Order Code RL31785
Report for Congress
Received through the CRS Web
U.S. Assistance to North Korea
Updated March 17, 2003
Mark E. Manyin
Analyst in Asian Affairs
Ryun Jun
Research Associate
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

U.S. Assistance to North Korea
Summary
Since 1995, the U.S. has provided over $1 billion in foreign assistance to the
Democratic People’s Republic of North Korea (DPRK, also known as North Korea),
about 60% of which has taken the form of food aid, and about 40% in the form of
energy assistance channeled through the Korean Peninsula Energy Development
Organization (KEDO). Additionally, there has been discussion of offering North
Korea broader economic development assistance in exchange for Pyongyang
verifiably dismantling its nuclear program and cooperating on other security-related
issues. U.S. aid to North Korea has been controversial since its inception, and the
controversy has been intimately linked to the larger debate over the most effective
strategy for dealing with the DPRK.
Food aid has been provided to help North Korea alleviate chronic, massive food
shortages that began in the early 1990s and that led to severe famine in the mid-1990s
that killed an estimated 1-2 million North Koreans. Food aid to North Korea has
come under criticism because the DPRK government restricts the ability of donor
agencies to operate in the country, particularly with regard to monitoring food
shipments, making it difficult to assess how much of each donation actually reaches
its intended recipients. There have been anecdotal reports that food aid is diverted
to the North Korean elite, who reportedly either consume it themselves or resell it for
profit on the black market. There are also reports that international food assistance
has been diverted to the North Korean military.
Since 1995, the United States has provided over $400 million in energy
assistance to North Korea under the terms of the 1994 Agreed Framework, in which
the DPRK agreed to halt its existing nuclear program in exchange for energy aid from
the United States and other countries. Aid to KEDO, the multilateral organization
that administers the Agreed Framework, has been dramatically curtailed since
October 2002, when North Korea reportedly admitted that it has a secret uranium
enrichment nuclear program. In response, North Korea has demanded new
negotiations with the United States and has restarted a number of nuclear facilities
that were mothballed under the Agreed Framework, creating a major foreign policy
problem for the United States and the DPRK’s neighbors. The Bush
Administration’s FY2004 budget request does not include any money for KEDO.
This report describes and assesses U.S. aid programs to North Korea, including
the controversies surrounding the programs, their relationship to the larger debate
over strategy and objectives toward the DPRK, and policy options confronting the
Bush Administration and Congress. The role of China, South Korea, and Japan in
providing assistance to North Korea is discussed, highlighting the likelihood that any
dramatic decrease in U.S. aid to North Korea have only marginal effects without the
cooperation of these countries. This report will be updated as circumstances warrant.

Contents
Introduction: Issues for U.S. Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Energy Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Food Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Debate over North Korea Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Developments Since September 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Congress’ Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
U.S. Food Assistance to North Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Current Food Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Current U.S. Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Details of U.S. Food Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
U.S. Food Aid Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
China’s Shipments of Food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Food Aid from South Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Food Aid from Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Diversion, Monitoring, and Triaging by North Korea . . . . . . . . . . . . . . . . . 11
North Korea’s Motivations for Controlling Relief Assistance . . . . . . 16
Shifts in U.S. Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Clinton Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Bush Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Assistance to KEDO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Heavy Fuel Oil (HFO) Shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
HFO’s Economic Importance to North Korea . . . . . . . . . . . . . . . . . . . 20
China’s Provision of Energy to North Korea . . . . . . . . . . . . . . . . . . . . 22
Other Forms of U.S.-North Korean Economic Interaction . . . . . . . . . . . . . . . . . 22
U.S.-North Korean Trade and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Funds from U.S. POW/MIA Recovery Efforts in the DPRK . . . . . . . . . . . 24
Policy Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Food Aid Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
KEDO Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Development Assistance Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
The Timing of a U.S. Offer of Development Assistance . . . . . . . . . . . 28
A Multilateral Development Assistance Program . . . . . . . . . . . . . . . . 28
Additional CRS Products on North Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
List of Figures
Figure 1. U.S. Food Aid to North Korea, 1996-2002
Sources: USAID, USDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Figure 2. Various Countries’ Reported Food Aid to North Korea, 1996-2002
Source: International Food Aid Information System (INTERFAIS) . . . . . 10

Figure 3. Map of The World Food Program’s
North Korea Operations as of January 2003 . . . . . . . . . . . . . . . . . . . . . . . . 13
Figure 4. Total KEDO Contributions,
Various Countries (1995-2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Figure 5. Avg. Cost of Heavy Fuel Oil
Source: KEDO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
List of Tables
Table 1. U.S. Assistance to North Korea, 1995-2003 . . . . . . . . . . . . . . . . . . . . . . 1
Table 2. U.S. Food Aid to North Korea, by Program 1996-2003 . . . . . . . . . . . . . 9
Table 3. KEDO Heavy Fuel Oil (HFO) Contributions, 1995-2002 . . . . . . . . . . 20
Table 3. U.S.-North Korea Trade, 1993-2002 . . . . . . . . . . . . . . . . . . . . . . . . . . 23

U.S. Assistance to North Korea
Introduction: Issues for U.S. Policy
For four decades after the end of the Korean War in 1953, U.S. strategy toward
the Democratic People’s Republic of Korea (DPRK, commonly referred to as North
Korea) was relatively simple: deter an attack on South Korea, an approach that
included a freeze on virtually all forms of economic contact between the United
States and North Korea. In the 1990s, two developments led the United States to
rethink its relationship with North Korea: North Korea’s progress in its nuclear
weapons program and massive, chronic food shortages in North Korea. In response,
the United States in 1995 began providing the DPRK with foreign assistance, which
has totaled over $1 billion. This aid has consisted of energy assistance through the
Korean Peninsula Energy Development Organization (KEDO), food aid, and a small
amount of medical supplies. (See Table 1.)
Table 1. U.S. Assistance to North Korea, 1995-2003
Food Aid (per FY)
KEDO
Medical
Calendar
Assistance
Supplies
Total
or Fiscal
Commodity
Metric
(per calendar
(per FY;
($ million)
Year
Value
Tons
yr; $ million)
$ million)
($ million)
1995
0
$0.0
$9.5
$0.2
$9.7
1996
19,500
$8.3
$22.0
$0.0
$30.3
1997
177,000
$52.4
$25.0
$5.0
$82.4
1998
200,000
$72.9
$50.0
$0.0
$122.9
1999
695,194
$222.1
$65.1
$0.0
$287.2
2000
265,000
$74.3
$64.4
$0.0
$138.7
2001
350,000
$102.8
$74.9
$0.0
$177.6
2002
207,000
$82.4
$90.5
$0.0
$172.9
2003a
40,000
n.a.
$5.0
$0.0
$5.0
Total 1,953,694
$615.2
$406.4
$5.2
$1,026.8
Sources: Figures for food aid and medical supplies from USAID and US Department of Agriculture;
KEDO (Korean Peninsula Energy Development Organization) figures from KEDO.
a As of February 2003. Food aid figure is amount pledged. KEDO figure is the amount appropriated,
though not yet spent.
Additionally, the growing diplomatic interaction between the United States and
North Korea permitted the two sides to begin negotiating the search for and recovery
of the suspected remains of the several thousand U.S. servicemen unaccounted for
during the Korean War. Since 1993, the U.S. Department of Defense has provided
the DPRK with nearly $15 million to pay for the costs of 25 joint recovery
operations.

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Energy Assistance. A series of diplomatic crises revolving around rapid
advances in North Korea’s nuclear weapons program led the United States in 1994
to negotiate a bilateral Agreed Framework with the DPRK. This agreement
committed Pyongyang to halt its existing nuclear program in return for Washington
providing energy assistance.1 Specifically, the United States agreed to arrange for the
financing of two light-water nuclear power plants in North Korea and for annual
shipments of 500,000 metric tons of heavy fuel oil (HFO) as an alternate source of
energy until the new reactors came online. Since 1995, the United States has
provided over $400 million to the Korean Peninsula Energy Development
Organization (KEDO), the multilateral institution that administers the Agreed
Framework. The rest is funded by South Korea, Japan, the European Union, and
several other countries. The U.S. contribution funds approximately one-quarter of
the KEDO program. Officials in both the Clinton and current Bush Administrations,
as well as the South Korean Administration of Roh Moo-hyun, periodically have
discussed the possibility of offering North Korea broader economic development
assistance in exchange for Pyongyang verifiably dismantling its nuclear program and
cooperating on other security-related issues. The Bush Administration’s FY2004
budget request does not include any money for the KEDO program.2
Food Assistance. The emergence in the 1990s of massive, chronic food
deficits in North Korea – shortages that killed between 5% and 10% of the country’s
population in the mid-1990s – prompted the United States to begin providing large
amounts of food aid. Since 1997, the United States has sent over 1.9 million metric
tons (MT) of assistance worth over $600 million, primarily channeled through the
United Nations World Food Program (WFP). The intervention of the international
community, including large food shipments from China, has helped stabilize North
Korea’s food situation; many observers feel the famine ended in 1997, though the
DPRK continues to run a food deficit. The aid has been sent despite the North
Korean government’s restrictions on the ability of international relief agencies to
operate in the country, particularly with regard to monitoring food shipments, making
it difficult to assess how much donated food reaches its intended recipients and how
much, if any, has been diverted to the political elite or the military. North Korea also
has declined to institute fundamental reforms of its agricultural policies that could
help reduce dependence on food aid.
The Debate over North Korea Policy
Aid to North Korea has been controversial since its inception, and the
controversy is intricately linked to the overall debate in the United States, South
Korea, and other countries over the best strategy for dealing with the DPRK. North
Korea is deemed a threat to U.S. interests because it possesses advanced nuclear and
missile programs, has a history of proliferating missiles and related technology, is
suspected of possessing chemical and biological weapons programs, and since the
1 For more on this topic, see CRS Issue Brief IB91141, North Korea’s Nuclear Weapons
Program
, by Larry Niksch.
2 See State Department, FY 2004 Congressional Budget Justification for Foreign
O p e r a t i o n s
, e s p e c i a l l y “ C o u n t r y / A c c o u n t S u mma r i e s ( ‘ S p i go t s ’ ) , ”
[http://www.state.gov/m/rm/rls/cbj/].

