Foreign Assistance to North Korea

Foreign Assistance to North Korea

Order Code RL31785
CRS Report for Congress
Received through the CRS Web
Foreign Assistance to North Korea
Updated May 26, 2005
Mark E. Manyin
Specialist in Asian Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

Foreign Assistance to North Korea
Summary
Since 1995, the United States 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, the Bush Administration has
proposed offering North Korea broad economic development assistance in exchange
for Pyongyang verifiably dismantling its nuclear program and cooperating on other
security-related issues. Although the President has considerable flexibility to offer
some forms of short term development assistance, longer term aid would likely
require congressional action.
Since the current North Korean nuclear crisis erupted in October 2002, when
North Korea reportedly admitted that it has a secret uranium enrichment nuclear
program, the dollar amount of U.S. aid has fallen by an order of magnitude. No U.S.
funds have been provided to KEDO since FY2003, and the Bush Administration’s
position is that it would like to permanently end the KEDO program. U.S. food aid
also has fallen considerably in recent years. Food 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, making
it difficult to assess how much of each donation actually reaches its intended
recipients and how much is diverted for resale in private markets or to the military.
Compounding the problem is that South Korea and China, by far North Korea’s two
most important providers of food, send almost all of their aid directly to North Korea
with virtually no monitoring. The WFP says that food conditions have worsened
since North Korea introduced economic reforms in 2002.
The Administration appears to be loosely adhering to its DPRK food aid policy
(i.e. it will provide base levels of food assistance to North Korea) with more to come
only if the DPRK allows greater access and monitoring. After announcing the policy
in February 2003, the Administration announced a new tranche of food aid, despite
only marginal improvements on the ground. New North Korean restrictions in 2004
are likely to complicate U.S. policy. A decision on food aid for 2005 has yet to be
reached. The North Korean Human Rights Act (P.L. 108-333) includes hortatory
language calling for “significant increases” above current levels of U.S. support for
humanitarian assistance to be conditioned upon “substantial improvements” in
transparency, monitoring, and access.
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. The roles of
China, South Korea, and Japan in providing assistance to North Korea are discussed,
highlighting the likelihood that any dramatic decrease in U.S. aid to North Korea may
have only marginal effects without the cooperation of these countries, particularly
China and South Korea. This report will be updated as circumstances warrant.

Contents
Introduction: Issues for U.S. Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Aid and the Debate over North Korea Policy . . . . . . . . . . . . . . . . . . . . . . . . 1
Humanitarian Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Coercive Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Development Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Congress’ Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The North Korea Human Rights Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Food Assistance to North Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Current Food Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Impact of the 2002 Economic Reforms . . . . . . . . . . . . . . . . . . . . . 7
Diversion, Monitoring, and Triaging by North Korea . . . . . . . . . . . . . . . . . . 9
Tightened Restrictions in 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Details of WFP’s Access and Monitoring . . . . . . . . . . . . . . . . . . . . . . 12
North Korea’s Motivations for Controlling Relief Assistance . . . . . . 16
Individual Countries’ Food Aid Programs . . . . . . . . . . . . . . . . . . . . . . . . . . 17
The United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Competition for Food Aid Resources . . . . . . . . . . . . . . . . . . . . . . . . . 19
China’s Food Aid and Food Exports . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Food Aid from South Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Food Aid from Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Energy Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
KEDO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Chinese Fuel Shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Other Forms of U.S.-North Korean Economic Interaction . . . . . . . . . . . . . . . . . 26
U.S.-North Korean Trade and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Funds from U.S. POW/MIA Recovery Efforts in the DPRK . . . . . . . . . . . 28
U.S. Policy Options for Aid to North Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Food Aid Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
KEDO Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Development Assistance Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
The Timing of a U.S. Offer of Development Assistance . . . . . . . . . . . 36
A Multilateral Development Assistance Program . . . . . . . . . . . . . . . . 36
Additional CRS Products on North Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Appendix A: South Korean Expenditures on Engaging North Korea . . . . . . . . 38
List of Figures
Figure 1. WFP and Non-WFP Food Aid Deliveries to North Korea,
1995-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Figure 2. North Korean Food Imports and Aid, 1990-2003 . . . . . . . . . . . . . . . . 12
Figure 3. Map of the World Food Program’s
North Korea Operations as of February 2004 . . . . . . . . . . . . . . . . . . . . . . . 14
Figure 4. Various Countries’ Reported Food Aid to North Korea, 1996-2004
Source: International Food Aid Information System (INTERFAIS) . . . . . 17
Figure 5. Deliveries of Chinese Food Aid to North Korea, 1996-2005
Source: WFP Interfais Database (2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Figure 6. Chinese Food Exports to North Korea, 1995-2004
Source: Global Trade Atlas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Figure 7. Deliveries of ROK Food Aid to North Korea, 1995-2004
Source: WFP Interfais database (2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Figure 8. Deliveries of Japanese Food Aid to North Korea, 1995-2004
Source: WFP Interfais Database (2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Figure 9. Chinese Fuel Shipments to North Korea, 1995-2004
Source: Global Trade Atlas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
List of Tables
Table 1. U.S. Assistance to North Korea, 1995-2004 . . . . . . . . . . . . . . . . . . . . . . 2
Table 2. KEDO Contributions, Various Countries . . . . . . . . . . . . . . . . . . . . . . 25
Table 3. U.S.-North Korea Trade, 1993-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Table 4. U.S. Payments to North Korea for Joint POW/MIA Recovery
Activities, 1996-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Table 5. North Korea’s Trade with Major Partners, 2001-2003 . . . . . . . . . . . . . 32
Table 6. South Korean Governmental Expenditures on Engaging North
Korea, 1995-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

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 the DPRK: North Korea’s progress in its nuclear
weapons program and massive, chronic food shortages there. In response, the United
States in 1995 began providing the DPRK with foreign assistance, which has totaled
over $1.1 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, including three medical kits that were sent to the World Health
Organization in April 2005 to help in dealing with the reported outbreak of avian
influenza in North Korea. (See Table 1.)
Since the current North Korean nuclear crisis erupted in late 2002, the level of
U.S. aid has fallen by an order of magnitude, in large measure because U.S. has sent
almost no funds to KEDO since the organization’s executive board voted to halt oil
shipments to North Korea in November 2002. In all likelihood, the dropoff in aid
levels has reduced the already little leverage U.S. aid had exerted on North Korean
behavior, particularly relative to China’s and South Korea’s continued assistance to
and increased trade with the DPRK.
Aid and 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, reportedly has threatened to
export parts of its self-declared nuclear arsenal, is suspected of possessing chemical
and biological weapons programs, and since the late 1980s has been included on the
U.S. list of states that sponsor terrorism. Pyongyang also is characterized as one of
the world’s worst violators of human rights and religious freedom, a record that some
Members of Congress and interest groups say should assume greater importance in
the formation of U.S. priorities toward North Korea.

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Table 1. U.S. Assistance to North Korea, 1995-2004
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
2003
40,200
$25.5
$3.7
$0.0
$29.2
2004
110,000
$55.1
$0.0
$0.2
$55.3
Total 2,063,894
$695.8
$405.1
$5.4
$1,106.2
Sources: Figures for food aid and medical supplies from USAID and US Department of Agriculture;
KEDO (Korean Peninsula Energy Development Organization) figures from KEDO.
Humanitarian Aid. Supporters of aid contend that humanitarian assistance
has saved and improved the lives of millions of North Koreans. Many also say
humanitarian and development assistance is one 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, Pyongyang’s unveiling of significant economic reforms since July 2002,
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; at worst, aid arguably has helped keep the
current North Korean regime in power, has allowed the regime to avoid making
fundamental economic and political reforms that could improve humanitarian
conditions, and possibly allowed additional funds to be channeled into the DPRK
military establishment. Moreover, critics suggest aid has encouraged Pyongyang to
engage in further acts of military blackmail to extract more assistance from the
international community. In this view, the aid under the Agreed Framework halted
North Korea’s plutonium program, but it did not keep the country from pursuing a
secret uranium enrichment program, disclosed in October 2002. Some 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.

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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, and 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. U.S. policy in recent
times has de-linked food and humanitarian aid from strategic interests.

