Order Code IB98045
CRS Issue Brief for Congress
Received through the CRS Web
Korea: U.S.-Korean Relations —
Issues for Congress
Updated August 18, 2004
Larry A. Niksch
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
U.S. Interests in South Korea
Recent Issues
Relations with North Korea
Nuclear Weapons and the Six Party Talks
Weapons of Mass Destruction
North Korea’s Inclusion on the U.S. Terrorism List
Food Aid
North Korean Refugees in China and Human Rights
South Korea’s Sunshine Policy and the Hyundai Payments to North Korea
Anti-Americanism and Plans to Change the U.S. Military Presence
FOR ADDITIONAL READING

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Korea: U.S.-Korean Relations — Issues for Congress
SUMMARY
North Korea’s decision in December
mantle its nuclear programs; (3) assembling
2002 to restart nuclear installations at Yongb-
an international coalition to apply pressure on
yon that were shut down under the U.S.-North
North Korea in multilateral talks; and (4)
Korean Agreed Framework of 1994 and its
planning for future economic sanctions and
announced withdrawal from the Nuclear Non-
military interdiction against North Korea.
Proliferation Treaty creates an acute foreign
China organized six-party talks in mid-2003;
policy problem for the United States. Restart-
but the talks have made little progress. U.S.
ing the Yongbyon facilities opens up a possi-
attempts to isolate North Korea in the talks
ble North Korean intent to stage a “nuclear
have been countered by North Korea’s strat-
breakout” of its nuclear program and openly
egy of threats to leave the talks, the issuance
produce nuclear weapons. North Korea claims
of settlement proposals, accusations that the
that it has nuclear weapons and that it has
United States plans an “Iraq-like” attack on
completed reprocessing nuclear weapons-
North Korea, and denials that it has a uranium
grade plutonium that could produce five or six
enrichment program.
atomic bombs. North Korea’s actions follow
the reported disclosure in October 2002 that
Differences have emerged between the
North Korea is operating a secret nuclear
Bush Administration and South Korea over
program based on uranium enrichment and the
policies toward North Korea. South Korea
decision by the Korean Peninsula Energy
emphasizes bilateral reconciliation with North
Development Organization (KEDO) in No-
Korea. The South Korean public has become
vember 2002 to suspend shipments of heavy
critical over Bush Administration policies and
oil to North Korea — a key U.S. obligation
the U.S. military presence. Anti-U.S. demon-
under the Agreed Framework.
strations erupted in 2002, and Roh Moo-hyun
was elected President after criticizing the
The main elements of Bush Administrat-
United States. In 2003-2004, the Pentagon
ion policy are (1) demanding that North Korea
has announced plans to relocate U.S. troops in
totally dismantle its nuclear programs; (2)
South Korea away from the demilitarized zone
withholding any U.S. reciprocal measures
and Seoul and to withdraw 12,500 troops from
until North Korea takes visible steps to dis-
South Korea by the end of 2005.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
The Pentagon announced plans to withdraw 12,500 U.S. troops from South Korea by
the end of 2005, bringing U.S. troop strength down from 37,000 to about 24,000. The
12,500 includes one of two combat brigades of the Second Infantry Division, which was
deployed to Iraq in August 2004. However, the Pentagon also announced long-term training
deployments of stealth fighters and F-15 fighters to South Korea. South Korean President
Roh Moo-hyun reaffirmed his decision to send 3,000 South Korean troops to Iraq in the face
of the execution of a South Korean national by Iraqi insurgents. Amidst rising pressure from
China, South Korea, and even Japan, the Bush Administration issued a detailed settlement
proposal at the six party talks on North Korea’s nuclear programs in June 2004. This was
the first U.S. proposal since the talks began in April 2003. The U.S. proposal called for a
quick dismantlement of North Korea’s plutonium and uranium enrichment programs
following a three month “preparatory period.” During the preparatory period, North Korea
would declare its nuclear facilities and materials, suspend their operation, allow effective
international inspections including a return of the International Atomic Energy Agency
(IAEA), and negotiate the steps to be taken in dismantlement. In return, South Korea and
Japan would supply North Korea with heavy oil. North Korea would receive a “provisional
multilateral security assurance” against a U.S. attack. The United States and North Korea
would begin talks over U.S. economic sanctions and North Korea’s inclusion on the U.S. list
of terrorist-supporting countries. The participants in the talks also would begin a study of
North Korea’s energy situation. After North Korea completed dismantlement, it would
receive a permanent security guarantee and permanent solutions to its energy problems would
be undertaken. After an initial mixed reaction, North Korea adopted a rejectionist stance
toward the U.S. proposal by the beginning of August 2004. North Korea may have been
encouraged to reject the proposal by the absence of positive responses or endorsements of
the proposals by the other members of the six party talks: China, Russia, South Korea, and
Japan.
BACKGROUND AND ANALYSIS
U.S. Interests in South Korea
U.S. interests in the Republic of Korea (R.O.K. — South Korea) involve a wide range
of security, economic, and political concerns. The United States fought the Korean War
from 1950 to 1953, suffering over 33,000 killed and over 101,000 wounded. The United
States agreed to defend South Korea from external aggression in the 1954 Mutual Defense
Treaty. The United States maintains about 37,000 troops there to supplement the
650,000-strong South Korean armed forces. This force is intended to deter North Korea’s
(the Democratic People’s Republic of Korea — D.P.R.K.) 1.2 million-man army. Since
1991, attention has focused on the implications of North Korea’s drive to develop nuclear
weapons (see CRS Issue Brief IB91141, North Korea’s Nuclear Weapons Program) and long
range missiles, and severe food shortages in North Korea.
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U.S. economic assistance to South Korea, from 1945 to 2002, totaled over 6 billion;
most economic aid ended in the mid-1970s as South Korea’s reached higher levels of
economic development. U.S. military aid, 1945-2002, totaled over $8.8 billion. The United
States is South Korea’s second largest trading partner (replaced as number one by China in
2002) and largest export market. South Korea is the seventh largest U.S. trading partner.