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late 1980s has been included on the U.S. list of states that sponsor terrorism. Many
supporters of aid contend that assistance is the most effective way to induce North
Korea to cooperate with the international community. Proponents of engagement
argue that in the long run, aid could fundamentally change the character of the North
Korean regime by increasing the DPRK’s exposure to and dependence on the outside
world. The Agreed Framework (which froze the DPRK’s plutonium nuclear
facilities for eight years), North Korea’s establishment of relations with a number of
European countries, and a spate of economic and humanitarian agreements with
South Korea are often cited as examples of this cooperation.
In contrast, many critics argue that aiding North Korea has led to marginal
changes in the DPRK’s behavior at best, and also has helped keep the current North
Korean regime in power and possibly allowed additional funds to be channeled into
the DPRK military establishment. Moreover, they suggest aid has encouraged
Pyongyang to engage in further acts of military blackmail to extract more assistance
from the international community. In this view, even the aid under the Agreed
Framework did not keep North Korea from pursuing a secret uranium enrichment
program, disclosed in October 2002. Some in this group argue that the best response
to the North Korean threat is to try to trigger the current regime’s collapse by
suspending non-humanitarian assistance. In its extreme manifestations, this approach
would also mean suspending food aid. Other critics have pushed for a more tailored
form of containment that would include diplomatically and economically isolating
North Korea and calibrating economic sanctions and/or the suspension or provision
of energy and development aid to reward or punish the DPRK’s actions.
Punitive steps may be ineffective if the United States pursues them unilaterally.
Sanctions, isolation and aid termination could be undercut without at least the tacit
cooperation of China, South Korea, and Japan. Chinese support would be
particularly important, as China is widely believed to be North Korea’s single-largest
provider of food and energy.
Food aid to North Korea has generated its own particular debate. Some
policymakers and commentators have called for it to be linked to broader foreign
policy concerns, either by using the promise of food to encourage cooperation in
security matters or by suspending food aid to trigger a collapse. Others, arguing that
food should not be used as a weapon, have called for delinking humanitarian
assistance from overall policy toward the DPRK, either by providing food
unconditionally or by conditioning it upon North Korea allowing international relief
groups greater freedom to distribute and monitor their aid.
Developments Since September 2001. The debate over U.S. policy
toward North Korea – and, by extension, U.S. aid to North Korea – has come under
increased scrutiny since the September 2001 terrorist attacks. The attacks led the
Bush Administration to develop a new security doctrine of using preventive attacks
to counter international threats, a strategy that has included increasing pressure on
states deemed to be proliferation threats and terrorist sponsors.3 President Bush has
3 See The National Security Strategy of the United States of America, September 2002,
(continued...)

CRS-4
characterized North Korea as a member of the “axis of evil” nations that threaten the
United States with weapons of mass destruction. Tensions with the DPRK have
greatly increased since October 2002, when North Korean officials reportedly
admitted to a U.S. delegation that the country had a clandestine uranium enrichment
nuclear program, a violation of the spirit, and arguably the letter, of the 1994 Agreed
Framework.4 This admission prompted KEDO’s executive board – made up of the
United States, South Korea, Japan, and the European Union (EU) – in November
2002 to suspend future heavy fuel oil shipments until North Korea takes “concrete
and credible actions to dismantle completely” its uranium enrichment program.
In response, North Korea announced its withdrawal from the Nuclear
Non-Proliferation Treaty, expelled monitors from the International Atomic Energy
Agency (IAEA), restarted the nuclear reactor shut down under the Agreed
Framework, and called for new, bilateral negotiations with the United States. If
North Korea begins reprocessing the 8,000 rods of weapons-grade plutonium that had
been sealed and subject to IAEA monitoring, within six to ten months, it could
conceivably possess enough fissile material for five to six nuclear weapons.5
The Bush Administration has refused to engage in direct negotiations with
North Korea – insisting instead on a multilateral forum – and supported moves by the
IAEA to submit the nuclear issue to the United Nations Security Council.
Administration officials also have publicly discussed and reportedly have developed
plans for future economic sanctions against North Korea, statements that have been
criticized by South Korea, Japan, China, and Russia. Meanwhile, the Bush
Administration announced in February 2003 that it would provide 40,000 MT of food
assistance to North Korea, with an additional 60,000 to be provided if the DPRK
allows greater access and monitoring. As for U.S. contributions to KEDO, Congress
appropriated up to $5 million for administrative costs in FY2003, and the
Administration’s FY2004 budget request does not include any money for the KEDO
program.6
In January 2003, President Bush said that he would consider offering the DPRK
a “bold initiative” including energy and agricultural development aid if the country
first verifiably dismantles its nuclear program and satisfies other U.S. security
concerns dealing with missiles and the deployment of conventional forces. The
Administration reportedly was preparing to offer a version of this plan to North
3 (...continued)
[http://www.whitehouse.gov/nsc/nss.html]; President Bush’s June 1, 2002 Graduation
Speech at West Point, [http://www.whitehouse.gov/].
4 The Agreed Framework principally dealt with North Korea’s plutonium nuclear
installations. The link to uranium enrichment activities is contained in Section III.2, which
commits North Korea to implement the 1992 North-South Korean Denuclearization
Declaration, which in turn prohibits the possession of uranium enrichment facilities.
5 CRS Report RS21391, North Korea’s Nuclear Weapons: How Soon an Arsenal?, by
Sharon Squassoni.
6 See State Department, FY 2004 Congressional Budget Justification for Foreign
O p e r a t i o n s
, e s p e c i a l l y “ C o u n t r y / A c c o u n t S u mma r i e s ( ‘ S p i go t s ’ ) , ”
[http://www.state.gov/m/rm/rls/cbj/].

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Korea in the summer of 2002, but pulled it back after acquiring more details of
Pyongyang’s clandestine uranium nuclear weapons program.7
Congress’ Role
The provision of aid to North Korea has given Congress a vehicle to influence
U.S. policy toward North Korea. Since 1998, Congress has included in the annual
Foreign Operations Appropriations bill requirements that the President certify
progress in nuclear and missile negotiations with North Korea before allocating
money to KEDO operations. In 1998, congressional pressure forced President
Clinton to appoint a North Korea policy coordinator, a position that was terminated
by the Bush Administration when it assumed office in 2001.
With regard to food aid, some Members have supported continued donations on
humanitarian grounds of helping the North Korean people, regardless of the actions
of the North Korean regime. Other Members have voiced their outright opposition
to food aid to the DPRK, or have called for food assistance to be conditioned upon
North Korean cooperation on monitoring and access. For instance, the Senate-passed
version of the FY2003 Omnibus Appropriations Act (H.J.Res. 2, which passed the
Senate on January 23, 2003) called on Pyongyang to provide “full verification of the
use of food aid assistance,” language that was dropped in conference.8
With regard to development assistance programs, in the near term, the President
has considerable flexibility to offer some forms of development assistance. The
Foreign Assistance Act of 1961, for instance, allows the President annually to
provide up to $50 million per country for any purpose.9 Longer-term initiatives,
however, would likely require changes in U.S. law and thereby require congressional
action. For instance, the Foreign Operations Appropriations law specifically bans
many forms of direct aid to North Korea, along with several other countries.10
U.S. Food Assistance to North Korea
A mountainous country with relatively little arable land, North Korea long has
relied upon imports of food. Beginning in the early 1990s, after the collapse of the
Soviet Union and the system of economic advantages North Korea had received from
the communist bloc, the DPRK began experiencing a food shortage of increasing
severity. Disastrous floods in the summer of 1995 plunged the country into a severe
famine that by some estimates was responsible for one to two million deaths,
7 Testimony of Richard Armitage, State Department Deputy Secretary, before the Senate
Foreign Relations Committee, February 4, 2003.
8 H.Rept. 108-10.
9 Section 614 of the Foreign Assistance Act of 1961, P.L. 87-195.
10 Section 507 of P.L. 108-7, the FY2003 Omnibus Appropriations Act, which also bans
direct aid to Cuba, Iraq, Libya, Iran, Sudan, and Syria. Many humanitarian and health aid
programs are exempt from this prohibition because they have “notwithstanding “ clauses in
their enacting legislation.

