::: KNSI : Korea National Strategy Institute :::
::: KNSI : Korea National Strategy Institute :::
       February 27 2021
Road to a Nuclear-Free Korean Peninsula after the BDA Affair by Bohyuk Suh
The problem of North Korean frozen funds at a bank named Banco Delta Asia (BDA) in Macao that had stood unresolved over one year has been finished. It was reported that North Korean frozen accounts at BDA, with help from the US, were remitted via Russia for the purpose of resuming international financial transactions.

Lesson of BDA Affair

Just as the BDA issue was resolved, none other than International Atomic Energy Agency (IAEA) is having the most hectic days. IAEA officials are now visiting to Pyongyang in June 26-29 to negotiate the terms for them to monitor North Korea's shutdown of the Yongbyon facility1. The negotiation between North Korea and IAEA is expected to proceed smoothly. North Korea has so far shown positive reactions towards the problem, and IAEA has also defined its position that it would refrain itself from any provocative behavior that could incite North Korea.
Yet, a controversy still exists over whether or not the implementation of the February 13 Agreement had been delayed, because of the BDA problem. The way to help in implementing the agreement, however is to remember the lesson we learned from the BDA affair. What BDA issue has left us is a lesson that any suspicion lacking reasonable grounds only creates mutual distrust and makes the resolution difficult. Though the US asserted North Korea had had illegal capital transactions via BDA accounts since September 2005, it has not been able to provide any specific evidence to concerned parties, including North Korea, even up to today.
Whether that was coincidental or intentional, the US brought up the BDA problem around the time when the September 19 Joint Statement was released. Presenting new problems between countries, especially when they are in a relationship of hostility and mutual distrust, should take place in a much careful and discreet way.
Since the announcement of the February 13 agreement, some trust is likely to be built with the expectation of the agreement's progress. Secretary of State Condoleezza Rice on the day of February 13 said that closure of North Korea's nuclear facilities would be "a sign that the North Koreans may, in fact, be ready to make a strategic choice." After returning from Pyongyang, Christopher Hill, the US chief delegate to six?party talks also evaluated positively the attitude of his counterparts on the agreement implementation. With the BDA problem now closed, the US is likely to take up an active attitude, in order to speed up the abandonment process of North Korea nuclear weapons in earnest.
On June 21-22, Hill's surprise visit to Pyongyang for consultations between the United States and North Korea on implementing the February 13 agreement reflect the United States' iron will. North Korea however will approach to the problem with extra care, as evidenced in the resolution process of BDA issue. It is highly likely that it would like to control the process of the agreement implementation on hold until it secures its objectives. Nevertheless, North Korea will cooperate the shutdown process of the Yongbyon nuclear facility to induce economic aid and to make direct bilateral channel with Washington for diplomatic normalization.

Smooth Implementation of Initial Actions?

A large number of observers seem to take an optimistic view that the initial stages of the February 13 Agreement will proceed smoothly, as a result of the resolved BDA issue. Such judgment is derived from the observation that the nuclear facilities in Yongbyon are not only old, but also have low strategic values, since most of the facilities are already exposed to the outside world. However, considerate observers say, "Things are just beginning" and "The real problem arises after the Yongbyon plants are sealed." Initial action phase that of the February 13 Agreement refers to consisting of five actions, which were agreed to "be taken in parallel" at the third session of fifth round of six-party talks.
North Korea is highly likely to be positive and progressive in closing and freezing Yongbyon nuclear plants, while linking the negotiation on making a list of all its nuclear programs with removing its name as a state?sponsor of terrorism and terminating the application of the Trading with the Enemy Act. In response to this strategy, other six party participants, including the US will bring up the fact that initial actions are agreed to be taken in parallel. Then, North Korea will in turn find the linkage between the progress of normalization of its relations with the US and the whole progress of six party talks and can point out that "plans made by the five Working Groups will be implemented as a whole in a coordinated manner."
Especially, with respect to the list of nuclear programs North Korea possesses, trouble is expected in deciding whether or not to include alleged highly enriched uranium (HEU) nuclear program in the list. In addition, another key issue to be brought up when negotiating the items to be listed is the past nuclear development programs and nuclear weapons before the Agreed Framework in 1994. These would be the first door to open when implementing the February 13 Agreement after the BDA affair. In this sense, closing of BDA issue is better to be understood as opening the door of the initial stages of the agreement implementation rather than guaranteeing its whole implementation.

