Dr. Yoshinori Kaseda, University of Kitakyushu

Global Peace Convention

Kuala Lumpur, Malaysia, December 5-8, 2013


Sixty years have passed since the signing of the Korean Armistice Agreement in 1953. However, the agreement has yet to be replaced by a peace treaty that formally ends the state of war. North Korea’s relations with South Korea, the United States, and Japan have not been normalized. In the post-Cold War era, a primary impediment to their reconciliation has been their confrontation over North Korea’s nuclear weapons development. It has been a major security concern for Japan, South Korea, the United States, China, and Russia. Resolution of this nuclear issue has proven very difficult as can be seen from North Korea’s three nuclear tests. International efforts to have North Korea abandon its nuclear program have largely failed.

In order to realize amicable international relations in Northeast Asia, causes of this failure need to be identified. Often times, North Korea is blamed for this failure and worsening of the nuclear problem. However, a close look at this issue reveals a different picture: the reluctance of the USA to normalize its relations with North Korea is an underlying factor behind the failure.
Since the USA remains reluctant, it is rather naïve to expect the USA to play a leading role in promoting peace in Northeast Asia. Japan is another unlikely leader. It is South Korea that has good reasons to take the lead. Its active economic engagement with North Korea would contribute significantly to peace-building in Northeast Asia and would promote Korean unification.


For Japan, the Korean peninsula has been an area of a major importance. After Korea was divided into two countries in 1948, Japan developed strong economic relations with South Korea, particularly after their diplomatic normalization in 1965. For Japan, South Korea (or the ROK) is a major trading partner and an economic competitor. As far as North Korea (or the DPRK) is concerned, during the Cold War Japan’s relations with the North was limited and not very friendly partly because of South Korea’s hostile relations with the North. After the Cold War, Japan came to see North Korea as a primary security threat to its national security because of North Korea’s nuclear and missile development and its abduction of Japanese citizens.

North Korea’s nuclear weapons development is a major security concern not only for Japan but also for other countries, particularly South Korea, the United States (USA), China, and Russia. In the early 1990s, tensions mounted over North Korea’s suspected extraction of plutonium from spent-fuel rods. The problem was resolved as a result of compromises between North Korea and the USA that were turned into their formal agreement, the Agreed Framework (AF), in October 1994. However, the AF collapsed in late 2002 during the Bush administration. Then, the Six-Party Talks (SPT) started in August 2003 to resolve the North Korean nuclear problem. Yet, the problem worsened to the extent that North Korea conducted its first nuclear test in October 2006. Rather belatedly, the SPT produced concrete agreements in 2007 regarding measures to be taken to resolve the nuclear problem. However, implementation of the agreements came to a halt in late 2008. After that, situations further deteriorated into North Korea’s second and third nuclear tests in May 2009 and February 2013. International efforts at having Pyongyang abandon its nuclear program have largely failed.

A widely held view is that North Korea is primarily responsible for the failure. This paper critically examines this view by focusing on the implementation of the AF of 1994, the collapse of the AF, North Korea’s first nuclear test, and the implementation of the agreements at the SPT in 2007. Then, the paper considers ways to ease tensions arising from this nuclear issue, to facilitate the peace and prosperity in Northeast Asia, and to promote Korean unification.

The Agreed Framework of 1994

The end of the Cold War generated a propitious chance to end the Cold War structure in Northeast Asia. In September 1991, President Bush announced his decision to withdraw US tactical nuclear arsenals deployed overseas including South Korea. Then, in December 1991 President Roh Tae-woo confirmed their removal from South Korea. Then, the two Koreas signed an Agreement on Reconciliation, Non-aggression, and Exchanges and Cooperation on 13 December 1991 and a Joint Declaration of the Denuclearization of the Korean Peninsula on 20 January 1992.

South Korea normalized its relations with the Soviet Union in September 1990 and with China in August 1992. North Korea tried to improve its relations with the USA and Japan. It could get a positive response from Japan and held eight rounds of normalization talks with Japan between 1991 and 1992. Yet, the USA showed little eagerness to normalize its relations with North Korea. Consequently, no normalization talks were held between the two.

The USA was more concerned about North Korea’s nuclear development. North Korea built a graphite-moderated reactor in 1985. Then, the USA detected a large building in 1989 that it suspected to be a spent-fuel reprocessing facility. In order to safely dispose of spent fuel from a graphite-moderated reactor, North Korea needed the capability to reprocess it. However, the USA, the ROK and Japan suspected that North Korea’s intention to build the facility was to extract plutonium from spent fuel rods. The surfacing of this nuclear issue led to the termination of the DPRK-Japan normalization talks in November 1992.