Recent Issues
Relations with North Korea
The Bush Administration’s policy toward North Korea has been based on two factors
within the Administration. First, President Bush has voiced profound distrust of North Korea
and its leader, Kim Jong-il. Second, there are divisions over policy toward North Korea
among factions within the Administration. An influential coalition consists of Secretary of
Defense Rumsfeld and his advisers, Vice President Cheney and his advisers, and
proliferation experts in the State Department and White House led by Undersecretary of State
John Bolton. They reportedly oppose negotiations with North Korea, favor the issuance of
demands for unilateral North Korean concessions on military issues, and advocate an overall
U.S. strategy of isolating North Korea diplomatically and through economic sanctions.
Officials within this group express hope and/or expectations of a collapse of the North
Korean regime. They assert that North Korean nuclear provocations will escalate to a point
at which other governments will join the United States in isolating North Korea through
economic sanctions. A second faction, mainly in the State Department and White House,
is led by Secretary of State Powell and is composed of officials with experience on East
Asian and Korean issues. This faction believes that the Administration should attempt
negotiations before adopting more coercive measures, and they reportedly doubt the
effectiveness of a strategy to bring about a North Korean collapse.
As part of a policy review toward North Korea, President Bush issued a statement on
June 6, 2001, outlining policy objectives related to implementation of the U.S.-North Korean
1994 Agreed Framework on North Korea’s nuclear program, North Korea’s missile program,
and its conventional forces. He stated that if North Korea took positive actions, the United
States “will expand our efforts to help the North Korean people, ease sanctions, and take
other political steps.” President Bush’s designation of North Korea as part of an “axis of
evil” in his January 29, 2002 State of the Union address symbolized a hardening of the
Administration’s policy. The policy is aimed at reducing and/or eliminating basic elements
of North Korean military power, including weapons of mass destruction (WMDs), nuclear
weapons and/or nuclear weapons-grade materials, missiles, and conventional artillery and
rocket launchers positioned on the demilitarized zone (DMZ) within range of the South
Korean capital, Seoul. The Administration’s emphasis on WMDs mounted after the Central
Intelligence Agency gained documentary evidence in Afghanistan that al Qaeda seeks WMDs
and plans new attacks on the United States. This reportedly influenced the Bush
Administration to broaden the definition of the war against terrorism to include states like
North Korea that potentially could supply WMDs to al Qaeda.
A key element of the Administration’s strategy is to employ public demands and
warnings to pressure North Korea to reduce and eliminate its military assets. Public
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statements by the Administration continually call for North Korea to take actions unilaterally.
As stated previously, there has been substantial opposition within the Administration to any
negotiations. When U.S. and North Korean officials have met, opponents of negotiations
have succeeded in restricting what U.S. officials can say. Except for vague references to a
“bold initiative” and a non-specific offer of a multilateral security guarantee, the
Administration gave no indication that it would offer North Korea reciprocal measures for
North Korean agreement and steps to reduce its military power in these areas.
Nuclear Weapons and the Six Party Talks. U.S. policy since 1994 has been
based largely on the U.S.-North Korean Agreed Framework of October 1994. The Agreed
Framework dealt primarily with nuclear facilities that North Korea was developing at a site
called Yongbyon. Existing facilities included a five megawatt nuclear reactor and a
plutonium reprocessing plant. Two larger reactors were under construction. U.S.
intelligence estimates concluded that these plutonium-based facilities could give North Korea
the capability to produce over 30 atomic weapons annually. North Korea had concluded a
safeguards agreement with the International Atomic Energy Agency (IAEA) in 1992, which
requires North Korea to report all nuclear programs to the IAEA and gives the IAEA the right
to conduct a range of inspections of North Korea’s nuclear installations. However, North
Korea obstructed or refused IAEA inspections in 1993-94, including refusal to allow an
IAEA special inspection of a underground facility, which the IAEA believed was a nuclear
waste site.
The Agreed Framework provided for the suspension of operations and construction of
North Korea’s “graphite-moderated reactors and related facilities” and the storage of 8,000
nuclear fuel rods that North Korea had removed from the five megawatt reactor in May 1994.
It provided to North Korea 500,000 tons of heavy oil annually until two light water nuclear
reactors (LWRs) are constructed in North Korea. The United States was obligated to
facilitate the heavy oil shipments and organize the construction of the LWRs. The IAEA
monitored the freeze of the designated facilities and activities. The Agreed Framework
stated that before North Korea receives nuclear materials for the LWRs, it is obligated to
come into full compliance with its obligations as a signatory to the Nuclear Non-Proliferation
Treaty with regard to its past nuclear activities. Clinton Administration officials testified that
this clause obligated North Korea to allow IAEA inspection of the suspected waste site and
the stored fuel rods. They also testified that any additional North Korean nuclear programs,
including any secret programs, are covered by the 1992 safeguards agreement and are subject
immediately to IAEA safeguards, including inspections.
The Korean Peninsula Energy Development Organization (KEDO) was created to
implement provisions of the Agreed Framework related to heavy oil shipments and
construction of the light water reactors. Lead members are the United States, Japan, South
Korea, and the European Union. The Agreed Framework set a target date of 2003 for
completion of the first of the light water reactors. In 2002, KEDO officials projected the
completion of the first light water reactor in 2008. From October 1995 through November
2002, North Korea received the annual shipments of 500,000 tons of heavy oil. The cost to
the United States of the heavy oil and financial support of KEDO from FY1995 through
FY2002 was $378 million Congressional appropriations for the heavy oil and KEDO rose
from $30 million in FY1996 to $95 million in FY2002.
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According to U.S. officials, North Korea admitted to having a secret uranium
enrichment program when Assistant Secretary of State James Kelly visited Pyongyang in
October 2002 (North Korea since has denied making an admission). This confirmed U.S.
intelligence information of such a program that had built up since 1998. North Korea
proposed a negotiation with the United States to include a non-aggression pact, an end to
U.S. “stifling” of North Korea’s economy, and recognition of North Korea’s “sovereignty.”