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approximately 5% - 10% of North Korea’s population. Although natural disasters
were the immediate causes of the food crisis, the root causes of the famine were
decades of economic and agricultural mismanagement.11 In September 1995, North
Korea appealed for international food assistance, contradicting its national ideology
of juche, or self-reliance.
Though the famine apparently abated by 1997 and the DPRK has made
incremental progress in agricultural production, North Korea still relies on
international aid to feed approximately one-third of its population and, according to
some estimates, runs a chronic food deficit of 1-2 million tons.12 A 2002 nutritional
survey of children and mothers conducted by the North Korean government indicated
that, although malnutrition rates have fallen significantly since the late 1990s, 9% of
North Korean children remain acutely malnourished and 42% suffer from chronic
malnutrition.13 The northern and northeastern provinces have been particularly hard
hit by the famine, for reasons examined below.
Unlike the situation in other humanitarian emergencies, the North Korean
government has remained intact and therefore has been able to impose strict limits
on international relief groups’ ability to operate in the country, in particular on aid
workers’ interaction with the North Korean people.
Current Food Situation. North Korea’s food situation appears to be entering
an acute period once again. In 2002, for the first time since it began assisting North
Korea in 1995, due to “donor fatigue,” the WFP failed to receive sufficient donations
to meet its targets in North Korea, leading the WFP to distribute less than 80% of
what had been planned and cut back the number of North Koreans it is assisting this
year from 6.4 million to 3.5 million. For 2003, the WFP has filled only one-fifth of
its 511,000 metric ton (MT) appeal for North Korea. Moreover, economic reforms
launched in the summer of 2002 appear to have caused rampant inflation and
production bottlenecks, causing workers to go unpaid and placing food prices out of
the reach of many.14 Urban residents are particularly vulnerable, as they rely heavily
on inflation-prone farmers’ markets and, according to the WFP, spend up to 85% of
11 See Andrew Natsios, The Great North Korean Famine, (U.S. Institute of Peace:
Washington, DC, 2001), especially chapters 1 and 2. Among the policies that over time led
to the famine were excessive use of chemical fertilizers and the excessive conversion of land
into agricultural uses. The latter practice contributed to the massive deforestation and soil
erosion that led to increasingly severe annual floods.
12 Marcus Noland, “North Korea’s External Economic Relations,”February 2001,
[http://www.iie.com/papers/asia.htm]; World Food Program Press Release, “WFP Seeks
Strong Backing for New Aid Initiative in North Korea,” December 3, 2002; Agence France
Press, “ROK Says North Korea To Be Short of 2 Million Tons of Food in 2004,” January
8, 2003.
13 U.N. World Food Programme, “Child Nutrition Survey Shows Improvements in DPRK,”
February 20, 2003.
14 John Pomfret, “Reforms Turn Disastrous For North Koreans,” Washington Post, January
27, 2003.

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their income on food, compared to no more than 35% for state farmers and much less
for collective farmers.15
Current U.S. Policy. The Administration has been deliberating its food aid
policy toward North Korea since June 2002, when it announced that future U.S. food
aid would depend on North Korea’s willingness to allow access of food donors to all
areas of the country, a nationwide nutritional survey, and an improvement in
monitoring food aid – conditions that other recipient countries meet.16 In December
2002, however, U.S. officials said that North Korea had not responded to the new
U.S. conditions and that the Administration had made no decision on future food aid.
In February 2003, the Bush Administration announced in that it would provide
40,000 MT of food assistance to the North Korea, via the WFP, with an additional
60,000 MT to be provided if the DPRK allows greater access and monitoring. North
Korea has accused the United States of politicizing and setting “unreasonable
conditions” for continuing food deliveries.17 40,000 MT and 100,000 MT represent
less than one-fifth and one-half of the 207,000 MT the United States provided in
2002. The WFP’s 2003 emergency appeal for North Korea is 512,000 MT, roughly
four-fifths of its 611,000 MT appeal in 2002.
Details of U.S. Food Assistance
U.S. food assistance to North Korea began in earnest in 1997, and has fluctuated
between 177,000 MT and 695,000 MT annually. (See Figure 1.) Over 90% of the
1.91 million MT of U.S. food assistance to North Korea has been channeled through
the World Food Program. To put these figures in context, aid to North Korea
constituted approximately 6.5% of total U.S. food aid between July 1995 and June
2001. Over the same period, the United States donated over $4.5 billion to the World
Food Program, roughly ten percent of which was designated for the WFP’s relief
efforts in North Korea.
15 World Food Program Press Release, “WFP Seeks Strong Backing for New Aid Initiative
in North Korea,” December 3, 2002.
16 The new conditions appear to be a sign of the influence of Andrew Natsios, the Director
of the U.S. Agency for International Development (USAID), whose recent book, The Great
North Korean Famine
, presents evidence that the North Korean government manipulated
food aid donors.
17 Tyler Marshall, “Nuclear Plans May Put Food Aid for N. Korea at Risk,” Los Angeles
Times
, December 17, 2002.

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Figure 1. U.S. Food Aid to North Korea, 1996-2002
Sources: USAID, USDA
U.S. Food Aid Programs. Nearly two-thirds of U.S. food aid to North Korea
has been provided under section 416(b) of the Agricultural Act of 1949. (See Table
2.) Administered by the U.S. Department of Agriculture (USDA), the section 416(b)
program allows for surplus food stocks owned by USDA’s Commodity Credit
Corporation (CCC, the government corporation that finances domestic commodity
price support programs, and some food aid and export programs) to be donated to
nations in need.
North Korea also has received food assistance under Title II of the Agricultural
Trade Development and Assistance Act of 1954, as amended (Public Law 83-480,
also known as PL480 and the Food for Peace Program). USAID administers Title
II, Emergency and Private Assistance Programs, which provide for the donation of
U.S. agricultural commodities to meet emergency and non-emergency food needs.
Title II donations may come either from surplus stocks owned by USDA’s CCC or
purchased on the market. Unlike 416(b) programs, Congress directly appropriates
PL480, and therefore could, although it rarely does, direct how the food should or
should not be disbursed. Congress has no formal role in 416(b) purchases or
distributions.
Future food aid to North Korea is likely to rely more heavily on Title II
programs, which is financed by congressional appropriations, than in the past. The
heavy use of the Section 416(b) program in recent years was facilitated by a sharp
rise in CCC-acquired food-stocks from 1999 through 2001. These stocks have
dramatically fallen, however, a development that may force the United States to rely
more heavily upon Title II appropriations, which already are stretched by the rising
need for food aid in Afghanistan, Sub-Saharan Africa, and potentially in Iraq.
Additionally, the Bush Administration has made a policy decision, issued in its
FY2003 budget proposal, that surplus commodities should not be used for food aid.
In program terms, this means that the use of the 416(b) program will be largely
phased out.

CRS-9
Table 2. U.S. Food Aid to North Korea, by Program 1996-2003
Title II
Total U.S. Gov’t
416 (b) (USDA)
(USAID/FFP)
Contribution
Fiscal Year/
Grantee
Dollar
Dollar
Dollar
Tonnage
Tonnage
Tonnage
Value
Value
Value
(MTs)
(MTs)
(MTs)
(Millions)
(Millions)
(Millions)
1996
WFP
0
$0.0
13,100
$6.3
13,100
$6.3
WFPa
0
$0.0
0
$0.0
6,400
$2.0
Total
0
$0.0
13,100
$6.3
19,500
$8.3
1997
WFP
0
$0.0
122,000
$36.1
122,000
$36.1
PVOC
0
$0.0
55,000
$16.3
55,000
$16.3
Total
0
$0.0
177,000
$52.4
177,000
$52.4
1998
WFP 0
$0.0
200,000
$72.0
200,000
$72.0
PVOC
0
$0.0
0
0.9
0
$0.9
Total
0
$0.0
200,000
$72.9
200,000
$72.9
1999
WFP
555,194
$165.8
70,000
$38.4
625,194
$204.2
PVOC
55,000
$9.6
15,000
$8.3
70,000
$17.9
Total
610,194
$175.4
85,000
$46.7
695,194
$222.1
2000
WFP
65,000
$14.8
170,000
$52.7
235,000
$67.5
PVOC
0
$0.0
30,000
$6.8
30,000
$6.8
Total
65,000
14.8
200,000
$59.5
265,000
$74.3
2001
WFP
346,000
$101.0
4,000
$1.77
350,000
$102.8
Total
346,000
$101.0
4,000
$1.77
350,000
$102.8
2002
WFP
207,000
$82.4
0
$0.00
207,000
$82.4
Total
207,000
$82.4
0
$0.00
207,000
$82.4
2003 (pledged)
WFP
program yet to be determined
40,000
n.a.
Total
40,000
n.a.
Grand Total
1,228,194
$373.6
679,100
$239.6 1,953,694
$615.2
Sources: USAID Office of Food for Peace; USDA, Farm Service Agency, Export Operations.
Notes: WFP: World Food Program; PVOC: Private Volunteer Organization Consortium. Tonnage
numbers are actual, exported quantities. Dollar values represent the total value of U.S. food aid
contributions, including commodity value, ocean freight, administrative costs, internal transportation,
storage, and handling.
a In 1996, USAID’s Office of U.S. Foreign Disaster Assistance (OFDA) provided a $2.0 million grant
to purchase 6,400 tons of rice for North Korea.