The tension between the DPRK and the USA along with the ROK and Japan later rose to an alarming level. Yet, former President Jimmy Carter’s visit and meeting with Kim Il-sung on 16-17 June and stopped further escalation of tension. Following the Carter-Kim talks, the DPRK and the USA made mutual compromises and reached an agreement called the Agreed Framework (AF) in October 1994 despite Kim’s sudden death in July 1994.

The Content of the AF

In the AF, the two countries made the following agreement. First, the DPRK will freeze its nuclear facilities in Nyongbyon, put them under the monitoring by the International Atomic Energy Agency (IAEA), and eventually dismantle them. The DPRK will accept full inspections by the IAEA before delivery of key nuclear components. Second, an international consortium led by the USA will construction two light-water reactors (LWRs) in the DPRK by the target date of 2003. Third, the USA will provide the DPRK with 500,000 tons of heavy fuel oil (HFO) per annum until the last stage of construction of the first LWR unit. Fourth, the DPRK and the USA will move toward full normalization of political and economic relations. Fifth, the USA will provide the DPRK with formal assurances against the threat or use of nuclear weapons.

Implementation of the AF

To what extend were these agreements were implemented? The DPRK froze its nuclear facilities and put them under the IAEA monitoring. With regard to the LRW project is concerned, the Korean Peninsula Energy Development Organization (KEDO) was formed to carry it out. But the start of construction of LWRs delayed. Consequently, their completion was expected to go far beyond 2003. With regard to the HFO provision, the USA kept the promise although its delivery delayed from time to time. As to normalization of their political and economic relations, little progress was made on. Regarding the security assurance, strong assurance in the form of a pact or treaty was not provided. Before signing the AF, the Clinton administration assured North Korea of its intention not to use its nuclear weapons or to threaten North Korea with possible use of nuclear weapons in their joint statements in June and July 1993. Also, in their joint communiqué of October 2000, the Clinton administration expressed its stance of not having hostile intent toward North Korea and its intention to build a new relationship with North Korea that is not hostile.

North Korea did what the USA deemed most important, that is, freezing its nuclear facilities and thereby stopping production of plutonium. In this sense, North Korea made a very significant concession to the USA. However, North Korea could not realize what it saw most important, namely, ending the military and economic hostilities of the USA.

Collapse of the AF

North Korea expressed its frustration with the US reluctance to normalize their relations and threaten to abrogate the AF and restart the operation of the frozen nuclear facilities. In this context, Pyongyang launched a Taepodong-1 on 31 August 1998, allegedly to put a satellite into an orbit. The launch may have been prompted by its frustration with Washington’s reluctance to normalize the bilateral relations.

Yet, North Korea did not abrogate the AF. That could be attributed to different factors. First, for Pyongyang, Washington’s provision of 500,000 tons of HFO was significant, considering that North Korea’s annual oil import peaked at around 3 million tons in the 1980s. A second factor is the onset of the Kim Dae-jung administration in 1998 and its engagement policy to actively promote improvement in inter-Korean relations and to facilitate improvement in North Korea’s relations with the USA and Japan. A third factor is the Perry Report of October 1999 that acknowledged the importance of the AF and urged the government to prepare to establish more normal diplomatic relations with the DPRK in order to preserve stability through the cooperative ending of DPRK nuclear weapons- and long-range missile-related activities. A fourth factor is actual improvement in its relations with the USA as can be seen from the visit of Kim Jong Il’s aide, Vice Marshal Jo Myong-rok, to Washington in October 2000, and Secretary Madeleine Albright’s reciprocal visit to Pyongyang later in the same month, which was prompted by the first inter-Korean summit of June 2000.

The Agreed Framework collapsed after Clinton was replaced by Bush in 2001. President Bush and his Republican Party had been highly critical of the AF and the Kim Jong-il regime. The Bush administration adopted a hostile policy toward North Korea. In January 2002 it adopted a new Nuclear Posture Review (NPR) that reportedly designated North Korea as one of the seven states against which a plan to use nuclear weapons should be compiled. In the same month, President Bush regarded North Korea as a part of “Axis of Evil” in his State of the Union speech. In September 2002, it adopted a new version of the National Security Strategy (NSS) that expressed its willingness to conduct preemptive actions against rogue states including the DPRK.

