TESTIMONY OF RUST DEMING DEPUTY ASSISTANT SECRETARY OF STATE FOR EAST ASIAN AND PACIFIC AFFAIRS SENATE COMMITTEE ON FOREIGN RELATIONS SUBCOMMITTEE ON EAST ASIAN AND PACIFIC AFFAIRS JULY 13, 1998 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. (end text)
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