CRS-10
China’s Shipments of Food. Since the Soviet Union withdrew its
patronage of North Korea in the early 1990s, China is widely believed to have
emerged as the single largest provider of food to North Korea, though the precise
amount is difficult to estimate due to lax controls on the North Korea-China border
and the overall unreliability of official Chinese statistics. Additionally, food from
China is known to enter the North on commercial, concessional, and barter terms,
making it difficult to distinguish aid from trade.18 During the North Korean nuclear
crisis of the early 1990s, China cut its food shipments to the DPRK dramatically,
only to restore them with the onset of famine, which threatened the possibility of a
North Korean collapse.19 What is known is that after declining in the early 1990s,
Chinese food shipments to the DPRK increased with the onset of North Korea’s
famine, as China became concerned that the food situation could lead to the collapse
of the Pyongyang regime and/or to increased numbers of North Koreans crossing the
border into northeastern China.
Figure 2. Various Countries’ Reported Food Aid to
North Korea, 1996-2002
Source: International Food Aid Information System (INTERFAIS)
Data acquired by the International Food Aid Information System (INTERFAIS),
the database was developed by WFP, provide one means of comparing food
donations to North Korea. According to INTERFAIS, the United States and China
provide North Korea with roughly the same amount of food aid. However,
INTERFAIS’s data does not include Chinese food exports to North Korea, at least
18 Marcus Noland, Avoiding the Apocalypse. The Future of the Two Koreas, (Washington,
DC: Institute for International Economics, 2000), 187-88.
19 China officially justified this move as a response to budget pressures and state-owned
enterprises’ increased to continue subsidizing aid to North Korea. See Noland, Avoiding the
Apocalypse
, p. 187-88. Later, in 1997, China reportedly threatened to scale back its food
aid after North Korea rejected Chinese advise to adopt market-oriented reforms in its
agricultural sector. North Korea then began negotiating a large food aid deal with Taiwan,
prompting Beijing to reverse its position and continue providing aid. See Natsios, The Great
North Korean Famine
, p. 139.

CRS-11
some of which is provided on terms beneficial to the DPRK. According to Beijing’s
official customs statistics, China exported nearly 2.6 million MT of cereals to the
North between 1996 and 2000.20 If these figures are accurate, China’s total food
shipments were nearly double the entire WFP shipments and nearly triple the U.S.
level for the same period. Some reports indicate that China’s food assistance may be
considerably higher than officially reported, perhaps as high as 1 million tons
annually during the late 1990s.21
Food Aid from South Korea. Figure 2 shows that South Korea provided
North Korea with over 1.1 MT of food aid since 1996. Nearly all of Seoul’s aid to
Pyongyang was provided in two periods: 450,000 MT of maize and rice given
directly to North Korea in the months after the June 2000 North-South Korean
summit; and 500,000 MT in 2002, provided directly and through the WFP. From
1999-2002, South Korea also gave North Korea over 600,000 MT of fertilizer.22 On
March 14, 2003, the South Korean Agriculture Minister announced Seoul would
provide North Korea with 432,000 tons of rice annually for the next three years.23
Food Aid from Japan. Japan gave the bulk (500,000 MT) of its 766,000 MT
in total contributions to North Korea in one year, 2001. Tokyo has since suspended
food aid shipments until North Korea cooperates on other bilateral issues, particularly
the matter of kidnapped Japanese citizens.
Diversion, Monitoring, and Triaging by North Korea
A number of sources have presented evidence that not all the food assistance
going to North Korea is reaching its intended recipients. These include interviews
with North Korean refugees in China who say they have never received international
food aid.24 The numerous reports of donated food being sold (at price levels far
higher than the official, government-controlled prices) in farmers’ markets are widely
assumed to be signs that officials are stealing and selling some of the aid for their
own profit. Additionally, a number of refugees, including former soldiers, have
stated that food aid has been distributed regularly to the North Korean People’s Army
(KPA).25 In February 2003, U.S. Ambassador to the U.N. food agencies, Tony Hall,
20 Figures provided by Nicholas Eberstadt and Heather Dresser of the American Enterprise
Institute.
21 Noland, Avoiding the Apocalypse, 187-88.
22 Fertilizer figures are from the Washington, DC South Korean Embassy.
23 Reuters News, “S.Korea to Send about 432,000T Rice to N.Korea,” March 14, 2003.
24 Testimony of Sophie Delaunay, North Korean Project Representative, Medecins Sans
Frontieres (MSF), before the House International Relations Subcommittee on East Asia and
the Pacific, May 2, 2002, [http://wwwa.house.gov/international_relations/]. See also MSF’s
North Korea: Testimonies of Famine, Refugee Interviews From the Sino-Korean Border,
[http://www.doctorswithoutborders.org/publications].
25 MSF, Testimonies of Famine; Amnesty International, Persecuting the Starving: The Plight
of North Koreans Fleeing into China
, December 15, 2000, available in the “library”section
of the organization’s website, [http://www.amnesty.org].

CRS-12
cited “credible” reports of diversion in making the case for possibly reducing and
conditioning future U.S. food aid.
WFP officials contend that they have seen no evidence that the military is
systemically diverting U.N. food donations, and further, that the North Korean
military has no need for WFP food, since it receives the first cut of North Korea’s
national harvest.26 Even if the military is not directly siphoning off food aid,
however, such assistance is fungible; funds that otherwise would have been spent on
food can be spent on other items, such as the military.27 Additionally, North Korea
is believed to expend little of its foreign currency to import food.
The North Korean government has restricted relief groups’ activities, hindering
their ability to ensure that their assistance reaches the neediest. A number of
prominent NGOs – including Medicins Sans Fontieres (MSF, Doctors Without
Borders), Action Against Hunger, and CARE – have halted their North Korean
operations because they cannot adequately monitor the assistance they provide.28
MSF has been particularly vocal in its criticism of the food aid program.29 A 1999
General Accounting Office inquiry into U.S. food assistance to the DPRK found that
“the North Korean government has not allowed the WFP to fully implement its
procedures and, as a result, it cannot be sure that the food aid is being shipped,
stored, or used as planned.”30 WFP officials themselves have cited a number of areas
of dissatisfaction:31
! Incomplete access. The North Korean government does not permit
the WFP to have access to many counties to assess needs, provide
food, and monitor distribution. Currently, the WFP is barred from
44 of 206 counties (see Figure 3) – comprising approximately 13%
of the population. In 1998, 61 counties were off limits. In keeping
with the organization’s “no access, no food” policy, the WFP does
not provide food to these banned counties.
26 Testimony of John Powell, World Food Program Regional Director, before the House
International Relations Subcommittee on East Asia and the Pacific, May 2, 2002.
27 Noland, “North Korea’s External Economic Relations.”
28 See Hazel Smith, Overcoming Humanitarian Dilemmas in the DPRK (North Korea),
United States Institute of Peace Special Report 90, July 2002, p. 5, 10. Arguing that there
is “no humanitarian space whatsoever” for work in North Korea, MSF withdrew its year-old
operation in 1998.
29 Testimony of Sophie Delaunay, North Korean Project Representative, Medecins Sans
Frontieres, before the House International Relations Subcommittee on East Asia and the
Pacific, May 2, 2002.
30 General Accounting Office Report GAO/NSIAD-00-35, North Korea Restricts Food Aid
Monitoring
, October 1999, available at [http://www.gao.gov].
31 See especially testimony of John Powell, World Food Program Regional Director, before
the House International Relations Subcommittee on East Asia and the Pacific, May 2, 2002.

