’s first term.

Chung conveyed similarly promising comments from Kim after a previous visit in March, when South Korean officials shuttled between Pyongyang and Washington to set up the Trump-Kim meeting.

He said then that Kim had said the North would not need to keep its nuclear weapons if it received a credible security guarantee and that the North Korean leader understood that U.S.-South Korea joint military exercises must continue. The comments were seen as an important departure from North Korea’s previous stance.

But Kim has never made similar comments publicly or in writing.

If Moon can’t convince Kim to express a commitment to concrete denuclearization steps, he will at least have to get Kim to put the things Chung has said he was told in a written agreement, said Du Hyeogn Cha, a visiting scholar at Seoul’s Asan Institute for Policy Studies.

That would provide a starting point for establishing a timeline for denuclearization, reduce concerns over North Korea’s intent and make it clearer that the North bears the greater responsibility in the efforts to resolve the nuclear crisis, Cha said.

“The Panmunjom Declaration after the first summit only provided a time limit for the end-of-war declaration, which was the end of 2018; on denuclearization, the statement just said the Koreas would jointly work toward it,” Cha said. “A failure to get something more specific out of Kim could cause the diplomatic efforts to lose much of their force.”

Source: https://www.cnbc.com/2018/09/15/korea-moon-faces-toughest-challenge-yet-in-third-summit-with-kim.html

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Chinese companies may invest in North Korea. American not so much

Daniel Shane - CNN Money — Mon, 11 Jun 2018 14:27:28 +0000

Could totalitarian North Korea one day become an opportunity for American businesses?

President Donald Trump is due to meet North Korean leader Kim Jong Un on Tuesday for a summit that the United States hopes will lead to North Korean nuclear disarmament.

US Secretary of State Mike Pompeo raised the possibility last month that US companies could invest in the isolated country if that happens.

There are big doubts whether it will — but even if the meeting leads to a breakthrough, experts say investors should still view North Korea with extreme caution. And if anyone moves fast to take advantage, it’s likely to be China.

‘Potentially lucrative’

On paper, North Korea has some appealing traits for foreign companies. It is located in the middle of a major Asian supply chain that includes China, South Korea and Japan. Its economy also has a lot of catching up to do.

“There’s a lot of potentially lucrative and very exciting investments in North Korea to be made,” said Peter Ward, a researcher at Seoul National University who studies North Korea.

North Korea’s population is impoverished but reasonably well educated, while labor costs are far lower than those of its neighbors, according to experts on the country. That makes it a potential hub for electronics and textile manufacturing, some analysts say.

But those advantages are outweighed by some extremely large obstacles for foreign investors, particularly the heavy hand of the Kim regime.

“The prospect of major investment being allowed into North Korea by the regime is unlikely,” said Go Myong-hyun, a research fellow at the Asan Institute for Policy Studies, a Seoul-based think tank. “The regime is deeply suspicious of the international market.”

China would lead

As North Korea’s largest trading partner and the regime’s primary backer, China could take the lead in investing in the country.

Ward said that North Korea looks like a natural candidate for China’s Belt and Road initiative — a grand plan to invest hundreds of billions developing roads, ports and railways from Asia to Africa. Infrastructure in most of North Korea is in a dilapidated state, according to experts.

But Chinese money can bring complications. In one case, China took control of a port it developed in Sri Lanka after the South Asian country fell behind on payments.

Such incidents are unlikely to have escaped the notice of Pyongyang, which will want to avoid any perception of ceding sovereignty to its northern neighbor.

“North Korea may be highly reluctant to potentially allow China to forcibly take possession of future ‘distressed assets,'” Ward said.

Poor track record

Foreign investors in North Korea have been burned in the past. In the 1980s, Pyongyang defaulted on loans from European and Australian banks. More recently, companies that have tried to operate there have run into trouble.

In the late 2000s, Egyptian conglomerate Orascom was invited to form a joint venture with the North Korean government to build the county’s first cellular network.

The company ran into difficulties in a matter of years, including being prevented from moving profits out of North Korea and Pyongyang setting up a state-run rival. In its 2015 financial report, Orascom simply said “control over the [joint venture’s] activities was lost.” Few other details about its fate have been made public.

Orascom didn’t respond to a request for comment on the matter.

South Korean companies have struggled, too.

In 1998, the Hyundai Group started operating a mountain resort for tourists in North Korea. The complex attracted two million South Korean visitors over the course of 10 years before the killing of a tourist by a North Korean sentry prompted its closure. The project has since been confiscated by Pyongyang.

“They lost everything,” said Asan Institute’s Go, referring to Hyundai. “The company no longer has access to North Korea.”

Despite that experience, the Hyundai Group has set up a task force to prepare for a potential return to the country. And Samsung Securities, the investment arm of another big South Korean conglomerate, said on Thursday that it was establishing a research team to analyze potential future investments in North Korea.

A prize catch?

The two Koreas also cooperated on Kaesong, a special economic zone where North Korean workers made goods for South Korean companies. But Ward said that many South Korean companies only agreed to operate in the zone on the North Korean side of the border because of guarantees and support from the government in Seoul.

Kaesong was shut down in 2016, a casualty of rising political tensions.

Experts offer several reasons why the North Korean regime has a tendency to turn around and bite foreign investors.

Some say that authorities are worried that the spread of market capitalism will undermine the regime’s grip on power, or that companies can end up as the victims of factional infighting within the government.

Others think that North Korea’s cloistered economy means officials are unaware of what is considered acceptable practice for dealing with business partners.

“They think of themselves as being a prize catch in international markets,” Ward said. “They don’t seem to understand that expropriating investors willy-nilly is going to get you a very bad reputation.”

CNNMoney (Hong Kong)First published June 11, 2018: 6:34 AM ET

Source: http://money.cnn.com/2018/06/11/investing/us-north-korea-investment-china/index.html

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