North Korea slashed these hostile moves as totally nullifying the DPRK-U.S. joint statement of 2000 and the AF. However, it did not abrogate the AF. The collapse of the AF was triggered by Washington’s announcement on 16 October 2002 regarding North Korea’s involvement in uranium enrichment. According to the US Department of State, North Korea admitted its possession of a uranium enrichment program to Assistant Secretary of State James Kelly who had visited Pyongyang between 3 and 5 October. However, the North Korean Foreign Ministry denied the allegation. The Bush administration regarded North Korea’s uranium enrichment program as a breach of the AF and terminate its provision oil to North Korea obliged by the AF in December 2002. In response, North Korea restarted its nuclear facilities later in the same month and announced its withdrawal from the NPT in January 2003. Consequently, North Korea could freely produce plutonium and increase its inventory of plutonium.

Who Is Responsible?

Who is responsible for the collapse of the AF? Is it North Korea that was, according to Washington, engaged in uranium enrichment? Or is it the Bush administration that stopped the oil shipment and thereby invited North Korea’s response of restarting its nuclear facilities?

If North Korea intended to produce highly enriched uranium (HEU) to make nuclear weapons and actually attempted to develop the capability to do so, that would deserve denouncement. However, it was very unwise for the Bush administration to terminate its provision of HFO to North Korea and thereby prompted it to resume its nuclear facilities. At that time, Washington suspected that Pyongyang had started the uranium enrichment program about four years ago, but was not sure if it had begun constructing a uranium enrichment plant. Criticizing North Korea is understandable. Yet, it was irrational and counterproductive to invite North Korea’s resumption of plutonium reprocessing. In fact, when Washington expressed its intention to terminate the oil shipment, Seoul and Tokyo voiced concerns for possibility of resultant collapse of the AF. In fact, many criticisms for the irrationality of the US decision have been made by scholars and (former) government officials in South Korea and the USA, although few criticisms have been made by Japanese scholars or officials.

Uranium Enrichment

If North Korea was actually involved in uranium enrichment after it had signed the AF, then why was it and how seriously was it?
The AF did not clearly state that North Korea was prohibited from possessing uranium enrichment capability. Yet, it indirectly obliged North Korea to refrain from doing so because North Korea agreed to abide by the North-South Joint Declaration on Non-Nuclear Korean Peninsula of 1992 that prohibited possession of uranium enrichment capability or plutonium production capability.

Reportedly, since 1993 North Korea gained access to Pakistan’s centrifuge program and experts at Khan Research Laboratories (KRL) in return for providing Pakistan with ballistic missiles and their technologies, and then obtained P1 and P2 centrifuges from KRL in about 2000. With regard to this deal, Pakistan seemed to be more eager than North Korea because it wanted to improve its missile capability that was inferior to India’s. North Korea had the capability to produce plutonium. Therefore, it had few reasons to acquire uranium enrichment capability to develop nuclear weapons. Also, it should be noted that its signing of the AF shows that North Korea was willing to freeze its nuclear facility in order to normalize its relations with the USA. In other words, it decided not to pursue acquisition of nuclear weapons in return for diplomatic normalization with the USA. Considering this decision of great importance, it is highly doubtful that North Korea seriously attempted to produce HEU at least in the early years after signing the AF.

However, it is conceivable that North Korea grew more interested in acquisition of uranium enrichment capability as it grew more frustrated with Washington’s unwillingness to normalize its relations with Pyongyang. North Korea might have thought of developing uranium enrichment capability as a diplomatic card to make Washington more serious about diplomatic normalization.

Another possibility is that North Korea was interested in producing low-enriched uranium for the two LWRs under construction by the KEDO. The LWRs were to be provided with nuclear fuel rods installed. Yet, after the initial installment, North Korea would have to buy fuel rods. Since North Korea is replete with uranium ore, it is understandable that it became interested in producing nuclear fuel by producing low-enriched uranium.

In short, it seems reasonable to assume that North Korea was not very serious about producing highly enriched uranium for nuclear weapons and that its interest in uranium enrichment capability was to use it as a bargaining chip or produce low-enriched uranium for nuclear fuel.

The First Nuclear Test

After the collapse of the AF, North Korea restarted its nuclear facilities and could produce plutonium. As time went by, North Korea would have possessed more plutonium. That was a very alarming development. Letting North Korea freely do so was unacceptable for the international community. That is why the Six-Party Talks (SPT) started in August 2003 with the participation of North Korea, the USA, China, South Korea, Japan, and Russia. However, for about two years, little progress was made toward denuclearization of the Korean peninsula. It was at least partly because of President Bush’s uncompromising, hardline demand that North Korea should first completely, verifiably, irreversibly dismantle its nuclear facilities (CVID) before discussing quid pro quos. Finally, in September 2005, the six parties agreed on principles for denuclearization of the Korean peninsula, including taking reciprocal actions step by step.

