The Six-Party Talks: Meeting North Korea’s energy needs

On February 13, 2007, North Korea and its five negotiating adversaries (the United States, South Korea, China, Japan, and Russia) agreed to reaffirm their 2005 commitments to denuclearize the Korean Peninsula but in a carefully sequenced manner. First Pyongyang was to freeze its plutonium production, then declare and disable its nuclear-weapons related capacities, and finally dismantle or remove those capacities irreversibly.

In the first or “Initial Actions” phase, North Korea obtained a million tonnes of heavy fuel oil (HFO) equivalent as the price for freezing its plutonium production at the Yongbyon nuclear facility. (See “The Beijing Deal is Not the Agreed Framework.”) The word “equivalent” allowed negotiators on both sides to determine (with some flexibility) how to deliver the million tonnes in short order and in light of North Korea’s known difficulty in absorbing or storing large quantities of HFO as fuel. (Nautilus previously estimated that North Korea could utilize only about 650,000 tonnes of HFO per year, or about 54,000 tonnes per month. See also our January/February 2006 Bulletin article Grid-Locked.)

An Energy and Economic Working Group (EEWG), one of five working groups established to negotiate the details of the February 13 agreement, was convened under South Korean chairmanship and met almost immediately for a “getting to know you” session in Beijing. However, little was achieved due to the predominance of foreign affairs officials present on all delegations. Most importantly, the North Korean side simply asked what was being offered to meet the million tonnes commitment without offering any guidance as to its priority energy needs.

South Korea sent 50,000 tonnes of HFO to North Korea within a few weeks as a sign of good faith that the five parties would meet their obligation provided North Korea froze its plutonium facilities. After the two Koreas settled upon acceptable import taxes and port fees, the first delivery went ahead as planned, and North Korea announced that International Atomic Energy Agency inspectors were welcome back to monitor and verify the freeze at Yongbyon, the nuclear reactor from which North Korea obtained its stocks of plutonium.

Separately, U.S. and North Korean negotiators were meeting in bilateral discussions on core issues related to the timetables and specific actions required to declare, disable, and dismantle North Korean nuclear capacities. Surprising many observers, the two parties agreed to complete the first phase by the end of 2007, giving only six months to deliver the million tonnes of HFO equivalent–no small task considering that no common understanding existed as to how to replace the HFO as fuel that North Korea could not absorb over that time (anything more than 300,000 tonnes).

South Korea initiated a round of discussions to explore the least expensive ways each of the parties could deliver on their HFO as fuel and their HFO equivalent commitments. The United States began to assemble its own preferred options to discuss with the North Korean negotiators based on the need to stay aligned with the other four parties, and the Japanese announced that they would not provide any assistance in this phase. The North Korean delegation was headed by its leading “American handler,” the head of their U.N. Mission in New York, instead of someone with knowledge of North Korean energy priorities.

At subsequent meetings (the third was held at Panmunjon from October 29-30), North Korea ignored suggestions that humanitarian or development priorities shape the HFO equivalent portion and requested that $280 million worth of equipment and material to rehabilitate coal mines, power lines, and generators be provided instead. Talks continue on specifying exactly what items will match the North Korean request and which of the five parties will purchase and ship them to North Korea.

But it’s already evident that only some of the HFO equivalent package can be delivered by the end of 2007. (Conversely, almost all of the HFO as fuel will have been supplied by year’s end.) Russia made clear it would not pay for HFO equivalent costs, although it would send its HFO as fuel quota. How this cost will be distributed between China, the United States, and South Korea given Japanese and Russian foot-dragging remains unclear.

Thus, North Korea has accepted some slippage in the first phase of energy assistance while observing the stringent timelines relating to its “complete” declaration of nuclear capacities. For its part, Washington will likely offset this slippage by pressing forward with preparations to remove North Korea from its list of terrorist states and lift economic sanctions–although these steps likely will be contingent upon North Korea completely declaring its nuclear capacities and overcoming U.S. congressional objections to the arrangement.