CRS-13
Figure 3. Map of The World Food Program’s
North Korea Operations as of January 2003

CRS-14
Aid workers involved in the North Korean relief effort offer a variety
of reasons Pyongyang has prohibited access to certain areas, including
the presence of sensitive security-related facilities; anger at the
actions of a particular local official; and/or the “triaging” of the
northern and eastern areas of the country so that more food can be
provided to politically favored regions and constituencies, particularly
the communist party elite in Pyongyang.32 A 2002 nutrition survey
found, for instance, that acute malnutrition among North Korean
children was three times as high in one of the eastern provinces than
in Pyongyang.33 Because the WFP uses the state-run public
distribution system (PDS) to deliver its food, the WFP’s North Korea
program is susceptible to any use of the PDS for the regime’s political
ends. There have been calls for the WFP to abandon the PDS because
it helps to sustain the regime and helps stunt the development of local
markets that are outside the government’s direct control.34
! No access to farmers’ markets. Additionally, the WFP is barred
access – as are all foreigners – from entering farmers’ markets,
which have replaced the public distribution system as the main
source of food for many, if not most, North Koreans. Gaining access
to the markets is perhaps the only way of determining the actual
price of food and other commodities in North Korea. In the markets,
prices reportedly fluctuate in accordance with relative supply and
demand, in contrast to the official public distribution system, where
prices are set by the central government.
! Inability to conduct random spot checks. Not only is the WFP’s
access incomplete, but is also highly circumscribed by the
government’s restrictions, which prevent the WFP’s staff from
conducting random checks. Pyongyang has yet to provide WFP with
the full list of institutions through which WFP food assistance is
provided, though in 2001 it pledged to do so. In the absence of a list
and free access, WFP monitoring teams in North Korea submit
travel requests to the government three - eight days in advance. The
32 The triaging argument has been prominently argued by Andrew Natsios, currently director
of the USAID, in his book, The Great North Korean Famine, p. 105-09. North Korea’s
traditional food allocation system is highly politicized, with lesser-favored groups receiving
lower rations. Natsios highlights the considerable evidence that as food shortages worsened,
the North Korean government curtailed and/or suspended the operation of the state-run food
distribution system in the northeastern provinces of Chagang, Yanggang, North Hamgyong,
and South Hamgyong. From 1995 until mid-1997, the government resisted the WFP’s plans
to allocate food to much of these regions.
33 U.N. World Food Programme, “Child Nutrition Survey Shows Improvements in DPRK,”
February 20, 2003.
34 For variations of these arguments, see Scott Snyder, “The NGO Experience in North
Korea,” in Scott Snyder, et. al., Paved with Good Intentions: The NGO Experience in North
Korea
, (Praeger Publishers: Westport, CT, Forthcoming 2003), especially p.5.

CRS-15
requests indicate the counties/districts and the types of institutions
(e.g., orphanages) the WFP team wishes to visit.35 Critics of the
food aid programs have argued that the monitoring trips are staged
by the North Korean government.36
Given these constraints, WFP officials say their ability to monitor
shipments has improved over time. The authorities have allowed the
WFP and other relief groups more access to more institutions.37 The
number of monitoring visits increased by 25% in 2001 and again in
2002, raising the average number of monthly visits to 430.
Additionally, WFP staff reportedly have been allowed greater
freedom in the types of questions they can ask and expect to be
answered.38
! Inability to use its own interpreters. The WFP is not permitted to
bring in personnel who speak Korean into North Korea, making
WFP staff reliant upon government-provided interpreters.
Notwithstanding these obstacles, WFP officials say they have “reasonable”
confidence that “the food provided through WFP gets to those who need it.” “We
have no doubt,” the former WFP country director for North Korea has written, “that
our aid has saved many, many lives.” WFP officials say they do not consider pulling
out because thousands of lives would be lost, and because such a move would violate
the agency’s mission of combating hunger regardless of operating conditions on the
ground.39 Note that according to WFP policy, it can withdraw assistance if a country
has not met its obligations under the agreements signed between the government and
the WFP. In 1997, the WFP used the threat of withdrawal to successfully pressure
Pyongyang to open the northeastern provinces.40 WFP officials also point to the
progress they have made since 1995, in particular gaining more access to more
counties and institutions, and achieving a greater degree of autonomy.41
Additionally, in 2002, the WFP recently accomplished a long-standing goal
when the North Korean government, in collaboration with the United Nations,
completed a comprehensive nutrition survey, the first since 1998. The survey
covered children younger than seven and their mothers, and indicated that
malnutrition rates have fallen significantly since the late 1990s. However, 9% of
North Korean children remain acutely malnourished and 42% suffer from chronic
35 January 2003 e-mail correspondence with Rick Corsino, WFP country director for North
Korea.
36 See, for instance, Sophie Delaunay, May 2, 2002 testimony.
37 Smith, Overcoming Humanitarian Dilemmas, p.13
38 January 2003 e-mail correspondence with Rick Corsino.
39 John Powell, May 2, 2002 testimony; Smith, Overcoming Humanitarian Dilemmas, p.14.
40 Natsios, The Great North Korean Famine, p. 175.
41 Smith, Overcoming Humanitarian Dilemmas, especially p. 13-14.

CRS-16
malnutrition.42 One improvement over the 1998 survey, which provided data only
at the country level, is that results will be available at the provincial level. However,
the survey has been criticized as unrepresentative because it was completed by the
North Korean government and excluded Chaggang and Kangwon provinces due to
the WFP’s lack of access to significant portions of these areas.
The WFP at times has halted specific programs in North Korea when it has not
been able to determine satisfactorily that food donations were reaching their intended
recipients.43 Additionally, the WFP has curtailed food shipments to other countries,
most recently Zimbabwe, to pressure central governments to improve access or
monitoring conditions. Humanitarian aid workers, including WFP officials, have
argued that member countries have not provided the WFP with sufficient backing to
push North Korea to adhere to international standards of access and monitoring.44
As discussed below, during the 1990s, the U.S. food aid was made contingent upon
Pyongyang’s cooperation on geostrategic matters rather than compliance with U.N.
principles in the provision of humanitarian relief.
North Korea’s Motivations for Controlling Relief Assistance. The
presence of foreign aid workers inside North Korea directly threatens the myth of
self-reliance, or juche, upon which DPRK ideology is based. Specifically, aid
groups’ demands for increased transparency challenge two of the main pillars for
perpetuating the government’s political control: the control of information and the
control of individual movement. The Flood Damage Rehabilitation Committee
(FDRC) – the North Korean agency created in the mid-1990s to manage interaction
with foreign relief groups – has been tasked with preserving the government’s strict
political controls by minimizing contact with ordinary people and institutions, while
simultaneously drawing in as many resources as possible.45 As a result, while contact
between foreigners and North Koreans has increased dramatically compared with the
pre-1995 situation, the rigid controls on humanitarian aid workers has led to little
engagement relative to the amount of aid flowing into the DPRK.
Shifts in U.S. Policy
The Clinton Administration. Despite the Clinton Administration’s claim
that food assistance to North Korea was not linked to security matters, it has been
well documented that during the 1990s the United States used food aid to secure
North Korea’s participation and increased cooperation in a variety of security-related
42 U.N. World Food Programme, “Child Nutrition Survey Shows Improvements in DPRK,”
February 20, 2003.
43 John Powell, May 2, 2002 testimony.
44 Natsios, The Great North Korean Famine, p. 188. John Powell, May 2, 2002 testimony,
particularly the following statement: “I think the failure of the past 7 years has been to allow
the WFP to negotiate on its own really and it has to be the full backing of the international
community to push the North Koreans on this.”
45 Scott Snyder, “Lessons of the NGO Experience in North Korea,” in Scott Snyder, et. al.,
Paved with Good Intentions: The NGO Experience in North Korea, (Praeger Publishers:
Westport, CT, Forthcoming 2003), p. 3, 113-19.

CRS-17
negotiations.46 Between 1997 and 1999, for instance, the Clinton Administration
provided food to secure North Korea’s participation in four-way security talks with
the U.S., South Korea, and China. The largest single U.S. pledge, over 500,000 MT
in 1999, was provided as a quid pro quo for North Korea allowing access to a
suspected underground nuclear site at Kumchangri. Although the “food for talks”
approach probably helped secure North Korea’s participation in a number of talks
(and was demanded by Pyongyang as a precondition for joining the talks), it did not
appear to result in substantive changes in DPRK behavior. Since food aid essentially
is controlled by the North Korean government, political linkages also may have
directly helped to sustain the regime.47 Linking food assistance to security issues was
opposed on humanitarian grounds for leaving the WFP and relief groups with little
leverage to negotiate better operating conditions inside North Korea.48 It also has
been criticized for sending the message to Pyongyang that North Korea could
maintain its restrictions on food donors and avoid fundamental agricultural reform
with little fear of jeopardizing future food shipments.49
The Bush Administration. Since June 2002, the Bush Administration has
applied a different type of conditionality, linking U.S. food aid to “verifiable
progress” in North Korea allowing the humanitarian community greater access to all
areas of the country, a nationwide nutritional survey, and improvements in the food
aid monitoring system.50 For months, the Administration gave conflicting signals
about whether it would continue donating food aid to North Korea, and if so, how
much and whether such aid should be conditioned on North Korean actions in the
humanitarian and/or security arenas. In December 2002, U.S. officials said that
North Korea had not responded to the new U.S. conditions and that the
Administration had made no decision on future food aid. In January 2003, President
Bush said that he would consider offering the North a “bold initiative” including
energy and food if the North dismantled its nuclear program. The Administration
reportedly was preparing to offer this plan to North Korea in the summer of 2002,
but pulled it back after acquiring more details of Pyongyang’s clandestine uranium
nuclear weapons program. Also in January 2003, USAID Director Andrew Natsios
was quoted as saying that food aid would not be continued if North Korea did not
satisfy U.S. monitoring standards. State Department spokesman Richard Boucher
somewhat clarified these remarks, stating that the United States “will be a significant
donor to North Korean food aid programs,” regardless of Pyongyang’s behavior,
though the amount of aid would likely be contingent upon the monitoring question.
46 Andrew Natsios, The Great North Korean Famine. Famine, Politics, and Foreign Policy,
(Washington, DC: United States Institute of Peace Press), Chapter 7; Marcus Noland,
Avoiding the Apocalypse. The Future of the Two Koreas, (Washington, DC: Institute for
International Economics), 182-91.
47 Snyder, “The NGO Experience in North Korea,” p.4-5.
48 Gordon Flake, “The Experience of U.S. NGOs in North Korea,” in Paved with Good
Intentions: The NGO Experience in North Korea
, (Praeger Publishers: Westport, CT,
Forthcoming 2003), p.16.
49 Natsios, The Great North Korean Famine; Noland, Avoiding the Apocalypse, p. 188-91.
50 USAID Press Release, June 7, 2000,
[http://www.usaid.gov/press/releases/2002/index.html].