However, on 15 September, just before the six parties issued their joint statement on this agreement on September 19, the US Department of Treasury imposed financial sanctions on Banco Delta Asia, a bank in Macao on the grounds that the bank helped North Korea’s money laundering. Not surprisingly, North Korea strongly reacted. It conducted missile tests in July 2006. Washington along with Tokyo pushed for adoption of a resolution of condemnation (resolution 1695) at the United Nations Security Council (UNSC) on 15 July. It enraged Pyongyang and prompted it to conduct its first nuclear test in October 2006. In response, Washington in cooperation with Tokyo succeeded in having the UNSC adopt a sanctions relation (resolution 1718) on 14 October.

The UNSC resolution enraged Pyongyang, but was not very damaging because it allowed member states to engage in economic exchanges with the DPRK that are unrelated to its nuclear and missile development. Probably, Pyongyang had anticipated passage of such a resolution because Beijing would not support crippling penalties on Pyongyang for fear of triggering its implosion or explosion. Also, it seems that Pyongyang had expected Beijing and Seoul to continue their economic assistance to Pyongyang although they might well reduce or suspend it for a while. Probably, Pyongyang also had expected that the risk of US attacks on it would be very low because Washington as well as Tokyo would not want to face its implosion or explosion and because Washington was not ready to fight a new war with the DPRK while engaged in large-scale military operations in Iraq and Afghanistan.

New Agreements at the Six-Party Talks

The UNSC sanction was not very strong and was not very effective in preventing North Korea’s technological, financial, and material transactions in order to hinder its development of ballistic missiles and nuclear weapons. Therefore, the SPT needed to find ways to achieve it. Negotiations among the six parties produced concrete agreements on February 13 and October 3, 2007 that gave substances to the joint declaration of September 17, 2005.

The Content of the SPT Agreements

The 2.13 agreement specified measures to take in the following 60 days and at the next stage. The former measures included: 1) for the DPRK to stop its nuclear facilities in Nyongbyon and accept monitoring and verification by the IAEA; 2) for the other five countries to provide emergency energy aid worth 50,000 tons of HFO to the DPRK; 3) for the USA to start normalization talks with the DPRK and initiate the process of rescinding its designation of the DPRK as a state sponsor of terrorism (SST) and the process of ending the application of the Trading with the Enemy Act (TWEA) to the DPRK; and 4) for Japan and the DPRK to hold normalization talks in accordance with the Pyongyang Declaration of 2002. The measures to take at the next stage, included: 4) the DPRK’s complete declaration of its entire nuclear program; 5) its disablement of all the existing nuclear facilities; 6) provision of aid to the DPRK by the other five countries worth 950,000 tons of HFO. The 10.3 agreement reconfirmed the commitment of the six parties to the 2.13 agreement and set a deadline of 31 December 2007 for Pyongyang’s declaration and disablement.

Implementation of the SPT Agreements

Apparently in order to facilitate North Korea’s implementation, the USA lifted its financial sanctions on North Korea in June 2007. For its part, North Korea stopped its nuclear facilities in Nyongbyon and allowed the IAEA to verify it. Then, it started dismantle them. By the time the USA removed the DPRK from the SST list in October 2008, the DPRK had submitted a detailed report on its nuclear program and had completed eight of the eleven agreed disablement measures. However, it obtained 496,000 tons of oil out of 1,000,000 tons promised by the five countries. It was partly because Japan refused to take part in the oil provision on the grounds that its contribution depended on progress on the issue of North Korea’s abduction of Japanese citizens. Also, there was little progress on its normalization talks with the USA and Japan.

Confrontation over Verification

The USA and Japan were not eager to normalize their relations with North Korea. Instead, their priority was verification of North Korea’s declaration of its nuclear activities. Washington, Tokyo, and Seoul under the new Lee Myung-bak administration demanded that Pyongyang allow them to verify its declaration through scientific examination. However, Pyongyang rejected the demand. Their disagreement over this verification issue stopped the implementation of the 2.13 and 10.3 agreements.

