[Senate Hearing 105-652]
[From the U.S. Government Publishing Office]
S. Hrg. 105-652
KEDO AND THE KOREAN AGREED NUCLEAR FRAMEWORK: PROBLEMS AND PROSPECTS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON EAST ASIAN
AND PACIFIC AFFAIRS
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
__________
JULY 14, 1998
__________
Printed for the use of the Committee on Foreign Relations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
U.S. GOVERNMENT PRINTING OFFICE
50815 cc WASHINGTON : 1998
COMMITTEE ON FOREIGN RELATIONS
JESSE HELMS, North Carolina, Chairman
RICHARD G. LUGAR, Indiana JOSEPH R. BIDEN, Jr., Delaware
PAUL COVERDELL, Georgia PAUL S. SARBANES, Maryland
CHUCK HAGEL, Nebraska CHRISTOPHER J. DODD, Connecticut
GORDON H. SMITH, Oregon JOHN F. KERRY, Massachusetts
CRAIG THOMAS, Wyoming CHARLES S. ROBB, Virginia
ROD GRAMS, Minnesota RUSSELL D. FEINGOLD, Wisconsin
JOHN ASHCROFT, Missouri DIANNE FEINSTEIN, California
BILL FRIST, Tennessee PAUL D. WELLSTONE, Minnesota
SAM BROWNBACK, Kansas
James W. Nance, Staff Director
Edwin K. Hall, Minority Staff Director
------
SUBCOMMITTEE ON EAST ASIAN AND PACIFIC AFFAIRS
CRAIG THOMAS, Wyoming, Chairman
BILL FRIST, Tennessee JOHN KERRY, Massachusetts
RICHARD G. LUGAR, Indiana CHARLES S. ROBB, Virginia
PAUL COVERDELL, Georgia RUSSELL D. FEINGOLD, Wisconsin
CHUCK HAGEL, Nebraska DIANNE FEINSTEIN, California
(ii)
C O N T E N T S
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Page
Anderson, Desaix, Executive Director, Korean Peninsula Energy
Development Organization (KEDO), New York, New York............ 18
Deming, Rust M., Principal Deputy Assistant Secretary of State
for East Asian and Pacific Affairs............................. 4
Gallucci, Hon. Robert L., Dean, Georgetown University Edmund A.
Walsh School of Foreign Service, Washington, D.C............... 20
Appendix
Korean Peninsula Energy Development Organization Members and
Contributions.................................................. 31
Responses to Additional Questions Submitted for the Record to
Principal Deputy Assistant Secretary of State Rust Deming...... 31
Prepared Statements Submitted for the Record by Witnesses
Prepared Statement of Rust M. Deming......................... 41
Prepared Statement of Desaix Anderson........................ 43
Prepared Statement of Robert L. Gallucci..................... 46
(iii)
KEDO AND THE KOREAN AGREED NUCLEAR FRAMEWORK PROBLEMS AND PROSPECTS
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TUESDAY, JULY 14, 1998
U.S. Senate,
Subcommittee on East Asian and Pacific
Affairs, Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:18 a.m. In
room SD-419, Dirksen Senate Office Building, Hon. Craig Thomas,
chairman of the subcommittee, presiding.
Present: Senators Thomas, Kerry, Robb, and Feinstein.
Senator Thomas. I will call the committee to order. I
apologize in that we had a vote which was supposed to be at 10,
but it got pushed back to quarter past 10. I think there will
be some more committee members here soon.
In any event, good morning and thank you for being here. I
will keep my comments short so that we can get on to our
witnesses.
This is the subcommittee's first hearing on the Korean
Peninsula Energy Development Organization and the North Korean
Agreed Framework since last year. We had it on the subcommittee
agenda for some time.
I had hoped to discuss the success that KEDO has had
implementing the Framework Agreement, getting started building
the two light water reactors, and stifling the threats of the
North Korean nuclear weapons development.
Instead, unfortunately, today the subcommittee meets to
explore just how it is that KEDO finds itself $47 million in
debt, behind in its heavy oil delivery schedule, and why the
North Koreans have accused the U.S. of failing to honor its
core commitments to the Agreed Framework.
Because KEDO has fallen behind, the DPRK began maintenance
work on its plutonium separation plant that has been shut down
since the agreement was reached. The May statement from the
North Korean Foreign Ministry noted, and I quote, ``The U.S.
side should take practical steps to fulfill its obligations
under the agreement as soon as possible. In case the U.S. side
repeats empty words, the consequences will be unpredictably
serious.''
A sticking point is the delivery of the heavy oil. KEDO
does not have the money to meet its year's 500,000 ton oil
commitment. Operating on an October 21 to October 20 fiscal
year, KEDO has delivered 152,000 tons so far this year. But it
cannot buy much more because of its $47 million debt from
previous years.
So I look forward to an explanation of how this can be.
Congress appropriated $38 million for KEDO in the current
fiscal year plus $10 million for a challenge grant, which is to
be released when other countries contribute a similar amount.
The administration is seeking another $35 million next year.
However, neither amount will cover the cost of oil, even at
today's depressed prices.
So far as I can learn, Congress has provided the
President's full request for the purchase of heavy fuel oil.
So, unless persuaded otherwise, I can only reach one of two
explanations for the debt. Either the administration low-balled
the initial figure to Congress, and that low-balling has now
come home to roost; or, number two, other countries who
promised financial assistance or which were told could be
counted upon to do so have not made good on their promises.
I am also concerned that this administration seems to me to
have been hesitant to bring the problem to our attention. I can
think of several causes for their recalcitrance. First, at the
time the agreement was presented to the Congress, then-
Secretary Warren Christopher promised U.S. costs would never be
more than $30 million per annum. So they have that benchmark
deal to deal with.
Second, the administration may have been hesitant to come
to the Hill and face what seemed to be a chilly reception from
some Members of Congress. Some members have been reluctant to
support the agreement from its inception. Other members have
expressed resentment over the fact that KEDO incurred debt,
even though Congress appropriated all the money that the
administration had previously requested.
Still others have indicated they feel deceived by perceived
promises from the administration that other countries would
volunteer to contribute.
Since 1993, I have held the view that the Agreed Framework
is not perfect, of course, but it is the best agreement that
all the parties are capable of reaching under the
circumstances. It is the only workable alternative to an
unpredictable and rogue Nation's development of its nuclear
weapons program.
So it behooves us all, the administration and the Congress,
to honestly examine how we came to this difficult situation and
now how we can get ourselves out of it. So I hope we will be
candid with one another and say where we are, why we are there,
and, indeed, what we do to change that situation.
Senator Kerry, do you have a comment, sir?
Senator Kerry. Mr. Chairman, I do have a comment, a brief
one.
First of all, thank you for having this important and
timely examination of where we stand with KEDO. It almost on
its face should go without any comment because it is so
obvious. And yet, the obviousness of it simply underscores the
absurdity of where we find ourselves.
I think everyone understands that we lost a huge amount of
opportunity as Russia imploded to gain control over those
weapons that we had spent 50 years aiming at each other,
spending millions of dollars. ``Loose nukes'' today present us
with our own set of new policy problems as a result.
We have had to labor hard to get Nunn-Lugar money and
mostly to implement much of that kind of effort because for
years the world has understood the importance of
nonproliferation efforts. That has only been underscored,
obviously--and this, again, I say is so obvious that it
confounds that we are here--by the grim reminder in recent days
with India and Pakistan of what happens when the world does not
pay attention to the dynamics surrounding proliferation. We are
going to struggle with that one for a while, though I think
many of us remain hopeful that the damage from that can be
contained.
But, clearly, one of the potential spillover damages from
that is the unleashing of a new sense of independence and/or
kind of world anarchy on the part of North Korea. The Framework
that we entered into was hard fought to win. It is a great
victory, frankly, not just for our foreign policy but for
international efforts with respect to proliferation. We are now
here questioning why it is we cannot follow through on our part
of the agreement. And I do not fault just our component of it.
I think the international participation in this that was
expected, anticipated, and ought to be forthcoming is also
disappointing.
But, notwithstanding that, for the Congress--and it is the
Congress to some degree in the appropriations process--to be
standing in the way of executing our responsibilities here is
not just absurd, it is dangerous. It is just downright
dangerous.
The intelligence estimates not just by us but we know by
Russia and other entities as to what the potential is for
nuclear weaponry within North Korea leave us, I think, no
alternative but to draw a conclusion that to allow the
Framework to languish in this way is the height of
irresponsibility on the part of anybody who has their finger on
the trigger of funds, so to speak.
I think the administration needs to exert more pressure and
greater visibility on this. But I think the Congress ought just
to respond rapidly. There should be an immediate statement from
the Appropriations Committee that we are just not going to let
this happen because the dangers are too clear.
So whether the cost of oil went up, whether there was a
low-balling with respect to the amount of money, whether or not
we were disappointed by one or two countries that might have
participated to a greater degree is worth airing. But in the
end it is almost irrelevant with respect to the fundamental
choice that we confront, and that choice is a simple reality:
we must guarantee that the Framework is upheld; we must
guarantee that the we continue to have the International Atomic
Energy Agency oversight, if you will, of the nuclear program
that has been put on freeze, which is critical; and we need to
target and stay on target for the year 2003--I believe it is--
for the light reactor production.
I look forward to the airing, if you will, of the various
dynamics of this. But it seems to me that the conclusion is on
the table at the beginning of this hearing, and I think the key
is how are we going to get there as rapidly as possible.
Anything else would be just a gigantic lapse on the part of all
of those who have anything to do with this.
Thank you, Mr. Chairman.
Senator Thomas. Thank you, Senator.
Welcome, Mr. Deming, Principal Deputy Assistant Secretary
of State for East Asian and Pacific Affairs. We are glad to
have you here, sir.
We will ensure that all of your statement is in the record.
If you would like to summarize it, of course, please do so.
STATEMENT OF RUST M. DEMING, PRINCIPAL DEPUTY ASSISTANT
SECRETARY OF STATE FOR EAST ASIAN AND PACIFIC AFFAIRS
Mr. Deming. Thank you very much, Mr. Chairman. I am
delighted to be up here. I took over my responsibilities 3
weeks ago, and this is my first opportunity to appear before
the committee, or any committee, for that matter. I look
forward to very close consultations with the members of the
committee and the staff as we deal with this very important
issue.
The Secretary and the President very much appreciate your
personal support and the support of the committee for KEDO, the
Korean Energy Development Organization, and all of our efforts
to try to implement the Agreed Framework and control the threat
of nuclear proliferation on the Korean Peninsula.
As you know, the Korean Peninsula remains one of the most
unstable and dangerous places in the world. Along with our ROK
colleagues, 37,000 Americans face more than 1 million North
Koreans across the Demilitarized Zone which remains extremely
dangerous.
In 1993, perhaps the most dangerous situation since the
armistice in 1953 occurred with the North Koreans moving toward
the production of nuclear weapons and the Agreed Framework has
brought that issue under control. We think the results of these
negotiations have been a success.
The North's indigenous nuclear program at Yongbyon remains
frozen. The canning of DPRK's spent fuel is now virtually
complete and under IAEA seal as are the reprocessing plants and
the reactors. The IAEA maintains a continuous monitoring
presence and Pyongyang has remained a party to the NPT.
North Korea has also acknowledged that it must eventually
dismantle all the elements of its nuclear program and permit
its existing spent nuclear fuel to be shipped out of North
Korea.
In return for North Korea's nuclear freeze, the United
States agreed to take the lead in organizing a consortium to
build two modern, safe, proliferation resistant light water
reactors in North Korea. In addition, the United States agreed
to make arrangements to offset the energy foregone with 500,000
metric tons of heavy fuel oil, or HFO.
South Korea and Japan have together committed themselves to
assume virtually the entire burden of the estimated $4.6
billion light water reactor project. KEDO has commenced work on
this project; and, although work is not yet fully in swing, an
important amount of site preparation work has been underway for
almost a year.
The provision of heavy fuel oil, which is seen by North
Korea, our KEDO partners, and the world as principally a U.S.
responsibility, is the most tangible evidence of the U.S.
Government's commitment to the Agreed Framework. In meeting its
responsibility, the U.S. Government has made vigorous efforts
to recruit assistance from other countries.
In 1995 testimony before Congress, to which you referred,
Mr. Chairman, by then-Secretary of State Warren Christopher
estimated that annual U.S. contributions to KEDO would be
between $20 million and $30 million, based on the conviction
that the balance of funds could be raised abroad. Just looking
at his exact words, he said, ``My own expectation is that the
annual contribution of the United States will be in the range
of $20 million to $30 million.''
We have vigorously sought contributions from other
countries. The results, frankly, have been disappointing. But
we have received some help.
In all, 22 countries and the EU have made contributions to
the heavy fuel oil program, totaling $52 million, whereas the
U.S. has contributed approximately $120 million out of a total
U.S. expenditure of $148 million for the Agreed Framework,
including the money we spend for the canning of the spent fuel
at the reactor site.
We are committed to redoubling our efforts to gain support
from other countries. But, frankly, it is not realistic to
think that the shortfall will be met in the near-term by
contributions from abroad. We believe that continued U.S.
leadership of and support for the heavy fuel oil program is a
small price to pay to reinforce peace on the Korean Peninsula
and to strengthen the global nonproliferation regime.
The implementation of the Agreed Framework is fundamental
to U.S. interests on the Korean Peninsula and in East Asia. As
KEDO fulfills each of its successive steps, North Korea is to
take steps to resolve our proliferation concerns. For delivery
of the nuclear components of the plant, North Korea must come
into compliance with its full scope NPT-IAEA safeguards
agreement. With full scope safeguards in place, the IAEA will
be permitted to inspect all of North Korea's facilities and
materials.
The additional security this will provide will be a
significant contribution to American, regional, and world
security.
The Agreed Framework is more than simply a nuclear accord,
however. It is a cornerstone of our efforts to reduce the
potential for conflict on the Korean Peninsula. The Agreed
Framework has allowed us to undertake a dialog with North Korea
that has led to Four Party Talks as well as negotiations on
missile sales, terrorism, and many other concerns.
In addition, regular contacts between North and South
Korea, already taking place at the reactor site, are
dramatically increasing. This has profound implications for
reducing tensions on the Korean Peninsula over the longer term.
We believe it is very much in our interest to continue
these efforts to reduce tensions on the peninsula.
A full implementation of the Agreed Framework with all the
benefits it should bring will only be possible if KEDO remains
financially healthy and able to carry out its mission. We are
continuing our international fund raising efforts, as I
mentioned, to address KEDO's financial difficulties, including
its debt from past year oil deliveries. However, it is not
realistic, again, to assume that sufficient contributions will
be made by other countries; and we, ourselves, will therefore
have to do more.
We will continue our consultations with you and your
colleagues in the House in the near future on our proposals for
additional KEDO funding and our strategy for addressing the
organization's financial problems over the long-term.
Let me close by stressing that KEDO and the Agreed
Framework remain central to our efforts to promote peace and
stability in Northeast Asia and to support regional and global
nonproliferation. KEDO's mission is of utmost importance to the
national security of this Nation as well. We must not allow
KEDO to fail.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Deming appears in the
appendix on page 41.]