The Bush Administration reacted by calling for concerned governments to pressure
North Korea to abandon the secret uranium enrichment program. In November 2002, it
pushed a resolution through KEDO to suspend heavy oil shipments to North Korea. (The
Administration subsequently secured a suspension of construction of the light water
reactors.) North Korea then initiated a number of aggressive moves to reactivate the
plutonium-based nuclear program shut down in 1994 under the Agreed Framework: re-
starting the small, five megawatt nuclear reactor, announcing that construction would resume
on two larger reactors, announcing that it would re-start the plutonium reprocessing plant,
and removing the 8,000 nuclear fuel rods from storage facilities. North Korea also expelled
IAEA officials who had been monitoring the freeze of the plutonium facilities under the
Agreed Framework. In January 2003, North Korea announced withdrawal from the Nuclear
Non-Proliferation Treaty. It threatened to end its moratorium on long-range missile testing
in effect since September 1999. North Korea asserted that it possesses nuclear weapons and
that it had completed reprocessing of the 8,000 fuel rods into weapons-grade plutonium.
Moreover, North Korea threatened to export nuclear materials. It justified these actions by
citing the U.S.-initiated cutoff of heavy oil shipments and by charging that the Bush
Administration planned a “pre-emptive nuclear attack” on North Korea. It escalated this by
citing the U.S. attack on Iraq as justification for North Korea developing a “nuclear
deterrent.”
Restarting the Yongbyon installations opens up a North Korean option to stage a
“breakout” of its nuclear program by openly producing nuclear weapons. The most
dangerous North Korean move would be to produce nuclear weapons-grade plutonium from
the 8,000 fuel rods. According to estimates by nuclear experts and reportedly by U.S.
intelligence agencies, reprocessing of the fuel rods would produce enough plutonium for four
to six atomic bombs. A Central Intelligence statement of August 18, 2003, estimated “that
North Korea has produced one or two simple fission-type nuclear weapons and has validated
the designs without conducting yield-producing nuclear tests.” Reuters News Agency and
the Washington Post reported on April 28, 2004, that U.S. intelligence agencies were
preparing a new National Intelligence Estimate that likely would conclude that North Korea
had approximately eight atomic bombs based on plutonium and that the secret uranium
enrichment program would be operational by 2007 and would produce enough weapons-
grade uranium for up to six atomic bombs annually.
The Administration’s proposal at the six party talks in June 2004 represents a major
shift in the Administration’s approach since the talks began in April 2004. Prior to this
proposal, the Administration’s policy has contained three elements: (1) a demand for
unilateral concessions, (2) the avoidance of direct negotiations with North Korea, and (3) the
isolation of North Korea internationally. In demanding unilateral concessions, the
Administration called on North Korea to commit to and take concrete measures to realize the
“complete, verifiable, irreversible dismantlement” of its nuclear programs, both the
plutonium program and the secret uranium enrichment (HEU) program. This demand has
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become known as “CVID.” The Administration asserts that North Korea must follow
procedures similar to those that Libya has adopted in giving up its weapons of mass
destruction.
The Administration has eschewed bilateral negotiations with North Korea. The
Administration stated that it will discuss ways to improve U.S.-North Korean relations only
after North Korea accepts CVID and takes measures to implement it. The Administration
also refused to make any detailed settlement proposals, asserting that North Korea first must
agree to CVID. In the June 2004 proposal, the Administration altered this linkage and
substituted the term “comprehensive denuclearization” for CVID.
Administration officials have spoken often about the objective of “isolating” North
Korea. There are two components to this goal. One is to isolate North Korea from
diplomatic support from other governments over the nuclear issue and create a bloc of
governments demanding that North Korea accept CVID. The second component is the
creation of a coalition of governments willing to impose economic sanctions on North Korea
if Pyongyang rejects CVID. Since May 2003, the United States has formed a Proliferation
Security Initiative (PSI) with over ten other countries aimed at interdicting exports of
weapons of mass destruction and illegal drugs by proliferator countries. Measures are being
planned to interdict North Korean sea and air traffic. The Administration reportedly has
drafted plans for economic sanctions, including cutting off financial flows to North Korea
from Japan and other sources and interdicting North Korean shipments of missiles and other
weapons to the Middle East and South Asia. The Administration is pressuring several
countries to cease purchases of North Korean missiles. The aim of the PSI would be to
constrict sharply North Korean foreign exchange earnings, which are a major source of
sustenance to the North Korean political elite and the North Korean military.
In early 2003, the Administration proposed multilateral talks as the diplomatic focus.
After a U.S.-North Korea-China meeting in April 2003, two plenary sessions of six party
talks (including South Korea, Japan, and Russia) were held in August 2003 and February
2004; a six party working group meeting was held in May 2004. The Administration has
viewed several roles for the six party talks. The talks help the Administration avoid bilateral
negotiations with North Korea. Until the June 2004 meeting, the Administration limited
direct contact with North Korean delegates. The Administration also views the six party
talks as giving it a vehicle to secure support from China, South Korea, Japan, and Russia for
the U.S. CVID demand. U.S. officials have spoken of creating a five versus one situation
in the six party talks, thus isolating North Korea. This would lay the groundwork for the
participation of these countries in sanctions against North Korea if North Korea rejected
CVID — sanctions either through the U.N. Security Council and/or the PSI. Throughout
2003, Administration officials expressed a view that North Korea would isolate itself through
its provocative actions in reopening its plutonium nuclear program and its threats to
proliferate nuclear materials and test nuclear weapons and missiles.
The Administration has placed emphasis on China’s role in the talks. They state that
China should exert diplomatic pressure on North Korea to accept CVID. Some
Administration officials have expressed the view that China can be persuaded to join the
United States in sanctions against North Korea even to the extent of creating an internal crisis
within the North Korean regime. The importance of China is pointed up by the mutual
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defense treaty China has with North Korea and China’s role in supplying North Korea with
an estimated 90% of its oil and 40% of its food.