The three countries criticized the DPRK for refusing to allow verification. It is understandable for them to do so. Yet, it should be noted that North Korea’s explanation for its refusal is understandable as well. On 26 August 2008, North Korea’s Foreign Ministry issued a statement saying, “As far as the verification is concerned, it is a commitment to be fulfilled by the six parties at the final phase of the denuclearization of the whole Korean Peninsula according to the September 19 joint statement.” It also criticized the USA, saying that Washington “pressurized the DPRK to accept such inspection as scouring any place of the DPRK as it pleases to collect samples and measure them,” and that such inspection would be “nothing but ‘special inspection’ which the IAEA called for in the 1990s to infringe upon the sovereignty of the DPRK and caused it to pull out of the NPT in the end.” North Korea’s stance was that the USA, Japan, and South Korea could not conduct verification without sufficiently improving their relations with North Korea. In other words, North Korea demanded the kind of reciprocal, step-by-step actions as agreed in the 9.19 joint statement. In December 2008, the heads of delegation to the SPT of the six countries held a meeting to resolve the verification issue, but could not do so. Since then, the SPT has been suspended to this date.

Who Is Responsible?

As pointed out in the DPRK’s above statement, the confrontation over the verification this time was very similar to the one in the early 1990s. The latter confrontation was resolved as a result of the Clinton administration’s decision to conduct verification at the final stage of implementation of the Agreed Framework, including construction of two LWRs and normalization of diplomatic relations between the USA and the DPRK. From this experience of the early 1990s, Washington, Tokyo, and Seoul could have easily anticipate Pyongyang’s refusal of upfront verification without giving sufficient quid pro quos. As Stephen Bosworth, former US special envoy to North Korea, stated before assuming the position, it is unlikely that the DPRK would denuclearize unless the US government ends its longstanding hostile policy toward the DPRK and build a friendly bilateral relationship.

Pyongyang’s Eagerness and Washington’s Reluctance

The formation and implementation of the AF and the 2.13 and 10.3 agreements of the SPT show North Korea’s eagerness to implement agreed measures for denuclearization and the USA’s reluctance to normalize its relations with North Korea.

For Kim Jong-il, rebuilding North Korea’s buttered economy must have been a top priority because it was a strong destabilizing factor to his regime. In order to do so, he needed to remove the US economic and military hostilities because that they made it difficult for Pyongyang to obtain financial support from international financial organizations such as the World Bank and the Asian Development Bank, bilateral official aid from foreign countries, and investment from foreign companies.

In contrast, Washington has been reluctant to normalize its relations with Pyongyang, probably because it expects demerits of doing so outweigh merits. It seems that Washington has been strongly concerned about the possibility that normalization of relations with the DPRK may well undermine its national interests by weakening its advantageous relations with Seoul and Tokyo. Changing its hostile relations with Pyongyang to friendly ones would mostly likely lead to corresponding changes in Pyongyang’s relations with Seoul and Tokyo. As a result, the military importance of the USA for Seoul and Tokyo would decline, probably to a greater extent for Seoul because the US military presence in South Korea has been to deal primarily with North Korean threat. Decline in the importance of US military protection might lead to reduction of Seoul and Tokyo’s generous host nation support for US forces in their countries and might lead even to reduction of US military presence. Also, US military sales to the two countries might well decrease.

US economic importance to South Korea and Japan might well decline as well. If North Korea’s relations with the USA, South Korea, and Japan are normalized, South Korea and Japan would make greater economic gains than the USA. As the economic interactions among North Korea, South Korea, Japan, China, and Russia would expand, Northeast Asia would enter into a new stage of economic development and interdependence. As regional economic integration deepens, the relative economic importance of the USA to South Korea and Japan would likely decline.

South Korea would likely benefit more than Japan due to its geographic proximity to North Korea, China, and Russia. For instance, it would be able to reduce its energy cost by a greater margin by importing gas from Russia via gas pipelines through North Korea, which has been under discussion among the three countries since the Lee Myung-bak administration. South Korea would be able to benefit more from the connection of its railways and road to North Korea’s.

All in all, US military and economic influence over South Korea and Japan would decrease as a result of its normalization with North Korea.

Who Is To Lead

After the implementation of the 2.13 and 10.3 agreements of the SPT came to a halt in late 2008 due to confrontation over the verification issue, the North Korean nuclear issue has become even more difficult to resolve because of North Korea’s development of uranium enrichment capability and its second and third nuclear tests in May 2009 and February 2013. Now that North Korea can produce HEU without being detected by other countries, other countries including the USA, Japan, and South Korea cannot completely erase their doubt that North Korea is hiding HEU somewhere, even if North Korea accepted their thorough inspections. International community needs to accept this reality.

If North Korea conducts more missile tests and nuclear tests, then North Korea would eventually possess nuclear missiles. If the USA, Japan, South Korea, and other countries want to prevent it, then they would need to convince North Korea not to do so through diplomatic measures. Past records vividly show that military and economic pressures by the USA, Japan, and others have not been very effective.

