[News analysis] The N. Korea-US clash regarding sanctions relief in exchange for denuclearization

Posted on : 2019-02-20 16:58 KST Modified on : 2019-02-20 16:58 KST
The US wants to grant exemptions while the North desires loosening of sanctions regime
Government officials transport works of art in front of the State Guest House in Hanoi in preparation for the second North Korea-US summit. (Yonhap News)
Government officials transport works of art in front of the State Guest House in Hanoi in preparation for the second North Korea-US summit. (Yonhap News)

“Why don’t we set up a tab?”

“We only do business in cash.”

These are the basic stances of the US and North Korea on the matter of relieving sanctions, which has emerged as a particularly thorny issue for their upcoming second summit. The US favors a “tab” system, suggesting it will consider loosening sanctions provided that the North adopts meaningful denuclearization measures including a dismantlement of its Yongbyon nuclear facilities “plus something extra.” The North prefers hard cash and a straightforward exchange of denuclearization for the relaxation of sanctions. The difference is a large one – and both sides realize some adjustments will be unavoidable to prevent the talks from breaking down.

Messages concerning such adjustments were conveyed in guidelines presented by the top US leadership following recent talks in Pyongyang by State Department Special Representative for North Korea Stephen Biegun. In a Feb. 13 interview, Secretary of State Mike Pompeo said, “It’s our full intention of getting a good outcome in exchange for relieving those sanctions.”

In a Feb. 15 White House press conference, President Donald Trump stressed, “Billions of dollars has [sic] been paid [in the past] to [North Korea]. And we won’t let that happen.“ It’s an approach of playing the “relieving sanctions“ card without releasing any US cash – blowing their nose with someone else’s hand, so to speak.

The chief approach that has been mentioned would be a sweeping exemption of sanctions for areas related to inter-Korean economic cooperation. This is what the South Korean government wants, and sources report that the US is not entirely opposed. This approach would not require the adoption of any additional resolutions if Article 25 concerning case-by-case exemption decisions and Article 27 welcoming “efforts [. . .] to facilitate a peaceful and comprehensive solution through dialogue and stress[ing] the importance of working to reduce tensions in the Korean Peninsula and beyond” are invoked from Resolution 2397, the UN’s latest resolution sanctioning North Korea.

US to give priority to Mt. Kumgang tourism over Kaesong complex

The US may see this as a carrot to elicit meaningful denuclearization measures from the North without tinkering with the current international sanctions regime. The US has said it is giving priority consideration to the Mt. Kumgang tourism project, which is not directly subject to sanctions in principle, over the Kaesong Industrial Complex, which is directly affected by various sanctions.

With leader Kim Jong-un proposing a resumption of the Mt. Kumgang and Kaesong projects “without any precondition and in return for nothing” in his New Year address, the matter is a top priority for the North as well. But there are some issues here. First of all, the North regards both efforts as “inter-Korean economic cooperation” and insists that the US should not meddle by using them as leverage for negotiations. This is not so much a refusal as it is a negotiating tactic aimed at gaining more ground. The essential issue is Pyongyang does not want the granting of exceptions for specific projects but rather the loosening of the sanctions regime in general. “Look at how the North approached things during the Banco Delta Asia (BDA) episode,” a source closely acquainted with the situation commented on Feb. 19.

N. Korea seeks access to global financial network

During the BDA episode – which served as an impetus for the North’s first nuclear test on Oct. 9, 2006, and a long-running stalemate in the Six-Party Talks on the nuclear issue – North Korea insisted on transfers of funds through the international financial network, rejecting the US’ proposal to free up US$25 million in funds from frozen accounts for the North to collect. The situation was not resolved until 2007 – two years after the episode first erupted – when South Korea, the US, China and Russia finally cooperated to transmit the money by way of a Russian bank.

“The thing the North prioritized during the BDA episode was not the US$25 million itself, but access to the global financial network,” the source explained.

“The same goes for the sanctions issue: the North doesn’t want ‘exceptions,’ it wants the sanctions regime loosened.”

Raising ceiling for refined petroleum products another option

The same source added, “With Kim Jong-un looking to achieving economic growth, finding a means of interacting economically with the international community beyond inter-Korean economic cooperation – including economic cooperation with China – is a life-or-death matter.”

Beyond the Mt. Kumkang and Kaesong projects, other approaches may include raising the ceiling of 500,000 tons of refined petroleum products in Article 5 of UNSC Resolution 2397 or waiving sanctions on specific areas related to public livelihood. But this would entail adopting a new UN resolution, which would be a large political burden for Trump.

A third solution also exists: setting up a committee to discuss and execute both denuclearization and corresponding measures (including the loosening of sanctions) as part of the implementation process for the agreement from the second North Korea-US summit. This would represent a compromise between the “running a tab” and “hard cash” approaches.

“Whether sanctions are loosened through adoption of a separate UN resolution or an exemption decision by the North Korea Sanctions Committee all depends on the talks between North Korea and the US,” said a senior official in the area of foreign affairs and national security.

“No one has any way of knowing until Kim Jong-un and Trump finish their negotiations and show up at the summit venue,” the official added.

By Lee Je-hun, senior staff writer

Please direct comments or questions to [english@hani.co.kr]

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