Coercive Measures. Some critics of the current aid effort argue for a more
tailored form of containment that would include diplomatically and economically
isolating North Korea and calibrating economic sanctions and development aid to
reward or punish the DPRK’s actions. A major difficulty with this approach is that
U.S. options are limited. In the current diplomatic and political climate, offering
“carrots” such as allowing North Korea to join international financial institutions
would likely require reciprocal actions that Pyongyang to date has resisted.
Punitive sanctions, however, would likely be only marginally effective without
at least the tacit cooperation of Beijing and Seoul. China and South Korea are by far
North Korea’s two largest economic partners and aid providers, and both countries
place greater priority on preserving North Korea’s stability than on resolving the
nuclear issue. Chinese support would be particularly important, as China is widely
believed to be North Korea’s single-largest provider of food and energy. To this end,
China and South Korea have been reluctant to use pressure tactics to induce changes
in the Kim Jong-il regime’s behavior. Japan, the country closest to the United States
in the six-party talks to discuss North Korea’s nuclear weapons program, has seen its
economic importance to North Korea diminish markedly over the past four years.1
Meanwhile, military options generally are considered to be poor given the
uncertainties surrounding North Korea’s nuclear program and the risk of unleashing
retaliatory North Korean missile strikes on South Korea and/or Japan. Therefore,
absent support from China and/or South Korea, some say the actions most likely to
hurt Kim Jong-il’s regime are those that would cut off its supply of hard currency by
curtailing sales of illicit materials — particularly narcotics, and counterfeit currency,
cigarettes, and pharmaceuticals — and weapons through such devices as the
Proliferation Security Initiative (PSI) and the Illicit Activities Initiative. The scale
and scope of North Korean criminal activity is believed to have risen in recent years,
and is thought to generate hundreds of millions of dollars in hard currency.2
1 The six party talks consist of the United States, North Korea, China, South Korea, Japan,
and Russia. Since the six party process was initiated in August 2003, three rounds of
plenary negotiations have been held. The last occurred in June 2004. As of early June
2005, North Korea has refused to return to the talks.
2 David Sanger, “U.S. Is Shaping Plan to Pressure North Korea,” New York Times, February
14, 2005. For more on PSI, see CRS Report RS21881, Proliferation Security Initiative
(PSI), by Sharon Squassoni. For more on North Korea’s criminal activities, see CRS Report
RL32167, Drug Trafficking and North Korea: Issues for U.S. Policy, by Raphael Perl.

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Development Assistance. Administration officials, including President
Bush, have issued vague pledges of U.S. assistance that might be forthcoming if
North Korea began dismantling its nuclear programs. 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.3 The Administration reportedly was
preparing to offer a version of 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.4 In June 2004, during the third round of six-party talks
to resolve the North Korean nuclear crisis, the United States offered a proposal that
envisioned a freeze of North Korea’s weapons’ program, followed by a series of
measures to ensure complete dismantlement and, eventually, a permanent security
guarantee, negotiations to resolve North Korea’s energy problems, and discussions
on normalizing U.S.-North Korean relations that would include lifting the remaining
U.S. sanctions and removing North Korea from the list of terrorist-supporting
countries. In the interim, Japan and South Korea would provide the North with
heavy oil. North Korea rejected the proposal as a “sham,” and it was not supported
in public by any of the other participants in the talks.
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.5 Longer-term initiatives,
however, would likely require changes in U.S. law and thereby require congressional
action. For instance, the FY 2005 Consolidated Appropriations Act specifically bans
many forms of direct aid to North Korea, along with several other countries.6 Many
health and emergency disaster relief aid programs are exempt from such legislative
restrictions because they have “notwithstanding” clauses in their enacting legislation.
Additionally, if the Administration were to designate North Korea as a country
involved in drug production and trafficking — as some have advocated — then by
law North Korea would be ineligible for receiving most forms of U.S. development
assistance.7
Congress’ Role
The provision of aid to North Korea has given Congress a vehicle to influence
U.S. policy toward North Korea. From 1998 until the United States halted funding
3 Testimony of Richard Armitage, State Department Deputy Secretary, before the Senate
Foreign Relations Committee, February 4, 2003.
4 Testimony of Richard Armitage, State Department Deputy Secretary, before the Senate
Foreign Relations Committee, February 4, 2003.
5 Section 614 of the Foreign Assistance Act of 1961, P.L. 87-195.
6 Section 507 of P.L. 108-447, the FY2005 Consolidated Appropriations Act, which also
bans direct aid to Cuba, Iraq, Libya, Iran, Sudan, and Syria.
7 See CRS Report RL32167, Drug Trafficking and North Korea: Issues for U.S. Policy, by
Raphael Perl.

CRS-5
for KEDO in FY2003, Congress included in each Foreign Operations Appropriations
requirement that the President certify progress in nuclear and missile negotiations
with North Korea before allocating money to KEDO operations. In 1998, under
congressional pressure, President Clinton appointed a North Korea policy
coordinator, a position that the Bush Administration terminated 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. The congressional debate over
food assistance to North Korea also is likely to be colored by the competing demands
for other emergency situations — particularly in Sudan, Ethiopia, and the countries
hit by the Indian Ocean tsumani — that have stretched FY2005 U.S. food aid funds
and commodities. (See the “Competition for Food Aid Resources” section below.)
The North Korea Human Rights Act. In 2004 the 108th Congress passed,
and President Bush signed, the North Korea Human Rights Act (H.R. 4011; P.L. 108-
333). With regard to U.S. assistance, the act:
! requires that U.S. non-humanitarian assistance to North Korea be
contingent upon North Korea making “substantial progress” on a
number of specific human rights issues;
! includes hortatory language calling for “significant increases” above
current levels of U.S. support for humanitarian assistance to be
conditioned upon “substantial improvements” in transparency,
monitoring, and access;
! requires the United States Agency for International Development
(USAID) to issue a report to Congress on humanitarian assistance
activities to North Korea and North Koreans in China that receive
U.S. funding, and any changes in the transparency, monitoring, and
access of food aid and other humanitarian activities; and,
! authorizes but does not appropriate a total of $24 million annually
for the next four years for programs that promote human rights and
democracy, freedom of information, and assistance to North Koreans
in China, including the dissemination of transistor radios inside
North Korea.

Pyongyang has cited the act as evidence of the “hostile policy” of the United States
toward North Korea and has used it as one justification for suspending its
participation in the six-party talks.8
8 Korean Central News Agency, “U.S. ‘North Korean Human Rights Act’ Flailed,” October
4, 2004.

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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 benefits 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,
approximately 5% - 10% of North Korea’s population. Although natural disasters
were the immediate causes of the food crisis, several experts have found the root
causes of the famine in decades of economic and agricultural mismanagement.9 In
September 1995, North Korea appealed for international food assistance,
contradicting its national ideology of juche, or self-reliance. Shortly thereafter, the
U.N. World Food Program (WFP) moved into North Korea, and its activities there
gradually have expanded to become the WFP’s largest single-country operation.
The United States has been by far the largest contributor to the WFP’s North
Korea appeals, contributing over half of the 3.7 million metric tons (MT) of food the
WFP has delivered to North Korea. According to WFP statistics, North Korea
received an additional 4.6 million MT from bilateral donations that are not channeled
through the WFP. China, which is widely believed to have provided even more food
than the United States, sends all its food aid directly to North Korea. Additionally,
since 2000, South Korea has been a major provider of food assistance, perhaps
surpassing China and the United States in importance in some years. Most of Seoul’s
food shipments are provided bilaterally to Pyongyang.
Current Food Situation
Though the famine apparently abated by 1997 and the DPRK has made
incremental progress in agricultural production, the WFP estimates that nearly half
of North Korea’s 23.7 million people do not have enough to eat and that more than
a third of the population is chronically malnourished.10 A 2004 nutritional survey
conducted by the North Korean government and sponsored by the United Nations
also indicated that, although malnutrition rates have fallen significantly since the late
1990s, more than a one-third of the population is chronically malnourished and
approximately one-third of North Korean mothers are malnourished and anemic.11
The northern and northeastern provinces have been particularly hard hit by the
famine, for reasons examined below.
9 For instance, see Andrew Natsios, The Great North Korean Famine, (U.S. Institute of
Peace: Washington, DC, 2001), especially chapters 1 and 2. Among the cited 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.
10 WFP News Release, “6.5 Million Vulnerable North Koreans Still in Desperate Need of
Food Aid,” January 27, 2005.
11 NAPSNET Special Report, “World Food Programme Press Conference on the DPRK by
Tony Banbury, WFP Regional Director for Asia,” March 31, 2005.