CRS-18
Boucher also implied that the President’s mention of food referred to programs to
support North Korea’s agricultural sector.51 Ultimately, in February 2003, the Bush
Administration announced that it would provide 40,000 MT of food assistance to the
North Korea, via the WFP, with an additional 60,000 MT contingent upon the DPRK
allowing greater access and monitoring.
Assistance to KEDO
The October 21, 1994 U.S.-North Korean Agreed Framework offered North
Korea a package of benefits in return for a freeze of North Korea’s nuclear program.
Benefits to North Korea, which have been provided by the multinational Korean
Peninsula Energy Development Organization (KEDO), include light water nuclear
reactors totaling 2,000 electric megawatts and annual 500,000 ton shipments of heavy
fuel oil to North Korea that were to continue until the first light water reactor is built.
The annual heavy fuel oil shipments are roughly equivalent to the energy North
Korea lost from shutting down its nuclear power plants. Since 1995, the United
States has provided $401.4 million to KEDO, of which $377.9 million has paid for
heavy fuel oil shipments and $27 million has paid for the organization’s
administrative expenses. The United States is the second-largest contributor to
KEDO, following South Korea. (See Figure 4.)
Figure 4. Total KEDO Contributions,
Various Countries (1995-2002)
In its initial FY2003 budgetary request for KEDO, the Bush Administration
requested $50 million for heavy fuel oil shipments. Following KEDO’s suspension
of its heavy fuel oil deliveries to the DPRK, the Administration reduced its FY2003
budgetary request to $3.5 million, to cover a portion of KEDO administrative
expenses. Congress eventually authorized the President to spend up to $5 million for
51 “President Bush Discusses North Korea,” White House Transcript, January 14, 2003,
[http://www.whitehouse.gov]; Irwin Arieff, “US Interrupts North Korea Food Aid,”Reuters,
January 13, 2003; State Department Daily Press Briefings by Spokesman Richard Boucher,
January 14 and 15, 2003, [http://www.state.gov].

CRS-19
KEDO-related activities in FY2003, contingent upon a Presidential justification to
Congress that such funds are in the security interests of the United States.52 Despite
developments since October 2002, construction of the light-water reactors in Kumho
continues.
The Bush Administration’s FY2004 budget request does not include any funds
for the KEDO program. State Department officials have stated that this decision was
made because the future of KEDO is uncertain, and have given public assurances that
if KEDO’s Executive Board decides to continue operating, the United States will
locate funds for the organization in FY2004.53 The European Union has appropriated
20 million euros to KEDO for 2003, but has placed a freeze on any payments to the
organization.
Heavy Fuel Oil (HFO) Shipments. As shown in Table 3, since 1996, the
United States has provided over $377 million – over three-quarters of the total – to
KEDO for the shipment of heavy fuel oil to the DPRK. The European Union has
provided $95.8 million, or nearly 20% of the total.54 Although South Korea and
Japan have not contributed to the heavy fuel oil shipments, they have provided the
bulk of the funding for building the reactors and for KEDO’s administrative costs.
52 Section 562 of P.L. 108-007, the FY2003 Consolidated Appropriations Act.
53 State Department Special Briefing on 2004 Request for International Affairs Budget,
February 3, 2003; [http://www.state.gov/m/rm/rls/rm/17157.htm].
54 The EU has channeled its contributions through the European Atomic Energy Commission
(EAEC). Note that the EU’s annual contributions to KEDO are unrestricted and, therefore,
not dedicated to any specific activity. From 1996-2001, KEDO allocated virtually all of the
EU’s annual contribution (euro 15 million from 1996-2000 and euro 20 million from 2001
to the present) to pay for heavy fuel oil shipments. All of the EU’s 2002 contribution of
euro 20 million has been used to pay for construction of the light water reactor in North
Korea.

CRS-20
Table 3. KEDO Heavy Fuel Oil (HFO) Contributions, 1995-2002
($ millions)
Country
1995
1996
1997
1998
1999
2000
2001
2002
Totals
U.S.
5.50
22.00
21.00
46.40
61.60
60.56
70.32
90.50
377.88
% of total
45%
53%
52%
71%
79%
80%
78%
98%
76%
EAEC

16.96
17.20
16.74
14.34
12.90
17.70
0.00
95.84
% of total

41%
43%
26%
18%
17%
20%
0%
19%
Australia
5.00
1.59
1.54
1.21
1.29
1.68
1.00
1.13
14.44
Canada
1.05
– – – –
0.67
0.62
0.49
2.83
Indonesia
0.32
0.33

0.33
– – – – 0.97
New
0.33
0.70
0.32
0.26
0.26
0.21
0.22
0.26
2.57
Zealand
Mexico
– – – –
0.10
– – – 0.10
Peru
– – – – –
0.10
– – 0.10
Total
12.21
41.57
40.06
64.93
77.60
76.11
89.86
92.39
494.74
Source: Korean Peninsula Energy Development Organization (KEDO).
Notes: The European Atomic Energy Community (EAEC) 1996 total includes 10/15/97 contribution
of $11.195 million. The EAEC 2001 total includes 1/7/02 contribution of $17.7 million.
The rising price of oil since 1995 (see Figure 5) has driven up the annual cost
of heavy fuel oil from $41.5 million in 1996 (the first year that the full 500,000 tons
were sent) to over $90 million in 2002.
Figure 5. Avg. Cost of Heavy Fuel Oil
Source: KEDO
HFO’s Economic Importance to North Korea. Estimates of the KEDO
heavy fuel oil’s importance to North Korea vary widely. According to officials with
the California-based Nautilus Institute for Security and Sustainability, which has
prepared detailed multi-year surveys of the DPRK’s energy sector, KEDO’s annual

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500,000 ton shipments represented approximately 2.5 percent of the North’s total
primary energy supply in 2000. However, cutting off the heavy fuel oil likely is
having a disproportionate – and significant – impact on the DPRK’s electricity sector,
particularly in the winter. The KEDO shipments provide fuel for approximately 8%
of the North’s electricity demand on average over the course of a year.55 In the winter
months this figure is likely to be considerably higher, not only because energy usage
increases but also because hydro-electric power plants are less productive in the
extreme cold of North Korea’s winter. Many of the hydroelectric facilities are
“run-of-river” variety, which means that their output varies with stream flow more
than plants that rely more heavily upon water storage facilities. Additionally, apart
from electricity generation, Nautilus Institute officials say it is likely that some heavy
fuel oil is used at the local level to fuel heat-only plants.56
The Nautilus Institute’s studies have been criticized for underestimating the
DPRK military’s energy consumption at less than 5 percent of the total. North Korea
is the world’s most militarized country, with over 1 million men – about one in five
of the working age male population – in uniform. The military operates a highly
secretive, separate economy, though the North’s long economic crisis appears to have
eroded the division between the military and civilian sectors in recent years.
Estimates of the size of this parallel military economy vary widely, from 20 percent
to 50 percent of the country’s total output.57 If the North Korean military’s true
energy consumption is close to these levels, the Nautilus Institute’s figures could
significantly inflate the importance of the heavy fuel oil to North Korea. Nautilus
Institute researchers argue that the discrepancy is principally due to different
definitions of the military sector’s parameters; some of the energy use that other
studies consider “military” is reflected under other sectors in Nautilus’ accounting,
which defines the military sector relatively narrowly.58
In general, quantitative measures may overstate the importance of the heavy fuel
oil shipments to North Korea’s leadership, which has survived the death and
deprivation of a substantial percentage of the population due to malnutrition and
cold. For nearly a decade, North Korea has been experiencing daily interruptions of
power supplies, even in the capital, Pyongyang; energy supplies from domestic and
foreign sources are estimated to have fallen by more than 50 percent since 1990.59
Thus, the strategic impact of the heavy fuel oil cutoff may be limited by the fact that
55 The heavy fuel oil shipments represent approximately one-third of the input to the
DPRK’s thermal power plants, which in turn provides about 23% of the country’s electricity
annually.
56 November 2002 e-mail correspondence with Peter Hayes and David Von Hippel,
Executive Director and Senior Associate, respectively, of the Nautilus Institute; David Von
Hippel, Timothy Savage, and Peter Hayes, The DPRK Energy Sector: Estimated Year 2000
Energy Balance and Suggested Approaches to Sectoral Redevelopment
, Nautilus Institute
for Security and Sustainable Development, September 13, 2002 draft, available at
[http://www.nautilus.org/pub/ftp/napsnet/special_reports/DPRK_Energy_2000.pdf].
57 Noland, Avoiding the Apocalypse, p.71-73.
58 November 2002 e-mail correspondence with David Von Hippel.
59 Noland, Avoiding the Apocalypse, p.143-45.