Senator Thomas. Thank you, Mr. Secretary.
As Senator Kerry said, I don't think we will talk a lot
about the merits of the Framework Agreement. Most people are
agreed that there is something to that. But I think more
importantly, and, quite frankly, I am not sure you answered our
question as to how we got where we are and how do we get out of
it.
For instance, I don't understand KEDO's $47 million debt.
It is a debt to whom? How did they get the debt? How do you fix
it?
Mr. Deming. My understanding is that KEDO's debt now
stands at, in fact, $38 million.
Senator Thomas. Oh, $38 million, $47 million, whatever.
Mr. Deming. This debt represents drawing against the $19
million Japanese fund that they have made available to draw
against, but it has not contributed directly to heavy fuel oil,
and drawing against the expectation of future funding from the
European Union and other countries. All of this funding--and I
think Mr. Anderson can go into more detail about the exact
details of how we do this--is based on solid commitments of
funding from other countries. We have tried to reach out ahead
of the actual cash on hand in order to try to maintain as
regular fuel supplies as possible.
Senator Thomas. You indicated that you think that these
funds coming from other countries are uncertain, and yet, at
the same time, that the United States needs to ensure or take
the leadership to ensure that this program goes forward. And
yet, I think the administration's request was for $35 million
again this year, which is insufficient to solve the problem.
How do you justify that?
Mr. Deming. We are looking at that.
In fact, when Secretary Christopher made his original
estimates in 1995, frankly we were overly optimistic about our
ability to attract funds from other countries. We have to be
much more realistic now.
It is true that the current request is $35 million. We are
looking at what we might do to raise that. We are in internal
consultations in the Department of State and with other
agencies, and I think we will be beginning consultations with
both the Senate and the House staff on this. But I think that
we recognize that we are going to have to do more ourselves.
While we will continue our vigorous efforts with other
countries, it is unrealistic and not wise to bet that that is
going to increase substantially. We are going to have to
request from the Congress more money to more fully fund our
heavy fuel oil obligations.
Senator Thomas. How would you describe the status of
diplomatic relations with North Korea in terms of the
statements that they have made that I mentioned before, that
there might be consequences that would be unpredictably serious
and less than practical?
What is the situation with regard to relations with North
Korea in this respect?
Mr. Deming. As you know, Mr. Chairman, North Korea is one
of the most difficult societies in the world to understand and
the most difficult to deal with. In my 3 weeks in this
position, already I have had evidence of that in terms of the
difficulty of getting a full understanding of what they are up
to.
We have made clear to the North Koreans that these threats
of reprocessing the remaining spent fuel in the reactor ponds
are irresponsible, unhelpful, and if they moved in that
direction would be a violation of the Agreed Framework. We have
expressed that view both orally and in writing to the North
Koreans.
We are continually amazed and disappointed by their actions
on things like submarine infiltrations in South Korea at a time
when South Korea is trying to reduce tensions on the Korean
Peninsula through Kim Dae-Jung's Sunshine Policy.
Every time we attempt to move forward in a constructive
way, some element in North Korea does something that is
disturbing.
Despite all of this, we are absolutely convinced that the
Agreed Framework remains very much vital to our interests. It
is in the U.S. interest to proceed with this. We are trying to
gain more cooperation from North Korea in fulfilling its side
of the Framework obligations and on missile talks and other
issues as well. But it remains a very, very frustrating place
to deal with.
Senator Thomas. What is your analysis of North Korea's
performance? There is some indication they have gone back to
work and do maintenance work on their plutonium separation
plant, which they agreed not to do.
Mr. Deming. Fundamentally, I think North Korea has abided
by its basic commitments under the Framework and all the
facilities under the Framework remain frozen.
They have undertaken maintenance work at the reprocessing
plant, which is not a violation of the Framework and is being
undertaken under IAEA supervision. To date, we have had no
indication from the IAEA that there have been any major
problems with that work.
But, to be very frank, the North Koreans are always sort of
testing the edges of what they can and cannot do. We have had
to push back constantly to try to make sure that they stay
within the letter and the spirit of the Framework Agreement.
Senator Thomas. What about the opportunities to inspect as
to what they are doing? Are you comfortable that the inspection
opportunities have been there and continue to be there?
Mr. Deming. We are comfortable, and I think the IAEA is
comfortable, that all of the activities, facilities under the
Agreed Framework are sufficiently monitored and that the
elements that are to be frozen are indeed frozen. And there is
no fundamental violation of any aspect of the Framework
Agreement.
Senator Thomas. So if there is a weakness in performing on
both sides, it is on our side?
Mr. Deming. Let me put it this way, Mr. Chairman. It is
very important that all parties meet their obligations under
the Framework Agreement. We are now, indeed, still meeting our
obligations on heavy fuel oil. The deliveries are not as fast
or rapid as we would like them to be. But we have met our
obligations every year and we intend to meet our obligations
this year in terms of providing the full 500,000 tons of fuel
oil that is due.
This will take some work with the Congress and
reprogramming of funds for this year about which we are now
consulting. But we are adamantly committed to fulfilling our
obligation. Any North Koreans charges that we are not meeting
our obligations are completely ill-founded, and we have
underlined that to them.
Senator Thomas. Well, it is their charges that have brought
us here, haven't they? I don't think we have heard from the
State Department that they are having difficulty living up to
our agreement?
Mr. Deming. We remain concerned about making sure that we
have the right funding for heavy fuel oil. And, even though we
are fully meeting our obligations, the fact that North Korea is
now threatening reprocessing are threats that we need to take
very seriously even though they are completely falsely based on
any charges that we are not meeting our obligations.
I think it is responsible for us to make sure that we do
everything we can to ensure the funding necessary to get the
heavy fuel oil there this year and in the out-years as well.
Senator Thomas. We are going to have to hustle to get the
500,000 tons this year, aren't we?
Mr. Deming. I think we are confident that we will get the
fuel oil there to meet our obligations.
Senator Thomas. Senator Kerry.
Senator Kerry. Thank you, Mr. Chairman.
Let me understand this as clearly as I can, where we are.
KEDO has agreed to supply 500,000 tons of heavy oil by
September 30, is that correct?
Mr. Deming. My understanding is that is the so-called KEDO
fuel year, yes.
Senator Kerry. OK, September 30. We are agreed on that.
Mr. Deming. I'm sorry--it's October 20, I am told. October
20 is the KEDO date.
Senator Kerry. And currently we have provided only 152,000
tons so far in 1998?
Mr. Deming. We have another 66,000 tons moving shortly.
Senator Kerry. How much?
Mr. Deming. An additional 66,000 metric tons.
Senator Kerry. When will that move? Do you know?
Mr. Deming. In the next few weeks--at the end of the
month.
Senator Kerry. End of the month. So that's at the end of
July. So in August and September you are going to move three
times what we have moved in the rest of 1998?
Mr. Deming. To be frank, we have in past years not always
met the fuel year deadline. We have met the calendar year
deadline.
Senator Kerry. Which one is North Korea working on?
Mr. Deming. Of course, in the past they have understood
the calendar year. But our nominal obligation is to meet the
fuel year deadline. We can probably have a little bit of
slippage in that.
Senator Kerry. Why would we want slippage? What is the deal
here? I mean, aren't we trying to build a relationship with a
country that has been completely isolated for years?
Mr. Deming. Senator, certainly we are. But we have had, as
you know, difficulties.
Senator Kerry. Isn't reliability a critical component, a
sort of good faith showing that we are serious?
Mr. Deming. I think any fair reading of the Agreed
Framework will show that we have met our obligations under it.
Senator Kerry. Then how do we have a $37 million debt with
a significant shortfall of the $60 million to $65 million that
KEDO needs to pay on an annual basis?
Mr. Deming. I'm afraid that is because we have
underestimated our ability to attract funding for heavy fuel
oil from other donors. That is something we have now had to
come to terms with; and, as I have been discussing, we will be
talking to you and to the House about ways that we can more
fully fund this obligation so that we can eliminate the debt in
a relatively short period and fully fund our obligations for
future years so we don't have this kind of situation.
Senator Kerry. So you are saying that the shortfall is
exclusively the result of the inability to attract funds from
donor countries?
Mr. Deming. Yes, sir. We hoped that we would be able to
get from other countries much more.
Senator Kerry. Which countries primarily were our
expectations from?
Mr. Deming. We approached countries in the region which
have direct security concerns. We got some funding from them.
Senator Kerry. Which countries? I would like to know which
countries we approached.
Mr. Deming. If you would, please give me 1 second.
We have approached 37 different countries. We have
approached Indonesia, we have approached Singapore, we have
approached Brunei, Australia, New Zealand, Canada, Thailand. We
have approached the European Union, which has funded and
provided about a $15 million a year fund for KEDO. We have
approached Europeans individually--Germany, France, the UK.
Senator Kerry. Is that a complete list that you have just
been given?
Mr. Deming. Yes. We can submit this for the record.
Senator Kerry. May I just ask that that list be made a part
of the record, Mr. Chairman?
Senator Thomas. Absolutely.
Senator Kerry. If you could, just provide us with copies of
that. That would be helpful.
[The information referred to appears in the appendix on
page 31.]
Senator Kerry. How much money in total have we been able to
collect from donor countries?
Mr. Deming. We have been able to collect $73 million. It's
$73 million.
Senator Kerry. That's $73 million total?
Mr. Deming. Uh-huh.
Senator Kerry. Now the $19 million that you offered up from
Japan has, in fact, not been offered up by Japan because the
Diet has not approved it yet, isn't that correct?
Mr. Deming. No, that's not. That money exists. It belongs
to KEDO. But the Japanese have not allowed it to be--it is a
loan from Japan to KEDO. We have drawn against that loan.
Senator Kerry. It's a loan?
Mr. Deming. It's collateral. The Japanese have agreed to
allow that money to be used as collateral for a loan for heavy
fuel oil. They have not agreed as of yet to forgive that loan
and allow it simply to be deposited into the KEDO fund.
Senator Kerry. Now Japan has also, I believe, promised $350
million toward the reactor itself, is that correct?
Mr. Deming. It's $1 billion.
Senator Kerry. $1 billion.
Mr. Deming. South Korea has promised 70 percent of the
light water reactor, and Japan has promised $1 billion toward
the cost of the light water reactor.
Senator Kerry. Do you have any sense that it may be too
early and--with the resignation of the prime minister and the
elections and so forth--where that commitment may or may not
stand?
Mr. Deming. I think I can say safely that there is no
danger that that commitment will be withdrawn. I think the
Japanese see a fundamental interest in KEDO and in stability on
the Korean Peninsula, and they will fulfill that obligation.
They have made clear that that obligation will be $1 billion at
whatever the current exchange rate is, so we won't get into any
disagreement about that.
Senator Kerry. Now Taiwan, I understand, has offered to put
up some money for KEDO. Beijing, obviously, opposes any
participation by Taiwan in international organizations.
Does the administration have a view as to the capacity to
have Taiwan participate in this particular effort?
Mr. Deming. I am not aware, in fact, that Taiwan has made
that offer. As you point out, Senator, I think having Taiwan
participate in KEDO raises some serious questions in respect to
China's continuing support for KEDO and for the other concerns
on the Korean Peninsula. It is something that we would have to
look at extremely carefully and consult very closely with our
other KEDO partners, Japan and Korea in particular, on that
issue.
It is a very complex issue, and I cannot offer a definitive
view at this time.
Senator Kerry. Has that consultation taken place at this
point?
Mr. Deming. Not to my knowledge, no.
Senator Kerry. My round is up on this one.
I do have some more questions and will see if I can come
back, Mr. Chairman.
Senator Thomas. Senator Robb.
Senator Robb. Thank you, Mr. Chairman.
I wonder if you could review very briefly--and if you did
so in your opening statement, I apologize as we were just
coming back from a vote--exactly what the principal parties
entered into with respect to the Agreed Framework. I know
Ambassador Gallucci is going to be on the next panel, and we've
worked with him in the negotiations for this Agreed Framework
over quite a number of meetings when that was being negotiated.
But just for the edification of all concerned, would you state
for this panel the obligations that the United States, that
South Korea, that Japan, and that other countries entered into
at that time?
Mr. Deming. The United States took the responsibility of
organizing the consortium to provide North Korea with light
water reactors and to provide North Korea with interim heavy
fuel oil to make up for the energy that was lost when they
closed down their graphite moderated reactor.
Senator Robb. With respect to just the interim heavy fuel
oil, what was the extent of the obligation that the United
States incurred in terms of responsibility for the provision of
the entire 500,000 tons annually?
Mr. Deming. The U.S. agreed to take the lead in organizing
funding for heavy fuel oil. Our expectation was and remains
that this would not simply be a sole U.S. obligation but that
we would take the lead in getting contributions from other
countries to participate in this.
Senator Robb. Indeed, it was assumed that the United States
would be principally an organizer and not a contributor, was it
not?
Mr. Deming. That's right. When Secretary Christopher came
up here, he testified that he expected the U.S. contribution
would be between $20 million and $30 million on the expectation
that we would be able to make up the balance from other
countries. We have undertaken a vigorous effort over the last
few years, approaching 37 countries, I think in 75 different
diplomatic interventions. We will submit for the record this
whole list of what has been done.
[The information referred to appears in the appendix on
page 31.]
Senator Robb. But just on that point, what percentage of
the total funding to date has been provided by the United
States directly and what percentage which, as you suggested,
was not expected to exceed 20 percent, and what percentage has
been provided by other countries in the region or
internationally?
Mr. Deming. The total KEDO funding is $191 million
dollars. Out of that, the U.S. has provided $118 million.
Senator Robb. That's 100-what?
Mr. Deming. It's $118 million, $91 million of which is for
KEDO--excuse me--the total $118 million, $79 million of which
has gone to heavy fuel oil, $27 million of which has gone to
canning the spent fuel at the reactor, which is almost
complete. It is 95 percent complete.
So the balance from other donors is about $73 million.
Senator Robb. All right, let's move on to the contributions
to the light water reactor itself that were expected from South
Korea and from Japan, if you will.
Mr. Deming. Under the Agreed Framework, South Korea
undertook to fund a major share of the light water reactor and
Japan to make a ``significant contribution,'' as I recall the
wording.
Senator Robb. There used to be numbers associated with
those.
Mr. Deming. I am going back to the original commitment.
Senator Robb. OK.
Mr. Deming. Since then, those commitments have turned into
numbers and the numbers are: South Korea has agreed to fund 70
percent of the cost of the light water reactors and Japan has
agreed to contribute $1 billion in U.S. dollars to that.
Senator Robb. Was it not the original intent that all of
the costs or virtually all of the costs would be borne by those
two countries? I recall the number, instead of 70 percent at
the time, being $4 billion that South Korea was going to
provide, most of it in-kind, and that the Japanese were going
to provide $1 billion, and that the United States was going to
organize the international community to provide the heavy fuel
support. Is that at variance with your understanding of the
agreement?
Mr. Deming. No. I think that has been the basic division
of labor, never completely formalized. Frankly, I think the
South Koreans and Japanese have always insisted that the U.S.
play some role in the light water reactor, which we have not,
of course.
