North Korea arms seizure may prod it back to talks

SEOUL Tue Dec 15, 2009 3:30am EST

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SEOUL (Reuters) - The seizure in Thailand of a plane carrying arms from North Korea may have dealt the destitute state a blow to its biggest hard currency earner and could push Pyongyang back to nuclear talks in the hopes of winning aid.

Estimates suggest the North earns more than $1 billion annually through arms sales, which provides funding for the nuclear program in a state with a $17 billion economy that struggles to feed its people.

"This is a tremendous setback to North Korea's very critical source of revenue because of how potential customers of arms are now going to look at it" said Baek Seung-joo of the Korea Institute of Defense Analyses (KIDA) in Seoul.

Fresh U.N. sanctions to punish the North for its nuclear test in May have put the squeeze on Pyongyang by making it more costly for the reclusive state to dodge an international dragnet when it sells arms, while increasing the risks for its customers.

News of the seizure of the cargo in Bangkok this week was first met with concern that it could anger the prickly North, which indicated it was ready to resume stalled nuclear disarmament talks after hosting a senior U.S. envoy last week.

Few expect North Korean leader Kim Jong-il will ever abandon arms sales, which earn him the foreign currency he needs for his military-first rule and win the backing of senior cadres as he prepares for succession in Asia's only communist dynasty.

But as the cash flow slows to a trickle, he may feel the need to make concessions at the stalled six-way nuclear disarmament talks.

"This points to a greater likelihood that the North will look to dialogue with the United States and also the six-party talks as a way out," said Baek. "They are not going to be able to abandon dialogue."

North Korea a year ago stepped away from a deal with China, Japan, Russia, South Korea and the United States to end its nuclear program in exchange for massive aid and an end to its international ostracism.

A Thai court has kept in detention the crew of the Ilyushin cargo aircraft registered in Georgia and packed with 35 tonnes of rocket propelled grenades, launchers for surface-to-air missiles and missile tubes and spare parts.

The North's biggest arms sales come from missiles to Iran and other Middle Eastern states, according to U.S. officials.

PRESSURE BUILDS

The seizure also increases pressure on China, the closest thing the North can claim as a major ally and the country seen as having the most influence on the enforcement of U.N. sanctions.

The incident in Bangkok clouded an overseas visit that started the week in Japan by China's Vice President Xi Jinping, seen as frontrunner to succeed President Hu Jintao.

The seizure in Thailand follows that of a vessel by the United Arab Emirates in August of North Korean arms being shipped to Iran.

"(The Bangkok seizure) is clear evidence of the sanctions increasing pressure on North Korea," said Daniel Pinkston, a specialist on Korean affairs in Seoul with the International Crisis Group.

"This is going to affect their earnings; their foreign exchange earnings and their revenue on the shipments," he said.

(Additional reporting by Jon Herskovitz; Editing by Jon Herskovitz)

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