In the summer of 2003, the North Korean leadership appeared worried that they faced
international isolation and heavier U.S. pressure. From that point, there has emerged a
multifaceted North Korean diplomatic strategy backed by a concerted propaganda campaign
aimed at strengthening Pyongyang’s position in the six party talks and weakening the U.S.
position. A lead component of North Korea’s strategy has been to threaten repeatedly that
it would abandon the six party talks, thus playing on the psychological fears of the other
parties. North Korea apparently has employed this threat to demand that China, the host of
the talks, provide it with financial subsidies and increased shipments of food and oil as
“payment” for North Korean agreement to attend future sessions of the talks. But with these
repeated threats, North Korea has made a series of proposals: first, a formal U.S.-North
Korean non-aggression pact, later modified to a formal U.S. guarantee that the United States
would not attack North Korea; second, a “freeze” of North Korea’s plutonium program; and
third, retention by North Korea of a “peaceful” nuclear program. North Korean proposals
also have called for extensive concessions by the United States and Japan, including removal
of North Korea from the U.S. list of terrorist-supporting states, supply of electricity, several
billion dollars in “compensation” from Japan, restoration of shipments of heavy oil and
construction of the two light water nuclear reactors under the 1994 Agreed Framework, and
an end to U.S. economic sanctions and U.S. interference in North Korea’s economic relations
with other countries. While purposefully keeping its proposals vague regarding content and
its own obligations, North Korea has engaged in a concerted propaganda campaign
promoting its proposals and accusing the Bush Administration of plotting an “Iraq-like”
attack.
An element in North Korea’s counter-strategy has been a campaign to deny that it has
a uranium enrichment (HEU) program. From the summer of 2003, North Korean
propaganda organs have escalated denials of an HEU program and denials that North Korean
officials admitted an HEU program to Assistant Secretary of State James Kelly in October
2002. North Korea also moderated its threats of proliferation and testing. It issued
statements that it would not proliferate nuclear materials. However, Iranian and Pakistani
testing of missiles based on North Korean technology and components appear to constitute
“surrogate testing” that benefits North Korea. There are longstanding reports, including
recent reports, of nuclear cooperation between North Korea and Iran and possibly Libya.
North Korea clearly occupied a stronger position in the February 2004 plenary session
of the six party talks and in the six party working group meeting in May 2004. The
Administration’s goal of creating a five versus one situation remained distant. North Korea’s
proposals for a nuclear “freeze” and retention of a “peaceful” nuclear program occupied
much of these meetings. U.S. negotiators claimed that the other four participants supported
CVID; but China and Russia expressed sympathy and/or support for Pyongyang’s proposals
of a U.S. non-aggression guarantee, nuclear freeze, and North Korean retention of a
“peaceful” nuclear program. China has asserted that the goal of the talks should be to
eliminate North Korea’s “nuclear weapons” rather than its nuclear programs. Since late
2003, Russia and China have voiced doubts that North Korea has an HEU program, and they
have not challenged North Korea’s denial strategy; in June 2004, a top Chinese official
openly challenged the U.S. claim. Some experts believe that China and Russia desire a
settlement of the nuclear issue that omits the HEU program (concentrating on the plutonium)
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and leave it the subject of future negotiations. Following the May 2004 working group
meeting, South Korea reportedly urged the Bush Administration to drop the CVID
terminology. Moreover, North Korea has succeeded in extracting more fuel, food, and
financial subsidies (at least $50 million) from China in bargaining over North Korea’s
participation in the talks. The other participants in the talks, including Japan in June 2004,
have urged the Bush Administration to propose detailed settlement proposals, including U.S.
reciprocal measures. China, Russia, and South Korea have expressed opposition to
economic sanctions, and only Japan has joined the PSI.
The Bush Administration modified its policy in certain areas to counter North Korean
strategy and the attitudes of China and Russia but with minimum success. President Bush
responded to Chinese urgings in October 2003 and offered to propose a multilateral security
guarantee to North Korea. In the February 2004 six party meeting, the Administration
reportedly said that if North Korea accepted CVID, it was prepared to discuss multilateral
security assurances, North Korea’s energy needs, outside assistance to help North Korea
dismantle its nuclear programs, diplomatic relations, and a Korean peace treaty. The
Administration attempted to use the reported “confession” of A.Q. Khan, Pakistan’s nuclear
czar, to rebuff North Korea’s denial campaign regarding the HEU program; Khan reportedly
confessed that he had transferred technology and components of an HEU program to North
Korea. However, Khan’s “confession”was based on second hand information; and it did not
change the Russian and Chinese positions. In the February 2004 session of the talks, the
Administration expressed support for a three part proposal of South Korea: (1) North Korean
commitment to CVID and a U.S. offer of a security guarantee; (2) a freeze of all North
Korean nuclear programs, including the HEU program, and South Korean delivery of energy
to North Korea; and (3) dismantlement of North Korean nuclear programs and settlement of
other issues. In supporting the South Korean proposal, the Bush Administration stipulated
that dismantlement must follow quickly the establishment of a freeze. China and Russia
offered to assist South Korea in supplying energy to North Korea. North Korea to date has
not responded to the South Korean proposal — a possible indication that North Korean
leaders believe the proposal presents problems for them.
Pressure from the other participants in the six party talks and the lack of progress toward
U.S. goals at the talks appear to be major factors behind the Bush Administration’s decision
to issue the proposal of June 2004. The longer term impact of the U.S. proposal is unclear,
but it changed the complexion of the six party meeting of June 2004. Other governments
muted criticisms of the United States and support for North Korea’s proposals. North
Korea’s propagandizing of its proposal was limited by the attention given to the U.S.
proposal and by Pyongyang’s attempt to give an initial response to it.
North Korea’s Missile Program. North Korea’s proposal at Beijing offers to “settle
the missile issue” but provides no details. North Korea has maintained a moratorium on
flight testing of long-range missiles since September 1999. The last such missile test, on
August 31, 1998, flew over Japanese territory. Japan also believes it is threatened by
approximately 100 intermediate-range Nodong missiles, which North Korea has deployed.
Japanese negotiators at Beijing emphasized the missile issue. Reports since 2000 cite U.S.
intelligence findings that North Korea is developing a Taepo Dong-2 intercontinental missile
that would be capable of striking Alaska, Hawaii, and the U.S. west coast with nuclear
weapons. U.S. officials reportedly claimed in September 2003 that North Korea had
developed a more accurate, longer-range intermediate ballistic missile that could reach
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Okinawa and Guam (sites of major U.S. military bases) and that there was evidence that
North Korea had produced the Taepo Dong-2. U.S. officials reportedly told Japanese
counterparts in July 2003 that North Korea was close to developing nuclear warheads for its
missiles. Reports in mid-1994 asserted that North Korea was close to completing
underground missile bases for advanced intermediate range missiles that could reach both
Guam and Hawaii.