Senator Robb. Wasn't that pretty well decided during the
course of negotiations? I know they have since encouraged U.S.
participation in the light water reactor to substitute for the
graphite reactor. But wasn't that pretty well settled during
the course of the negotiations?
Mr. Deming. I prefer to leave that to Mr. Gallucci in
terms of the details of what was understood during the
negotiations.
Senator Robb. I see a wan smile on his face. We will look
forward to his testimony. [General laughter]
Mr. Deming. In my association with this issue, the
Japanese and the South Koreans have always sought some U.S.
participation in the light water reactors.
Senator Robb. Let me just ask you one question to finish up
as my time is about over.
What would be the consequences with respect to the ability
of Kim Jung-Il and Pyongyang to reconstitute its nuclear
weapons capability in the event for whatever reason we fail to
live up to our commitments internationally to provide money for
the heavy fuel oil or there was what appeared to be a complete
breakdown? I must tell you that your assurances by both the
South Koreans and the Japanese are a little stronger than I
have received directly in recent conversations with
representatives of those two governments.
What would be the capability to reconstitute a nuclear
program?
Mr. Deming. Well, as you know, the North Korean facilities
are frozen; they are not at this stage dismantled. So anything
that is frozen is capable of being unfrozen.
I am afraid that, under the worst case scenarios, we could
find ourselves back in the situation we were facing in 1994
when this crisis reached its head.
Under the program, as we move forward in the development of
the light water reactors and deliver the major non-nuclear
components, then North Korea begins to dismantle the facilities
as well. But we are not at that stage yet. So the facilities
still exist.
Senator Robb. Thank you.
My time has expired, Mr. Chairman, and I thank you.
Senator Thomas. Senator Feinstein.
Senator Feinstein. Thanks very much, Mr. Chairman.
I am sorry I missed your oral comments, Mr. Deming. I have
had a chance to review your written ones. Let me ask you for
your judgment.
In your judgment, are all parties maintaining their
commitments?
Mr. Deming. I think all parties fundamentally are
maintaining their commitments to the Agreed Framework,
including the United States.
Senator Feinstein. Let me ask you a specific question about
the $10 million challenge grant that was included over and
above the $35 million that was appropriated. What progress has
been made in seeking matching funds and what countries have
agreed to provide funds under this challenge grant?
Mr. Deming. We have attracted, as I mentioned earlier,
about $73 million from other donors. But this money came in, I
think, almost all before the challenge grant. So, frankly, we
have had a very difficult time meeting the requirements of that
challenge grant. We have been discussing with the staffs on the
Hill the possibly of reprogramming that money without being
able to meet the requirements of that challenge.
Senator Feinstein. When you say ``reprogramming that
money,'' what specifically are you referring to?
Mr. Deming. Well, we are still looking at from where that
money might be transferred. It's to try to have the Congress
allow us to move forward with that money despite our inability
to meet the matching requirement. We think that is the prudent
thing to do.
We have tried very, very hard. We are continuing our
efforts to raise funds from other countries. In the last year,
the ability to raise funds in Asia has been seriously
compromised by the Asian financial crisis, as I am sure you can
appreciate. The EU and others are continuing their annual
contributions of about $15 million a year. We are getting some
small help from other countries, and we are going to continue
to make this effort.
But as I said in my statement and in my oral comments
before you came in, I think it is unrealistic to assume that we
are going to be able to get enough money from other donors to
be able to fill the gap between what we have appropriated and
what needs to be there to fund our heavy fuel oil obligations.
Senator Feinstein. What do you propose doing with the gap?
Mr. Deming. We are discussing ways that we can, as I said,
reprogram money. We have already moved forward with
reprogramming $5 million.
Senator Feinstein. Now you see, I am not understanding your
term ``reprogramming.''
Mr. Deming. I mean taking money that is in the State
Department budget for other projects and moving it over to this
project.
Senator Feinstein. Oh. So, in other words, our grant would
cease to be a challenge grant, and we would add money to it? Is
that what you are saying?
Mr. Deming. Yes.
Senator Feinstein. OK.
Let me ask another question, and this is, again, one to
solicit your expertise and knowledge.
I have been concerned by what at least appears to me to be
increased incursions by submarines and intelligence forces from
the North to the South, particularly this last submarine when
the intelligence officers apparently shot and killed the
sailors aboard the sub.
What do you make of this? Is it at all related to the
Agreed Framework?
Mr. Deming. Anything to do with North Korea we have a very
difficult time understanding their decisionmaking process, if
they have such a process, and why they do things that seem to
us to be clearly counterproductive to their own interests. At a
time when President Kim Dae-Jung is reaching out to the North
with his Sunshine Policy, the North has come up with a series
of very provocative and completely irresponsible kinds of
incidents, including the two submarine incidents.
As our analysts look at this, I think it is very, very
difficult to determine the logic behind it or what the reasons
are. We have no evidence that it is directly linked, or even
indirectly linked, to the KEDO program or in that regard. But,
frankly, we just don't know because we have no real insights
into how these people make decisions and why they do the things
they do at a time when it seems completely counter to their
interests to do these things.
Senator Feinstein. I had the privilege of meeting with the
Korean Foreign Minister while he was here last week. I was very
heartened by his attitude, which is one of at least trying to
make specific overtures and see if there is not an open window
for some progress in the relationship at this time. So from the
position of the South, I felt that they were doing all they
could.
Do you agree with that or do you think there are other
overtures that could, in fact, be made?
Mr. Deming. No, absolutely. I think the South is doing
even more than its share. I mean, it is turning the other cheek
in the face of these provocations.
When President Kim Dae-Jung was here, I think we were
terribly impressed, as I think the Congress was as well, with
his commitment to reaching out to the North and trying to move
things forward. Hopefully, the North will find a way to respond
a little more in the way they should.
I think we need to give South Korea full credit for its
patience and the wisdom of its policies as it deals with a very
difficult North Korea.
Senator Feinstein. I have one quick question. You mentioned
the Japanese $1 billion commitment. What chances do you see of
that commitment being kept?
Mr. Deming. I am absolutely confident. Before I came back
to Washington, I was the number two in the Embassy in Tokyo;
and I have worked this issue with them a long time. I am
absolutely confident they will keep this commitment.
Senator Feinstein. Thank you very much.
Thank you, Mr. Chairman.
Senator Thomas. Thank you. We will have a couple of more
questions before we move on to our second panel.
You mentioned progress on the site. Now it has been some
time. My understanding is there has been relatively little
progress other than some surveying and this and that. What is
your expectation there in terms of when actual construction and
progress will be made?
Mr. Deming. Others on the panel may have more detailed
information. My understanding is a lot of earth has been moved
around. I was talking to a German diplomat yesterday who had
just come back in May from visiting the site. He said he was
amazed by the number of heavy equipment up there. There were 50
or 60--oh, more than that--South Korean workers with North
Korean workers, working together if not living together, and
things are beginning to move.
As to when actual physical laying of cement takes place, I
think Mr. Anderson can be more precise on the exact timetable.
But things are moving forward there.
Senator Thomas. What do you suppose prompted the North
Korean Government to come out with this statement about the
U.S. not fulfilling its obligations?
You indicate that we are. Yet they indicate we are not. How
do you reconcile those two points of view?
Mr. Deming. I think the North Koreans are always looking
for any kind of vindication that they can use as leverage. The
fact is that the fuel oil deliveries have been slower than we
would have liked them to have been. But, as I said before, we
are confident that we will be able to meet our obligations
during the course of the calendar year if not during the course
of the so-called fuel year.
The North Koreans watch things very carefully and, as I
said, are always looking for points of leverage. They
apparently think they have found one here.
Senator Thomas. There are a number of other issues, other
than the heavy oil. In 1995, the State Department announced a
series of things they were going to do to reduce the barriers
of trade. Have those progressed--such things as unblocking
certain frozen assets; establishment of liaison offices in the
two countries; use of U.S. credit cards; more travel between
the U.S. and North Korea?
Mr. Deming. My understanding is that some of the things
have moved forward. The financial transaction, I think the
credit card thing, has moved forward.
We have tried to move forward in other areas, and
particularly since President Kim Dae-Jung was here and
expressed a strong interest in the U.S. doing what it could to
reexamine sanctions. We are in that process.
Ambassador Designate Kartman, who will be the Ambassador to
the Four Party Talks if he is confirmed by the Senate, is
scheduled to go in August to Seoul to consult with the South
Koreans about the whole sanctions issue. But, frankly, as we
move forward in this, the North Koreans do provocative things,
like the submarine incident, and this does not help the
atmosphere in trying to get support for removing some sanctions
and reducing the barriers between North and South Korea.
On the liaison offices, we are prepared to move forward.
But the South Koreans have put a number of barriers in our way.
I'm sorry, I mean the North Koreans have put a number of
barriers in our way.
For one example, we would like to be able to support that
office across the DMZ from South Korea, which would make it
economically feasible to maintain an office in Pyongyang. The
North Koreans have not agreed to that, and there are several
other points where they are raising barriers to it.
We would very much like to move forward, but it takes two
to tango; and they have not been willing to dance, as of yet.
Senator Thomas. Just as an observation, as one who is
interested in electric distribution and generation, it has
always been interesting to me that the nuclear plants that were
in question run by the North Koreans, no one could ever
determine that there was any power grid going out from them.
And, if you are going to have a light water power plant here,
there has to be a power grid. A power plant is not very useful
unless you have a way to distribute its power. As far as I
know, there has been no effort made to continue that.
Senator Kerry.
Senator Kerry. Just very quickly, Mr. Chairman, thank you.
How would you sum up the options at this point in time? Is
this a no option situation? Are there a couple of options as to
how you may proceed?
Mr. Deming. In terms of funding for heavy fuel oil?
I think the basic options at this point are, first, to
continue our efforts to get funds from abroad, understanding
that we are not going to get a great deal more than we have
gotten, at least in the near-term.
Second is to look at reprogramming existing funds to try to
ensure that we meet our obligations this year.
Third is to come up to the Congress in the budget process
with a request for fuller funding.
Senator Kerry. Is reprogramming preferable to a
supplemental?
Mr. Deming. I will have to defer to my colleagues who
handle Congressional relations on the details of how to do
this. I am sorry. I don't want to make a definitive statement
on that as I don't feel comfortable there.
Senator Kerry. That's OK.
Let me ask this. Have we approached any of our allies in
the Middle East--the Saudis, the Kuwaitis, the Gulf States--to
supply some oil directly?
Mr. Deming. Yes, we have.
Senator Kerry. What is the result of that?
Mr. Deming. I'm afraid there has been no success. We are
going back again.
There are some letters going out shortly that are a
followup on an earlier request.
Senator Kerry. Kuwait refused?
Mr. Deming. Yes, Kuwait has refused and numerous times, I
am told.
Senator Kerry. Numerous times? That is sort of interesting,
isn't it?
Senator Feinstein. Would you yield for just a moment on
that point?
Senator Kerry. I would yield. Sure.
Senator Feinstein. Why are these Middle Eastern Nations
refusing to help? Do you have a feeling about what the reason
is, particularly the more affluent ones?
Mr. Deming. I don't, Senator. I'm sorry. I've just come
into this, and I have not dealt directly with the Middle East
Nations on this. But my understanding is that they just simply
see this as sort of outside their sphere of interest and that
their sphere of interest is rather narrowly drawn.
We think this is a global as well as a regional challenge.
We have had difficulty getting other countries to accept that.
But I must say, the fact is that the EU has come through,
and individual European countries have come through with a not
insignificant contribution. And the EU is a difficult process,
as you can imagine, to get all these countries together to
agree on funding for heavy fuel oil. We are very grateful for
that. So we should give due credit to them.
Senator Kerry. I think that is appropriate. But I also
think it would be appropriate to perhaps ask the Secretary if
she would not--I don't know if she has a personal basis, but I
think it would be well worthwhile reiterating and raising to a
higher level of request, perhaps, both the visibility as well
as the interpersonal aspect of it, the notion of how
appropriate it might be for some other countries to take part
in this, particularly, I think, some of our friends in the
Middle East.
I am just dumbfounded that that has been ``stiffed'' on a
number of occasions.
Mr. Deming. Senator, the Secretary is very concerned with
this issue and is fully supportive of all our efforts. I would
certainly do that.
Senator Kerry. Would you convey that?
Mr. Deming. Yes, sir.
Senator Kerry. I might even call her and chat with her
about it. But I think that the world ought to be aware that
this is not just our effort. This is something that obviously
pertains to everybody.
We have a lot of countries, a number of countries, that
have restrained their nuclear programs based on the assumption
that we were all moving down a common road.
Now India and Pakistan obviously present us with a bump in
that. But, on the other hand, properly translated and properly
massaged in the next months, India and Pakistan could be turned
into a very positive event that could underscore the futility
of that road and, in fact, strengthen our ability to build the
regime, the protocol by which we restrain other countries. I
think of Brazil, Argentina, South Africa, and other places
which are impacted by this.
I would think most leaders today would not be so foolish as
to believe that their security is enhanced by moving in that
direction or that that is a wise expenditure of resources, and
so forth. But there are obviously countries, North Korea among
them, which just think differently about their threats, their
concerns, and these issues.
I think it is really worth doing; that and, if I could, I
would commend that to you.
My last question, quickly, is this. Last month, the North
Koreans threatened publicly to conduct maintenance on the
plutonium processing plant. Do we know whether or not that has
moved beyond the threat stage? Has that occurred?
Mr. Deming. My understanding is they have done some
maintenance which is consistent with the framework, and it has
been under IAEA supervision. The IAEA has not indicated to us
that there has been any deviation from their obligations.
Senator Kerry. Good.
Thank you very much.
Thank you, Mr. Chairman.
Senator Thomas. Senator Feinstein, are we ready for the
second panel?
Senator Feinstein. No further questions. Thank you very
much.
Senator Thomas. Thank you very much, Mr. Secretary. We are
glad to have you here for the first time and hope to see you
back again.
Mr. Deming. Thank you very much, Mr. Chairman.
Senator Thomas. Let us now welcome our other two witnesses
today. We are particularly pleased to have Desaix Anderson, the
Executive Director of KEDO from New York and Ambassador Robert
Gallucci, who is a vital speaker in this instance since he was
sort of the author of this whole arrangement and has appeared
before this committee on a number of occasions.
Mr. Anderson, would you care to begin. Your full statement
will be included in the record. If you would care to, please
summarize it.
STATEMENT OF DESAIX ANDERSON, EXECUTIVE DIRECTOR, KOREAN
PENINSULA ENERGY DEVELOPMENT ORGANIZATION (KEDO), NEW YORK, NEW
YORK
Mr. Anderson. Thank you very much, Mr. Chairman. I would
like to say I am very pleased to be here.
I would like to just give some abbreviated remarks, if that
is satisfactory.
Senator Thomas. That's fine. Thank you.
Mr. Anderson. In the 3 years that KEDO has been operating,
we have made somewhat surprising progress and have had greater
success than most people seem to realize.
First, KEDO has ensured that North Korea has kept its
nuclear nonproliferation commitments under the Agreed
Framework. Pyongyang's national nuclear program, including the
plutonium production plant, have been frozen.