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the DPRK’s political and economic systems have adjusted to severe energy
shortages.
China’s Provision of Energy to North Korea. The impact of suspending
heavy fuel oil shipments likely will depend heavily upon the response of China,
which is widely believed to supply North Korea with most of its energy through
shipments of oil and coal.60 Secretary of State Colin Powell has stated that China
provides the DPRK with 80% of its energy needs.61 Thus, an increase in Chinese
shipments could offset the loss of the KEDO oil. Using Chinese figures and its own
calculations, the Nautilus Institute estimates that China’s major energy shipments to
North Korea in 2000 were:
! coal: 225,000 tons. The Nautilus Institute estimates that North
Korea’s supply of coal and coke in 2000 was the approximate
equivalent of 13 million tons of coal equivalent.
! crude oil: 390,000 tons. The Nautilus Institute estimates that the
total year 2000 supply of crude oil was 600,000 tons, all of which
was imported.
! refined oil products: 420,000 tons. The Nautilus Institute estimates
that the North’s 2000 supply of refined oil was 950,000 tons,
including the heavy fuel oil provided by KEDO.62 By the Institute’s
estimate, in 2000 the DPRK also used its own refineries to produce
about 560,000 tons of additional refined oil products from the
imported crude oil.
Other Forms of U.S.-North Korean Economic
Interaction
Tensions over North Korea’s nuclear program have increased interest in all
forms of U.S. economic interaction with the DPRK, including trade flows and the
U.S. Defense Department’s program to recover the remains of servicemen missing
from the Korean War.
U.S.-North Korean Trade and Investment
Following North Korea’s invasion of the South in June 1950, the United States
imposed a nearly complete economic embargo on the DPRK. In September 1999,
President Clinton announced that the United States would ease economic sanctions
against North Korea affecting most trade and travel. Today, trade and related
transactions are generally allowed for other than dual-use goods (i.e., items that may
60 Noland, Avoiding the Apocalypse, p.143-45.
61 February 25, 2003 Secretary of State Press Briefing on Board Plane en Route Elmendorf
Air Force Base, available at [http://www.state.gov/secretary/rm/].
62 Von Hippel, Savage, and Hayes, The DPRK Energy Sector, p. 103-04; also November 18,
2002 e-mail correspondence from David Von Hippel.

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have both civilian and military uses). U.S. citizens may travel to North Korea; there
are no restrictions on the amount of money one may spend in transit or while there.63
Despite the easing of most trade restrictions, trade and investment between
North Korea and the United States has remained virtually non-existent. As Table 3
shows, trade flows have varied widely from year to year, with no seeming pattern.
Bilateral trade consists almost exclusively of U.S. exports, which tend to be
agricultural items. One reason for the absence of North Korean exports on the U.S.
market could be continued restrictions, particularly the fact that the DPRK does not
have most-favored-nation status (also called normal trade relations status), which
means that North Korean products face significantly higher tariff rates relative to
those applied to products imported from other countries.
Table 3. U.S.-North Korea Trade, 1993-2002
($ thousands)
Imports from
Exports to
Total
North Korea North Korea
1993
0
1,979
1,979
1994
0
180
180
1995
0
5,007
5,007
1996
0
541
541
1997
0
2,409
2,409
1998
0
4,454
4,454
1999
0
11,265
11,265
2000
154
2,737
2,891
2001
20
650
670
2002
15
25,012
25,027
Source: U.S. International Trade Commission
However, a more probable cause is North Korea’s lack of export
competitiveness. North Korea has faced few or no barriers to exporting to Japan and
the European Union, for instance, but exports little to these countries. North Korea’s
failure to generate export revenue is a major reason the country is unable to import
food on commercial terms to make up for its chronic food shortage. In turn, the
overall uncompetitiveness of North Korean enterprises is a direct result of
Pyongyang’s unwillingness to engage in fundamental economic reforms, leading
some commentators to point out that international assistance actually has allowed
North Korea’s leadership to avoid instituting more market-oriented policies.64
There is virtually no U.S. foreign direct investment in North Korea. The
American Chamber of Commerce in South Korea has attempted to arrange
63 Rennack, North Korea: Economic Sanctions.
64 See, for instance, Noland, Avoiding the Apocalypse, p. 107-110.

CRS-24
exploratory trips to the North, but has not received the necessary visas from the
DPRK government. Even if North Korea were to allow a delegation to visit, it is
likely that most U.S. investors would be deterred by the country’s chronic shortages,
widespread corruption, lack of legal infrastructure, sudden economic policy reversals,
and North Korean enterprises’ past history of failing to pay foreign firms for services
or goods rendered.
Funds from U.S. POW/MIA Recovery Efforts in the DPRK
Since 1993, the Department of Defense’s Prisoner of War/Missing Personnel
Office (DPMO) has provided North Korea with nearly $15 million for assistance in
recovering the suspected remains of the several thousand U.S. servicemen
unaccounted for during the Korean War.65 Most of these funds have paid for the 25
joint recovery operations (JROs) that have been conducted in North Korea since
1996, operations that have recovered over 180 remains.66 As with joint recovery
operations in Vietnam, Laos, and other countries, the payments are calculated by
negotiating the compensation provided for the workers, materials, facilities and
equipment provided by the North Korean People’s Army (KPA) and other North
Korean government entities. Payment is provided in cash deliveries – via the United
Nations Command in South Korea – to the KPA in installments during the course of
the calendar year’s operations. The size, scope, and location of the recovery
operations are negotiated annually, and the size of the compensation package varies
accordingly. For 2003, the KPA has yet to respond to the Defense Department’s
request for talks to arrange the next series of recovery operations, presumably
because of the increase in U.S.-DPRK tension since October 2002. Defense
Department officials report that while operating conditions in North Korea are far
from ideal, the scale of the operations has increased significantly since 1996.67
Policy Options
Congress and the Administration have a variety of options for future assistance
to North Korea. The most immediate decisions will be whether to continue funding
for KEDO and providing food aid. Additionally, if talks with North Korea over its
nuclear program begin and score a breakthrough, there will likely be consideration
of a broader economic assistance package. As indicated below, any unilateral
decision by the United States to suspend or terminate its current aid is expected to
have a limited economic effect on North Korea because in the short-to-medium term,
China and/or South Korea could increase their own assistance to compensate.
65 Estimates vary as to the number whose death might result in remains being found in
North Korea; the range is roughly between 2,000 and 9,000. For more on the POW/MIA
issue, see CRS IB92101, POWs and MIAs: Status and Accounting Issues, by Robert
Goldich.
66 Between 1990 and 1994, North Korea unilaterally returned over 200 remains, virtually
all of which were unidentifiable.
67 February 2003 briefing by DPMO officials.

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Food Aid Options
Options for food aid policy include:
! Providing food aid unconditionally. The core humanitarian
argument for continuing aid regardless of the North Korean
government’s actions is that a major reduction in assistance could
lead to another famine. A diplomatic benefit of providing food aid
unconditionally is that it could weaken criticism in South Korea of
the Bush Administration’s policy toward the DPRK; U.S. food
shipments lend support to President Bush’s often-stated approach of
supporting the North Korean people despite his concerns about the
regime.68 China and South Korea, which favor preserving short-term
stability in North Korea, appear likely to continue providing food
unconditionally.
! Discontinue food aid. This option has been proposed both on
security and humanitarian grounds. Cutting off food assistance
could be used as part of an isolation strategy or a plan to trigger the
collapse of the North Korean regime. The effects of the United
States suspending food assistance may be undercut, however, by
increased shipments from China or South Korea. From a
humanitarian perspective, sending food to North Korea arguably
diverts limited supplies of food aid from other needy, and more
accountable, countries. Furthermore, as discussed above, some
argue that the volume and consistency of international aid has
allowed the North Korean government to institutionalize emergency
food assistance as part of its annual budget needed to feed its people
and remain in power.69
Options between these extremes include:
! Establish “external” linkages - condition future food aid on
progress in political and security-related talks, such as
negotiations regarding the North’s nuclear programs. Emphasizing
geostrategic concerns could lead to greater immediate cooperation
in certain negotiations from Pyongyang. However, it is not clear that
food aid would induce significant changes in North Korea’s overall
behavior on security issues. The huge U.S. provision of food aid in
1999, for instance, may have helped obtain an inspection of the
suspected nuclear site at Kumchangri, but it did not prevent North
Korea from pursuing a uranium enrichment nuclear program.
Additionally, this approach runs the risk of encouraging the North
68 See, for instance, President Bush’s February 20, 2002 remarks at the Demilitarized Zone,
[http://www.whitehouse.gov/news/releases/2002].
69 Scott Snyder, “The NGO Experience in North Korea,” in Scott Snyder and Gordon Flake,
eds., Paved with Good Intentions: The NGO Experience in North Korea, (Praeger
Publishers: Westport, CT, Forthcoming, 2003), p. 7.