In the 1990s, North Korea exported short-range Scud missiles and Scud missile
technology to countries in the Middle East. It exported Nodong missiles and Nodong
technology to Iran, Pakistan, and Libya. In 1998, Iran and Pakistan successfully tested
medium range missiles modeled on the Nodong. North Korea reportedly shipped 50
Nodong missiles to Libya in 1999. Japan’s Sankei Shimbun newspaper reported on August
6, 2003, that North Korea and Iran were negotiating a deal for the export of the long-range
Taepo Dong-2 missile to Iran and the joint development of nuclear warheads. Pakistani and
Iranian tests of North Korean-designed missiles have provided “surrogate testing” that
benefits North Korea and dilutes the limitations of the September 1999 moratorium.
The test launch of the Taepo Dong-1 spurred the Clinton Administration to intensify
diplomacy on North Korea’s missile program. The Administration’s 1999 Perry initiative
set the goal of “verifiable cessation of testing, production and deployment of missiles
exceeding the parameters of the Missile Technology Control Regime, and the complete
cessation of export sales of such missiles and the equipment and technology associated with
them.” The Perry initiative offered North Korea steps to normalize U.S.-North Korean
relations, an end to U.S. economic sanctions, and other economic benefits in return for
positive North Korean actions on the missile and nuclear issues. This produced the
September 1999 North Korean moratorium on long-range missile testing. The Clinton
Administration responded in June 2000 by lifting of a significant number of U.S. economic
sanctions against North Korea.
In October 2002, the Clinton Administration reportedly proposed a comprehensive deal
covering all aspects of the issue. North Korea offered to prohibit exports of medium and
long-range missiles and related technologies in exchange for “in-kind assistance.” (North
Korea previously had demanded $1 billion annually.) It also offered to ban permanently
missile tests and production above a certain range in exchange for “in kind assistance” and
assistance in launching commercial satellites. Pyongyang also offered to cease the
deployment of Nodong and Taepo Dong missiles. It proposed that President Clinton visit
North Korea to conclude an agreement. The negotiations reportedly stalled over four issues:
North Korea’s refusal to include short-range Scud missiles in the commitment to cease the
development and deployment of missiles; North Korea’s non-response to the U.S. position
that it would have to agree to dismantle the already deployed Nodong missiles; the details
of U.S. verification of a missile agreement; and the nature and size of a U.S. financial
compensation package.
President Bush’s June 6, 2001 statement set a goal of “verifiable constraints on North
Korea’s missile programs and a ban on its missile exports.” After the January 2002 State of
the Union speech, the Administration repeatedly described North Korea as a dangerous
proliferator of missiles and demanded that North Korea cease exporting missiles and missile
technology. However, the Administration has offered no specific negotiating proposal on
missiles. The Administration emphasized the necessity of installing an anti-missile defense
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system in Alaska, which it claimed would be 90% effective in intercepting North Korean
missiles; non-Administration experts have expressed skepticism over this claim.
Weapons of Mass Destruction. The Bush Administration’s emphasis on North
Korea’s weapons of mass destruction (WMDs) resulted from the September 11, 2001,
terrorist attack. A Pentagon report on the North Korean military, released in September
2000, stated that North Korea had developed up to 5,000 metric tons of chemical munitions
and had the capability to produce biological weapons, including anthrax, smallpox, the
bubonic plague, and cholera. The Bush Administration expresses a fear that North Korea
might sell nuclear, chemical, or biological weapons to a terrorist group like al Qaeda or that
al Qaeda might acquire these weapons from a Middle East country that had purchased them
from North Korea. In November 2001, President Bush included North Korea’s WMDs as
part of the “war against terrorism.” The Bush Administration has not accused North Korea
directly of providing terrorist groups with WMDs. There are reports from the early 1990s
that North Korea exported nuclear technology to Iran and that North Korea assisted Syria and
Iran to develop chemical and biological weapons capabilities.
North Korea’s Inclusion on the U.S. Terrorism List. In February 2000, North
Korea began to demand that the United States remove it from the U.S. list of terrorist
countries. It made this a pre-condition for the visit of a high level North Korean official to
Washington. Although it later dropped this pre-condition, it continued to demand removal
from the terrorist list. In response to the terrorist attack of September 11, 2001, North Korea
issued statements opposing terrorism and signed two United Nations conventions against
terrorism. North Korea’s proposals at the six party nuclear talks call for the United States
to remove Pyongyang from the terrorist list. North Korea’s chief motive appears to be to
open the way for it to receive financial aid from the World Bank and the International
Monetary Fund (IMF). U.S. law P.L. 95-118, the International Financial Institutions Act,
requires the United States to oppose any proposals in the IMF and World Bank to extend
loans or other financial assistance to countries on the terrorism list. The South Korean Kim
Dae-jung Administration also urged the United States to remove North Korean from the
terrorism list so that North Korea could receive international financial assistance.
Japan has urged the United States to keep North Korea on the terrorism list until North
Korea resolves Japan’s concerns. Japan’s concerns are North Korea’s sanctuary to members
of the terrorist Japanese Red Army organization and evidence that North Korea kidnapped
and is holding at least ten Japanese citizens. The Clinton Administration gave Japan’s
concerns increased priority in U.S. diplomacy in 2000. Secretary Albright raised the issue
of kidnapped Japanese when she met with Kim Jong-il in Pyongyang in October 2000. (See
CRS Report RL30613, North Korea: Terrorism List Removal?) At the Beijing meetings, the
Bush Administration called on North Korea to resolve the issue with Japan. In 2004, the
Administration made the kidnapping of Japanese an official reason for North Korea’s
inclusion on the terrorist list. Kim Jong-il’s admission of kidnapping Japanese during the
Kim-Koizumi summit of September 2002 did not resolve the issue. His claim that 8 of the
13 admitted kidnapped victims are dead raised new issues for the Japanese government,
including information about the deaths of the kidnapped and the possibility that more
Japanese were kidnapped. The five living kidnapped Japanese returned to Japan in October
2002. In May 2004, North Korea released children of the five abductees (except two
daughters of an abductee) and an American military deserter living in North Korea. In
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return, Japan promised North Korea 250,000 tons of food and $10 million in medical
supplies.