Senator Thomas. Excuse me. Would you pull the microphone
closer? I think the folks in the back are having trouble
hearing you.
Mr. Anderson. Certainly.
Virtually all of the spent fuel rods from the 5 megawatt
reactor have been canned. The DPRK has remained a party to the
NPT, and the IAEA has been allowed to monitor the nuclear
facilities.
Second, KEDO has served a very important diplomatic or
geopolitical function. Through its daily work in New York and
the DPRK, and the negotiations at the Kumho site in North Korea
on the East Coast, KEDO has provided a novel and a crucial link
between Pyongyang and the outside world, providing a forum of
nearly constant contact with the North Koreans. It serves as a
prototype organization which will help to try to engage North
Korea and bring it into the international community.
Third, KEDO has provided an opportunity for direct contact
between South and North Koreans on both a formal and an
informal level. That is one of the main objectives of the
Agreed Framework.
Under KEDO's institutional umbrella, South Koreans and KEDO
have negotiated directly with the North Koreans on various
agreements.
In the field itself, the agreements between KEDO and South
Korean contractors and subcontractors have been negotiated and
signed between North Korean companies and South Korean
companies to provide such things as labor, goods, facilities,
and other services at the site.
Similarly, there has been considerable interaction between
the 120 South Korean workers at the site and the anywhere
between 75 and 90 North Korean workers who are working with
them.
Fourth, the physical work to prepare the site has proceeded
smoothly and, in fact, we are ahead of schedule in the past
year. Thousands of tons of equipment to construct the light
water reactors have been delivered to the site. We have
constructed a small village, including housing facilities,
medical facilities, roads, and a restaurant from which both
North and South Korean workers are served, and even have opened
a bank.
Although there has been significant progress during the
past 3 years, it is no secret that KEDO now faces very serious
financial challenges: first, resolving how the KEDO Executive
Board members will share the burden of paying for the two light
water reactors, with a cost estimated now at $4.6 billion; and,
second, how to finance KEDO's commitment to deliver 500,000
tons of heavy fuel oil to North Korea each year.
With respect to cost sharing, South Korea has agreed it
would play a ``central role'' and Japan a ``significant role'';
and you are aware, from what Mr. Deming has said, what that is
being translated into. The KEDO Executive Board, however, will
meet in New York later this week to try to finalize exactly
what these commitments mean and the modalities for putting this
package together. I hope that we are very close to a final
agreement on that issue.
Once we reach agreement on the cost sharing, KEDO intends
to conclude later this year a turnkey contract with our prime
contractor, Korea Electric Power Corporation, KEPCO; and the
turnkey contract will govern the rest of the project, including
full-scale construction work.
With respect to the funding of the heavy fuel oil shipments
to the North, KEDO began 1998 $47 million in debt from oil
delivered to North Korea in 1997. With the exception of the $19
million in collateral provided by the Japanese, however, there
are commitments for the remainder of it. So it is debt with
backing.
The cost of delivering this year's allotment will run to
between $55 million and $65 million. By the end of this month,
KEDO will have shipped 216,000 of the 500,000 tons needed to
ship this year, including 66,000 tons being shipped this month.
If KEDO does not obtain the funding for the oil shipments
and does not reach agreement on funding the light water
reactors, North Korea's adherence to the Agreed Framework,
including the pledge to freeze and eventually to dismantle the
nuclear program, would be jeopardized. The implications of such
a development obviously are dire.
The North's spent fuel from its 5 megawatt reactor is
currently stored in canisters under IAEA safeguards, but it
contains enough plutonium to produce four to five nuclear
bombs, should they attempt to do so.
However, I remain, I must remain, optimistic that the
funding will be found. It is too important for security in the
region and globally.
The importance of KEDO's work has been recognized by the
international community, particularly by the United States,
South Korea, Japan, and the European Community, and there are
some 26 other countries who have made financial contributions.
I would be happy to give you a list of those, which I think you
will find interesting.
[The information referred to appears in the appendix on
page 31.]
Mr. Anderson. As KEDO's Chief Executive Officer, I would
like to thank those Members of Congress, both Democrats and
Republicans, who have supported KEDO's work in the past; and I
appreciated your opening remarks. I urge that you continue this
support.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Anderson appears in the
appendix on page 43.]
Senator Thomas. Thank you, Mr. Anderson. Ambassador
Gallucci.
STATEMENT OF HON. ROBERT L. GALLUCCI, DEAN, GEORGETOWN
UNIVERSITY EDMUND A. WALSH SCHOOL OF FOREIGN SERVICE,
WASHINGTON, D.C.
Ambassador Gallucci. Thank you, Mr. Chairman. I also, with
your permission, would like to submit a written statement for
the record.
Senator Thomas. Absolutely.
Ambassador Gallucci. Mr. Chairman, I understand the issue
is whether or not Congress should, in general terms, be
providing more funds now and in the future to support KEDO and
that those funds would, in turn, be used for the purchase of
heavy fuel oil to be delivered to North Korea.
Is it, in other words, in the national security interests
of the United States to provide, perhaps, in round numbers
maybe $50 million a year for heavy fuel oil for North Korea or,
about, in round numbers, twice what Secretary Christopher
estimated 3\1/2\ years ago might be required of the United
States under the Agreed Framework? In other words, is this game
worth that candle?
For some, the answer, I think, is as clear as the benefits
that have already been realized seem to be. That 5 megawatt
reactor that had been producing a bomb's worth of plutonium a
year is frozen. The spent fuel from that reactor that has, we
estimate, 5 or 6 bombs' worth of plutonium contained in it, has
been recanned for safe storage and eventual shipment out of
North Korea, rather than being reprocessed.
The facility that was constructed and expanded, the
reprocessing plant, for the sole purpose of separating
plutonium, we think, for nuclear weapons, has been frozen. Two
large graphite reactors that by now could be producing enough
plutonium for maybe 25 or 30 nuclear weapons are frozen.
All of this freezing is also easily verified by the IAEA.
That is what has happened so far.
In the future, if the Agreed Framework is sustained, those
facilities are completely dismantled; that fuel I referred to
is shipped out of North Korea; and North Korea must come clean
on how much plutonium it produced in the past. It must settle
the issue of those special inspections or it does not get those
two light water reactors that are part of the Agreed Framework.
But the question for some is has the Agreed Framework been
fully implemented? I would say the answer is no.
The North-South dialog, which we hoped would flow from the
Agreed Framework--and there is language in the Agreed Framework
that is designed or was designed to pressure the North in the
direction of a dialog directly with the South--the expectation
in the Agreed Framework that that might come about has not been
realized despite the very aggressive pursuit of peace by new
South Korean President Kim Dae-Jung.
Second, there are what are referred to in the Agreed
Framework as the ``other concerns'' of the United States of
America. I would mention two principally here--the North Korean
ballistic missile program, as we are very concerned about the
development of extended range ballistic missiles, two in
particular, and their export by North Korea; and we are also
very concerned about the forward deployment of North Korea's
million man army close to the DMZ, close to South Korea, and
the deployment of 37,000 Americans.
Would it not have been better, as some have noted, had the
Agreed Framework provided for the delivery of two
conventionally fueled plants rather than two light water
reactors--in other words, solve the problem of North Korea's
gas graphite reactors not with light water reactors but with
coal fired plants? Yes, it would have been. But that I do not
believe was negotiable. We tried. It would not have been
accepted. The North Koreans insisted on modern nuclear
technology to replace the graphite technology.
Does the Agreed Framework remove North Korea's threat to
the United States, to regional security? It does not. There are
those ballistic missiles. There are other programs of weapons
of mass destruction in North Korea. There is the threat of the
North Korean conventional forces to U.S. forces and to South
Korea. There is always the risk of secret facilities that must
be discovered.
In 1995, when I spoke, Mr. Chairman, to members of this
committee, I noted that our experience with Iraq--and I had had
a fair amount of that experience--taught us all, I think, that
there are secret facilities which are sometimes hard to find,
and that we are accomplishing with the Agreed Framework
something very specific which was addressing a known set of
facilities, and a known set of facilities which, by now, I
believe would have produced probably enough plutonium for about
10 nuclear weapons.
So we are accomplishing something very specific with the
Agreed Framework so far, and we have the prospect of
accomplishing a great deal more if the Framework is sustained.
But the question, I think, that is before Congress now is
at what cost. The largest financial cost, of course, is the
roughly $5 billion that is projected as the price tag for the
light water reactor project, those 2,000 megawatt light water
reactors, to be borne principally by Japan and the Republic of
Korea, and, in addition, maybe an estimated $65 million a year
for heavy fuel oil, to be borne by the United States, the
European Union, and other States that decide to contribute each
year until the first light water reactor comes on line.
But I would ask, as the Congress considers this, that those
numbers, particularly the U.S. burden, be put in context. If
the U.S. portion were, say, about $50 million or $50 million to
$60 million, I would suggest that that is a relatively small
price to pay compared to the alternatives to deal with this
problem.
I recall that when we looked at the alternative to the
Agreed Framework and we thought it might be a return to the
United Nations Security Council and perhaps the vote of
sanctions, there would be a very large price tag attached to
the cost of U.S. military force redeployments--naval, sea, and
air--to deal with the contingency that might result from a
Security Council resolution.
I would also suggest that that figure is small, of course,
compared to the cost of any military contingency that we might
launch in order to deal with this treat.
Would we, Mr. Chairman, be willing to spend $50 million a
year to end the nuclear weapons program in Southeast Asia, in
India and Pakistan?
In short and in sum, Mr. Chairman, I think this game is
worth that candle.
Thank you.
[The prepared statement of Ambassador Gallucci appears in
the appendix on page 46.]
Senator Thomas. Thank you, sir. Thanks to both of you.
I have just a couple of quick questions.
Mr. Anderson, we have had this agreement now for some time
and some commitments, apparently, but you indicate that the
specifics of the contribution of South Korea and Japan are yet
to be determined.
Assume that now the cost has gone up to close to $5
billion, instead of $4 billion. What happens if, partly because
of their financial condition, they do not agree to this?
Mr. Anderson. Mr. Chairman, it has actually gone from $4
billion to $5.2 billion and now it is down to $4.6 billion.
All of the details of the agreement for the light water
funding have got to come together as a package. But there is
not any question about the commitment of South Korea or Japan
along the lines that Mr. Deming mentioned. So the bulk of the
money is there. It is exactly how these arrangements were put
together.
Senator Thomas. You are talking about the detail. You would
say that there is a commitment by both South Korea and Japan to
pay their share?
Mr. Anderson. It has been unequivocally reconfirmed in
recent weeks. Yes, sir.
Senator Thomas. OK. I will write that down.
You indicated also that there is $47 million, and with the
$19 million from Japan there is also commitment for the rest of
it. Where does that commitment come from?
Mr. Anderson. Well, for example, the European Union. We
are expecting $17 million from them within a few days. Part of
it is borrowed against that, that funding. There are other
commitments that are made, but we have not yet received them.
So it is against those funds that we have purchased the fuel
oil.
Senator Thomas. So the $47 million has been offset by--you
are comfortable with commitments to offset that?
Mr. Anderson. Well, I am not comfortable with them. If we,
indeed, received all of these commitments, they would take care
of $28 million of the $47 million. But we would have no money
with which to purchase the current requirements.
Senator Thomas. The State Department does not seem to be
quite as confident as you in terms of those commitments.
Mr. Anderson. I don't think there is a disagreement there.
It is just the way in which I am phrasing it. You could call it
$47 million in debt, but we have commitments for $28 million of
that, which we could pay off if we had to. But we could not
order new oil which is necessary for the current requirement.
Senator Thomas. Is there any reason to think that North
Korea is looking for reasons to sort of pull away from the
agreement?
Mr. Anderson. They started raising the question when I
visited North Korea last November. They said there were those
who were pushing to resume their nuclear program because we
were not moving quickly enough. So there has been a ratcheting
up of what they have been saying over the past several months.
They have also not confined it to the fuel oil. They have
talked about three things: one, the lifting of the U.S.
sanctions, and we had nothing to do with that; second, the pace
of the light water reactor construction; and, third, the heavy
fuel oil.
Now they are mistaken about the light water reactor. We
are, in fact, ahead of schedule because we have worked faster
than we intended. But they have linked their threats to all
three of these items.
So there is a growing concern on their part; and I think
these could be remedied by finding the funds so that we could
provide the oil on a regular basis, and so the light water
reactor construction can begin in earnest within a couple of
months.
Senator Thomas. Mr. Ambassador, in your view, is there any
relationship between this light water reactor, this KEDO
agreement, and sanctions?
Ambassador Gallucci. Mr. Chairman, I am not sure about the
connection you are suggesting.
Senator Thomas. Well, Mr. Anderson suggested they have
raised several questions which have caused them to question the
KEDO agreement or to not adhere to it, one of them being
sanctions.
Correct?
Mr. Anderson. Yes.
Senator Thomas. And I am saying when you negotiated the
KEDO thing, was there any suggestion that there would be an
opening of trade, that sanctions would not be there? Do they
have a reason to question that?
Ambassador Gallucci. By my recollection, Mr. Chairman, the
language of the Agreed Framework has, over time, the United
States and the DPRK moving to a more normal relationship. But
it is linked to other issues of concern being resolved.
We took certain steps, the United States did, I would say
certain minimal steps immediately after the negotiation of the
Agreed Framework, and it was the judgment then of the
administration that we were acting consistent with the
Framework. The North Koreans have always been disappointed that
more has not been done by the United States.
I think you have heard Deputy Assistant Secretary Deming
refer to the moves so far and the inclination with the new
President, Kim Dae-Jung, in South Korea to relook at that
issue. But also, I say again, the North Korean behavior
sometimes, provocations of one kind or another, bear upon that.
So I think we should not be surprised that the North
Koreans are wanting more from the United States, and I think we
have been moving quite deliberately and appropriately.
Senator Thomas. It seems that one of the most unusual
things you would expect to hear was North Korea being concerned
that the United States has not been open enough--the United
States, of all countries, not being open.
You indicated that you think it is the role of Congress to
provide. What about the administration making a request? This,
after all, was an administration agreement. You did not bring
it to us as a treaty. The Congress has never agreed to this,
right?
Ambassador Gallucci. I used to be repeatedly corrected,
Mr. Chairman, by lawyers not to use the word ``agreement'' and
to call it an ``Agreed Framework.'' So I have been struggling
to do that.
Senator Thomas. Well, what is your reaction to the
administration's request for funding?
Ambassador Gallucci. I have not, in fact, followed very
closely the requests of the administration each year since I
have left government. I think the expectation--and here I am
speaking as a citizen when I say this--I think the expectation
of the administration was that its efforts with other
governments would have brought forth more fruit than so far
they have realized, and that their request to Congress was
conditioned by that. When other governments have not been as
forthcoming as we think they ought to have been, they have come
back to Congress for more help.
The thrust of my remarks today really is that the stakes
here are such that, after regretting that other governments
have not been more forthcoming, it is yet still a Framework
that is very, very worth sustaining.
Senator Thomas. I am going to ignore the timer here for a
moment and ask one more question.
You indicated that there are inspections of the sites but
there were described sites to be inspected.