CRS-7
The Impact of the 2002 Economic Reforms. The economic reforms the
North Korean government initiated in July 2002 were perhaps the most sweeping in
the country’s history and have had a major impact on the lives of North Koreans.12
The most important of the reforms were: raising official prices to bring them closer
to black market levels, raising wage levels to meet the rise in prices, granting farmers
and cooperatives greater lattitude to sell produce, officially recognizing the informal
markets that had sprouted in the 1990s, and cutting government subsidies to most
industries.13 In general, those with access to hard currency — such as the political
elite — appear to be doing much better, as evidenced by the appearance of more
cars and restaurants in Pyongyang. Aid workers and defector reports indicate a
striking upsurge in entrepreneurial activity, including activity outside the state sector.
New restaurants and other leisure establishments have opened in Pyongyang, and a
wide range of products now appear in the official markets. More bicycles are on the
streets throughout the country, and small-scale service activities such as bike repair
shops and shoe shine stands have appeared in the countryside. Farmers’ incomes
appear to have increased now that they are permitted to maintain private plots and/or
sell above-quota produce on the open market. Indeed, there are reports that cash
crops have appeared, as farmers can raise more money producing vegetables, fruits,
and selling those in the market, than in producing staple grains such as maize or rice
or potatoes.14
However, the reforms appear to have worsened general conditions for all except
the top strata of society. North Korea is experiencing high or hyperinflation in many
items, particularly in important foodstuffs such as rice, the price of which the WFP
estimates tripled in parts of the country in 2003 and 2004.15 Urban residents are
particularly vulnerable, as they rely heavily on inflation-prone private markets. In
late 2002, the WFP estimated these individuals spent up to 80% of their income on
food, compared to no more than 35% for state farmers and much less for collective
farmers.16 The reforms also have led to unemployment and underemployment,
further reducing workers’ ability to survive outside the government’s public
distribution system (PDS), which is used by nearly 70% of the population but is
subject to chronic shortages and occasional and selective shutdowns. Increasingly,
the WFP has channeled its food supplies to these newly vulnerable groups, and their
plight was leading some within the WFP to consider increasing the size of its
12 See, for instance, International Crisis Group, North Korea: Can the Iron Fist Accept the
Invisible Hand? Washington, DC, April 25, 2005.
13 See CRS Report RL32493, The North Korean Economy: Background and Policy Analysis,
by Dick Nanto. According to one report, food, fuel, and electricity prices rose by 26 times
on average and public transportation fees rose by twenty times. Rice prices reportedly were
raised by a factor of 550. International Crisis Group, p.5-6.
14 March and April 2005 e-mail exchanges and phone conversations with WFP, USAID, and
NGO representatives; NAPSNET Special Report, “World Food Programme Press
Conference on the DPRK by Tony Banbury, WFP Regional Director for Asia,” March 31,
2005; International Crisis Group, p.5-6.
15 Banbury Press Conference, March 31, 2005; International Crisis Group, p. 6.
16 World Food Program Press Release, “WFP Seeks Strong Backing for New Aid Initiative
in North Korea,” December 3, 2002.

CRS-8
appeal.17 Richard Ragan, the WFP Country Director for North Korea, reportedly said
in May 2005 that he worries the country “is inching back to a precipice.”18
Figure 1. WFP and Non-WFP Food Aid Deliveries to North Korea,
1995-2004
1,000,000
800,000
600,000
400,000
200,000
0
1996
1997
1998
1999
2000
2001
2002
2003
2004a
Non-WFP
WFP
Source: WFP INTERFAIS database (2005).
a. 2004 totals do not include ROK pledges of 200,000 MT directly to North Korea and
100,000 through the WFP. These are expected to be delivered in 2005.
Despite the continued, and perhaps growing need, the World Food Program has
had difficulty filling its appeals for donations to North Korea since 2002, due largely
to “donor fatigue” and from competing demands for food assistance elsewhere,
particularly east Africa. Figure 1 shows the decline in recorded food aid shipments
overall since 2002, as well as the jump in the relative importance of food donated
directly to North Korea, virtually all of which is from China and South Korea. Since
2000, bilateral shipments have exceeded those channeled through the WFP. The one
exception, 2001, occurred because of Japan’s 500,000 MT donation that year.
17 Banbury Press Conference, March 31, 2005.
18 Jay Solomon, “U.S. Has Put Food Aid For North Korea On Hold,” Wall Street Journal
May 20, 2005.

CRS-9
The WFP says the amount of food in the WFP pipeline has been erratic in recent
years, sometimes sufficient to meet only 20% of its targeted population. In
September 2004, the WFP for the first time in two years had enough food to feed all
of its 6.5 million targeted recipients, primarily due to a large contribution from
Japan.19 However, as of mid-May 2005, none of the WFP’s largest donors to its
North Korea appeal — the United States, South Korea, the European Union, and
Japan — had pledged a contribution. WFP’s 2005 emergency operation seeks
500,000 MT of food, valued at $200 million, to help feed the 6.5 million North
Koreans deemed most at risk. The appeal is up from the 485,000 MT target in 2004,
the first increase since 2002, when the WFP fell short of its target of 611,000 MT.
Diversion, Monitoring, and Triaging by North Korea
Various sources assert that not all the food assistance going to North Korea is
reaching its intended recipients, and that North Korea’s restrictions have made it
impossible for the WFP to fully track food shipments to the over 40,000 institutional
recipients. Sources include interviews with North Korean refugees in China who say
they have never received international food aid.20 The numerous reports of donated
food being sold (at price levels far higher than the official, government-controlled
prices) in 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, has stated that food aid has been distributed regularly to
the North Korean People’s Army (KPA).21 In February 2003, U.S. Ambassador to
the U.N. food agencies, Tony Hall, cited “credible” reports of diversion in making
the case for possibly reducing and conditioning future U.S. food aid. Testifying in
April 2005 at a joint hearing of the House International Relations Subcommittees on
Asia and the Pacific and Africa, Global Human Rights, and International Operations,
economist Marcus Noland cited estimates of diversion that range from 10% - 30%,
presumably most to private markets. Noland also noted that diversion to markets can
have the unintended effect of lowering food prices, hurting farmers but benefiting
food-consumers.22
WFP officials and a number of analysts have pointed out that because the KPA
receives the first cut at the domestic harvest and Chinese food aid, it has no need for
19 WFP North Korea Director Richard Ragan comments at May 12, 2005 seminar at CSIS.
20 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].
21 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]
22 Testimony of Marcus Noland to the House International Relations Subcommittees on Asia
and the Pacific and on Africa, Global Human Rights, and International Operations hearing
on April 28, 2005.

CRS-10
WFP food.23 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.24 North Korea has expended little of its
foreign currency to import food. Figure 2 shows how according to U.N. data, North
Korea’s commercial imports of food fell dramatically once full-fledged international
assistance began. Since 1999, around 90% of North Korea’s inflows of food has
come from aid rather than commercial imports.25
Since it first appealed for outside assistance, the North Korean government has
restricted relief groups’ activities, hindering their ability to ensure that their
assistance reaches the neediest. Though many NGOs have operated for years in the
DPRK, several prominent groups — 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.26 MSF has been particularly vocal in its criticism of the food aid program.27
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.”28
As mentioned earlier, bilateral food donations from China and South Korea
have in recent years exceeded donations from the WFP, in some years by large
amounts. The Chinese are not believed to attach any conditions to their food aid, and
South Korea has been able to negotiate a monitoring system that most observers
describe as so limited as to be almost nonexistent. Speaking at a May 2005 seminar
on North Korea’s humanitarian problems, WFP Country Director Richard Ragan said
bilateral donations “undercut” the WFP’s efforts to negotiate improvements with
North Korea, a charge echoed by other analysts and aid workers.29 USAID reports
that the Bush Administration has “strongly encouraged” South Korea and China to
23 Testimony of John Powell, World Food Program Regional Director, before the House
International Relations Subcommittee on East Asia and the Pacific, May 2, 2002.
24 Noland, “North Korea’s External Economic Relations,” February 2001, available at
www.iie.com.
25 Marcus Noland and Stephan Haggard, Statement Submitted to House International
Relations Subcommittees on Asia and the Pacific and on Africa, Global Human Rights, and
International Operations hearing on April 28, 2005.
26 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.
27 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.
28 General Accounting Office Report GAO/NSIAD-00-35, North Korea Restricts Food Aid
Monitoring, October 1999, available at [http://www.gao.gov].
29 “North Korea: Addressing Humanitarian and Human Rights Problems,” May 12, 2005
seminar at the Center for Strategic and International Studies, Washington, DC.