Food Aid. Secretary of State Powell announced on February 25, 2003, that the United
States would extend 40,000 tons of food aid to North Korea in 2003 and would extend
another 60,000 tons if North Korea agreed to greater access of food donors and more
effective monitoring of food aid distribution. The Bush Administration announced in
December 2003 that it would proceed with the 60,000 ton shipment. The State Department
announced another 50,000 ton donation in July 2004. The offer is a reduced U.S.
commitment from previous years. North Korea demanded increased food in its proposals
in late 2003 for settlement of the nuclear issue. It has rejected the Administration’s
conditions. From 1995 through 2002, the United States supplied North Korea with 1.9
million metric tons of food aid through the WFP. On June 8, 2002, Andrew Natsios,
Director of the U.S. Agency for International Development, stated 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 improved monitoring system. However, the
announced commitments in December 2003 and July 2004 came without any North Korean
agreement to the U.S. monitoring conditions. The WFP appealed for 485,000 tons of food
for 2004, warning that diminished donations were lessening its ability to feed North Koreans.
However, South Korea has extended increasing amounts of bilateral food aid to North Korea,
promising one million tons of rice for 2004.
Agriculture production in North Korea began to decline in the mid-1980s. Severe food
shortages appeared in 1990-1991. In September 1995, North Korea appealed for
international food assistance. The Clinton Administration used food aid to secure North
Korean agreement to certain types of negotiations and North Korean agreement to allow a
U.S. inspection of the suspected nuclear site at Kumchangri.
The WFP acknowledges that North Korea places restrictions on its monitors’ access
to the food distribution system, but it believes that most of its food aid reaches needy people.
Several private aid groups, however, withdrew from North Korea because of such restrictions
and suspicions that the North Korean regime was diverting food aid to the military or the
communist elite living mainly in the capital of Pyongyang. It is generally agreed that the
regime gives priority to these two groups in its overall food distribution policy. Some
experts also believe that North Korean officials divert some food aid for sale on the extensive
black market. The regime has spent none of several billion dollars in foreign exchange
earnings since 1998 to import food or medicines. The regime refuses to adopt agricultural
reforms similar to those of fellow communist countries, China and Vietnam, including
dismantling of Stalinist collective farms. While such reforms resulted in big increases in
food production in China and Vietnam, North Korea continues to experience sizeable food
shortages year after year with no end in sight. It is estimated that one to three million North
Koreans died of malnutrition between 1995 and 2003.
North Korean Refugees in China and Human Rights. This issue confronted
governments after March 2002 when North Korean refugees, aided by South Korean and
European NGOs, sought asylum in foreign diplomatic missions in China and the Chinese
government sought to prevent access to the missions and forcibly removed refugees from the
Japanese and South Korean embassies. The refugee exodus from North Korea into China’s
Manchuria region began in the mid-1990s as the result of the dire food situation in North
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Korea’s provinces in the far north and northeast along the Chinese border. The North Korean
government reportedly suspended the state food rationing system in these provinces
beginning about 1993 and never allowed international food aid donors into them Estimates
of the number of refugees cover a huge range, from 10,000 to 300,000.
China followed conflicting policies reflecting conflicting interests. Generally, China
tacitly accepted the refugees so long as their presence was underground and/or not highly
visible. China also allowed foreign private non-government groups (NGOs), including South
Korean NGOs, to provide aid to the refugees, again so long as their activities were not highly
visible. China barred any official international aid presence, including any role for the
United Nations High Commission for Refugees. It also interrupted its general policy of tacit
acceptance with periodic crackdowns that included police sweeps of refugee populated areas,
rounding up of refugees, and returning them to North Korea. In 2002 and 2003, China
allowed refugees, who had gained asylum in foreign diplomatic missions, to emigrate to
South Korea. However, its crackdown on the border reportedly included the torture of
captured refugees to gain information on the NGOs that assisted them.
China tries to prevent any scenario that would lead to a collapse of the Pyongyang
regime, its long-standing ally. Chinese officials fear that too much visibility of the refugees
and especially any U.N. presence could spark an escalation of the refugee outflow and lead
to a North Korean regime crisis and possible collapse. China’s crackdowns are sometimes
a reaction to increased visibility of the refugee issue. China’s interests in buttressing North
Korea also have made China susceptible to North Korean pressure to crack down on the
refugees and return them. Reports in 2003 described stepped-up security on both sides of
the China-North Korea border, including the deployment of Chinese army troops, to stop the
movement of refugees and Chinese roundups of refugees and repatriation of them to North
Korea. The Chinese government also appears reluctant to establish the precedent of allowing
any United Nations presence on its soil.
South Korea, which previously had turned refugees away from its diplomatic missions,
changed its policy in response to the new situation. It accepted refugees seeking entrance
into its missions and allowed them entrance into South Korea, and it negotiated with China
over how to deal with these refugees.
The Bush Administration has given the refugee issue low priority. The Administration
has requested that China allow U.N. assistance to the refugees but has asserted that South
Korea should have the lead diplomatically in dealing with China. Congress has been more
active on the issue. The issue has been aired in hearings. In June 2002, the House of
Representatives passed H.Con.Res. 213, which calls on China to halt forced returns of
refugees to North Korea and give the U.N. High Commission on Refugees access to North
Korean refugees.
The refugee issue had led to increased outside attention to human rights conditions in
North Korea. Reports assert that refugees forcibly returned from China have been
imprisoned and tortured in an extensive apparatus of North Korean concentration camps
modeled after the “gulag” concentration camp system in the Soviet Union under Stalin.
Reports by Amnesty International, the U.S. State Department, and, most recently, the U.S.
Committee for Human Rights in North Korea have described this system as holding up to
250,000 people. In 2003 and 2004, the United States secured a resolution from the U.N.