Isn't it possible that there are lots of other sites in
which things could be happening in which there is no
inspection?
Ambassador Gallucci. Senator, this question, as I said,
was raised before. The only answer, plausible answer, is
absolutely. Let's be clear about this.
I made reference to the Iraq experience which should really
chasten all of us about our intelligence community and other
governments that were focused on Iraq before the Gulf War; and
then, after the Gulf War, in the Special Commission we found
all kinds of things we did not anticipate.
A country like North Korea, which is known for a certain
amount of tunneling, can presumably have the capability to try
to hide things. The Agreed Framework is a wonderful tool, first
to get at known facilities that threaten our forces and our
alliance in the international community.
Second, it commits the North Koreans if they wish to stay
in the Framework, within the Framework not to do certain
things. They are not only listed to some degree in the public
version of the Agreed Framework, but, as you know, there is a
Confidential Minute which has a certain increased detail, which
is available to the subcommittee, which is useful to us.
I am not now nor was I before asserting to you that the
Agreed Framework turned or changed the nature of the North
Korean regime. We hope over time it will be a vehicle to help
that happen. But this is still a country that must be watched
very, very carefully.
Senator Thomas. Senator Kerry.
Senator Kerry. I have just a quick question. Thank you, Mr.
Chairman.
Under the Agreed Framework, Japan and South Korea were
going to pick up the cost of the reactor. I understand now
there may be a projected $350 million or so shortfall in their
capacity or willingness to do that.
I see Mr. Anderson's head nodding affirmatively.
If that is true--and is that your understanding--who makes
up the difference? Are we obligated to?
Ambassador Gallucci. If I could give a little bit of
history here, Senator, when we had not yet concluded the Agreed
Framework but were attempting to put together the package, the
light water reactor package, our team visited Seoul and Tokyo
and came away with commitments for, in the language at the
time, a ``significant contribution'' from the Republic of Korea
and an ``important contribution'' from Japan--or language to
that effect.
Subsequently, we translated it into 70 percent from South
Korea and $1 billion from Japan.
At the time, both South Korea and Japan wished the United
States to participate in the light water reactor project as
well. It is my clear recollection that we could make no such
commitment; that we were prepared to say that we would take the
lead, that the United States would take the lead, in putting
together the consortium that would provide the funding that
would supply the heavy fuel oil; and that we would seek to have
the United States participate in the light water reactor
project. This means we would seek from Congress.
In fact, I remember coming to Congress and so seeking. I
also remember so failing.
Senator Kerry. So that's up in the air.
Ambassador Gallucci. Right now I speak as a citizen and
say what I understand is that discussions have been proceeding
between the United States, Japan and the Republic of Korea to
resolve what seems to be a gap for the last percentage, however
much that turns out to be, 10 percent or less.
Senator Kerry. I appreciate that answer. It is helpful to
get the history on the record. I also appreciate very much your
strategic comparison of what we achieve and do not achieve
here. I could not agree with you more that the differential on
the fuel oil, compared to the deployment of the Seventh Fleet
or a whole bunch of other things that could be envisioned here,
not to mention the long-term costs with respect to
proliferation and engagement, is obviously pale.
So I hope we can, as a result of this hearing, find some
rapid, sensible resolution of this.
Thanks, Mr. Chairman.
Senator Thomas. Thank you, Senator.
Senator Feinstein.
Senator Feinstein. Thank you, Mr. Chairman.
Ambassador Gallucci, as one who was here in 1995 and heard
your testimony before this committee, I must tell you that I
regard this with some sense of dismay and some feeling that
this thing is falling apart.
Let me begin with the dialog portion of this. As I recall
the testimony almost 4 years ago, a lot was put or an emphasis
was placed on the fact that there would be dialog. I understand
that there has been one set of meetings but now nothing is
scheduled. So the real Four Party Talks are in a hiatus, if I
understand it correctly.
I am very concerned about that. I could interpret this all
wrong, but it looks to me like you are sort of setting the
precedent for the United States to put more money into this
thing. And, unless there is a corollary of the discussions
proceeding and some progress taking place, our committee report
points out that, even with respect to the dismantlement of
existing reactors and the reprocessing facility, the costs
there are presumed to be the responsibility of North Korea; and
the smallest of the reactors is already contaminated with
radioactivity and expected substantially to increase the cost.
It seems to me, then, that we are getting nowhere fast except
into a holding situation.
If you can disabuse me of this feeling of dismay that I
have as a product of the testimony, I would appreciate it.
Ambassador Gallucci. Senator, I am going to try, because I
do not share your dismay.
If I take the forest view for just a second, before going
down to the trees, I would say that with the Agreed Framework
in place now approaching 4 years, the performance under the
Framework has been nothing short of remarkable. The creation of
KEDO, the participation of a number of countries, even if it is
not as much as we would like, is still significant. Those
facilities are frozen that would be producing nuclear weapons
right now. They were frozen under a continuous IAEA presence,
and American technicians canned that fuel--all of it that could
be easily canned. They have some sludge that has yet to be
handled. I think this is all remarkable.
I don't think, if I may now say, that it is all that
remarkable that North Korea has not burst forward with a dialog
with the South. We fought very hard for language in the
Framework which would, if this were a binding agreement, compel
North Korea to the table. But it is not that. It is a
``framework'' and for a variety, I am sure, of political
reasons, the North Koreans have not come forward. I listed that
as one of the elements of the Framework not realized.
But if I could offer at this point something, if the
Framework stays in place and the North Korean nuclear weapons
threat is kept in a box and ultimately dismantled, at the kinds
of costs that are indicated here to the United States--we are
talking about tens of millions of dollars each year for maybe
10 years and billions of dollars for the Japanese and Koreans--
this is still, compared to the alternative way of dealing with
this problem--and I hesitate to say this as a taxpayer--peanuts
compared to the money we pay to deal in the defense
establishment with threats of this character.
This is a tremendous bargain.
While I am saying that, I want us very much, the U.S.
Government, to put pressure: (a) on other governments to
participate in this because it is a good deal for them, too,
and we should not bear all this burden; and also (b) on the
North, now that we have particularly a government in the South
that has been so aggressive in pursuing that dialog and in
pursuing peace with the North. I want that to happen.
But, Senator, time is on our side. It is not on the side of
the regime in North Korea. I think if we can sustain the
progress we have made and the course we are on, we are doing
very well.
Mr. Anderson said, I think quite correctly, that the light
water reactor project is, indeed, on schedule. This, I say
again, is absolutely remarkable--the building of this kind of
facility in North Korea using South Korean neighbors. This is
the kind of thing we dreamed about happening for years. Now it
is happening.
We have now a problem with heavy fuel oil that is in the
tens of millions of dollars; and if the Agreed Framework should
falter for that, it would be a tragedy in my view.
Senator Feinstein. Well, no, it is not that. I mean it is
one thing to say this thing is great. It is another to
recognize that it is frozen and could be started up at any
time.
I think the thing that is going to be persuasive here is
the Four Party Talks. If there are not discussions that can
lead to some kind of permanent solution, I don't see that we
get all that much. I agree that delay is worth something. But I
would not embroider on that a whole tapestry.
Ambassador Gallucci. Senator, I will stay away from that
metaphor. But if we could go back to the terms of the
Framework, according to the terms of the Framework the North
Koreans receive the big benefits--the light water reactors, the
$5 billion project--only after these facilities are not only
frozen but completely dismantled, and only after the spent
fuel, the only spent fuel that we know of that exists in North
Korea, is completely shipped out. So this problem is not only
frozen, it is disposed of, as we understand it now, to the best
of our ability. This is if nothing happened on the dialog.
Now I do not want to diminish the political elements of the
Agreed Framework. They were very important to us, and I want
very much for that dialog to proceed. But I, myself, at this
moment, as I assess what this is worth to American national
security and to stability in Northeast Asia, I look at the
Framework as having delivered, at least up to this point. And I
want to preserve it.
I do want to pressure those North Koreans into dialog with
the South. But I would not hold up implementation of the
Framework pending that dialog.
Senator Feinstein. When is the dialog going to begin? It
has been almost 4 years now.
Ambassador Gallucci. I really do not want to be in a
position of apologizing for Pyongyang not doing what it is
supposed to do under the terms of the Framework. What I really
want to do is tell you that, as we press them to do that, in
the meantime, I would like to see the United States do what it
said it would do, which is to take responsibility for the
delivery of the heavy fuel oil.
We are not yet behind the terms of the schedule. We are
behind the terms of the pace at which we told the North Koreans
we would try to deliver heavy fuel oil.
In other words, I want to join you, Senator, in insisting
that that dialog get started. But when we turn from that
observation that the North Koreans are really not delivering,
what ought to happen now with respect to the Congress and the
administration is I want to make sure that we sustain the
Framework.
Senator Feinstein. Mr. Chairman, will you permit me just
one more question?
Senator Thomas. Sure.
Senator Feinstein. How far are we behind on the heavy fuel
oil?
Ambassador Gallucci. Actually, Senator, the way I
understand the deal when we first did it, and I don't know
whether there have been further talks, we are not yet behind at
all in terms of delivery of heavy fuel oil, that is, the formal
expectations--I don't want to say ``obligations,'' but
expectations--of the Agreed Framework.
However, at one point the North Koreans told us early on in
this arrangement in 1994-1995 that it would help them if we
paced our delivery of heavy fuel oil in a way that allowed them
to consume it, so that we would deliver a certain amount over
the months.
According to that schedule, we are not on that schedule.
But that is not an obligation of ours.
Senator Feinstein. How far off that schedule are the
deliveries?
Ambassador Gallucci. If I could, I would shove that
question over to my colleague. I am not sure about the months
and the timing and, indeed, the exact amount of oil that has
been delivered. But I suspect that we are behind the schedule.
Can I ask my colleague to speak to that?
Mr. Anderson. You may.
Senator, we have delivered 216,000 tons of the 500,000.
What the North Koreans would like is for us to deliver 4,400
tons a month. We have done that for several months but not
since last October. We started late because we were still
delivering 1997 oil until January.
To actually deliver all that is committed, the 500,000
tons, we would need to deliver 95,000 tons per month in August,
September, and October. I suspect that that can be spread out a
little bit more and probably the North Koreans will agree to
it.
But we started late, and we have been delivering pretty
regularly since then. But we are now without funds totally. So
to get all that is committed delivered, we will need to deliver
95,000 tons in those 3 months or over the rest of the year, and
we need the funding for that.
Senator Feinstein. So in other words, you are saying that,
unless you get additional funding, you won't be able to keep
that portion of the terms of the agreement?
Mr. Anderson. That's correct, Senator.
Senator Feinstein. Is there any indication from the North
Koreans that they will be willing to begin the Four Party Talks
in a serious manner?
Ambassador Gallucci. If there is, I am unaware of it. I
know that the Four Party Talks were stopped. I know that there
were some direct talks between the North and South in Beijing,
but I don't know the current status. I would respectfully have
to ask that that be passed to the administration to respond to.
Senator Feinstein. May I, Mr. Chairman, ask for a response
in writing on that point?
Senator Thomas. Surely.
Senator Feinstein. Thank you very much.
Senator Thomas. Are you clear as to what she is asking?
Mr. Deming. The status of the Four Party Talks.
Senator Feinstein. On the talks, yes. Thank you.
[The information referred to appears in the appendix on
page 40.]
Senator Thomas. All right, thank you. We appreciate it very
much.
Certainly I think there is agreement that we must continue
to make this thing work, that it is a valuable tool. I think we
also have to make sure that we do not allow North Korea to find
reasons not to comply.
Further following the Senator from California's notion,
accomplishing this is not in itself success. This is a role.
This is a part of moving toward opening North Korea, in my
view, and causing some changes to be made there. The success of
this individually will not be a success in the changes.
We need to comply with what we have agreed to. On the other
hand, it seems to me that we should not be pushed into picking
up the whole load. Just because you are a leader does not mean
you have to pay the tab. I think sometimes we slide over into
that.
So I hope that our policy and where we want to go, all of
that, using this activity of the KEDO and so on should be made
clear. Our policy needs to be clearly stated with respect to
this country, as in my view it needs to be with all countries.
We need to let it be known that we will adhere to that policy
that we articulate.
Ambassador, thank you, sir.
Ambassador Gallucci. Thank you, Mr. Chairman.
Senator Thomas. Mr. Anderson, good luck in your difficult
chore.
Mr. Anderson. Thank you.
Senator Thomas. Mr. Secretary, we are glad to have had you
here.
Mr. Deming. Thank you, sir.
Senator Thomas. Thank you all so much.
The subcommittee is adjourned.
[Whereupon, at 11:50 a.m., the subcommittee adjourned.]
A P P E N D I X
----------
Korean Peninsula Energy Development Organization Members and
Contributions
Members
United States, Republic of Korea, Japan, EU, Canada, Australia,
Finland, New Zealand, Indonesia, Chile, Argentina, and Poland. Total:
12.
Contributions \1\
Total contributions to KEDO of $195.8 million consist of $91.5
million from the U.S. and $104.3 million from 21 other countries and
the EU.
United States--$91,500,000 \2\
European Union (EU)--$34,654,500
Japan--$32,260,000 \3\
ROK--$17,165,000
Australia--$9,379,00
Canada--$2,696,500
New Zealand--$1,355,400
Germany--$1,011,500
UK--$1,000,000
Indonesia--$974,900
Netherlands--$790,200
Norway--$500,000
Singapore--$600,000
Brunei--$423,700
Finland--$310,500
Malaysia--$300,000
Thailand--$300,000
Argentina--$200,000
Philippines--$150,000
Czech Republic--$127,816
Switzerland--$118,100
Oman--$50,000
Greece--$25,000
Hungary--$10,000
Pledges \4\
Total: $20.6 million
EU--$16,618,500 (ECU 15 mil. x 1.1079 $/EU)
France--$2,000,000 (US$ 2 mil.)
Italy--$1,710,000 (Lira 3 bil. x .00057 $/Lira)
New Zealand--$264,200 (NZ$ 500,000 x .5283 $/NZ$)
\1\ Contributions through August 21, 1998.
\2\ Does not include appropriations for the spent fuel canning
project, which is funded and implemented independently by the United
States. To date, the U.S. has appropriated US$27 million for the spent
fuel project, bringing U.S. total contributions in support of the
Agreed Framework to US$118.5 million.
\3\ Includes $19 million cash collateral fund provided by Japan to
KEDO to facilitate HFO borrowing.
\4\ Only includes pledges approved by legislature of donor.
Exchange rates as of 7/20/98.
__________
Responses to Additional Questions Submitted for the Record to Principal
Deputy Assistant Secretary of State Rust Deming
Responses to Questions Submitted by Senator Helms
Questions 1-5. Can you tell the committee, on an unclassified
level, with a reasonable degree of assurance, whether or not North
Korea may be engaging in nuclear or nuclear weapons related activities
at sites other than those covered by the Framework Agreement? Our
colleague on the House Appropriations Committee, Foreign Operations
subcommittee Chairman Sonny Callahan recently (Washington Post, July 6,
1998) expressed his concern that North Korea may be pursuing nuclear
weapons at facilities other than those frozen under the agreement.