North Korea has attempted to improve its regime security by improving its serious economic conditions and has demanded that the USA end its hostile economic and military policy toward North Korea because it has been the primary obstacle to North Korea’s economic development. As discussed above, the USA has, however, been very reluctant to terminate the hard-line policy and normalize its relations with North Korea. This US reluctance seems unlikely to wane significantly in the near future.

Therefore, if South Korea, Japan, and other countries want to prevent North Korea from acquiring nuclear missiles and want to improve its relations with North Korea, then they cannot expect the USA to take a leading role. Instead, they have to take initiatives.

As discussed earlier, the USA is reluctant to normalize its relations with North Korea because it is likely to lead to the DPRK-ROK and DPRK-Japan normalizations and is likely to reduce South Korea and Japan’s military and economic dependence on the USA. That is why the USA has not been actively supported South Korea and Japan’s attempts at improving their relations with North Korea. Therefore, if South Korea and Japan want to improve their relations with North Korea, they have to do so without US support and possibly against US wishes. This is a major challenge for them.

As far as Japan is concerned, there are not many Japanese leaders who support improvement of Japan’s relations with North Korea if doing so make the USA unhappy. The USA is widely seen as the most important country for Japan. This recognition has become even stronger in recent years as tensions have grown between Japan and China over the Senkaku/Diaoyu islands. Considering that, Japan is unlikely to play a leading role in improving North Korea’s international tensions and thereby promoting the peace in Northeast Asia. In contrast, South Korea does not have territorial disputes with China or Russia unlike Japan. Also, as mentioned earlier, South Korea’s economic gain in improving relations with North Korea is likely to be greater than Japan’s. Thus, South Korea is the country that has the reasons to take the lead in improving North Korea’s international relations and promoting amicable interactions in Northeast Asia.

Along with South Korea, China and Russia can play important roles in reducing tensions and promoting such interactions in the region. In fact, China has been economically supporting North Korea, preventing its collapse. In recent years, China has given a priority to promoting economic development of its northeastern provinces because their economic developed has been sluggish. As one of the measures to achieve this objective, China has been improving transportation networks in the provinces and access to the North Korean port of Rajin located near its borders with China and Russia. China does not have a port facing the Sea of Japan. Therefore, Rajin can be a very important logistical hub for promoting economic development of the provinces.
Besides, China can expect North Korea’s economic development can have a stimulating impact on the economy of its northeastern provinces and other provinces because North Korea has the population of about 25 million and a lot of natural resources. Considering that, China is likely to find it in its economic interest for South Korea to actively promote North Korea’s economic development by increasing inter-Korean economic exchanges.

Russia is similar to China in this respect. Russia’s far Eastern region is economically underdeveloped. The Russian government has been promoting the economic development of this region. Russia wants to sell its natural resources, particularly gas, to South Korea. One way to do so is to build a pipeline from Sakhalin to Busan via North Korea. Russia has already discussed this project with the two Koreas and has gained their support. All the three parties can benefit from this project. However, due to the volatile relations between the two Koreas, this project has not started yet. Also, similar to China, Russia is interested in using Rajin as a logistical hub. Recently, it has built rails alongside North Korean ones between Rajin and the Russian city of Hassan, making the rails dual gages, so that Russian trains can run between them.

Paradoxical Opportunity

The current regime of North Korea led by First Secretary Kim Jong-un has given the precedence to economic development. His regime succeeded in putting a satellite into an orbit in December 2012 and conducted a third nuclear test in February 2013. Uranium enrichment facilities seem to be in operation. North Korea has acquired the capabilities to enrich uranium and produce plutonium. Its nuclear development has come a long way. By now, North Korea has made significant military progress. It has reached the stage where Kim Jong-un can say that his country has achieved the goal of becoming a militarily strong state and that its next goal is to become an economically strong state. Put it differently, military development has given the North Korean leadership to shift its priority from military to economic development. The current leadership has been very active, more than ever, in promoting economic development and improving economic conditions of North Korean people. For instance, it has decided to establish about 15 more special economic zones and has made legal changes in order to attract foreign investment in North Korea.

This is a golden opportunity for other countries to expand economic exchanges with North Korea and assist North Korea with its effort to make economic development. Success of the ongoing economic reform led by non-military party members would prompt the leadership to continue the economic reform. In other words, the success of the economic reform is likely to enhance their relative power vis-à-vis the military within the Kim Jong-un regime.