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Human Rights Commission expressing concern over human rights violations in North Korea,
including concentration camps and forced labor. South Korea abstained in the Commission’s
votes in the interest of pursuing its “sunshine” policy with North Korea. Senate and House
bills S. 1903 and H.R. 3573 respectively would grant asylum and legal immigration status
to North Korean refugees and would have the U.S. executive branch adopt a number of
measures aimed at furthering human rights in North Korea, including financial support of
non-government human rights groups, increased radio broadcasts into North Korea, sending
of radios into North Korea, and a demand for more effective monitoring of food aid.
South Korea’s Sunshine Policy and the Hyundai Payments to North Korea.
South Korean President Kim Dae-jung took office in 1998, proclaiming a “sunshine policy”
of reconciliation with North Korea. He achieved an apparent breakthrough with his meeting
of Kim Dae-jung and North Korean leader Kim Jong-il in Pyongyang, June 13-14, 2000.
Following the summit, Seoul and Pyongyang negotiated agreements on the restoration of a
railway and road across the DMZ, investment guarantees and tax measures to stimulate South
Korean private investments in North Korea, provision of South Korean food aid to North
Korea, and flood control projects for the Imjim River. President Kim called on the United
States to support his sunshine policy by normalizing diplomatic relations with North Korea,
negotiating a missile agreement with Pyongyang, and removing North Korea from the U.S.
terrorist list. Negotiations in August 2002 produced a renewal of family reunions and
agreement to implement economic agreements of 2000. The roads in the eastern and western
sectors of the DMZ opened in 2003, and work on the rail lines is continuing. Seoul and
Pyongyang reached agreement in November 2002 on South Korean aid to construct a special
economic zone at Kaesong inside North Korea to attract South Korean and other outside
private investment. North Korea subsequently issued a law for foreign investment at
Kaesong. In June 2004, North and South Korea agreed to set up military hotlines and cease
propaganda broadcasts across the DMZ.
The most controversial component of the sunshine policy has been the cash payments
the Hyundai Group has made to North Korea, supported by the R.O.K. government. In
October 1998, Hyundai Asan, one of the member companies of the Hyundai Group, entered
into an agreement with North Korea to operate a tourism enterprise at Mount Kumgang in
North Korea. The agreement stipulated that Hyundai Asan would make cash payments to
the North Korean government of $942 million over six years. From 1999 into 2003, Hyundai
made public cash payments of about $600 million to North Korea for the Mt. Kumgang
project and two other projects. According to informed sources available to CRS in 2001,
Hyundai companies made additional secret payments to North Korea. Hyundai officials and
the Kim Dae-jung administration denied for nearly two years that secret payments were
made. In early 2003, they admitted to secret payments of $500 million and that the money
was transferred shortly before the June 2000 North-South summit.
Investigations by a special prosecutor and South Korean newspapers revealed that North
Korean leader, Kim Jong-il, demanded $1 billion from Hyundai Asan in return for meeting
with Kim Dae-jung. Chung Mong-hun, the CEO of Hyundai Asan and one of the son’s of
Hyundai’s founder, Chung Ju-yung, initially turned down the North Korean demand; but
officials of the Kim Dae-jung administration urged him to make payments. Hyundai Asan
and North Korean officials agreed on $500 million on April 8, 2000. The special prosecutor’s
findings were that several Hyundai member companies of the Hyundai Group (also run by
Chung family members) were involved in making the secret payments a few days before the
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summit: Hyundai Merchant Marine ($200 million); Hyundai Engineering and Construction
($150 million); Hyundai Electronics ($100 million); and Hyundai Asan ($50 million in
luxury goods). The special prosecutor also found that officials of the government’s Korean
Exchange Bank and the National Intelligence Service helped the Hyundai companies transfer
the money to North Korean banks in Macao, Singapore, and Austria. Senior officials of the
Kim Dae-jung administration facilitated a government loan of $359 million to Hyundai
Merchant Marine, which used more than 50% of it in the transfers. President Roh Moo-hyun
cut off the special prosecutor’s investigation in June 2003; the opposition Grand National
Party has charged that there were additional secret payments totaling several hundred million
dollars. There were six indictments and convictions of R.O.K. and Hyundai officials.
After the conclusion of the Mt. Kumgang agreement, U.S. military officials were
suspicious that North Korea was using the Hyundai money for military purposes. U.S.
military officials in Korea reportedly raised the issue with Hyundai officials in November
1999. The Korea Herald, February 5, 2001, quoted a spokesman for the U.S. Military
Command in Korea that “I know that military experts at home and abroad are concerned
about Pyongyang’s possible diversion of the [Hyundai] cash for military purposes.” Most
serious is evidence that the Hyundai payments helped North Korea financially to accelerate
its secret uranium enrichment nuclear weapons program and possibly also its missile
program. Several experts had concluded that Hyundai Asan’s public cash payments went
into Bureau 39 of North Korea’s Communist Party, which reportedly is controlled directly
by Kim Jong-il. The special prosecutor and South Korean newspapers learned that the secret
payments were transferred to bank accounts in Macao, Singapore, and Austria known to be
controlled by the Daesong Group, a front organization for Bureau 39. Bureau 39’s functions
reportedly include controlling and enlarging the inflow of foreign exchange to North Korea
through legal exports and illegal exports such as drug smuggling. It also directs the
expenditure of North Korea’s foreign exchange resources with two priorities: (1)
procurement of luxury products from abroad that Kim Jong-il distributes to a broad swath
of North Korean military, party, and government officials to secure their loyalty — Mercedes
Benzes, food, wines, stereos, deluxe beds, rolex watches, televisions, etc., estimated at $100
million annually by U.S. military officials in Seoul, according to a Reuters report of March
4, 2003; and (2) procurement overseas of components and materials for North Korea’s
WMDs and missiles. (See especially the Wall Street Journal’s report on Bureau 39, July 14,
2003.)
Estimates of North Korea’s exports in 1999 and 2000 indicate that the Hyundai
payments made up at least 30% of North Korea’s foreign exchange earnings. During the
same period into 2001, according to reported CIA estimates, North Korea accelerated its
secret uranium enrichment (HEU) program, advancing it from a research and development
stage to the procurement and installation of equipment capable of producing uranium-based
atomic weapons. The CIA estimates, according to a Washington Post analysis of February
1, 2003, stressed North Korea’s overseas procurement of “large quantities” of materials and
components for the HEU program. The Asian Wall Street Journal, October 29, 2002,
reported that North Korea had paid $75 million to Pakistan’s Khan laboratory that
specialized in Pakistan’s uranium enrichment program. A number of press reports described
the specific role of the Daesong banks from 1999 to 2003 in purchases of components that
could be used in an HEU program. Public and reported CIA estimates since December 2002
project that North Korea could produce a uranium-based atomic bomb as early as mid-2004.