Assuming that the first phase is completed around April 2008 and the second phase is already in motion by that time, the lead on energy negotiations will pass from the EEWG to the U.S.-North Korea bilateral working group and the nuclear working group. In the second phase, the weapons-related disclosures and actions by North Korea will be much more demanding (and valuable to the five other parties), and prospective energy and economic assistance will number in the billions of dollars.

North Korea is then expected to immediately reiterate its demand for light water reactors (LWRs), something it was promised in the Agreed Framework but when that deal collapsed in 2002, never materialized. Although the LWRs are a poor way of meeting North Korea’s vast energy needs, Pyongyang views them as a status symbol and a substitute for nuclear weapons in this regard. It also allows them to retain a residual nuclear weapon capability, which is why the United States will likely resist acquiescing to this demand but agree to talk about it a noncommittal manner, something that Washington agreed to do in the September 2005 principles. Actual negotiation of and commitment to building LWRs (or a “LWR equivalent” package worth roughly $4-6 billion) wouldn’t occur until the most valuable (and therefore final) bargaining chip was on the table–North Korea’s nuclear weapons.

Meanwhile, with sanctions lifted, the EEWG would likely move from focusing on energy to addressing the economic dimension of engaging North Korea. Without sanctions, it will be possible for North Korea to start discussions with the World Bank about membership–the first step in ending decades of isolation and rehabilitating its reputation for secretive and risky commercial practices. Joining the World Bank would take at least five years, stretching long after any process of denuclearization during the Bush administration. But these talks may hold the key to North Korea moving beyond the easy disablement and dismantlement steps (plutonium facilities) to the harder and most difficult steps–surrendering its enrichment capacities and nuclear weapons.

By mid-2008, assuming no big surprises disrupt the process, talks about what North Korea must do to obtain the real prize (a strong economy) might be underway. To this end, the World Bank will utilize trust funds to field missions to Pyongyang to discuss structural and sectoral policy and institutional issues and to review North Korea’s accounts and policy framework.

Ultimately, the action will shift back to the EEWG or its derivative in 2008, assuming the denuclearization process is underway. The EEWG might undertake more stopgap energy assistance. Recent reports from Pyongyang indicate that more lights are on at night, electricity supply has improved somewhat, and more coal is being produced– although the situation in provincial towns and rural areas remains dismal and winter shortages of food and fuel are approaching. The EEWG might also take up the issue of how to redeploy North Korea’s atomic industrial complex, helping convert its facilities and thousands of scientists and technicians to new economic roles in a “cooperative threat reduction” arrangement.

Whether North Korea’s leadership will embrace this agenda of wholesale change is unknown, and Kim Jong Il is likely undecided. His response will determine the final outcome of the Six-Party Talks. It will reveal whether the parties have been maneuvering for tactical advantage and to gain time in order to avoid hard decisions, or if the talks have become a venue for substantive discussion about ending North Korea’s nuclear weapons program.

At this stage, most observers believe the process will play out slowly and indecisively. No one knows what might lead Kim and George W. Bush to decide that they need each other enough that North Korea abandoning its nuclear weapons becomes negotiable. For Kim, the source of such motivations is most likely domestic, and therefore unknown. He also faces new leadership emerging in South Korea and Japan in 2008. For Bush, an inclination to push hard for a resolution with “pygmy” Kim (as he once characterized him) likely rests on how much he needs a foreign policy success in the run-up to the November 2008 elections to offset the current disaster in Iraq and pending disaster in Iran.

In short, uncertainty dominates the political calculus of all the key players concerned with North Korea. Consequently, they will move cautiously and slowly rather than decisively and rapidly in their negotiations and actions. Therefore, an incoming U.S. president in January 2009 is likely to face a Kim Jong Il still armed with nuclear weapons even if deprived of plutonium production and uranium enrichment capacities.