CRS-26
Korean government to believe it does not need to comply with
humanitarian relief groups’ demands. Any attempts to link food aid
or sales to foreign policy or national security objectives might have
to be reconciled with recent congressional and executive efforts to
delink the two.70
! Establish “internal” linkages - condition future food aid on
improvements in access and monitoring, as the Bush
Administration has done. The Administration essentially has
adopted a hybrid approach of giving a base amount of aid
unconditionally and linking food above this amount to progress in
monitoring and other items related to the relief effort. One difficulty
of this approach is that the North Korean government is unlikely to
see any decision on food assistance as divorced from the overall
security climate.
! Channel aid through non-governmental organizations (NGOs).71
Most relief NGOs operating in North Korea have been forced to
operate under the same, if not more rigid, controls as the WFP.72 A
few relief groups, however, report they have overcome many
obstacles to monitoring assistance, particularly gaining access to aid
recipients and using their own Korean-speaking staff. The more
successful U.S. NGOs appear to be relatively small, affiliated with
a U.S. religious group, and focused on ongoing niche areas such as
rebuilding North Korea’s health care system, rather than on
emergency relief.73 These organizations’ relative degree of success
compared to the WFP may be partly attributable to the smaller scale
of their operations, which allows some to set up their own
distribution system independent of the public distribution system and
to deal principally with local North Korean officials who often are
more eager to cooperate than officials in Pyongyang. Some of these
advantages might be negated if the groups began to receive large
amounts of funding from the U.S. government. But smaller-scale
programs might lend themselves to this approach.
70 In 2000, Congress passed, and President Clinton signed into law, the Trade Sanctions
Reform and Export Enhancement Act of 2000 (title IX of H.R. 5426, enacted by reference
in P.L. 106-387) to remove food and medicine from U.S. sanctions policy, though some
restrictions were maintained for terrorist states. For further information see CRS Report
RL30384, Economic Sanctions: Legislation in the 106th Congress, by Dianne Rennack and
CRS Issue Brief IB10051, Exempting Food and Agriculture Products from U.S. Economic
Sanctions
, by Remy Jurenas.
71 Among those who have argued for this approach is Timothy A. Peters, director of the
relief groups Helping Hands Korea and the Ton-a-Month Club, two Seoul-based
humanitarian organizations that attempt to provide assistance to North Koreans. See Peters’
testimony before the House International Relations Subcommittee on East Asia and the
Pacific, May 2, 2002, [http://wwwa.house.gov/international_relations/].
72 Snyder, et. al., The NGO Experience in North Korea.
73 Flaker, “The Experience of U.S. NGOs in North Korea,” p.31-35.

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A past U.S. public-private initiative yielded mixed results similar to those
reported by the WFP. From 1997 - 2000, the U.S. government provided
over 155,000 MT of food aid to be distributed by the Private Voluntary
Organization Consortium (PVOC), which included several private relief
groups operating in North Korea. The PVOC estimated that the food for
one program, to distribute 100,000 MT to laborers participating in
food-for-work projects, reached nearly 2.7 million people in 110 North
Korean counties. However, the Consortium reported the North Korean
government’s restrictions made it difficult to adequately monitor the
distribution of the food. Citing these difficulties, one member, CARE,
withdrew from the PVOC in June 2000.74
KEDO Options
With regard to KEDO, the U.S. has several options, including: resume heavy
fuel oil payments; continue to make payments for KEDO’s operational expenses but
not for heavy fuel oil; suspend all payments to KEDO; or permanently terminate all
payments. Suspending without terminating payments could buy the United States
more time and avoid further antagonizing North Korea by maintaining the ambiguous
status of the Agreed Framework – from which neither the United States nor North
Korea have officially withdrawn. Permanently halting payments, which South Korea
and Japan would likely oppose, would almost certainly mean the end of KEDO. Not
only was KEDO the creation of a U.S.-North Korean agreement (the Agreed
Framework), but also the United States has provided the primary diplomatic and
financial backing for the organization. Terminating the KEDO program would not
necessarily preclude the formulation of another multilateral initiative to provide
energy assistance to North Korea.
Development Assistance Options
As mentioned earlier, President Bush has said that the United States would
consider offering North Korea a broad development aid package if the DPRK
cooperates on security issues. Options include:
! provide agricultural support assistance, thereby attempting to
reduce North Korea’s chronic dependence on outside aid by boosting
its domestic agricultural output.75 President Bush has referred to
such programs in mentioning a broad assistance package that the
U.S. would discuss if North Korea verifiably dismantles its nuclear
program. While the President has considerable flexibility in funding
short-term initiatives, longer-term programs would likely require
Congressional action to waive or rewrite U.S. laws that prohibit
74 United States General Accounting Office (GAO), U.S. Bilateral Food Assistance to North
Korea Had Mixed Results
, GAO/NSIAD-00-175, June 2000, [http://www.gao.gov/].
75 See the GAO’s report, U.S. Bilateral Food Assistance to North Korea Had Mixed Results,
for a discussion of a U.S. government-supported private project to increase North Korean
production in 1999 and 2000.

CRS-28
certain types of aid to countries on the terrorism list and that
specifically prohibit aid for North Korea. Many European NGOs
operating in North Korea have moved from providing relief to
rehabilitating the country’s agricultural system. According to one
study, the prospects for success of these efforts are not likely to
make substantial progress unless the North Korean government
allows development workers greater access to the North Korean
population and abandons its priority of attaining self-sufficiency in
food.76
! provide other types of humanitarian assistance. North Korea’s
health care system, for instance, has been devastated by the collapse
of the country’s economy. At the same time, a decade of food
shortages has led to the prevalence of opportunistic diseases,
including tuberculosis, which had been eradicated from the DPRK
in the 1970s. As mentioned above, some relief NGOs have had
more success in obtaining North Korean cooperation in the areas of
health care and disease prevention than they have in providing food.
! provide non-nuclear energy assistance. Critics of the Agreed
Framework have long argued that nuclear reactors are ill-suited to
meeting North Korea’s energy needs because they will take a long
time to complete and because the DPRK’s electrical grid is not
capable of absorbing the added power. Pyongyang periodically has
asked the United States and South Korea for electrical power and for
help modernizing its grid. Though Seoul has been receptive to the
idea, both the Clinton and Bush Administrations have resisted it.
The Timing of a U.S. Offer of Development Assistance. Thus far, the
Administration has indicated that it would insist that the North first begin verifiably
dismantling its nuclear program before the United States would discuss an aid
package. This stance on the timing of aid negotiations could be modified.
A Multilateral Development Assistance Program. There is considerable
scope for putting together a prospective multilateral assistance program to North
Korea. Key U.S. concerns in assembling such a program are likely to revolve around
fungibility, diversion, and transparency.
Providing a future large-scale aid package was a major component of former
South Korean President Kim Dae Jung’s “sunshine policy” of engaging North Korea.
President Kim placed particular emphasis on rebuilding the DPRK’s economic
infrastructure. Although the details have yet to be publicized, South Korea’s new
president, Roh Moo-hyun, has indicated that North Korea can expect significant
assistance under his “peace and prosperity” engagement policy.

76 Michael Schloms, “The European NGO Experience in North Korea,” in Scott Snyder, et.
al., Paved with Good Intentions: The NGO Experience in North Korea, (Praeger Publishers:
Westport, CT, Forthcoming 2003), especially p. 64-66.

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In bilateral normalization talks, Japan has offered to give North Korea a
large-scale economic aid package to compensate the DPRK for Japan’s colonization
of the Korean Peninsula from 1910 to 1945. Reportedly, Japanese officials are
discussing a package on the order of $5-$10 billion. Large-scale aid from Tokyo,
however, is contingent on North Korea cooperating on other issues, especially the
matter of Japanese citizens kidnapped by North Korean agents in the 1970s and
1980s. Disagreements over this issue, combined with developments in the DPRK’s
nuclear weapons program, brought Japan-North Korea normalization talks to a halt
in the fall of 2002.77
Russia, which in recent years has expanded its economic ties to North Korea,
may also be interested in participating in a multilateral aid program. Moscow
appears particularly keen to link the Trans-Siberian Railway to South Korea via the
DPRK. Russian railway authorities completed a joint on-site survey of the 920 km
trans-Korean railway in 2002, and plan to begin rebuilding North Korea’s dilapidated
rail system in 2003.
Additionally, funding could be sought from international financial institutions
such as the World Bank, Asian Development Bank, and the International Monetary
Fund. The United States and Japan currently oppose North Korea’s membership in
these organizations.
Additional CRS Products on North Korea
CRS Issue Brief IB98045, Korea: U.S.-Korean Relations – Issues for Congress.
CRS Issue Brief IB91141, North Korea’s Nuclear Weapons Program.
CRS Report RS21391, North Korea’s Nuclear Weapons: How Soon an Arsenal?
CRS Report RL31696, North Korea: Economic Sanctions.
CRS Report RL30613, North Korea: Terrorism List Removal?
CRS Report RS20526, North Korea-Japan Relations: The Normalization Talks and
the Compensation/Reparations Issue.
77 For more on DPRK-Japan relations, see CRS Report RS20526, North Korea-Japan
Relations: The Normalization Talks and the Compensation/Reparations Issue
, by Mark
Manyin.