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As a result of the Hyundai secret payment revelations and the financial difficulties of
Hyundai Asan, payments for the Mt. Kumgang project declined to $7 million over the first
eight months of 2003. However, the Roh Moo-hyun administration continues to promote
deals between South Korean companies and North Korea, which potentially could lead to
more North Korean demands for cash payments.
Anti-Americanism and Plans to Change the U.S. Military Presence
Beginning in early 2003, the Bush Administration made a series of decisions that will
alter significantly the U.S. presence in South Korea. In June 2003, the Pentagon announced
that the Second Infantry Division of about 15,000 troops would be withdrawn from its
position just below the DMZ and relocated to “hub bases” about 75 miles south. It also
announced that the U.S. Yongsan base, housing about 8,000 U.S. military personnel in the
center of Seoul, would be relocated away from the city. (A 1991 agreement to relocate
Yongsan never was implemented.) In May-June 2004, the Pentagon disclosed a plan to
withdraw 12,500 U.S. troops from South Korea by the end of 2005, including the deployment
to Iraq by August 2004 of one of the two combat brigades of the Second Division. Such a
withdrawal would reduce U.S. troop strength in South Korea from 37,000 to about 24,000.
The 3,600 man brigade left for Iraq in August 2004. Pentagon officials spoke of U.S.
military compensation measures, including the augmentation of air and naval forces in the
Western Pacific; and they later announced long-term training deployment of two squadrons
of stealth fighters and F-15 fighters to South Korea. There also are reports that the Pentagon
and the U.S. Pacific Command are considering changes in the U.S. military command
structure in Korea, which presently includes the United Nations Command, the U.S. Forces
Korea (USFK) Command, and the U.S.-South Korean Combined Forces Command. As part
of these changes, the Pentagon will invest $11 billion to upgrade U.S. forces in Korea. The
South Korean government has expressed reservations over the U.S. decisions; but it has
concluded several agreements with the Pentagon to facilitate the relocations. South Korea
has agreed to assume the estimated $3-4 billion cost of relocating the Yongsan garrison by
2008 in an agreement finalized in July 2004. South Korean officials have indicated that they
will try to secure a postponement of the 2005 target date for the withdrawal of 12,500 U.S.
troops.
There are several rationales for the Pentagon’s decisions. Relocation of the Second
Division will facilitate its restructuring and reorganization along the lines of the Pentagon’s
plans to restructure the U.S. Army’s traditional combat divisions into smaller, mobile combat
brigades. The withdrawal of troops will help the U.S. Army meet the manpower burdens of
its role in Iraq and potentially in other fronts in the “war against terrorism.” U.S. officials
also have voiced the hope that the troop changes and reduction would mitigate against the
rising anti-American sentiment among South Koreans.
Signs appeared after 1998 that South Korean public opinion was becoming more critical
of the U.S. military presence. Later, criticisms arose of the Bush Administration’s policies
toward North Korea, partly reflecting South Korean public support for Kim Dae-jung’s
sunshine policy. South Koreans increasingly viewed the U.S. military presence and the Bush
Administration’s policy as endangering South Korea’s efforts to improve relations with
North Korea. South Korean fears of a military threat from North Korea have declined,
according to numerous polls. Incidents involving U.S. military personnel and South Korean
civilians drew growing South Korean criticisms. In 2002, massive South Korean protests
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erupted when a U.S. military vehicle killed two Korean schoolgirls and the U.S. military
personnel driving the vehicle were acquitted in a U.S. court martial. Roh Moo-hyun was
elected in December 2002 after emphasizing criticisms of the United States during his
campaign. Anti-U.S. sentiment is especially strong among younger South Koreans under 40,
according to polls. A January 2004 poll found that 39% of respondents viewed the United
States as the biggest threat to South Korea as compared to 33% who viewed North Korea as
the principle threat. Respondents in their 20s chose the United States by 58% to 20% for
North Korea.
A growing network of non-government civic groups have taken up anti-American
themes, including some accusations similar to those propagated by North Korean
propaganda. A widespread South Korean view, reportedly held by some officials of the Roh
Moo-hyun administration, is that the Pentagon’s plan to relocate the Second Division is
intended to get the Division out of range of North Korean artillery north of the DMZ so that
the Bush Administration could launch a unilateral attack against North Korea. The U.S.
invasion of Iraq also drew considerable criticism from the South Korean public. President
Roh faced considerable public criticism for his decision to send 700 South Korean medical
and engineering personnel to Iraq. In December 2003, South Korea announced that it would
send a brigade-sized (about 3,000 troops) South Korean combat unit to Iraq. President Roh
reaffirmed that decision in June 2004 in the face of the execution of a South Korean national
by Iraqi insurgents. Roh has asserted that his ability to influence U.S. policy toward North
Korea is a primary reason for his support of the U.S. war against Iraq. In October 2003, the
R.O.K. government announced that it would commit $200 million in reconstruction aid to
Iraq. However, the new Uri Party-dominated National Assembly elected in April 2004 is
expected to pressure for a reversal of the decision to send South Korean troops to Iraq and
likely will take up other issues involving criticisms of the United States.
The total cost of stationing U.S. troops in South Korea is nearly $3 billion annually.
The South Korean direct financial contribution for 2002 is $490 million, up from $399
million in 2000.
FOR ADDITIONAL READING
CRS Report RL31696. North Korea: Economic Sanctions.
CRS Issue Brief IB91141. North Korea’s Nuclear Weapons Program.
CRS Report RS21391. North Korea’s Nuclear Weapons: How Soon an Arsenal?
CRS Report RS21473. North Korean Ballistic Missile Threat to the United States.
CRS Report RL31785. U.S. Assistance to North Korea.
CRS Report RL32167. Drug Trafficking and North Korea: Issues for U.S. Policy.
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