CRS-11
channel their aid through the WFP and/or to make monitoring, access, and
transparency more of a priority in negotiating bilateral donations.30
Tightened Restrictions in 2004. Until the fall of 2004, WFP officials
provided evidence of improvements over time. As detailed below, North Korean
authorities were granting increased access and tolerating more and more frequent
monitoring visits, the spontaneity of which was increasing. In September 2004,
however, the North Korean government began restricting many humanitarian
activities, particularly those of resident relief organizations, such as the WFP, and of
American NGOs operating in North Korea.31 North Korea authorities closed off
several counties to U.N. humanitarian agencies, told the WFP it would have to reduce
its expatriate monitoring presence by one-third (from fifteen to ten officials), and
began to deny more monitoring visit requests. North Korea also announced it would
no longer appeal for outside humanitarian assistance — preferring development aid
instead — and therefore would no longer participate in the U.N. Consolidated
Appeals Process (CAP) and no longer would have need for the U.N. Office for the
Coordination of Humanitarian Affairs (OCHA) in Pyongyang.
WFP and NGO officials say this led to much tougher operating conditions in
late 2004 and early 2005. Beginning in February and March 2005, North Korea
began to relax some of its restrictions. The WFP was allowed to re-enter most of the
counties that had been closed off; North Korean authorities have decided not to close
OCHA’s office; the government granted WFP expatriates authority to use the local
cellular phone service; and approvals of monitoring visit requests began to rise. 32
However, although monitoring and access conditions appear to have improved since
early 2005, they do not yet appear to have returned to the level they had reached in
the summer of 2004. In particular, the number of monitoring visits the WFP has
been permitted is down to three-year lows, and North Korea has not reversed its
demand that the WFP draw down its expatriate staff, which is likely to reduce the
number of monitoring visits. The WFP has attempted to compensate by reaching an
agreement in principle with DPRK authorities on several ways to improve the quality
of its monitoring, including the ability to observe actual distributions of food aid, the
distribution of WFP ration cards, and the establishment of a comprehensive
commodity tracking system. As of late April 2005, the agreement had yet to be
implemented.33
30 USAID, Report on U.S. Humanitarian Assistance to North Koreans, April 25, 2005, p.
6.
31 North Korean authorities generally do not permit American NGOs to have permanent
residential status in North Korea.
32 March and April 2005 e-mail correspondence with Richard Ragan, WFP Country Director
for North Korea.
33 Banbury press conference; USAID, Report on U.S. Humanitarian Assistance to North
Koreans, April 25, 2005; March and April 2005 e-mail exchanges and phone conversations
with WFP, USAID, and NGO representatives.

CRS-12
Figure 2. North Korean Food Imports and Aid, 1990-2003
m etric tons
percent
(m illions)
1.6
100%
Imports on
90%
1.4
Commercial
Terms
80%
Aid, % of Food
1.2
Inflows
70%
1.0
60%
0.8
50%
Volume of
Aid
40%
0.6
30%
0.4
20%
0.2
10%
0.0
0%
1990
1991 1992
1993 1994
1995 1996
1997 1998
1999 2000
2001 2002
2003
Sources: Adapted from Marcus Noland and Stephan Haggard, Statement for April 28, 2005 House International Relations
Hearing. Imports: FAO/WFP (various publications); Aid: INTERFAIS (2005)
Details of WFP’s Access and Monitoring. Over the years, WFP officials
have cited a number of areas of dissatisfaction with operating conditions in North
Korea:34
! 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. Over time, DPRK authorities had
opened more counties to the WFP. By the summer of 2004, only 42
counties — representing about 15% of the population — were off
limits, down from 61 in 1998. In keeping with the organization’s “no
access, no food” policy, the WFP does not provide food to these
banned counties. North Korea’s August 2004 restrictions included
the closure of ten counties previously open to the WFP, reducing
WFP’s access to about 80% of the population. Seven of these were
reopened in March 2005, bringing country-wide access to 158 of
203 counties and districts, representing approximately 83% of the
population.35
34 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.
35 USAID, Report on U.S. Humanitarian Assistance to North Koreans, April 25, 2005;
March and April 2005 e-mail exchanges and phone conversations with WFP and USAID
(continued...)

CRS-13
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.36 The 2004 nutrition survey found, for instance, that the
stunting rates (measured as height-for-age) for children under six in the
northern and eastern provinces of Yanggang (47%) and South Hamgyong
(46%) were nearly half the level in Pyongyang (26%).37 Because the WFP
uses the state-run 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 on the basis that it helps
to sustain the regime and to stunt the development of local markets that are
outside the government’s direct control.38
! Inability to conduct random spot checks. Not only is the WFP’s
access incomplete, but is also highly circumscribed by the
government, which restricts the WFP’s staff from conducting
random checks. Pyongyang has yet to provide WFP with the full list
of beneficiary institutions through which WFP food assistance is
provided, despite a 2001 pledge to do so. In the absence of a list and
free access, WFP monitoring teams in North Korea submit travel
requests to the government five days in advance. Local North
Korean authorities then decide which institutions will be visited,
though WFP officers’ on-the-spot requests for visits to specific sites
occasionally are granted. Critics of the food aid programs have
argued that the monitoring trips are staged by the North Korean
government.39 Interviewees cannot be chosen at random, for
instance, and the WFP is not permitted to interview households that
35 (...continued)
representatives.
36 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.
37 North Korean Central Bureau of Statistics Institute of Child Nutrition, DPRK 2004
Nutrition Assessment. Report of Survey Results, February 2005, p.82.
38 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, 2003), especially p.5.
39 See, for instance, Sophie Delaunay, May 2, 2002 testimony.

CRS-14
are not already receiving aid, making it difficult to ascertain whether
aid is going to the most needy.
Figure 3. Map of the World Food Program’s
North Korea Operations as of February 2004
Source: World Food Program, Map Resources. Adapted by CRS. (K. Yancey 3/18/04)
Until the restrictions implemented in the fall of 2004, U.N. officials
said the level of cooperation with their North Korean counterparts
had increased significantly over the years. In 2003, about 1% of the
pre-arranged trips were cancelled, compared with 5% in 2002 and
8% in 2001.40 Prior to the 2004 restrictions, WFP officials said
their ability to monitor shipments had improved over time, despite
the constraints imposed on them. The authorities had allowed the
WFP and other relief groups more access to more institutions.41
The number of monitoring visits more than doubled between 2001
and 2003, raising the average number of monthly visits to 513 in
2003, up from 265 in 2000. Following the fall 2004 restrictions,
visits fell to levels not experienced since 2001, though they were
40 March 2004 e-mail correspondence with Massood Hyder, WFP Representative for the
DPRK.
41 Smith, Overcoming Humanitarian Dilemmas, p.13

CRS-15
still above some previous years’ levels.42 Additionally, WFP staff
reportedly have been allowed greater freedom in the types of
questions they can ask and expect to be answered.43
! Access to consumers’ markets. Until 2003, the WFP was barred
access — as were all foreigners — from entering consumers’
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.
In August 2003, the North Korean government gave the WFP and
other foreigners permission to enter the newly opened Tongil
consumer market in Pyongyang. Thereafter, visitations to other
markets began to be allowed, though WFP staff are permitted only
intermittent access to other markets throughout the country.44
! Inability to use its own interpreters. The WFP is not permitted to
recruit Korean speakers as its international staff, making WFP staff
reliant upon government-provided interpreters. WFP staff have been
allowed to study Korean after they arrive in North Korea.
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,” a former WFP country director for North Korea has written, “that our
aid has saved many, many lives.” Masood Hyder, former United Nations
humanitarian coordinator in North Korea has added that “above all, we [the U.N.
agencies] have established preventive capacity: Another famine cannot happen while
we are here and properly supported.”45 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.46 WFP officials also point to the progress they have made since 1995,
42 USAID, Report on U.S. Humanitarian Assistance.
43 January 2003 e-mail correspondence with Rick Corsino, former WFP Country Director
for North Korea.
44 May 2005 e-mail correspondence with Richard Ragan, WFP Country Director for North
Korea.
45 Masood Hyder, “In North Korea: First, Save Lives,” The Washington Post, January 4,
2004.
46 John Powell, May 2, 2002 testimony; Smith, Overcoming Humanitarian Dilemmas, p.14.

CRS-16
in particular gaining more access to more counties and institutions, and achieving a
greater degree of autonomy.47
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.
The WFP has curtailed food shipments to other countries, such as Zimbabwe, to
pressure central governments to improve access or monitoring conditions. In 1997,
the WFP reportedly used the threat of withdrawal to successfully pressure Pyongyang
to open the northeastern provinces.48 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.49 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.50 As discussed below, during the 1990s, U.S. and Japanese
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. Aid groups’ demands
for increased transparency appear to 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 most 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.51 As a result, while
contact between foreigners and North Koreans has increased dramatically compared
with the pre-1995 situation, rigid controls on humanitarian aid workers have led to
little engagement relative to the amount of aid flowing into the DPRK. NGO
representatives speculate that the tightening of restrictions on their activities in the
fall of 2004 was the result of a greater wariness toward the outside world by North
Korea’s top leaders and/or the increased influence of those North Korean authorities
who were uncomfortable with the growing access of foreign groups. The tightening
47 Smith, Overcoming Humanitarian Dilemmas, especially p. 13-14.
48 Natsios, The Great North Korean Famine, p. 175.
49 John Powell, May 2, 2002 testimony.
50 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.”
51 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, 2003), p. 3, 113-19.