Looking back North Korea's foreign policies, they show certain strategic patterns according to the each situation. North Korea usually takes brinkmanship tactics in conflicting situation, in order to break a deadlock or get the right end of the stick for negotiation. On the other hand, in time of dialogue situation, it pursues profit maximization through compromise and bargaining, just like other states, and at this time, it usually employs salami tactics, since it lacks bargaining cards on the negotiating table. The brinkmanship tactics were found in phase of the first and second nuclear crisis, while the salami tactics were employed when it pursued profit maximization by dividing the agenda into test, production, export etc. at the US and North Korea missile negotiations that was held right after the Agreed Agreement to 2000.

Outlook: Combination of Linkage Approach and Parallel Approach

Suppose that a dialogue situation is created, such as the resumption of the six-party meeting, North Korea is highly likely to apply linkage and salami tactics. Within the scope of the first phase of the February 13 agreement, North Korea is expected to sit down at the negotiating table separating the issue of shutdown of Yongbyon facility from listing of nuclear programs. Regarding the closedown of the facility, it will employ linkage tactics, such as 1) commencement of providing energy, equivalent to 50,000 ton in return for beginning of the shutdown process of the Yongbyon facility, and 2) completion of providing energy, equivalent to 50,000 ton and resumption of working?level talks for normalization of the US and North Korea relations, in return for completion of the shutdown process. In order to proceed with these tactics, negotiation between IAEA and North Korea on the extent of the Yongbyon facility closedown including the radiochemistry laboratory and monitoring methods should precede.
Secondly, with regard to listing nuclear programs, North Korea will try to maximize its political and economic profits by using alleged HEU program, related materials, and past nuclear program development as bargaining chips. It will basically link the listing of nuclear programs with removal of its name from the list of state?sponsor of terrorism, terminating the application of the Trading with the Enemy Act, and supplying light?water reactors as well as the energy, equivalent to 950,000ton. Bargaining of the key issues like those is within the bounds of possibility. North Korea, in this process will aim at advancing process of normalizing its relations with the US and securing the alternative energy, including the light?water reactors.
Through this process, the six?party talks might be able to spread two wings, namely denuclearization of the Korean Peninsula and Northeast Asia security cooperation. Now, the question lies in what approach the rest of six?party talk participants will take, in response to North Korea's linkage and salami tactics. One way to solving the issue is to step?by?step development of the situation towards the "complete denuclearization" of the peninsula, while understanding the inevitability of North Korea's linkage tactics.
Hill told reporters in Washington June 25 for the first time that North Korea's Yongbyon nuclear reactor could be disabled and a peace mechanism for resolving the decades-old Korean conflicts could be in place by the end of 2007. Once into the Yongbyon disablement phase, he expected a peace process on the Korean Peninsula by North Korea, South Korea, China, and the United States. His discussion seemed to very insightful and enthusiastic, considering that it was released after his unexpected visit to North Korea and proposed action plans based on the principle of 'action for action'. In this sense, parallel tactics is perceived to be the most suitable for countering North Korea's tactics. Following the coordination with four countries of the six-party talks, the United States needs to negotiate timeline with North Korea for simultaneous achievement of the denuclearization on the Korean Peninsula and the normalization between the two countries. (June 27, 2007, Seoul)

1. IAEA's monitoring of Yongbyon nuclear facilities cannot be named as 'inspection', since North Korea is currently withdrawn from the Nuclear Nonproliferation Treaty and Nuclear Safety Agreement.

***Suh Bo-hyuk
(Fellow, Korea National Strategy Institute)
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