According to the Washington Post the Administration said ``there is no
evidence of this.'' Is the Administration response an accurate
statement and do you stand by that statement today?
Is it the Administration's assessment that North Korea has
terminated its nuclear weapons program?
Are there nuclear weapons related activities which were underway
prior to the signing of the Agreed Framework which are still underway
in North Korea?
Has new information been acquired over the past year regarding key
components of a nuclear weapons program?
Answer. We are aware of Chairman Callahan's concerns. Since those
concerns related to intelligence assessments, they were addressed
during a classified briefing provided to Rep. Callahan and other
Members of Congress. In response to your questions in this area, we
would be pleased to schedule a similar briefing.
Question 6. What is the extent of North Korea's nuclear weapons
related cooperation with other states, both as a supplier and as a
recipient of nuclear weapons related technology?
Answer. We will be pleased to brief you on this topic in a closed
setting.
Question 7. Would the provision of sophisticated nuclear technology
and training assist North Korea in pursuing a nuclear weapons program
if it is still pursuing such a program?
Answer. Light water reactors (LWRs) are significantly more
proliferation-resistant than North Korea's frozen graphite-moderated
reactors. It is much harder to obtain and divert weapons material from
spent LWR fuel.
Under the terms of the Agreed Framework, the DPRK must come into
compliance with IAEA full-scope safeguards before the LWRs can be
completed. This will permit the IAEA to maintain safeguards over any
spent fuel eventually produced from the LWRs.
Under the terms of the Supply Agreement between KEDO and the DPRK,
the DPRK must allow, if requested by KEDO, the shipment of its LWR
spent fuel out of North Korea for disposal abroad.
The technology and training which KEDO is providing the DPRK in
connection with the LWR project is useful only for building and
operating LWRs. The technology is highly specialized and of little use
in pursuing a nuclear weapons program.
Question 8. Where does the heavy fuel oil that we provide under the
Agreed Framework come from? Please provide the source, costs, and
shipping methods for each HFO provider.
Answer. The attached tables list each delivery of HFO that KEDO has
made to North Korea, including the date, quantity, cost, and source of
the oil.
The HFO Sellers listed in the tables ship oil from the following
countries
Montello......................... Singapore
Itochu........................... Japan
Honam............................ South Korea
Vitol/Vitol Asia................. Singapore
BP Oil/BP Singapore.............. Singapore
Sunkyong......................... South Korea
Hanwha........................... South Korea
Mitsubishi....................... Japan
Caltex........................... South Korea
Petro Diamond.................... Japan
Sumitomo......................... Japan
Meiwa............................ Japan
Nissho Iwai...................... Japan
All KEDO HFO has been delivered by oil tanker to one of three DPRK
ports: Sonbong, Nampo/Songrim, or Chongim.
HFO Costs--1996 Program
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
B/L Date or
Scheduled Discharge Date Ship (HFO Seller) B/L Quantity M/Ts Transportation Freight Cost Commodity Cost Commodity Cost Total Freight and
Delivery Port Price Per M/T Per M/T Commodity
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
12/95........................... 1/14/96 Vigour 29,400 $26.00 Est. $764,400 $112.00 Est. $4,057,200 $4,057,200
Sonbong (Montello)
---------------------------------------------------------------------------------------------------------------------------------------------------------------
1/14/98 Cherry 12,100 $26.00 Est. $314,600 $112.00 Est. $1,669,800 $1,669,800
Sonbong (Montello)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2/96............................ 3/12/96 Yang He 21,500 $15.50 $333,250 $114.99 $2,472,285 $2,805,535
Sonbong (Itochu)
---------------------------------------------------------------------------------------------------------------------------------------------------------------
3/13/96 Asahi Maru 18,100 $16.50 $298,650, Includes $114.99 $2,081,319 $2,379,969
Sonbong (Itochu) $3,733.13 ISC Fee
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3/96............................ 3/20/96 Liu He 22,807.90 $10.00 $228,079 $126.73 $2,890,445.17 $3,118,524.17
Sonbong (Honam)
---------------------------------------------------------------------------------------------------------------------------------------------------------------
3/30/96 Liu He 22,454.80 $10.00 $224,548 $126.73 $2,845,696.80 $3,070,244.80
Sonbong (Honam)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4/96............................ 5/2/96 Posidon 34,100.968 $23.00 Est. $784,323 Est. $111.50 $5,921,520.66 $5,921,520.66
Sonbong (Vitol Asia)
---------------------------------------------------------------------------------------------------------------------------------------------------------------
5/4/96 Jin He 9,999.554 $23.00 Est. $230,000 Est. $111.50 (Included in (See above)
Chongjin (Vitol Asia) above)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
5/96............................ 6/4/96 Natuna Sea 37,800.129 $15.00 Est. $585,902 Est. $115.40 $4,929,136.82 $4,929,136.82
Sonbong (BP Oil)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
6/96............................ 7/8/96 Natuna Sea 37,837.679 $15.50 Est. $586,484 Est. $100.00 Est. $4,370,251.92 $4,370,251.92
Sonbong (BP Oil)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
7/96............................ 8/16/96 Jin He/Dan Chi 24,730.031 $33.37 $825,307.90 $104.00 $2,571,923.12 $3,397,231.12
Nampo (Sunkyong)
9,327
Songrim
15,403
---------------------------------------------------------------------------------------------------------------------------------------------------------------
7/22/96 Yu Chi 21,017.007 $12.75 $267,966.84 $104.00 $2,185,768.73 $2,453,735.57
Sonbong (Sunkyong)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
8/96............................ 8/23/96 Yu Chi 21,062.321 $12.85 $270,650.82 $108.65 $2,288,421.18 $2,559,072
Sonbong (Hanwha)
---------------------------------------------------------------------------------------------------------------------------------------------------------------
9/4/96 Jin Chi 21,000 $15.50 $325,500 $109.75 $2,304,750 $2,630,250
(Itochu)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
9/96............................ 8/30/96 Daqing-73 20,000 $16.00 $320,000 $115.50 $2,310,000 $2,630,000
Nampo (Vitol)
4,000
Songrim
16,000
---------------------------------------------------------------------------------------------------------------------------------------------------------------
9/25-30/96 Daqing-71 20,006.255 $16.00 $320,100,08 $111.50 $2,230,697.43 $2,550,797.51
Nampo (Mitsubishi)
Songrim
---------------------------------------------------------------------------------------------------------------------------------------------------------------
9/26/96 Yu Chi 20,701.122 $16.00 $331,217.95 $111.50 $2,308,175.10 2,639,393.05
Chongjin (Itochu)
---------------------------------------------------------------------------------------------------------------------------------------------------------------
10/8/96 Est. Yu Chi 20,703.277 $14.00 $289,845.88 $111.40 $2,308,415.39 $2,598,261.27
Sonbong (Itochu)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
10/96........................... 10/4/96 Daqing-71 20,000 Est. $15.75 $315,000 $126.00 $2,520,000 $2,835,000
Nampo (Vitol)
5,172.707
Songrim
14,827
---------------------------------------------------------------------------------------------------------------------------------------------------------------
10/14/96 Daqing-73 20,000 Est. $14.75 $315,000 $126.00 $2,520,000 $2,835,000
Nampo (Vitol)
9,000
Songrim
11,000
---------------------------------------------------------------------------------------------------------------------------------------------------------------
10/15/96 Est. Ming Chi 21,006.360 $15.25 $320,346.99 $123.25 $2,589,033.87 $2,909,380.86
Sonbong (Mitsubishi)
---------------------------------------------------------------------------------------------------------------------------------------------------------------
10/21/96 Est. Jin Chi 21,005.387 $15.25 $320,332.15 $124.25 $2,609,919.33 $2,930,251.48
Sonbong (Mitsubishi)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
HFO Costs--1997 Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
Delivery Date Ship (HFO B/L Quantity M/ Transportation Commodity Cost
Scheduled Month (B/L Date) Delivery Port Seller) Ts Price Per M/T Freight Cost Per M/T Commodity Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
1/97 (2/6/97)................ 2/8/97 M/T Magpie 21,850.30 $13.50 $294,979.05 $105.25 $2,299,744.08
Sonbong (LG-Caltex)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1/97 (2/14/97)............... 2/22/97 M/T Yu Chi 21,627.00 $16.00 $346,032.00 $105.25 $2,276,241.75
Nampo, Songrim (LG-Caltex)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3/97 (4/20/97)............... 4/24/97 M/T Sun River 21,990.845 $15.50 $340,858.10 $107.50 $2,364,015.84
Sonbong (Petro
Diamond)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3/97 (4/24/97)............... 4/25/97 M/T Jin Chi 20,320.4 $16.00 $325,126.40 $108.75 $2,209,843.50
Nampo, Songrim (LG-Caltex)
--------------------------------------------------------------------------------------------------------------------------------------------------------
5/97 (5/17/97)............... 5/19/97 M/T Jin Chi 20,044.6 $15.40 $308,686.84 $108.77 $2,180,251.14
Nampo, Songrim (LG-Caltex)
--------------------------------------------------------------------------------------------------------------------------------------------------------
5/97 (5/27/97)............... 5/29/97 M/T Egret 22,059 $12.75 $281,252.25 $108.77 $2,399,357.43
Sonbong (LG-Caltex)
--------------------------------------------------------------------------------------------------------------------------------------------------------
6/97 (6/15/97)............... 6/29/97 Natuna Sea 37,999.435 C & F C & F $122.90 $4,670,130.00
Sonbong (BP Singapore)
--------------------------------------------------------------------------------------------------------------------------------------------------------
6/97 (6/18/97)............... 6/20/97 Daqing-75 22,035.5 $14.90 $328,328.95 $113.00 $2,490,011.50
Nampo, Songrim (LG-Caltex)
--------------------------------------------------------------------------------------------------------------------------------------------------------
6/97 (6/29/97)............... 7/6/97 Sun River 22,000 $15.90 $349,800.00 $110.25 $2,425,500.00
Sonbong (Petro
Diamond)
--------------------------------------------------------------------------------------------------------------------------------------------------------
7/97 (7/15/97)............... 7/16/97 Natuna Sea 37,999.156 C & F C & F $120.90 $4,594,097.96
Sonbong (BP Singapore)
--------------------------------------------------------------------------------------------------------------------------------------------------------
7/97 (7/18/97)............... 8/7/97 Daqing-76 23,073.588 $18.75 $432,629.78 $109.75 $2,532,326.28
Nampo, Songrim (Petro
Diamond)
--------------------------------------------------------------------------------------------------------------------------------------------------------
8/97 (8/28/97)............... 8/30/97 Anfu 23,538.67 $12.75 $300,118.04 $106.12 $2,497,923.66
Sonbong (Sunkyong)
--------------------------------------------------------------------------------------------------------------------------------------------------------
8/97 (9/2/97)................ 8/7/97 Magpie 25,303.3 $12.60 $318,821.58 $107.75 $2,726,430.58
Sonbong (LG-Caltex)
--------------------------------------------------------------------------------------------------------------------------------------------------------
8/97 (9/18/97)............... 9/10/97 Daqing-74 22,049.606 $15.10 $332,949.05 $106.12 $2,339,904.19
Nampo, Songrim (Sunkyong)
--------------------------------------------------------------------------------------------------------------------------------------------------------
9/97 (10/8/97)............... 10/10/97 Egret 23,192.3 $16.10 $386,400.00 $110.10 $2,553,472.23
Nampo, Songrim (LG-Caltex) (includes
$13,003.97 for
changes)
--------------------------------------------------------------------------------------------------------------------------------------------------------
9/97 (9/20/97)............... 9/22/97 Liu He 24,415.539 $12.90 $314,960.45 $106.12 $2,590,977.00
Sonbong (Sunkyong)
--------------------------------------------------------------------------------------------------------------------------------------------------------
9/97 (9/24/97)............... 9/28/97 Daqing-76 22,377.3 $14.90 $333,421.18 $110.10 $2,463,740.73
Nampo, Songrim (LG-Caltex)
--------------------------------------------------------------------------------------------------------------------------------------------------------
11/97 (12/26/97)............. 12/28/97 Jin He 21,980.692 $17.00 $374,000.00 $106.00 $2,329,953.36
Sonbong (Petro
Diamond)
--------------------------------------------------------------------------------------------------------------------------------------------------------
11/97 (12/23/97)............. 12/27/97 Daqing-71 22,050.181 $17.10 $377,058.10 $109.95 $2,424,417.40
Nampo, Songrim (Itochu)
--------------------------------------------------------------------------------------------------------------------------------------------------------
12/97 (1/9/98)............... 1/15/98 Jin He 22,272.838 $17.00 $378,638.25 $106.10 $2,363,148.11
Sonbong (Petro
Diamond)
--------------------------------------------------------------------------------------------------------------------------------------------------------
12/97 (1/10/98).............. 1/19/98 Daqing-75 22,147.3 $15.00 $332,209.50 $111.50 $2,469,423.95
Nampo, Songrim (LG-Caltex)
--------------------------------------------------------------------------------------------------------------------------------------------------------
HFO Costs--1998 Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
Delivery Date Ship (HFO B/L Quantity M/ Transportation Commodity Cost
Scheduled Month (B/L Date) Delivery Port Seller) Ts Price Per M/T Freight Cost Per M/T Commodity Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
2/98 (3/3/98)................ 3/8/98 M/T Ding He 21,948.399 $15.75 $345,687.28 $67.90 $1,490,296.29
Sonbong (Petro
Diamond)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2/98 (3/8/98)................ 3/7/98 M/T Daqing-72 20,060.739 $15.00 $300,911.09 $74.90 + .50 $1,512,579.72
Nampo, Songrim (Sumitomo = $75.40
Corp.)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3/98 (3/27/98)............... 3/30/98 M/T Egret 22,142.8 $13.00 $287,856.40 $76.45 $1,692,817.06
Sonbong (Meiwa Trading
Co.)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3/98 (3/13/98)............... 3/22/98 M/T Tanja Jacob 21,999.410 Included in Included in $87.70 --
Songrim (BP Singapore) commodity per commodity
ton price price (C & F)
--------------------------------------------------------------------------------------------------------------------------------------------------------
4/98 (4/17/98)............... 4/21/98 Daqing-76 21,994.72 $17.50 $384,907.60 $77.25 $1,699,092.12
Nampo, Songrim (Petro
Diamond)
--------------------------------------------------------------------------------------------------------------------------------------------------------
5/98 (5/22/98)............... 5/31/98 Daqing-73 21,88.5 $15.10 $330,516.35 $95.18 $2,083,347.43
Nampo, Songrim (LG-Caltex)
--------------------------------------------------------------------------------------------------------------------------------------------------------
6/98 (6/20/98)............... 6/22/98 Daqing-76 21,841.5 $14.50 $317,550.00 $83.00 $1,812,844.50
Nampo, Songrim (Nissho Iwai) (min. cargo
contract)
--------------------------------------------------------------------------------------------------------------------------------------------------------
7/98 (7/16/98)............... 7/17/98 Est. Dan Chi 19,776.3 $13.50 $266,980.05 $78.50 Est. $1,522,439.55
Sonbong (LG-Caltex)
--------------------------------------------------------------------------------------------------------------------------------------------------------
7/98 (not available)......... 7/28/98 Est. An Fu 22,000 Est. $13.50 $297,000.00 $79.50 Est. $1,749,000.00
Sonbong (LG-Caltex) Est. Est.