CRS-17
coincided with growing tensions between North Korea and the United States, South
Korea, and Japan.52
Individual Countries’ Food Aid Programs
Four countries — the United States, China, South Korea, and Japan — together
have given over 80% of the 8.34 million MT of food aid the WFP says North Korea
received between 1996 and 2004. (See Figure 4.) According to the WFP, the United
States, China, and South Korea each gave around 2 million MT during that period.
Figure 4. Various Countries’ Reported Food
Aid to North Korea, 1996-2004
2,500,000
2,250,000
2,000,000
1,750,000
1,500,000
1,250,000
1,000,000
750,000
500,000
250,000
0
United States
China
South Korea
Japan
Non-WFP
Through WFP
Source: International Food Aid Information System (INTERFAIS)
The United States. Since 1997, the United States has sent over two million
metric tons (MT) of assistance worth nearly $700 million, over 90% of which has
been channeled through the United Nations World Food Program (WFP). 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. U.S. food
assistance has fallen markedly since 2001. The United States requires that at least
75% of its food assistance be shipped to the northeastern provinces.
Food Aid Policy During the Clinton Administration. Despite the
Clinton Administration’s claim that food assistance to North Korea was not linked
52 March and April 2005 e-mail and phone exchanges with WFP and NGO representatives.

CRS-18
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 negotiations.53 Between 1997 and 1999, for instance,
the Clinton Administration provided food to secure North Korea’s participation in
four-way security talks with the United States, 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.54 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.55
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.56 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.57
Food Aid Policy During the Bush Administration. Though the Bush
Administration generally has followed a food assistance policy that is more closely
linked to humanitarian principles than was the case during the Clinton years, it too
has given contradictory signals on food aid. Since June 2002, the Bush
Administration officially has applied a different type of conditionality than was used
during the Clinton years, linking the level of 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.58 For months, the Administration officials made conflicting
statements 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. Also in January 2003,
53 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.
54 David Sanger, “N. Korea Consents to U.S. Inspection of a Suspect Site,” New York Times,
March 17, 1999.
55 Snyder, “The NGO Experience in North Korea,” p.4-5.
56 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.
57 Natsios, The Great North Korean Famine; Noland, Avoiding the Apocalypse, p. 188-91.
58 USAID Press Release, June 7, 2002.

CRS-19
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. Boucher also implied that the
President’s mention of food referred to programs to support North Korea’s
agricultural sector.59 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.
On December 24, 2003, the State Department announced that the United States
had decided to donate the additional 60,000 MT to the WFP’s 2003 North Korea
appeal. The stated reason for providing the additional amount was the continued
poor humanitarian situation in North Korea. Administration officials denied the
decisions were motivated by a desire to influence the six-party talks. The official
announcements also referred to improvements in North Korea’s cooperation with the
WFP on access and monitoring, though those improvements were widely thought to
be marginal.
On July 23, 2004, the State Department announced a 50,000 MT contribution
to the WFP’s 2004 North Korea appeal. As of late May 2005, the Bush
Administration had yet to make a decision on new pledges of food to the DPRK. On
May 20, 2005, State Department spokesman Boucher said that the decision would be
based on three factors: the need in North Korea, the ability to monitor food
shipments, and competing needs on U.S. food assistance.60

Bush Administration officials report they have held a number of meetings with
their North Korean counterparts to discuss the ways in which North Korea could
address monitoring and access issues in exchange for increased U.S. food assistance.
North Korea reportedly has failed to respond to these proposals. The Administration
also has asked the South Korean and Chinese governments to donate food through
the WFP and to press North Korea to allow better access and monitoring of their
bilateral food aid.61
59 “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].
60 Richard Boucher, State Department Daily Press Briefing, May 20, 2005.
61 USAID, Report on U.S. Humanitarian Assistance to North Koreans.

CRS-20
Competition for Food Aid Resources.62 The debate over whether and
how to provide food aid to North Korea has been made more acute by competition
with other emergency situations — particularly those in Sudan, Ethiopia, and the
countries hit by the December 26, 2004 Indian Ocean tsunami — where access and
transparency are less of an issue. These competing demands have stretched U.S. food
aid resources for FY2005. For instance, of the nearly $1.2 billion in regular FY2005
appropriations for the P.L. 480 Title II food assistance program, all but $33 million
had been allocated as of early April 2005. Congress approved an additional $240
million for Sudan and other emergencies in Africa in May 2005 as part of the
emergency FY2005 supplemental (P.L. 109-13), but some believe that amount will
fall short of existing demands. Historically, P.L. 480 has been the main vehicle for
providing U.S. agricultural commodities as food aid overseas, and since the end of
FY2002 has been the program that has funded nearly all of the U.S. food
commitments to North Korea. Congress directly appropriates P.L. 480 aid, and
therefore could, although it rarely does, direct how the food should or should not be
disbursed. Some Members of Congress have asked the Administration to release
food and funds from the Bill Emerson Humanitarian Trust, a reserve of commodities
and cash that is intended to provide food aid when Title II aid is unavailable, for the
emergency food situation in Ethiopia. However, in early April 2005, the trust held
just 1.4 million MT of its 4 million MT of capacity and only about $89 million in
cash.63
Another food aid program, section 416(b) of the Agricultural Act of 1949, is
unlikely to be available. From FY1999-FY2002, most of U.S. food assistance to
North Korea was provided under the 416(b) program, which is administered by the
U.S. Department of Agriculture (USDA) and 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. The heavy use of the Section 416(b)
program was facilitated by a sharp rise in CCC-acquired food-stocks from 1999
through 2001. Since then, however, these stocks have fallen dramatically.
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.
China’s Food Aid and Food Exports. 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.64 In the mid-1990s, during the
62 This section borrows heavily from CRS Report RS22027, Indian Ocean Earthquake and
Tsunami: Food Aid Needs and the U.S. Response, and Issue Brief IB98006, Agricultural
Export and Food Aid Programs, both by Charles Hanrahan.
63 Charles Hanrahan, CRS Report RS22027, Indian Ocean Earthquake and Tsunami: Food
Aid Needs and the U.S. Response, updated April 8, 2005.
64 Marcus Noland, Avoiding the Apocalypse. The Future of the Two Koreas, (Washington,
(continued...)

CRS-21
height of the first North Korean nuclear crisis, China cut its food shipments to the
DPRK dramatically, perhaps by as much as 80% - 90%, only to restore them in 1996
and 1997 with the onset of famine, which threatened the possibility of a North
Korean collapse and was leading to increased numbers of North Koreans crossing the
border into northeastern China.65 As discussed below, in the section on energy
assistance, Chinese fuel shipments to North Korea have been much larger and more
consistent than its food exports. Many observers believe Beijing has promised North
Korea food and fuel in exchange for its participation in the six-party nuclear talks.
Figure 5. Deliveries of Chinese Food Aid to
North Korea, 1996-2005
500,000
400,000
300,000
200,000
100,000
0
1996
1997
1998
1999
2000
2001
2002
2003
2004 1/05-3/05
Source: WFP INTERFAIS Database (2005)
According to WFP statistics, which are obtained from the Chinese government,
since 1996, China has provided North Korea with roughly 2 million MT of food
assistance. Chinese official food aid to North Korea has fallen in recent years,
though in the first three months of 2005 China sent over 140,000 MT, compared with
just over 130,000 MT for all of 2004.66 However, the WFP data do not include
Chinese food exports to North Korea, at least some of which is provided at
64 (...continued)
DC: Institute for International Economics, 2000), 187-88.
65 China officially justified this move as a response to budget pressures and state-owned
enterprises’ increased resistance 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 advice 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.
66 Joseph Kahn and David E. Sanger, “China Rules Out Using Sanctions On North Korea,”
New York Times, May 11, 2005.