We will have to see how other countries, particularly South Korea and China, respond to this opportunity. In this regard, it should be noted that President Park Geun-hye and President Putin agreed at their summit meetings on 13 November 2013 that three South Korean companies (Korea Railroad Corporation, Hyundai Merchant Marine, and POSCO, one of the biggest steel companies in the world) would join Russia’s project with North Korea to improve Russia’s railway access from Hassan to Rajin and modernize the port of Rajin. This development is very particularly noteworthy because it amounts to easing of South Korea’s economic sanctions on North Korea initiated on 24 May 2010 (5.24 sanctions) by former President Lee Myung-bak and supported by conservatives.

In this connection, another noteworthy development was “Eurasia Initiative” that Park proposed on 18 October 2013 at the Global Cooperation in the Era of Eurasia conference held in Seoul hosted by the Korea Institute for International Economic Policy. In the initiative, she advocated connecting energy and logistics infrastructure across the continent. She said, “A new era must be opened by once again connecting Eurasia as a single continent. The severed logistics network needs to be linked to overcome the physical barriers that prevent exchange” and “Win-win Eurasian energy cooperation must be developed, such as linking energy infrastructures including electricity grids, gas and oil pipelines, and codeveloping China’s shale gas and eastern Siberia’s petroleum and gas.” As a part of the initiative, she proposed establishment of a “Silk Road Express” that would connect rail and road networks from Korea’s Busan to Europe via North Korea. The aforementioned recent decision on the participation of the three South Korean companies in the Russia-North Korea logistics project could be seen as a part of this initiative.

Besides the Eurasia Initiative, Park has presented the Northeast Asia Peace and Cooperation Initiative, which “seeks to gradually develop a habit of cooperation among regional players so that it may eventually contribute to addressing the region’s thornier issues and ushering in a new, prosperous Northeast Asia,” “[s]tarting from building a consensus on softer, yet equally critical issues such as climate change, environment, disaster relief and nuclear safety.”

Park intends to apply this initiative to North Korea in order to build trust between the two Koreas, as can be seen from her North Korean policy called “Korean Peninsula Trust Building Process.” In the Korean Peninsula Trust Building Process, South Korea would make economic engagement with North Korea in three stages: 1) humanitarian assistance such as food aid; 2) low-level economic cooperation in such fields as agriculture and forestry; and 3) large-scale investment in projects to develop infrastructure such as transportation and communication. The Park administration has shown willingness to implement the first two stages without setting such preconditions as North Korea’s denuclearization.

North Korea’s new special economic zones discussed above included those focusing on agriculture and fishery. One of them is to be established near the Northern Limit Line (NLL) and the Demilitarized Zone (DMZ) and close to South Korea’s Yeonpyeong Island. Opening up this militarily important area to foreign investment indicates North Korea’s seriousness in promoting economic development. It may well be the case that the aforementioned economic engagement policy of Park’s Korean Peninsula Trust Building Process prompted North Korea to designate this area as one of its new special economic zones in order to attract South Korean investment. We will have to see how South Korea responds to this new approach by North Korea. Because Park herself and her party are conservative and have been critical of the engagement policy of Presidents Kim Dae-jun and Roh Moo-hyun, Park’s economic engagement may well not be as active as Kim and Roh’s.

In this regard, China can play an instrumental role in facilitating South Korea’s economic engagement to North Korea by helping North Korea’s economic reform centered on special economic zones. China’s investment in those zones would make it easier for Park to allow investment by South Korean companies. Along the same line, China’s investment in the Kaesong Industrial Complex can have a very positive influence in that Chinese investment will strongly discourage North Korea to close the complex as part of its hardline policy toward South Korea as it did in April 2013.

If North Korea keeps refraining from making military provocations such as conducting another nuclear test in response to increase in Chinese and South Korean investment and improvement in economic conditions, then it would become more likely for Washington and Tokyo to soften their stance toward North Korea. The two countries, particularly Japan, may well feel disadvantaged if China and South Korea increase their economic gains from expanding economic exchanges with North Korea. For instance, if South Korean companies can reduce production cost by importing raw materials from North Korea, then their Japanese competitors should feel disadvantaged and may well urge the Japanese government to ease its strict economic sanctions on North Korea so that they can also invest in North Korea. The same could be said for American companies.


This paper has advocated promotion of peace and prosperity in Northeast Asia by expanding economic exchanges among the countries in the region, particularly North Korea’s economic exchanges with the other countries. In Northeast Asia, peace and prosperity has been constrained by international tensions between North Korea on one hand and the USA, Japan, and South Korea on the other hand over North Korea’s nuclear development.

