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| Prepared by: | Carin Zissis |
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Banco Delta Asia is accused of helping North Korea launder money and handling counterfeit U.S. currency. (AP/Dennis Ho)
Even as a path is cleared to meet the requirements of the North Korean denuclearization agreement reached in February, another round of Six-Party Talks has stalled. The February deal, which requires Pyongyang to shut down its main nuclear reactor within sixty days in exchange for fuel oil, involves a series of bilateral talks, including U.S.-North Korea negotiations aimed at normalizing relations. On March 14, Washington broke through on one of the biggest obstacles in its relations with Pyongyang with a decision that allows the release of $25 million (LAT) in North Korean funds from a Macao-based bank.
The United States blacklisted Banco Delta Asia in 2005 over allegations the bank laundered North Korean money. The freeze prompted Pyongyang to walk away from negotiations and delayed the Six-Party Talks for over a year. The funds issue appears to be holding up progress again: When the funds didn’t make a quick arrival in North Korean accounts, Pyongyang’s chief nuclear negotiator walked away (BBC) from the latest round of talks in Beijing.
The move to release the funds marked a shift in Bush administration policy toward North Korea. As the Financial Times reports, Secretary of State Condoleezza Rice convinced the Treasury Department to unfreeze the funds in hopes of achieving the larger goal of getting Pyongyang to close its nuclear reactor. Initially, the double-edged nature of the U.S. Treasury Department’s ruling allowed for the unfreezing of funds by Chinese monetary authorities, but prohibited U.S. banks from dealing with Banco Delta. In advance of new Six-Party Talks, Washington reached an agreement with Pyongyang in which North Korea pledged to use the money “for humanitarian and educational purposes.”
Even if the released $25 million goes to development rather than toward lining the pockets of Kim Jong-Il’s supporters, the regime has other crime-for-profit schemes to keep operations running. A new Congressional Research Service report on North Korea’s criminal activity estimates drug dealing, counterfeiting, and insurance fraud generate profits between $500 million and $1 billion a year. The report argues there is little likelihood for ending such criminal schemes because Kim Jong-Il’s regime depends on them to “sustain the loyalty of a core of thousands of party elite and to underwrite weapons development programs.”
No one downplays the complexity of the diplomatic road ahead. A dispute between Pyongyang and Tokyo over Japanese citizens abducted by North Korean agents during the 1970s and 1980s resulted in a breakdown of bilateral talks in Hanoi last month and the feud continued (FT) this week in Beijing. Before the talks, Assistant Secretary of State Christopher R. Hill voiced guarded optimism during an interview on the Charlie Rose Show acknowledged the North Koreans know “we have a tough time figuring out what really motivates them.” In a recent interview, CFR Director of Studies Gary Samore, who helped negotiate the bilateral 1994 Agreed Framework, called the February 13 agreement a “wise compromise” yet warned Pyongyang “will continue to insist on retaining some level of a nuclear weapons capacity.”
In a new Online Debate Henry D. Sokolski, executive director of the Nonproliferation Policy Education Center, says the “deal affords North Korea plenty of diplomatic slack” and sets no deadline for disarming besides the April 14 date of suspending its program to receive fuel oil. But others say the agreement creates an opportunity for other U.S. foreign policy interests. This CFR.org Crisis Guide takes a closer look at the North Korean nuclear issue. A Slate article discusses the limited value of the fifty thousand tons of fuel oil promised to North Korea.
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