CRS-22
“friendship prices.” According to Beijing’s official customs statistics, for instance,
China exported nearly 2.6 million MT of cereals to the North between 1996 and
2000.67 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.68
Figure 6 charts the year-by-year value of Chinese exports of cereals (principally rice
and corn) and meat. Meat exports increased by a factor of 14 from 2002 to 2004, due
to a surge in shipments of pork.
Figure 6. Chinese Food Exports to North
Korea, 1995-2004
$160
$140
$120
$100
$80
$60
$40
$20
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Cereals
Meat
Source: Global Trade Atlas
Food Aid from South Korea. South Korea has provided North Korea with
nearly 2 million MT of governmental food aid since 1996, a figure that does not
include an additional 300,000 MT Seoul pledged in 2004 and likely will be delivered
in 2005. Nearly all of Seoul’s humanitarian aid to Pyongyang has been sent since
2000, when relations between North and South Korea began improving dramatically
under the “sunshine policy” of engagement pursued by then President Kim Dae Jung.
Current ROK President Roh Moo-hyun has expanded the policy by continuing
humanitarian assistance and increasing funding for two major inter-Korean projects:
the reconnecting of inter-Korean roads and rail lines, and the creation of an industrial
park in the North Korean city of Kaesong. Until 2005, funding for existing South
Korean aid programs appeared to be unrelated to developments in the overall security
environment, though South Korean government officials have stated that major new
projects would not be initiated until the nuclear situation was resolved. In 2005,
67 Cited in March 2003 e-mail correspondence with Nicholas Eberstadt and Heather Dresser
of the American Enterprise Institute.
68 Noland, Avoiding the Apocalypse, 187-88.

CRS-23
Seoul linked provision of humanitarian assistance to North Korea returning to the
bilateral reconciliation process, which it had halted in July 2004.
South Korea has filled much of the food gap created when other countries’
donations to North Korea began to drop in 2002. About three-quarters of South
Korea’s food is sent bilaterally to North Korea, a method that has drawn criticism
from some observers because Pyongyang permits South Korea to conduct only
minimal monitoring of its food assistance. The bilateral shipments are sold to the
North Korean government, which pays for the food via a loan from the South Korean
Export-Import Bank. The loans are to be repaid in a twenty-year installment plan,
which begins after a ten-year grace period (i.e. the full length of the loan is thirty
years) at a 1% annual rate of interest. As of early June 2005, South Korea had yet to
pledge additional food assistance to North Korea, despite reports of Pyongyang
requests for aid. During inter-Korean vice-ministerial level talks in May 2005, ROK
officials reportedly told the North Koreans they would discuss food assistance only
if North Korea agreed to restart inter-Korean dialogue, which Pyongyang had halted
in July 2004.69 During the meeting, the two Koreas agreed to resume inter-
ministerial level talks — which had been held quarterly for about two years until
North Korea’s walkout — in June 2005.
Figure 7. Deliveries of ROK Food Aid to
North Korea, 1995-2004
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
ROK Non-WFP
ROK WFP
Source: WFP INTERFAIS database (2005)
From 1999-2004, South Korea also gave North Korea over 1.5 million MT of
fertilizer, including 300,000 MT annually from 2002-2004.70 (See Table 6 in the
Appendix for a detailed, non-exhaustive account of South Korean expenditures on
inter-Korean relations) In early 2005, North Korea reportedly requested 500,000 MT
69 “South Offers North Payoff for 6-Way Talks,” JoongAng Ilbo, May 17, 2005.
70 Fertilizer figures are from the Washington, DC South Korean Embassy.

CRS-24
of food from South Korea, but Seoul refused until Pyongyang agreed to restart high-
level dialogue. In a vice-ministerial meeting between the two Koreas in May 2005,
the first high-level inter-Korean meeting in nearly a year, South Korea agreed to
provide 200,000 MT of fertilizer aid.
Food Aid from Japan. Japan has given its food aid episodically, and has
linked its donations to the state of its relations with North Korea. Much (500,000
MT) of Japan’s 1.2 million MT total contribution to North Korea came in one year,
2001. The subsequent downturn in Pyongyang-Tokyo relations led Japan to
discontinue its food aid until 2004, when Japan pledged 250,000 MT following the
May 2004 summit between Japanese Prime Minister Junichiro Koizumi and North
Korean leader Kim Jong-il. However, only 80,000 of the pledge was actually
delivered in 2004, after bilateral relations took a downturn later in the year, leading
Japan to once again halt food assistance. The deterioration in relations has been
primarily due to the lack of progress in resolving the issue of North Korea’s
kidnapping of several Japanese in the 1970s and 1980s. Since 1997, all of Japan’s
donations have been channeled through the WFP. In 2004, Japanese teams traveled
to North Korea to monitor the WFP’s distribution of Japanese food aid.
Figure 8. Deliveries of Japanese Food Aid to
North Korea, 1995-2004
500,000
400,000
300,000
200,000
100,000
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Japan Non-WFP
Japan WFP
Source: WFP INTERFAIS database (2005)
Energy Assistance
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.

CRS-25
Benefits promised to North Korea, which have been provided by the multinational
Korean Peninsula Energy Development Organization (KEDO), include the
construction of two 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 were
roughly equivalent to the energy North Korea lost from shutting down its nuclear
power plants. Between 1995 and 2003, the United States provided over $400 million
to KEDO, of which nearly $380 million went towards heavy fuel oil shipments and
the remainder for the organization’s administrative expenses.
The United States is the third-largest contributor to KEDO, following South
Korea, which has contributed over $1.3 billion, and Japan ($480 million). (See
Table 2.) South Korea and Japan have provided the bulk of the funding for building
the reactors, for KEDO’s administrative costs, and for funding the plan to suspend
the reactor construction. The United States funded over three-quarters of the total for
the shipment of heavy fuel oil (HFO) to the DPRK. The European Union has
provided $95.8 million, or nearly 20% of the HFO costs.71
Following KEDO’s suspension of its heavy fuel oil deliveries to the DPRK in
November 2002, U.S. funding for KEDO fell to $3.7 million in 2003 (for
administrative expenses), and to zero thereafter. The Bush Administration’s position
is that it would like to permanently end the KEDO program.72 In November 2003,
KEDO’s Executive Board decided to suspend construction of the partially-built
nuclear reactors for one year, a decision that was repeated in November 2004. In
May 2005, it was announced that the contract of KEDO’s Executive Director,
Charles Hartman, had not been renewed.
Table 2. KEDO Contributions, Various Countries
($ millions)
ROK
Japan
US
EU
Total (1995-2004)
1,364.4
480.9
405.1
121.4
2003-2004
470.0
147.5
3.7
2.4
Source: KEDO
Since construction on the light-water reactors was suspended, KEDO’s staff at
headquarters in New York was reduced to 38, from 50 at the end of 2001. Over one
hundred caretaker workers remain at Kumho, where they perform security,
maintenance, and preservation tasks for the partially constructed reactors. These
activities are funded primarily by South Korea and Japan. Over 1,400 workers were
71 The EU has channeled its contributions through the European Atomic Energy Commission
(EAEC). Most of the EU’s annual contributions to KEDO have been 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.
72 State Department Daily Press Briefing by Adam Ereli, Deputy Spokesman, November 5,
2003.

CRS-26
at the site at the end of 2001. After the suspension was announced, North Korea
refused to allow KEDO to remove certain types of equipment from the Kumho site,
in violation of agreements signed between KEDO and the North Korean
government.73
Chinese Fuel Shipments
Chinese shipments of petroleum and coal products to North Korea are believed
to be quite significant to the North Korean economy. As figure 9 shows, the value
of Chinese fuel exports — some of which is presumably obtained at “friendship
prices” — generally has been over $100 million per year. China’s fuel shipments
nearly doubled in the two years after the KEDO Executive Board halted heavy fuel
oil deliveries in November 2002.
Figure 9. Chinese Fuel Shipments to North
Korea, 1995-2004
$250
$200
$150
$100
$50
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source: Global Trade Atlas
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
73 For instance, Article IV, paragraph 9 of the 1995 DPRK-KEDO Supply Agreement reads
“The DPRK shall not interfere with the repatriation, in accordance with customs clearance
procedures, by KEDO, its contractors and subcontractors of construction equipment and
remaining materials from the LWR [light-water reactor] project.”

CRS-27
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
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.74
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, 1993-2003
($ thousands)
U.S.
U.S.
U.S.
U.S.
Year
Total
Year
Total
Imports
Exports
Imports
Exports
1993
0
1,979
1,979
1999
0
11,265
11,265
1994
0
180
180
2000
154
2737
2,891
1995
0
5,007
5,007
2001
20
650
670
1996
0
541
541
2002
15
25,012
25,027
1997
0
2,409
2,409
2003
59
7,977
8,036
1998
0
4,454
4,454
2004
77
23,750
23,827
Source: U.S. International Trade Commission
However, a more probable cause is North Korea’s lack of export
competitiveness and relative economic isolation from the rest of the world. North
Korea has faced few or no barriers to exporting to Japan and the European Union, for
instance. While its exports to those areas are far greater than to the United States, the
absolute values are minuscule compared with countries of comparable size that are
integrated into the global trading system. 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 opine that
74 Rennack, North Korea: Economic Sanctions.

