[Overseas view]Step up economic diplomacy with North

The decision by the Bush administration to remove North Korea from the U.S. list of terrorism-sponsoring states, in return for Pyongyang’s decision to submit its nuclear declaration as agreed under the six-party talks, may prove to be more than just another move in an endless game of chicken. Last week, North Korea stated unequivocally that United Nations inspectors would be allowed full access.

North Korea complained that eight of the eleven agreed steps in disabling the nuclear facility at Yongbyon had been meet, but they had received only about half of an agreed 1 billion tons of oil aid in exchange. The current agreement resulted from intense negotiations in 2007 involving China, Japan and Russia as well as South Korea and the United States.

The situation is further complicated by the fact that the United States is immersed in, and distracted by, the presidential campaign and election, which underscores the role of South Korea. The current administration in Seoul has been comparatively hard-line toward North Korea, and the frustration regarding the erratic behavior of Pyongyang makes that fully understandable.

Nevertheless, South Korea has certain distinctive advantages which provide important leverage in dealing with the North Korean regime. The current international financial crisis raises uncertainty about economic recession and the survival of a number of large banking institutions. Nonetheless, the extraordinary economic success of South Korea remains grounded on a very substantial manufacturing base. This combined with notable military strength based on American and United Nations guarantees means that the security situation is reassuring.

The Lee Myung-bak administration has relatively good ties with the business community, and this in turn could be used to greater advantage in dealing with Pyongyang. The current, very limited trade could be increased, in particular through expansion of the small joint industrial development project in North Korea. The constant threat of mass starvation argues for using the good offices of South Korea greatly to expand nongovernmental donations of food and other assistance to the North. Again, UN involvement reinforces this opportunity. Uncertainty concerning the condition of North Korean leader Kim Jong-il provides further opportunity for South Korean leadership.

The high stakes involved are self-evident. The Korean War of 1950-53 took an estimated one million lives, brought American and Chinese forces in direct combat, and devastated the Korean Peninsula. In U.S. politics, the conflict demolished public support for the Truman administration and fed anti-communist hysteria.

Another war would devastate the Koreas once again, greatly disrupt international politics, and might go nuclear.

Additionally, the U.S. is now mired in Iraq, with precious few forces to spare for any additional war.

Last year, two developments were distinctive. First, international financial pressure spearheaded by the United States was instrumental in forcing flexibility on the rigid communist regime. The Bush administration declared Banco Delta Asia in Macau a renegade institution assisting illegal financial activities by Pyongyang. U.S. businesses were banned from dealing with BDA, and others followed suit. Macau government authorities froze $25 million in North Korean funds.

Washington then offered to facilitate unfreezing North Korean funds at BDA in return for nuclear flexibility. This transfer has been carried out by BDA, reportedly with assistance from the Federal Reserve Bank of New York, the central bank of Russia and a private Russian bank, the Far East Commercial Bank.

Second, in the wake of this nuclear-financial negotiation, the Pyongyang regime in June 2007 launched a missile over the waters between South Korea and Japan, with a 100-kilometer range.

This was the third test in two months, and reflected North Korean propensity to flex airborne muscle toward Japan, the hated former colonial ruler. There have been more missile tests this year, most recently in March and this month.

Such moves may be a sign of North Korean infighting. Cracks in the rigid totalitarian face of the regime could complicate but also facilitate efforts to reach a nuclear agreement. Trigger-happy missile launchers may force more moderate factions to rally around Pyongyang’s current efforts to reach a fresh nuclear understanding with other powers.

There has also been Bush administration infighting. President Bush has been consistently supportive of [the six-party talks] agreement, which directly reflects the efforts of the State Department and, specifically, chief negotiator Christopher Hill. Bluntly rejecting criticism of the agreement by John Bolton, his former UN ambassador, and other neoconservatives, Bush underscored the importance of “more than one voice.”

President Bush’s [recent turn to] multilateral diplomacy, and the importance of allies, has particular resonance in this part of the world, where South Korea, China, Japan and Russia along with the U.S. have played roles in the current breakthrough. Over the years, Pyongyang has become masterful at creating crises, sometimes approaching the brink of war, only to step back, usually in return for substantial economic concessions.

The writer is Clausen Distinguished Professor at Carthage College. He can be reached at acyr@carthage.edu.

By Arthur I. Cyr