Key step forward on North Korea

Agreement on funds frozen by US paves way for North Korean shutdown of its nuclear program.

This week's settlement of a dispute between the United States and North Korea over $25 million in tainted cash held in a Macao bank may be remembered as the key to full dismantlement of Pyongyang's nuclear program.

Or it may be recalled as a retreat by a White House beset by one too many foreign fire and as a signal to troublemaker regimes, including Iran, that world powers can be forced down from tough sanctions and uncompromising positions.

Many Democrats and foreign-policy experts are joining the Bush administration in hailing an agreement Wednesday that gave North Korea immediate access to deposits the US froze in 2005 as part of a crackdown on counterfeiting in Pyongyang. The settlement paves the way for the North to shut down its Yongbyon nuclear power plant – a first step toward dismantlement of its nuclear program, to which the North agreed in February with the US and four other countries.

But hard-liners are calling the accord a bad precedent for dealing with regimes that threatenglobal stability, particularly with nuclear development.

Either way, the lesser-evil-for-greater-good agreement is emblematic of the kind of diplomatic compromise President Bush eschewed in his first term but appears more prone to accept in his second.

"Is this deal going to leave a bad taste in a lot of mouths? You bet," says Jon Wolfsthal, a nonproliferation expert at the Center for Strategic and International Studies (CSIS) in Washington. "But we have yet to determine if North Korea is really ready to give up its nuclear arms program, and if we had to jump this hurdle to find that out, it's worth the risk."

Even as US officials said the issue of the $25 million was "resolved," North Korea suggested it would need perhaps a month to shut down Yongbyon – a step that under the February agreement was to take place by Saturday.

New Mexico Gov. Bill Richardson, leading a bipartisan entourage that had just spent four days meeting senior North Korean officials in Pyongyang, said that there was no reason it should take that long for North Korean technicians to go through the whole procedure.

Mr. Richardson, talking Wednesday about his visit to Pyongyang several hours after crossing the line from North to South Korea, appeared anxious to give an impression of bluntness and firmness in response to North Korean official comments about going a month beyond the Saturday deadline set in the six-party agreement of February 13.

"I believe that is too much time," he said, recounting one of several meetings with North Koreans. "You don't need 30 days to shut down a reactor."

Look North: S. Korea's nuclear envoy Chun Young-woo talked with US Assistant Secretary of State Christopher Hill Wednesday. LEE JIN-Man/AP

Richardson noted that the North has said it will admit nuclear inspectors from the International Atomic Energy Agency within a day of receiving the frozen funds.

The US Treasury Department removed all barriers to the recovery by North Korea of the $25 million that had been frozen in Banco Delta Asia in Macau. Two years ago, the Treasury Department said that North Korea had been using the bank as a conduit for $100 "supernotes" counterfeited in Pyongyang and decreed that no firm doing business with Banco Delta Asia could do business in the US.

As of either Wednesday night or Thursday morning, according to the Treasury Department, North Korean agents could withdraw from their accounts in the bank. In return, US officials said that they expect North Korea to make good on its side of the bargain. As Richardson put it, "Now the ball's in North Korea's court to take the next significant step."

The North may not move quickly

How quickly North Korea moves, though, is far from certain. In his four days in Pyongyang, leading a delegation that included Victor Cha, top White House adviser on Asia, Richardson had the impression that all North Korea awaited was the means to recover its money.

But other experts on North Korea say that the US can expect further tricks and delays from Pyongyang as efforts proceed to successfully denuclearize the Korean peninsula.

"Will North Korea continue to be obstreperous and hold out for payoffs every step of the way to denuclearization? The answer is absolutely yes," says Ken Lieberthal, an Asia expert at the University of Michigan. "They are very astute at maximizing the benefits from a very weak position, so you can count on it."

Mr. Lieberthal, who served on the National Security Council in the Clinton White House, says the US is in a worse bargaining position than it was in 2000 because the Bush administration sidelined the "agreed framework" that had been reached with Pyongyang in favor of a no-negotiations stance. That approach was based on intelligence that said the North had a parallel secret uranium-enrichment program – intelligence that Lieberthal says turned out to be wrong.

"So what we are back to six years later is the agreed framework-minus," he says. "Instead of enough plutonium [from Yongbyon] for one or two bombs, the North Koreans have now tested a weapon and probably have enough plutonium for eight to 10 more weapons."

As for US claims that the North is to use the $25 million for humanitarian purposes, Lieberthal says this is a "fig leaf." Saying North Korea has proved for more than a decade that it is "not a good actor," he says, "I do not know any expert on North Korea who would take that seriously."

Skepticism is shared by some analysts in the region. Park Joong Song, of the Institute of Foreign and National Security in Seoul, says that a number of pitfalls loom. "From now, North Korea will be able to demand its name as terrorist-sponsored state be wiped from the State Department list, and they can ask for shipments of heavy oil from South Korea.... They will make sure they receive everything before they shut down their nuclear facility."

One issue Richardson did not address was the fact that $7 million of the amount belongs to the British-owned Daedong Credit Bank, set up in Pyongyang for foreign clients, including diplomatic missions and nongovernmental organizations. Colin McAskill, head of the company that's taking over Daedong Credit Bank, had demanded the $7 million remain in Banco Delta Asia until his bank withdraws it.

Richardson and former veterans affairs secretary Anthony Principi talked about the North's response with an air of triumph made all the more compelling by their success in returning from Pyongyang with the remains of six American soldiers killed in the Korean War.

Goodwill in repatriating remains

That was seen as an extraordinary gesture of goodwill, since North Korea had offered before the signing of the February accord to resume the search for more than 8,000 Americans missing from the war. It was the first time in two years that North Korea had returned American remains, the focus of a series of searches before the breakdown of relations.

The remains were turned over at Panmunjom as the US delegation, which included two Department of Defense officials, arrived from Pyongyang. The North's agreement that the group could cross through the demilitarized zone was seen as further evidence of the North's desire to live up to the agreement.

While it seemed unlikely North Korea would shut down the Yongbyon reactor by Saturday, the Americans hoped at least that IAEA officials could go there by then. Once that hurdle is overcome, US envoy Christopher Hill hopes to get on with the next phase, including more six-party talks on the scope of North Korea's nuclear program beyond Yongbyon.

But experts say the near-collapse of the February accord over a small sum of money may mean tough days ahead. "What this suggests is that the whole February agreement is on extremely shaky ground and could collapse ... at the next obstacle," says CSIS's Mr. Wolfsthal. "Rest assured that even after Yongbyon is figured out and even if international inspectors get back in there, there will long, painful negotiations, with the North holding out for some kind of payoff every step of the way."