CRS-28
international assistance actually has allowed North Korea’s leadership to avoid
instituting more market-oriented policies.75
There is virtually no U.S. foreign direct investment in North Korea. The
American Chamber of Commerce in South Korea has attempted to arrange
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 $28 million for assistance in
recovering the suspected remains of the several thousand U.S. servicemen
unaccounted for during the Korean War.76 Most of the funds have been used to pay
for the costs of over 32 joint field activities that have been conducted in North Korea
since 1996, operations that have recovered over 220 probable U.S. remains.77 (See
Table 4 below) These figures do not include costs of flying a North Korean
delegation to Bangkok for annual negotiations about future joint field operations.
DPMO estimates the cost of flying a seven-person North Korean team, which has
been done since 2002, at $25,000, a figure the office says is cheaper than conducting
the negotiations in other locations.
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. Defense Department officials report that
while operating conditions in North Korea are far from ideal, the scale of the
operations increased gradually significantly from 1996 to 2001 and has varied in
scale since.78
75 See, for instance, Noland, Avoiding the Apocalypse, p. 107-110.
76 Estimates vary as to the number whose deaths might result in remains being found in
North Korea; the range is roughly between 2,000 and 9,000. In an April 2005 e-mail
exchange, DPMO put the total at “more than 8,000.” For more on the POW/MIA issue, see
CRS Issue Brief IB92101, POWs and MIAs: Status and Accounting Issues, by Robert
Goldich.
77 April 2005 e-mail correspondence with DPMO. Between 1990 and 1994, North Korea
unilaterally returned over 200 remains, virtually all of which were unidentifiable.
78 February 2003 briefing by and April 2005 e-mail correspondence with DPMO officials.

CRS-29
On May 25, 2005, the U.S. Department of Defense announced it was
“temporarily” suspending the joint recovery operations, ostensibly due to “force
protection” concerns over the safety of U.S. search teams, which operate without any
means of communicating outside North Korea. A Defense Department statement
said the operations would continue after North Korea has “created an appropriate
environment.” In May 26 congressional testimony, Deputy Assistant Secretary of
Defense Richard Lawless indicated that the Pentagon had asked the North Koreans
to alter the terms of the search agreement to allow U.S. military personnel a way to
communicate in emergencies. One search team had completed its mission before the
announcement was made.79
Table 4. U.S. Payments to North Korea for Joint POW/MIA
Recovery Activities, 1996-2005
($US millions)
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Total
$0.1
$0.3
$0.7
$1.3
$2.1
$4.4
$3.1
$2.1
$5.0
$1.5a
$20.5
Source: Department of Defense’s Prisoner of War/Missing Personnel Office
a. First payment of $5.5 million.
U.S. Policy Options for Aid to North Korea
Congress and the Administration have a variety of options for future assistance
to North Korea. Given the suspension of the KEDO project, the immediate decisions
will revolve around food aid, particularly given increased demand for food assistance
from other areas of the world. 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 discussed earlier, any decision by the United States to apply sanctions,
impose a de facto quarantine, or economically suspend or terminate its current aid
would be expected to have a limited economic effect on North Korea because in the
short-to-medium term, China and/or South Korea — which place a high priority on
maintaining North Korea’s stability — could increase their own assistance to
compensate. Table 6, in the appendix, shows the dramatic increase in the South
Korean government’s expenditures on engaging North Korea since the June 2000
summit between Kim Jong-il and Kim Dae Jung. The bulk of these funds, which are
in the $500 million per year range, constitute direct or indirect assistance to the
DPRK. Moreover, in addition to aid, Beijing and Seoul are by far North Korea’s
largest trading partners. (See Table 5.)
Food Aid Options
Options for food aid policy include:
79 Bradley Graham, “U.S. Halts Missions To Recover Remains In N. Korea,” Washington
Post, May 26, 2005; May 26, 2005 hearing before the House International Relations
Subcommittee on Asia and the Pacific.

CRS-30
! Provide 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. Proponents of continued assistance take
issue with criticism that international aid enables the North Korean
government to divert resources to the country’s military and elite.
They argue that because humanitarian priorities are unlikely to
dictate the North Korean regime’s priorities, foreign assistance is the
only hope for feeding the bulk of the population, at least in the
immediate term.80 Many also argue that food aid provides an
opportunity for exposing North Koreans to the outside world, by
virtue of the permanent and reasonably extensive monitoring
presence maintained by the WFP and other aid groups. An
additional diplomatic benefit of providing food aid unconditionally
is that it might 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.81
! 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 an attempt 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
enabled the North Korean government to avoid importing food,
allowing it to spend hard currency on other items.82
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 might lead to greater immediate cooperation
in certain negotiations from Pyongyang. China and Japan have had
some short-term successes in linking their food assistance to North
80 Hyder, “In North Korea: First, Save Lives.”
81 See, for instance, President Bush’s February 20, 2002 remarks at the Demilitarized Zone,
[http://www.whitehouse.gov/news/releases/2002].
82 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-31
Korean cooperation on other issues. In China’s case, it appears to
have helped secure North Korea’s participation in various rounds of
six party talks. For Japan, promises of food aid have helped in on
resolving some issues of North Korea’s abductions of Japanese
citizens in the 1970s and 1980s.
However, in both the Japanese and Chinese cases, it is not clear that the
provision of food has induced significant changes in North Korea’s overall
behavior on security issues. Likewise, the huge U.S. provision of food aid
in 1999, may have helped obtain an inspection of the suspected nuclear site
at Kumchangri, but it did not prevent North Korea from pursuing a
separate uranium enrichment nuclear program. Additionally, this approach
runs the risk of encouraging the North 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 would have to be reconciled with recent congressional and
executive efforts to delink the two.83
! Establish “internal” linkages by conditioning future food aid on
improvements in access and monitoring, as USAID Director
Andrew Natsios has argued in the past.84 Establishing such internal
linkages, however, is unlikely to induce much change in North
Korea so long as it is dwarfed by unmonitored Chinese and South
Korean assistance.
! Maintain the status quo of a hybrid approach to food aid. In
theory, 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. The Administration’s relatively loose application
of its official policy, however, shows the difficulties in practice of
divorcing humanitarian assistance from the overall security
environment.
83 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.
84 Natsios, The Great North Korean Famine.

CRS-32
Table 5. North Korea’s Trade with Major Partners, 2001-2003
(thousands of dollars)
2003
2002
2001
Total
NK Export
NK Import
Total
NK Export
NK Import
Total
NK Export
NK Import
All Countries
3,115,592
1,066,244
2,049,347
2,902,118
1,006,567
1,895,551
2,663,345
911,162
1,752,183
Share
100%
100%
100%
100%
100%
100%
100%
100%
100%
China
1,022,927
395,344
627,583
738,172
270,863
467,309
737,457
166,797
570,660
33%
37%
31%
25%
27%
25%
28%
18%
33%
South Korea
724,217
289,252
434,965
641,730
271,575
370,155
402,957
176,170
226,787
23%
27%
21%
22%
27%
20%
15%
19%
13%
Japan
265,318
173,818
91,500
369,541
234,404
135,137
474,695
225,618
249,077
9%
16%
4%
13%
23%
7%
18%
25%
14%
EU
n/a
347,690
65,031
282,659
313,523
81,062
232,461
12%
6%
15%
12%
9%
13%
Thailand
254,317
50,706
203,611
216,582
44,616
171,966
130,062
24,098
105,964
8%
5%
10%
7%
4%
9%
5%
3%
6%
United States
8,036
59
7,977
25,027
15
25,012
670
20
650
0.3%
0%
0%
0.9%
0.0%
1.3%
0.0%
0.0%
0.0%
Other Countries
840,777
157,065
683,711
563,376
120,063
443,313
603,981
237,397
366,584
27%
15%
33%
20%
12%
25%
23%
26%
21%
Source: KOTRA (Korea Trade Investment Promotion Agency), Ministry of Unification, U.S. ITC
Notes: “All Countries” includes North Korea’s Trade with South Korea. NK import figures include foreign aid.