--------------------------------------------------------------------------------------------------------------------------------------------------------
7/98 (7/12/98)............... 7/20/98 Est. Alex 20,999.428 $16.00 Est. $335,990.85 $80.00 Est. $1,679,954.24
Nampo, Songrim (BP Singapore) Est.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Response to Question Submitted by Senator Thomas
Question. In addition to the LWR, will North Korea also need a
power grid to distribute the power generated, particularly given that
the previous reactors at Yongbyon were never connected to a grid?
Answer. A reliable transmission and distribution system is
necessary for a safe startup, operation, and shutdown of a nuclear
power plant and to assure a reliable off-site power supply for safety-
related equipment.
North Korea's existing capabilities are inadequate to handle the
2,000 megawatts of electricity which will be generated by the LWR's.
Upgrading the transmission and distribution system is the
responsibility of the DPRK. Neither KEDO nor any of its members have
undertaken any obligation to pay for this upgrade.
Consultations with the North Koreans about the required
characteristics for the transmission grid are ongoing.
Response to Question Submitted by Senator Kerry of Massachusetts
Question. What are our options for providing the necessary funding
for HFO? Should the additional funds be reprogrammed or provided
through a supplemental?
Answer. We are in the process of consulting with the Congress on
reprogramming $15 million under Section 614 authority, and considering
later in this fiscal year invocation of the Secretary's authority under
Section 451 of the Foreign Assistance Act, if necessary, to reprogram
$12 million for KEDO HFO.
We do not believe that a supplemental would be an effective
response to KEDO's funding needs, given the difficulties in integrating
such a supplemental into the appropriations process
We look forward to discussing our funding plans with you further in
this consultation process.
Meanwhile, we are continuing and redoubling our efforts to raise
funds and support abroad for KEDO.
We are committed to ensuring that sufficient funding is secured to
meet KEDO's obligations to provide heavy fuel oil.
Response to Question Submitted by Senator Feinstein
Question. When is North/South dialogue going to begin? Is there any
indication that the North is willing to begin four-party talks in a
serious manner?
Answer. At the North's initiative, North and South Korea did engage
in direct talks last April in Beijing on possible ROK fertilizer
assistance. Those talks ended without resolution and there is no
indication as to when they might continue.
We are fully supporting the efforts of our ROK allies to persuade
North Korea to resume the North-South dialogue.
The ROK and the U.S. first proposed four party talks in April 1996
date. After strenous efforts by us, the ROK and the PRC, the first
round of plenary talks was held in December 1997 and the second in
March 1998.
A third plenary round of the Four Party talks has yet to be
scheduled, though it is our hope that it will be convened soon.
North Korean intransigence prevented any progress from being made
during the first two rounds of Four Party Talks. Specifically, the DPRK
insisted that withdrawal of U.S. troops from Korea and the negotiation
of a U.S.DPRK peace treaty be the main topics of discussion, while the
U.S. and ROK called for the establishment of subcommittees to address
the topics of confidence-building measures to reduce tensions, the
establishment of a permanent peace treaty to replace the Armistice.
North Korea subsequently offered to withdraw its demands in return for
more food aid and an easing of U.S. sanctions--a proposal which we
rejected out of hand.
Nonetheless, we consider it to be a very significant accomplishment
that we have finally persuaded the North to participate in multilateral
talks which include the ROK and which are designed to lead to a
permanent peace settlement. We communicate regularly with the North at
the working level in an effort to make the DPRK's involvement more
constructive.
In our view, the ROK's dialogue with the North is complementary to
the Four Party process. While the purpose of the Four Party talks is
the reduction of tension on the Peninsula and the achievement of a
permanent peace treaty to replace the armistice, North-South talks
allow the two to address specific topics such as the food situation.
Progress in the Four Party process and better relations between the
participants are mutually reinforcing.
Prepared Statement of Rust M. Deming
Thank you, Mr. Chairman. I greatly appreciate the opportunity to
appear before your Committee today to speak about U.S. policy toward
North Korea. The Secretary and President appreciate your past support
for the Korean Peninsula Energy Development Organization--KEDO--and for
the Agreed Framework, and hope that you will continue to support our
efforts.
The Korean Peninsula remains one of the most unstable and dangerous
places in the world today. Forty-five years after the armistice, 37,000
American troops, together with their colleagues from the ROK, face more
than a million North Korean troops across the demilitarized zone. One
of the most dangerous moments of that tense history was just four years
ago, in the summer of 1994.
In 1993, isolated by the transformations of its cold war patrons
and facing a southern neighbor with growing economic power and global
stature, North Korea began to bring its efforts to acquire nuclear
weapons to fulfillment. Kim Il Sung's engineers had completed a large-
scale plant to reprocess plutonium from spent fuel produced by North
Korea's Soviet-designed graphite-moderated reactor. In addition, the
North had begun constructing two larger graphite-moderated reactors,
which in addition to being of unsafe design, would be capable of
producing enough plutonium for a significant nuclear arsenal within a
few short years.
Disputes over past production of plutonium and the monitoring of
nuclear facilities by the International Atomic Energy Agency led the
DPRK to announce, in June 1994, its withdrawal from the IAEA; the North
was also on the verge of carrying out its threat to withdraw from the
Nuclear Nonproliferation Treaty, or NPT. When the DPRK subsequently
began to defuel its reactor without the IAEA's presence, which would
make confirmation of past production of plutonium more difficult, the
security situation on the Korean Peninsula was as tense as it has been
at any point since the cessation of open hostilities in 1953. Military
forces on both sides were augmented and placed on high alert.
Fortunately, a negotiated solution was found and a crisis averted.
The result of these negotiations was the 1994 U.S.-DPRK Agreed
Framework. To date, the Agreed Framework has been a success. The
North's indigenous nuclear program at Yongbyon remains frozen, the
canning of the DPRK's spent fuel is now virtually complete and under
IAEA seal, as are the reprocessing plant and reactors. The IAEA
maintains a continuous monitoring presence and Pyongyang has remained a
party to the NPT. North Korea also has acknowledged that it must
eventually dismantle all the elements of its nuclear program and permit
its existing spent nuclear fuel to be shipped out of North Korea.
In return for the North's nuclear freeze, the U.S. agreed to take
the lead in organizing a consortium to build two modern, safe,
proliferation-resistant light water reactors, known as LWRs, in North
Korea. In addition, the United States agreed to ``make arrangements to
offset the energy foregone,'' with 500,000 metric tons of heavy fuel
oil or ``HFO''.
That consortium, which became known as the Korean Peninsula Energy
Development Organization or ``KEDO'', was founded by the U.S., Japan
and South Korea in 1995 to implement both the LWR and HFO aspects of
the Agreed Framework. KEDO has negotiated with the DPRK a Supply
Agreement for the LWR project, six side protocols and a number of other
instruments spelling out how the LWR and HFO aspects of the Framework
would be implemented.
South Korea and Japan have together committed themselves to assume
virtually the entire burden of the estimated $4.6 billion LWR project.
Specifically, South Korea has pledged to fund 70 percent of the
project, and Japan has agreed to provide $1 billion. KEDO has commenced
work on the project and, although work is not yet in full swing, an
important amount of site preparation work has been underway for almost
a year.
With respect to the funding of any shortfall that might occur at
the later stages of the LWR project, discussions among the original
three members of the KEDO Executive Board as well as the European
Union, which just joined as a major contributor, are continuing and, we
feel, are approaching a resolution.
The provision of heavy fuel oil, which is seen by North Korea, our
KEDO partners and the world as principally a U.S. responsibility, is
the most tangible evidence of the U.S. government's commitment to the
Agreed Framework. In meeting this responsibility the U.S. government
has made vigorous efforts to recruit assistance from other countries.
U.S. officials have made direct approaches, in most cases repeatedly
and at a high level, to 37 countries and the European Union for HFO
funding. In general, we have targeted countries with a direct interest
in peace and stability in East Asia as well as those with the ability
and willingness to contribute, whether in funding or in kind, to a
cause that serves global nonproliferation goals.
In 1995 testimony before Congress, then-Secretary of State Warren
Christopher estimated that annual U.S. contributions to KEDO would be
between $20-30 million, based on the conviction that the balance of
funds could be raised abroad. Secretary Christopher's testimony was an
implicit pledge to you that we would make our best efforts to secure
such contributions. The results have been disappointing, but we have
received some help. Australia, New Zealand and Canada, strong
supporters of the Agreed Framework, have made generous contributions
totaling almost $12 million. The European Union has contributed $34.7
million to date. (An additional EU contribution of $16 million is
expected this summer.) Japan has made available a collateral fund of
$19 million for the HFO program, though it has declined our requests
that it turn the fund into a hard contribution; we are continuing to
discuss this issue with the Japanese government. In all, 22 countries
and the EU have made contributions to the HFO program totaling $52
million, whereas the U.S. has contributed approximately $80 million for
HFO (out of a total of $118.5 million for Agreed Framework-related
expenses, including the canning of spent fuel).
We will redouble our efforts, but it is not realistic to think that
the shortfall will be met in the near term by contributions from
abroad. I believe that continued U.S. leadership of and support for the
HFO program, until such time as the first LWR plant is built, is a
small price to pay to reinforce peace on the Korean Peninsula and to
strengthen the global nonproliferation regime.
The implementation of the Agreed Framework is fundamental to U.S.
interests on the Korean Peninsula and in East Asia. As KEDO fulfills
each of its successive steps, North Korea is to take steps to resolve
our proliferation concerns. Following completion of the first LWR
containment building and its electrical generating equipment--but
before delivery of the nuclear components of the plant--North Korea
must come into compliance with its full-scope NPT IAEA safeguards
agreement. I cannot overstate the significance of this step. With full-
scope safeguards in place, the IAEA will be permitted to inspect all of
the North's nuclear facilities and materials. The additional security
this will provide will be significant.
The Framework's implementation carries with it associated benefits
in the nuclear area, many of which were not even envisaged at the time
of its signing. We are working with North Korea's nuclear community,
for example, in an effort to foster an independent nuclear regulator
for the LWRs, as well as a general nuclear ``safety culture'' which
would not otherwise exist.
The Agreed Framework is more than simply a nuclear accord, however.
It is the cornerstone of our efforts to reduce the potential for
conflict on the Korean Peninsula. The Agreed Framework has allowed us
to undertake a dialogue with North Korea that has led to the Four Party
Talks as well as negotiations on missile sales, terrorism and a host of
other concerns. In addition, regular contact between North and South
Koreans is dramatically increasing, in particular at the LWR site.
North and South Korea have begun to take steps to cooperate on such
issues as air traffic and telephone links between the two countries.
Progress has been slow at best in all of these areas, and North Korea
remains a very difficult interlocutor. However, we believe it is very
much in our interest to continue these efforts to reduce tensions on
the Korean Peninsula.
The full implementation of the Agreed Framework, with all the
benefits it should bring, will only be possible if KEDO remains
financially healthy and able to carry out its mission. As I stated
before, we are continuing our international fundraising efforts and
working on ways to address KEDO's financial difficulties, including its
debt from past year oil deliveries. However as I have just noted it is
not realistic to assume that sufficient contributions will be made by
other countries, and we will therefore have to do more. We will
continue our consultations with you and your colleagues in the House in
the near future on our proposals for additional KEDO funding and our
strategy for addressing the organization's financial problems over the
long term.
Let me close by stressing that KEDO and the Agreed Framework remain
central to our efforts to promote peace and stability in Northeast Asia
and to support regional and global nuclear nonproliferation. KEDO's
mission is of utmost importance to the national security of this nation
as well. We must not allow KEDO to fail.
Thank you.
Prepared Statement of Desaix Anderson
I am very pleased to be here today to update you about KEDO's work
and the progress of the light-water-reactor (LWR) project. Now is a
good time to discuss this subject since there have been many
developments regarding the Korean Peninsula in the past few months--
developments that have helped place KEDO's efforts in context.
In his inaugural address in February, President Kim Dae Jung spoke
of ``reconciliation, exchanges, cooperation and non-aggression.'' He
also spoke of the implementation of the 1991 North-South ``non-nuclear
declaration.'' These statements, as well as calls for family contacts,
for cultural, economic and communication exchanges, and the decision to
lift the ceiling on South Korean investment in the North, suggest that
a spirit of hope and reconciliation might be in the air. The cattle run
through Panmunjom last month by the Chairman of Hyundai, the proposal
for a joint ``unity'' celebration, talks of joint sports teams and
matches, resumption of the Military Armistice Commission (MAC) talks at
the general officer level, initiation of the Four Party Talks in
Geneva, and resumption of North-South talks are welcome signs from
North Korea.
These statements, and more generally, President Kim's ``sunshine''
policy, which separates economics from politics, are a very welcome
change from the past. They are also a far cry from the situation that
existed in 1994. In fact, it is easy to forget that five years ago
Pyongyang announced its intention to pull out of the Nuclear Non-
proliferation Treaty and blocked inspections by the International
Atomic Energy Agency, in the process heightening global fears that its
nuclear program might have purposes other than electricity generation.
As Don Oberdorfer illustrated in his recent book, The Two Koreas, in
June 1994, war on the Korean Peninsula was not only a possibility, but
also may have been much closer than most people realized.
I will not claim that KEDO is responsible for the change from war
footing to calls for rapprochement, but I do believe that the Agreed
Framework and KEDO, which was created to implement much of it, have
been important parts of the process which has brought more stability to
Northeast Asia and may help lead to reconciliation between the North
and South. KEDO, while helping to defuse a very real security threat,
has also been a classic confidence-building measure.
KEDO was founded in early 1995 by Japan, South Korea and the United
States to fulfill commitments made under the October 1994 Agreed
Framework. Today KEDO has 12 members, including the European Union
(EU), which joined KEDO as an Executive Board member late last year,
Australia, Argentina, Canada, Chile, Finland, Indonesia, New Zealand
and Poland. The diversity among KEDO's members is a sign of growing
international support for KEDO's work and a recognition of its
accomplishments during the past three years.
While support for and membership in KEDO have grown, the KEDO
Secretariat itself has remained relatively small. We now have 35
professional and support staff, primarily from the United States, ROK,
Japan, and Europe. Structurally, the Secretariat is divided into six
divisions: the Policy and DPRK Affairs Division; the Project Operations
Division; the Nuclear Safety and Quality Assurance Division; the Legal
Division; the Finance and Heavy Fuel Oil Division; and General Affairs
(administrative). The Secretariat's small size and dedicated staff have
created a relatively smooth operation that belies the difficulty
inherent in bringing together driven, talented individuals from
substantially different professional backgrounds and cultures.
It is fair to say that in its three years of operation KEDO has
achieved greater success than most observers initially thought
possible. This success has occurred on seve ral levels.
On the nuclear non-proliferation level, KEDO's success has ensured
that North Korea has kept its commitments under the Agreed Framework.
