Q+A: What is behind North Korea's conciliatory moves?

SEOUL Sat Aug 22, 2009 11:09pm EDT

SEOUL (Reuters) - North Korean envoys in Seoul to mourn the death of a former president on Sunday held their first talks with the current leader since he took office about 18 months ago, marking a new conciliatory tone from Pyongyang.

North Korean leader Kim Jong-il has made a number of conciliatory gestures this month, which included calls to restore business ties with the South, after the North stoked tensions with a nuclear test in May, missile launches and threats to attack it capitalist neighbor.

Following are some questions and answers about the moves:

WHY IS NORTH KOREA OPENING UP TO THE SOUTH?

The most obvious reason is money.

Impoverished North Korea's economy, already broken by years of mismanagement and global sanctions, has taken further hits this year from heavy rains that hurt its crucial farm sector, a loss of aid from the South -- roughly equal to about 5 percent of its estimated $17 billion a year GDP -- caused by political wrangling and new U.N. sanctions for the nuclear test aimed at cutting off its arms trade that is a key source of hard currency.

WHY DOES THE NORTH NEED THE MONEY?

North Korea uses foreign currency to buy items abroad needed for its military and nuclear programs as well as to purchase perks for its ruling elite and the military. Leader Kim, 67, has moved forward with his succession plans after he apparently suffered a stroke a year ago and needs the backing of powerful military and communist party figures to secure a smooth path to power for his designated heir, his youngest son, analysts said.

North Korea may also be looking to rebuild its main nuclear plant that had been disabled under a six-way nuclear deal.

WILL KIM BE SEEN AS BUCKLING?

Quite the contrary. The visit of Bill Clinton this month to secure the freedom of the two American journalists held in the North was portrayed by the North's media as proof that the country's recent nuclear test and missile launches were a stunning victory for Kim and that resulted in the former U.S. president coming to Pyongyang to pay tribute and negotiate.

By sending a delegation to the funeral of Kim Dae-jung, whose "Sunshine Policy" of engagement with Pyongyang started a steady stream of aid to the impoverished state, the North's leaders can show their anger at current President Lee Myung-bak who has effectively ended the policy by linking handouts to the North's disarmament.

Also this month, Kim Jong-il met the chairwoman of the powerful Hyundai Group, a major investor in the North for about a decade, where they agreed to resume stalled business ties. The meeting will be trumpeted as a tribute showing one of the South's leading conglomerates has great respect for Kim.

HOW MUCH COULD NORTH KOREA EARN?

By allowing tourism to resume at the Mount Kumgang resort, located in North Korea and run by a Hyundai affiliate, Pyongyang can receive tens of millions of dollars by the end of the year.

The North was also seeking to increase wages and rents paid at a joint factory park in the North Korean border city of Kaesong, run by the same Hyundai affiliate, which could again earn its leaders tens of millions of dollars by year's end. There has been no indication a deal was reached to increase payments when Kim met Hyundai Chairwoman Hyun Jeong-eun.

By improving ties with South Korea, the North may be hoping for a resumption of food and fertilizer aid. The South used to send about 400,000 to 500,000 metric tons of rice and about 300,000 metric tons of fertilizer to the North each year but that has been halted since Lee took office in February 2008.

WILL THE MOVES HAVE ANY IMPACT ON STALLED NUCLEAR TALKS?

The North's recent moves likely indicate Pyongyang may be finished with its recent round of provocations and signal it is ready to try diplomacy. This will likely ease concerns among investors who were worried about troubles spinning out of control, which could lead to heavy damage to the globally vital economies of North Asia.

Analysts do not expect any breakthrough in the talks among the two Koreas, China, Japan, Russia and the United States, especially after Pyongyang said it saw that process as dead and signaled it wants to talk directly with Washington.

(Editing by Alex Richardson)

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