Make minerals work

Watershed summit meetings that could shape the future of the Korean Peninsula are in the making. Seoul is busy preparing a denuclearization scheme for a summit with Pyongyang in April. It will likely ask North Korea to return to the path of denuclearization in return for normalization of its ties with Washington and acceptance of the rogue state by the international community.

But that is easier said than done. The first question is whether Pyongyang will go along with Seoul’s proposals. Pyongyang, which ultimately wishes to guarantee the sustainability of its regime, may want more — a withdrawal of U.S. troops from South Korea and ending of the Seoul-Washington security alliance. The second problem is the effectiveness of the denuclearization scheme. Even when nuclear weapons and facilities are dismantled, the programs can be revived as long as North Korea has the nuclear know-how and uranium resources.

Some advise Seoul and Washington to offer large-scale economic development cooperation and aid. North Korean leader Kim Jong-un could be drawn to the idea of improving living standards for his people instead of killing the dialogue momentum through an insistence on the withdrawal of U.S. troops. An economic roadmap could raise the likelihood of North Korea complying with denuclearization. But there is a risk to economic aid. If Pyongyang gets richer from trade and economic improvements, its dictator could channel some of the money to restoring his nuclear program to produce more powerful weapons at a faster pace. The promising of economic projects, as was done in the past, can hardly guarantee an irreversible denuclearization, which is the objective of many countries including the South.

Seoul must come up with a more creative solution to make North Korea accept its scheme and ensure the irreversibility of any denuclearization. I propose Seoul suggest an international project of developing and operating North Korea’s anthracite, iron ore and uranium mines once Pyongyang wraps up the dismantlement of its nuclear weapons programs. Anthracite and iron ore exports were North Korea’s biggest source of hard currency before international sanctions took effect.

North Korea annually exported more than $1 billion worth of minerals, which accounted for half of the country’s total outbound shipments. Much of the revenue would have been spent on nuclear and missile development. Uranium in particular is a key nuclear material. If the financial resource to fund its weapons programs and nuclear material go under international oversight and management, a nuclear-free North Korea could become permanent. International investment also could ensure the viability of the business.

At the same time, revenue from the mineral trade would go to the North Korean people. Presuming that profit margins in the trade are 80 percent, as much as $800 million out of the $10 billion in mineral shipments could be spent to improve the lives of North Koreans. That money is enough to pay $32 to each North Korean a year. Since it takes $40 to $50 on average for a family of four to live a month — based on the black market foreign exchange rate — that kind of allowance can cover 20 to 30 percent of a household’s living expenses for a year.

When mineral productivity and exports increase through international investment and management, North Koreans could earn nearly a year’s income. The payments could be made through issuing securities timed with the complete dismantlement of nuclear and missile weapons. Such wealth would be enough to persuade Kim and the rest of North Korea towards the denuclearization option.

To increase the appeal of the proposal, Seoul could propose a package of business and economic ventures. The projects must be designed to help not only the two Koreas but also the United States, China, Japan and Russia, who all have major stakes in the goal of lasting peace and prosperity in the region. When foreign capital has stakes in North Korea, Kim could feel more secure about his regime. An increased international presence in the North will accelerate market activities and change its closed economic structure.

The idea can be compared to the establishment of the European Coal and Steel Community launched after World War II. The centralization of key industrial production and a common market for coal and steel was first proposed by French Foreign Minister Robert Schuman to “make war not only unthinkable but materially impossible.” We should establish a similar framework to “make nuclear development physically impossible.”

An economic solution backed by powerful incentives can activate a binding deterrence against nuclear development. In the long run, the aim should be to integrate the economies of the two Koreas and the region to ensure a lasting peace in Asia. A denuclearization scheme that stokes conflict between Washington and Beijing may not only not work, but also cannot ensure a safe future for the region.

Denuclearization can be achieved when sanctions stay intact until the international society is fully assured that the danger from Pyongyang’s nuclear and missile programs is completed removed from North Korea. In negotiations, North Korea will attempt to shake off international sanctions. Kim will surrender his nuclear ambitions when he learns such attempts cannot work. An international roadmap on denuclearization jointly backed by Seoul, Washington and Beijing is the only way to put Pyongyang on a peaceful path — and to ensure that it stays on it.

Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, March 28, Page 35

The author is a professor of economics at Seoul National University.

Kim Byung-yeon