Pyongyang's suspect graphite-moderated reactors and related facilities
have been frozen; the spent fuel rods from the five-megawatt reactor
have been removed and the canning of those rods was virtually completed
in April; and, the DPRK has remained a party to the NPT and has allowed
the IAEA to monitor its nuclear facilities.
In addition to ensuring thus far these non-proliferation
achievements, KEDO has also served an important diplomatic, or
geopolitical, function. Through its daily work in New York, in
negotiations with the DPRK, and at our Kumho site on North Korea's east
coast, KEDO has provided a crucial link between Pyongyang and the
outside world. Particularly during the occasional flare-ups that have
occurred, KEDO has provided a forum for near constant contact and
interaction with the North.
In addition to being a window to the world for North Korea, KEDO
has provided opportunity for direct contact between South and North
Koreans, on both a formal and informal level. Under KEDO's
institutional umbrella, South Koreans at KEDO have directly negotiated
agreements with North Koreans. At the negotiating table and in the
field at the Kumho site, the learning curve from KEDO's interaction
with the North has been steep and agreement has never been easy. But in
slogging away through countless negotiating sessions, we have learned
to work with each other and to listen to each other's concerns.
I should note that the interaction I just described is not limited
only to members of the KEDO Secretariat or delegations from KEDO's
Executive Board members. Under agreements arranged by KEDO, KEDO's
South Korean contractors and subcontractors have directly negotiated
and signed separate contracts with North Korean companies which will
provide labor, goods, facilities or other services at the site.
Similarly, there has been considerable interaction between the more
than two hundred South and North Korean workers at the site. It has
been a remarkable aspect--and benefit--of the project to see workers
from the two Koreas, which remain technically at war, talking, sharing
cigarettes and in general learning about each other for the first time.
As the LWR project progresses, eventually thousands of South and North
Koreans will work side by side jointly building the two light-water
reactors.
It is also worth noting another success of KEDO. KEDO has provided
important political benefits to each of its founding members. In a few
short years, KEDO has become an important feature of the landscape on
the Korean Peninsula and in Northeast Asia. It serves as an example of
how a cooperative and targeted international diplomatic effort can lead
to the resolution of regional security or political crises. KEDO has
become an important mechanism for coordinating and harmonizing
Japanese, South Korean, American, and now European interests and
policies.
Let me turn for a moment to the actual work KEDO has undertaken at
the negotiating table and on the ground.
First, let me address KEDO's track record at the negotiating table.
As you know, under the Agreed Framework, in exchange for
Pyongyang's freezing and ultimately dismantling its graphite-moderated
reactors and related facilities, KEDO will provide two proliferation-
resistant 1,000 MW(e) light-water reactors and 500,000 tons of heavy
fuel oil per year until the first reactor comes on stream.
In December 1995, KEDO concluded a Supply Agreement with the DPRK
that serves as a roadmap for the project. It states, among other
things, the project's scope, terms of repayment, and general terms and
conditions under which KEDO, its prime contractor and subcontractors
will operate at the site.
Since the Supply Agreement, KEDO has negotiated and signed six
additional protocols, or agreements, with the DPRK. These protocols
address issues such as:
KEDO's juridical status, and privileges and immunities in
the DPRK;
transportation routes to and from the DPRK;
communications to and from the site;
access to, use of and takeover of the site;
the provision of DPRK labor, goods, facilities and other
services; and,
penalties in the event of nonpayment by the DPRK for the
cost of the two reactors.
The protocols in many ways have proven perhaps more difficult than
the Supply Agreement to conclude since they have addressed in detail
sensitive issues unprecedented in nature for the North Korean regime.
In addition to the Supply Agreement and the protocols, just
mentioned, KEDO and the DPRK have also concluded approximately two
dozen detailed implementing agreements on issues such as: medical
services; procedures for sea, land and air transportation; and,
guidelines and principles for contracts to be signed between KEDO, its
contractors or subcontractors and DPRK companies. Many of these
agreements are different from protocols only in name. They, too,
address very sensitive, unprecedented issues that have required
creative thinking by both sides to resolve.
With respect to actual work on the ground, following conclusion of
the necessary protocols and agreements, KEDO officially broke ground
for site preparation last August at the Kumho site. For the
groundbreaking ceremony, a large delegation, including diplomats from
almost all KEDO member countries and 27 journalists from Japan, South
Korea and the United States, traveled by boat directly from South Korea
to a port near the site. These journalists broadcast live via satellite
pictures of the ceremony around the world without any interference or
censorship from the DPRK.
The 120 KEDO construction workers, technicians and engineers at the
site, the overwhelming majority of whom are South Korean nationals,
have now almost completed initial site preparation. Thousands of tons
of equipment have been delivered to the site to build the necessary
infrastructure for the nuclear reactors. A small village has been built
from nothing. We now have housing facilities, a medical facility,
roads, water services, electricity services; a restaurant for North and
South Korean workers, recreational facilities, and other amenities.
KEDO workers travel to the site by boat or chartered aircraft, enjoy
access to direct dial phone lines and mail service to South Korea,
watch CNN on satellite television, and enjoy consular projection,
privileges and immunities similar to those accorded diplomats and other
international organizations.
Shortly before the groundbreaking ceremony, KEDO opened a permanent
branch office at the site. This office is staffed by a small core of
professional diplomats from Japan, the US and the ROK who rotate out of
North Korea on a regular basis. A few months after KEDO opened its
branch office, a South Korean bank (the Korea Exchange Bank) also
opened a branch office at the site to service the financial needs of
workers living there.
We recently completed the second of four oceanographic surveys
(using a South Korean ship) to evaluate the environmental impact of the
LWR project, and this spring we inaug urated what will become regular
cargo/passenger service between Sokc'ho, South Korea to Yangwha, the
port near the Kumho site.
Before discussing the road ahead, let me point out that work at the
site, while progressing very well, has not always been easy. The winter
is cold, and, with only very limited exceptions, our workers are
required to remain within the site boundaries. The situation in general
is lonely, harsh and stressful. Also, as one might expect at any
construction site, there have also been accidents and incidents, many
typical of construction work. However, to date, KEDO and the DPRK have
been able to work through these events without serious disruption to
the project. It is a testament to the desire of both sides to keep
their commitments under the Supply Agreement that KEDO and the DPRK
have worked together pragmatically to resolve any differences and move
forward with the project.
I should start my discussion of the road ahead by stating clearly
that the political achievements and work on the ground that have
already been achieved would not have been possible without the strong
political and financial support KEDO has received from its member
countries and other contributors, particularly South Korea, Japan, the
United States, and, more recently, the EU.
KEDO has an ambitious agenda for 1998. We would like to pursue
agreements with North Korea on a range of issues, including:
a protocol on training for DPRK technicians who will operate
and maintain the light-water reactors;
a protocol on quality assurance and warranties;
and, a protocol on the delivery schedule for the project
(including the requirement that the DPRK will come into full
compliance with its NPT and IAEA safeguards obligations before
KEDO ships significant nuclear components to the site).
In addition to these protocols with the DPRK, KEDO intends to
conclude later this year a turnkey contract with our prime contractor,
the Korea Electric Power Corporation (KEPCO). The site preparation work
now being performed by KEPCO (described earlier) is under a separate
contract financed through South Korean Export-Import Bank loans worth
approximately US$45 million. The turnkey contract will govern the rest
of the project, including full-scale construction work.
It is no secret, of course, that KEDO faces serious financial
challenges. KEDO began 1998 US$47 million in debt from the heavy fuel
oil delivered to North Korea in 1997. Additionally, KEDO is committed
to delivering 500,000 metric tons of oil in the current fuel-oil year
(which runs from October to October). This commitment has cost US$65
million/year for the first two full years of the program (1996 and
1997), but may cost slightly less this year because of lower oil
prices.
With respect to the LWR project, the Executive Board members agreed
in November 1997 that the cost estimate for the project would be about
US$5 billion. However, this cost is likely to drop to $4.5/4.6 billion
because of the devaluation of the Korean won versus the US dollar.
The coded language for cost sharing has always been that South
Korea would play a ``central'' role and Japan a ``significant'' role in
the project. The Executive Board is meeting in New York later this week
to continue discussions on how to translate this language into real
financial commitments and money, and we are very close to reaching a
final agreement. The financial crisis in Asia has certainly not been
helpful, but South Korea and Japan have unequivocally reaffirmed their
respective commitments.
My top priority has been to achieve a comprehensive resolution of
financing issues for the LWR project and the supply of heavy fuel oil
so that we can operate on a firm financial basis. This would be
reassuring to all parties.
The Executive Board, particularly the United States, is also
working to retire the debt that currently exists with respect to heavy
fuel oil and to establish stable financing for the future. It would be
myopic to say the least to jeopardize the non-proliferation
accomplishments of KEDO by failing to provide funds for this relatively
inexpensive component of the Agreed Framework. With financing for the
light-water-reactor project and heavy fuel oil arranged, KEDO would be
free to concentrate on concluding the turnkey contract and the
remaining protocols, and moving ahead to construct the LWRs.
Despite the accomplishments of the Agreed Framework and KEDO, there
are some clouds on the horizon. The DPRK criticism of the pace of the
LWR project's progress; of the slow and erratic pace of provision of
heavy fuel oil; and, in the US bilateral context, of the lifting of US
economic sanctions against North Korea, has taken an increasingly
worrisome tone. The recent acknowledgment by Pyongyang that it has sold
missiles and would continue to do so could be interpreted as a threat
or, conversely, as an offer to re-engage the U.S. and possibly
negotiate a solution to the issue. Recent nuclear testing in India and
Pakistan have also underscored the importance of KEDO and its
objectives.
In and of itself, but particularly in the context of recent
developments in Asia, especially in Northeast Asia, KEDO remains an
important, even essential, element of Northeast Asian security. KEDO
members have demonstrated this by their support for KEDO's mission and
activities. It is imperative for the security interests we all share,
that needed political and financial support continue to be provided.
Thank you.
Prepared Statement of Robert L. Gallucci
Mr. Chairman:
Thank you for giving me this opportunity to appear before the
Subcommittee on the subject of KEDO and the Agreed Framework with North
Korea.
I understand the issue before the Congress, in general terms, to be
whether or not to permit the Administration to provide additional funds
to KEDO for the purchase of heavy fuel oil, that would then be supplied
to North Korea, and thus help meet an immediate need as provided by the
terms of the Agreed Framework. Put even more broadly, the issue is
whether or not the financial burden of providing heavy fuel oil through
KEDO, for years into the future, in order to preserve the Agreed
Framework, is worth it to the United States. Is it in the national
interest, or even the national security interest, to spend perhaps
twice as much for this purpose as Secretary Christopher estimated, more
than three years ago, when he thought the bill for the United States
would be between twenty and thirty million dollars per year until the
first light water reactor came on line in North Korea?
That was a controversial question three years ago when the ink on
the Agreed Framework had not yet dried, but with three years of
experience behind us, one might expect that the calculation would
become a bit easier. For most it has, but for some it has not.
Those who see the clear benefits of the Agreed Framework observe
that the gas graphite reactors and associated facilities have indeed
been frozen:
the 5MW reactor that produced about a bomb's worth of
plutonium each year of its operation has not been refueled;
the estimated six bombs' worth of plutonium contained in
spent fuel has been re-canned by American technicians for safe
storage and eventual shipment out of the country--rather than
separated for weapons fabrication as we believe had been
planned;
the plutonium separation facility has been frozen;
the two larger gas graphite reactors under construction that
we estimated when completed could have produced enough
plutonium each year for 25-30 nuclear weapons have both been
frozen;
IAEA inspectors have been on the ground verifying these
provisions of the Framework.
This was the biggest, most immediate benefit to the United States,
its allies South Korea and Japan, and the international community. Over
time, if the Framework is sustained, the gas graphite reactors and
associated facilities will be dismantled, the spent fuel shipped out,
and the North will accept whatever inspections the IAEA determines are
necessary to come into full compliance with its safeguards
obligations--including the resolution of the dispute over its initial
plutonium declaration.
The North can be expected to do all this in the future for the same
reason that it has cooperated over the last three years: its short term
gain of 500,000 tons of heavy fuel oil each year, and in the long term,
the delivery two light-water moderated power reactors.
The Framework has a number of other important provisions aimed at
objectives that have not yet been realized, such as establishing a
dialogue between North and South, and resolving other issues of concern
to us that would in turn permit normalizing relations between the North
and the United States. The North's failure to respond adequately to
President Kim Dae Jung's initiatives, together with intermittent
military provocations, leave North Korea far short of the position
envisioned in the language of the Framework. Similarly, our concerns
about the North's development and export of extended-range ballistic
missiles, and forward deployment of its army along the DMZ, while not
explicitly mentioned in the Framework, remain important obstacles to
the improved relations between the U.S. and the North which are part of
the Framework.
That said, the principal purpose of the Agreed Framework, as seen
from the American perspective, was to stop a very large nuclear weapons
development program from succeeding in a country run by a rogue regime,
and eventually to bring that country, which had violated its safeguards
undertakings and announced its intention to withdraw from the Nuclear
Non-Proliferation Treaty, back into the safeguards and treaty regimes.
That is the road we are now on. The Framework, a diplomatic solution,
costs about $5 billion for the light water reactors, virtually all of
which will be managed by South Korea and Japan, and about another $65
million per year for perhaps ten years, some significant portion of
which the Administration argues that the U.S. should manage.
However one judges the fairness of the burden-sharing in this
arrangement, no one should doubt that the size of the burden for the
United States would have increased astronomically if a military
solution had been forced upon us by a failure to find a diplomatic one.
Even the cost to the U.S. of those relatively small land, air, and sea
movements necessary to improve our defensive posture in the event of a
vote in the Security Council to impose sanctions, would dwarf the
funding levels now discussed for heavy fuel oil. Should we have had to
resort to force to deal with the emerging nuclear threat, the financial
cost, while far greater still, would have been slight compared to the
cost in American and South Korean lives.
For some of those who see the virtue of a diplomatic solution,
particularly when compared to the alternatives, the Framework is
criticized for making the provision of nuclear reactors to North Korea
part of that solution. Why not, they ask, provide the same amount of
energy with conventionally fueled power stations. The answer is that in
both Berlin and Geneva, at the technical and the political levels, the
North was pitched on the virtues of conventional plants--facilities
that could be provided much earlier and would be much better suited to
the North's electrical grid; however, the North insisted on having
modern light-water moderated nuclear reactors if they were going to
give up their gas graphite nuclear reactors.
The Agreed Framework does not put to rest all our concerns about
North Korea nor could it. It addresses a group of facilities that we
were confident would have produced a significant amount of fissile
material by now if not stopped. Is that worth twice what Secretary
Christopher estimated it might cost, perhaps $50 million each year? If
it is not worth that much to manage this nuclear threat with diplomacy,
how much would it cost to remove it or defend against it with military
means? Would we be willing to remove the risk of nuclear war between
India and Pakistan--where no American troops are deployed--for that
amount of money?
Mr. Chairman, an increase in the amount of U.S. funding for KEDO is
essential now and for the longer term, even if the Administration is
successful in its efforts to draw greater support from other countries.
Sustaining KEDO sustains the Agreed Framework, and it is clearly in the
national security interest to do so.