CRS-33
! Channel aid through non-governmental organizations (NGOs).85
Most relief NGOs operating in North Korea are forced to operate
under the same, if not more rigid, controls as the WFP.86 U.S. NGOs
operate under particularly tight scrutiny. They are not permitted to
maintain permanent offices inside North Korea. Additionally,
numerous South Korean NGOs operate in North Korea, often with
financial backing from Seoul. A few relief groups 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 groups, and focused on ongoing niche
areas such as rebuilding North Korea’s health care system, rather
than on emergency relief.87 These organizations’ relative degree of
success may be partly attributable to the size of their operations,
which allows some to set up their own distribution system
independent of the public distribution system and to deal principally
with more cooperative local North Korean officials. Some of these
advantages might be negated if the groups began to receive large
amounts of funding from the U.S. government. Additionally, NGO
representatives report that they were hard hit by the DPRK’s
tightening of restrictions in the fall 2004.
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 2000.88
! Increase pressure on South Korea and China to channel their
food aid through the WFP.89 WFP officials have said that the large
85 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/].
86 Snyder, et. al., The NGO Experience in North Korea.
87 Flaker, “The Experience of U.S. NGOs in North Korea,” p.31-35.
88 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/].
89 Marcus Noland and Stephan Haggard, Statement Submitted to House International
Relations Subcommittees on Asia and the Pacific and on Africa, Global Human Rights, and
(continued...)

CRS-34
bilateral, and largely unmonitored, donations South Korea and China
undermine their efforts to negotiate increased access and
transparency. Although U.S. working level officials have raised the
issue with their South Korean and Chinese counterparts, it is not
clear whether higher level officials have done so.
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 push to terminate all or
parts of the KEDO program. Suspending without terminating KEDO arguably has
bought the United States more time and avoided 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. South Korea
and Japan have opposed permanently shutting down KEDO, which the Bush
Administration has said it favors. Some policymakers and observers have spoken of
terminating KEDO’s light-water reactor program but preserving its organizational
structure, in order to make use of KEDO’s functional expertise and history of
working with North Korea in future energy initiatives with Pyongyang.
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 energy assistance. 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
certain types of aid to countries on the terrorism list and that
specifically prohibit aid for North Korea. Some assert that any
energy assistance provided should be non-nuclear in nature, arguing
that nuclear reactors are ill-suited to meeting North Korea’s energy
needs because they will take a long time to complete and that 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. Seoul has
been receptive to the idea, and has begun providing electricity for the
North-South industrial park in Kaesong, North Korea.
In June 2004, during the third round of six-party talks the United States
gave its blessing to a proposal by Japan and South Korea under which
89 (...continued)
International Operations hearing, April 28, 2005.

CRS-35
those countries would provide the North with heavy oil in return for a
freeze of North Korea’s nuclear weapons program, followed by a series of
measures to ensure complete dismantlement and, eventually, a permanent
security guarantee, negotiations to resolve North Korea’s energy problems,
and discussions on normalizing U.S.-North Korean relations that would
include lifting the remaining U.S. sanctions and removing North Korea
from the list of terrorist-supporting countries. North Korea rejected the
proposal as a “sham.”

! Provide agricultural support assistance. This could help reduce
North Korea’s chronic dependence on outside aid by boosting its
domestic agricultural output.90 Many European NGOs, and some
U.S. groups, 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.91 Some observers
counter that focusing on self-sufficiency distracts from what they
argue is the most efficient solution to the food security problem:
importing more food from abroad.92
! Provide other types of humanitarian assistance. North Korea’s
health care system 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 was believed to have been eradicated from the
DPRK in the 1970s. 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.
! Expand academic exchanges and training programs in financial
and economic skills for North Koreans. Some have called for
capitalizing on the growth of North Korea’s private sector by
building a “vanguard for change” among the North Korean
bureaucracy and academia that could become advocates for
additional reforms. Many such exchanges and programs exist
including some in the United States. Proponents for expanding these
activities contend that they represent ways to build North Korea’s
90 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.
91 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.
92 May 2005 e-mail correspondence with Marcus Noland, Senior Fellow, Institute for
International Economics.

CRS-36
institutional capacity for change without channeling resources to the
current Kim Jong-il regime.93
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 begin providing any
large-scale aid.
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
is a major component of former the “sunshine policy” of engagement initiated by
former South Korean President Kim Dae Jung. Kim’s successor, Roh Moo-hyun, has
expanded the policy, though South Korea appears to be linking larger-scale assistance
to progress on the nuclear issue.

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, have brought Japan-North Korea normalization talks to
a halt since the fall of 2002.94
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 have discussed plans to begin rebuilding North
Korea’s dilapidated rail system.
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.
93 See, for instance, International Crisis Group Report No.96, North Korea: Can the Iron
Fist Accept the Invisible Hand? April 25, 2005.
94 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.

CRS-37
Additional CRS Products on North Korea
CRS Report RS21834, U.S. Assistance to North Korea: Fact Sheet.
CRS Issue Brief IB98045, Korea: U.S.-Korean Relations — Issues for Congress.
CRS Issue Brief IB91141, North Korea’s Nuclear Weapons Program.
CRS Report RL32743, North Korea: A Chronology of Events, October
2002-December 2004.
CRS Report RL31696, North Korea: Economic Sanctions.
CRS Report RL32493, The North Korean Economy: Background and Policy
Analysis.
CRS Report RL30613, North Korea: Terrorism List Removal?
CRS Report RL32167, Drug Trafficking and North Korea: Issues for U.S. Policy.
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 RS21582, North Korean Crisis: Possible Military Options.
CRS Report RL32428, Japanese Prime Minister Koizumi’s May 2004 Trip to North
Korea: Implications for U.S. Objectives.
CRS Report RL32161, Japan-North Korea Relations: Selected Issues.

CRS-38
Appendix A: South Korean Expenditures on Engaging North Korea
Table 6. South Korean Governmental Expenditures on Engaging North Korea, 1995-2004
Payment
Road &
Mt.
Kaesung
to DPRK
Aid to ROK
Family
Other
Exch.
Total Value KEDO (a)
Food Aid (b)
Fertilizer (b)
Rail Links
Kumgang
Industrial
for 2000
Business
Reunions
(e)
Rate
Year
(c)
Tours (c)
Complex (c)
Summit (d)
Value
Value
($ mil)
($ mil.)
Metric Tons
Metric Tons
($ mil)
($ mil)
($ mil)
($ mil)
($ mil)
($ mil)
($ mil.) (won/$)
($ mil.)
($ mil.)
1995
$241.8
$1.8
$240.0
150,000
—
—
—
—
—
—
—
—
—
771
1996
$11.9
$8.9
$2.9
3,612
—
—
—
—
—
—
—
—
$0.0
805
1997
$31.4
$3.0
$23.1
69,322
—
—
—
—
—
—
—
—
$5.3
954
1998
$21.1
$6.5
$11.0
40,000
—
—
—
—
—
—
—
$0.0
$3.6
1,395
1999
$35.3
$6.4
—
—
$28.5
150,000
—
—
—
—
—
$0.4
$0.0
1,189
2000
$706.5
$308.9
$93.4
500,000
$83.4
300,000
$12.9
$200.0
—
$0.4
—
$2.4
$5.0
1,131
2001
$453.2
$271.1
$17.3
100,000
$49.5
200,000
$69.6
— $34.8
$0.8

— $1.0
$9.1
1,291
2002
$584.9
$288.7
$120.4
500,000
$66.6
300,000
$53.5
— $43.9
$2.2

— $1.6
$7.9
1,251
2003
$650.4
$333.0
$122.2
500,000
$70.1
300,000
$94.1
— $5.1
$10.7

— $2.5
$12.8
1,192
2004
$543.3
$137.1
$164.6
500,000
$89.8
300,000
$92.6
—
$6.8
$11.9
$21.8
$2.8
$15.9
1,145
Total
$3,492.9
$1,365.2
$794.9
2,362,934
$387.9
1,550,000
$322.7
$200.0
$90.6
$26.1
$21.8
$223.9
$59.8
Notes: Exchange Rates from Bank of Korea Economic Statistics System (Longer Frequency, Avg Closing Rate).
Dollar values calculated as current year dollar conversions from Korean won. The exceptions are KEDO and the payment for the 2000 inter-Korean summit.
a. Figures from KEDO Annual Reports
b. ROK Ministry of Unification. Tonnage figures are pledges, not necessarily deliveries.
c. ROK Export-Import Bank’s “DPRK Support Fund”
d. South Korea Independent Counsel. In discussions held in March and April 2000 to arrange the first-ever North-South Korean summit, North and South Korean government officials
agreed that the Hyundai Group would pay North Korea $350 million in cash and that the South Korean government would pay $100 million in cash. The South Korean
government then arranged for the state-run Korean Development Bank to loan a Hyundai affiliate $200 million, which days before the summit was transferred to North Korean
bank accounts in Macao.
e. Includes Cultural Exchanges and Aid to NGOs