North Korea: US moves to lift financial sanctions

March 1, 2007

On February 26, a US consular official in Hong Kong announced that Washington was ready to "begin taking steps" to lift financial sanctions on North Korea by resolving a dispute over Macau's Banco Delta Asia. In September 2005, the US Treasury designated BDA a primary money-laundering concern, accusing it of being a "willing pawn" in North Korea's alleged distribution of counterfeit US dollars and sales of illegal tobacco products.

The designation prompted the government of Macau, a special administrative region on China's south coast, to freeze the bank's accounts. This spooked other foreign banks into also freezing North Korea's accounts, shutting Pyongyang out of the international financial system.

In response, Pyongyang boycotted the six-party talks in Beijing with China, Japan, Russia, South Korea and the US on the "denuclearisation of the Korean Peninsula" from November 2005 until after North Korea tested a plutonium-based nuclear weapon last October 9. Pyongyang insisted Washington's financial sanctions against it be addressed as part of the talks, which resumed in December.

On February 13, an agreement was reached at the talks under which Washington is to resolve the dispute over BDA within 30 days. If this deadline is met, Pyongyang has agreed to begin implementing its commitments under an agreement on "Initial Actions for the Implementation of the Joint Statement" of the six parties issued on September 19, 2005.

The joint statement committed North Korea and the US "to respect each other's sovereignty, exist peacefully together, and take steps to normalise their relations". In exchange, Pyongyang agreed to give up all its nuclear weapons and existing nuclear programs.

In the four decades after US military forces were fought to a stalemate by North Korea and China in the 1950-53 Korean War, Washington has continued to regard North Korea as an "enemy state", repeatedly threatening it with a US nuclear attack.

In 1993, Pyongyang declared that it would withdraw from the nuclear Non-Proliferation Treaty (NPT), and begin extracting plutonium from nuclear waste to produce nuclear weapons as a deterrent against a nuclear attack.

After a year of negotiations, the administration of then US president Bill Clinton signed an "agreed framework" with Pyongyang under which "both sides will move toward full normalisation of political and economic relations", including a provision by Washington that it would "provide formal assurances" to North Korea "against the threat or use of nuclear weapons by the US".

Both sides also agreed to "work together for peace and security on a nuclear [weapons] free Korean peninsula". Pyongyang agreed to close its Yongbyon heavy-water moderated nuclear power reactor — which generated plutonium waste — in exchange for the West supplying non-plutonium-producing light-water moderated reactors (LWR).

The US agreed to supply 500,000 tonnes of fuel oil annually to North Korea while the LWR reactors were being built.

Upon becoming US president in 2001, George Bush junior told South Korea's president and North Korean emissaries that he had no intentions of normalising relations with Pyongyang as required under the 1994 agreement.

In January 2002, Bush denounced North Korea as part of an "axis of evil" that included Iraq and Iran. These countries, Bush alleged, had secret nuclear weapons programs, in violation of their NPT commitments, and he vowed to take "pre-emptive" military action to stop them producing nuclear bombs.

In October 2002, Bush unilaterally abrogated the 1994 agreement, including ending fuel-oil shipments. Pyongyang responded by reopening its nuclear facilities for energy generation. As Washington assembled its military forces for its March 2003 invasion of Iraq, Pyongyang announced it was withdrawing from the NPT.

In the months after the US-led invasion of Iraq, North Korea announced it was extracting plutonium from spent fuel rods to produce nuclear weapons until "the US gives up its hostile policy". While calling for bilateral talks with Washington, Pyongyang also declared that, "if the US is ready to make a bold switchover in its Korea policy for a settlement of the nuclear issue, [North Korea] will not stick to any particular dialogue format". The six-party talks began August 2003.

The February 13 six-party agreement sets out preliminary steps to implement the September 2005 joint statement. These include an agreement that Pyongyang and Washington "will start bilateral talks aimed at resolving bilateral issues and moving toward full diplomatic relations". In exchange for Pyongyang agreeing to close down its Yongbyon facility and rejoin the NPT, the other five parties agreed to "the provision of emergency energy assistance" to North Korea. An "initial shipment of emergency energy assistance equivalent to 50,000 tonnes of heavy fuel oil (HFO) will commence within the next 60 days".

Former US ambassador to the UN John Bolton, who was the key architect of Bush's belligerent policy, denounced the February 13 agreement. It "contradicts fundamental premises of the president's policy [that] he's been following for the past six years", Bolton told CNN on February 14. It sends the "bad signal" that "if you just have enough patience, if you just have enough persistence, you'll wear the United States down".

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