November 2, 2009 / 4:53 PM / 10 years ago

North Korea's broken economy the key to nuclear talks

SEOUL (Reuters) - A promise by North Korean leader Kim Jong-il to improve the state’s broken economy is forcing him to ask for massive aid and may even bring him back to nuclear talks that Pyongyang once declared dead.

The North, which last month sent an envoy to the United States on a charm offensive, on Monday gave its clearest signal yet that it was ready to return to the six-way, disarmament-for-aid talks.

Plenty of obstacles remain to reviving the discussions, not least the fact that Washington wants Pyongyang to recommit to giving up its nuclear activities before negotiations.

“It is still too early to tell if the North is desperate enough to make the strategic decision about a change in its nuclear arms program,” said a diplomatic source in Seoul.

But Kim, it appears, has backed himself into a corner after having pledged to turn North Korea into a “strong and prosperous nation” by 2012 to mark the 100th anniversary of the birth of his father and the state’s founder, Kim Il-sung.

Meeting that promise and Kim’s need to pay off cadres to win their support for a generational change in Asia’s only communist dynasty help explain why he abruptly stopped raising tensions with the international community after numerous missile launches this year and a nuclear test in May.

“This puts pressure on the regime to get as much aid as it can, as fast as it can,” said B.R. Myers, an expert on the North’s state ideology at Dongseo University in South Korea.

“To say that it will be a strong and prosperous country and to say that will be achieved by 2012, and to raise expectations, is actually a very risky thing.”

The year 2012 not only marks the 100th anniversary of the elder Kim’s birth. It may also be the year when Kim Jong-il, 67, announces to his countrymen that he is handing over power to the youngest of his three sons.

WELCOME TO PARADISE

Unlike other times when the North’s leaders were able to claim victory by touting fictitious economic achievements or blaming U.S. imperialists for its woes, the North will have to show its citizens real change by 2012 because it has raised expectations so high, analysts said.

“Very high and vast are the targets we have to hit,” the North’s KCNA news agency itself declared a few months ago.

And very bare are its coffers.

North Korea’s tiny economy, estimated at $17 billion or just two percent the size of neighboring South Korea, has been buffeted on several fronts.

First, a new government in Seoul cut off aid to North Korea in early 2008. It said the aid, roughly equivalent to 5 percent of North Korea’s economy, would only flow again if Pyongyang took concrete steps on nuclear disarmament.

Most recently, tough U.N. sanctions in the wake of the nuclear test in May have cut Pyongyang’s lucrative arms sales while the country is also suffering a poor harvest.

The North could get more from South Korea, which once supplied $1 billion in annual aid, than by trying to revive assistance worth a quarter of that value that was suspended when Pyongyang left the six-way nuclear talks a year ago.

But by returning to the nuclear talks, the North would please Beijing, host of the discussions and a critical player in enforcement of the U.N. sanctions. It could also head off any U.S. plans to further crack down on its international finances.

In recent months Pyongyang has sought direct talks with the United States even as Washington has refused to relent in enforcing the sanctions. Pyongyang has also reached out to the government of South Korean President Lee Myung-bak, which angered Pyongyang by cutting off unconditional handouts in early 2008.

VIEW FROM THE GROUND

“The North is shackled and can feel it. Its conciliatory moves and the attempt to improve things with the United States are all part of trying to unlock the shackles,” said Kim Yong-hyun, an expert on the North at Dongguk University in Seoul.

Kim has also moved to firm up relations with China, the closest Pyongyang can claim as a major ally and the main supplier of the aid that keeps him from sinking.

Some experts think the upper limit in any new talks would see North Korea give up its Soviet-era Yongbyon nuclear plant, thus putting it out of the plutonium-producing business, and perhaps handing over a portion of its stockpile of fissile material, estimated to be enough for six to eight bombs.

That would still leave the North’s nascent uranium enrichment program, another way to make a nuclear bomb and one that is harder for the international community to track given such activities can be carried out underground.

But any progress depends on getting sputtering discussions among the two Koreas, China, Japan, Russia and the United States past procedural and implementation difficulties.

In North Korea, people have had to contend with one of the worst harvests in years, which has fed into rising food prices and aggravated years of economic mismanagement by leader Kim.

“This ‘murderous agflation’ is shown in rice prices, where 1 kg of rice costs the same as a laborer’s monthly pay,” the Samsung Economic Research Institute said in an October report.

Additional reporting by Jack Kim and Christine Kim, Editing by Dean Yates

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