North Korea has advanced its nuclear development in the context of lasting confrontation with the USA. The two countries agreed to normalize their relations in the AF of 1994 and the SPT agreements of October 2007. Yet, little progress was made toward normalization due largely to US reluctance. Its reluctance is understandable because its normalization with North Korea is likely to lead to North Korea’s normalization with South Korea and Japan and reduce their military and economic dependence on the USA, which means decline of US power over them.

Due to its reluctance, it is unlikely for the USA to take the lead in easing tensions over North Korea’s nuclear development. Neither is Japan because it has pursued the policy of strengthening its military and security ties with the USA in response to its deteriorating relations with China. In contrast, South Korea does not have such a reason to strengthen its ties with the USA. Also, South Korea can benefit more from expanding economic exchanges with North Korea than Japan can. Therefore, South Korea has the best potential for playing a leading role in promoting North Korea’s amicable international relations and the peace and prosperity of Northeast Asia.

As a concrete measure, expansion of economic engagement is promising. It is often times effective to change the existing incentive structure in order to ease mutual hostility. As economic exchanges expand and economic gains increase, it makes greater sense to further expand economic exchanges. As economic stakes of maintaining good economic relations increase, reluctance to take a hostile policy toward the other party becomes stronger.

Besides South Korea, China and Russia are likely to benefit a lot from improvement in inter-Korean economic relations. Therefore, they can play an important instrumental role in promoting improvement in inter-Korean relations and the peace and prosperity in Northeast Asia.

As economic exchanges among North Korea, South Korea, China, and Russia expand and their economic gains increase, then the USA and Japan would feel urged to review their hard-line policy toward North Korea. Probably, their domestic support for engagement policy would increase. They might well ease their strict economic sanctions on North Korea and allow their companies to do business with North Korea. As their economic exchanges with North Korea expand, the support for diplomatic normalization with the country might well become stronger. When the USA becomes ready to normalize the relations, it could urge North Korea to give up its nuclear weapons and related facilities in exchange for normalization that entails conclusion of a peace treaty between them or among them plus South Korea and China, the four countries that fought the Korean War.

In order to have North Korea accept denuclearization, Japan could play an instrumental role. At the first Japan-DPRK summit in 2002, Japan promised to provide economic aid to North Korea after normalization, which is expected to be approximately 1 trillion yen (US$10billion). The USA and Japan could coordinate the timing of their diplomatic normalization with North Korea and provide it with attractive incentives for realizing its denuclearization. The US-DPRK and Japan-DPRK normalizations would increase the chance of the two countries to reunite into one Korea.

As Dr. Tae-Hwan Kwak and others have pointed out rightly, the two Koreas need to agree to make a united Korea as a neutral state in order to gain sufficient support from the USA, China, Japan, and Russia. That means the end of the US-ROK Alliance and withdrawal of US forces in South Korea. The loss of US forward deployment in South Korea might meet domestic opposition within the USA. Yet, its alliance with Japan and forward deployment in Japan would make it easier for South Korea to convince the USA to agree to end their alliance. In this way, Japan might well make an unintended contribution to Korean unification.

Unified Korea would have the population of about 75 million and would become a major economic power. Consequently, Japan would face greater economic competition from it than from South Korea. This prospect might well raise concern in Japan about Korean unification. However, economic development of unified Korea has a bright side for Japan as well because its economic development would promote economic development of Northeast Asia and beyond and thereby would give Japan more opportunities to increase its exports.

Japan has played a leading role in promoting economic development of China. That resulted in China’s GDP surpassing Japan’s and also in Japanese companies facing greater economic competition from Chinese companies. Yet, the Japanese economy has benefitted greatly from China’s economic development. Economic gains have probably outweighed economic losses.
Considering that, Japan would support Korean unification, rather than opposing it, out of its own interests.

Even if Japan strongly opposes Korean unification, it does not have the power to prevent it. If the two Koreas make firm determination to reunite and propose neutralized unification, not only Japan but also China, the USA, and Russia cannot ostensibly oppose it. Moreover, if economic exchanges among the two Korea, China, Russia, Japan and the USA have expanded significantly by the time the two Koreas make the proposal, the two Koreas would not face less opposition from the four countries. The extent of expansion of economic exchanges among them in the future depends crucially on South Korea’s policy toward North Korea.


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This paper was prepared for the GlobalPeace Convention 2013 in Kuala Lumpur, Malaysia.The Global Peace Convention is a preeminent, world-level platform organized by the Global Peace Foundation and sponsors, supporters and partners to share best practices and develop collaborative strategies in areas of peacebuilding, education, entrepreneurship, sustainable development, youth and women empowerment, and other fields of social impact.