Session VII: The KEDO and Europe

 The KEDO Process at the Crossroads

by Seongwhun Cheon

The LWR Project: An Ongoing Development 

In an effort to curb North Korea's nuclear proliferation attempts, the Geneva Agreed Framework was signed on October 24, 1994. In return for Pyongyang's promise to stop nuclear weapon activities, Korean Peninsula Energy Development Organization (KEDO) was established to lead the light water reactor (LWR) project. South Korea, the United States, Japan and the European Union represented by the European Atomic Energy Community are the executive board members and 9 other countries participate in KEDO as regular members.¹⁾ Another major mission of KEDO is to provide the DPRK with an alternative source of energy for heating and electricity production until the first of the 1,000MWe reactors is completed. For this purpose, 500,000 tons of heavy fuel oil has been delivered annually to North Korea.

The supply agreement was signed on December 15, 1996 and subsequently, a dozen of important protocols have been agreed on. The prime contractor, Korea Electric Power Corporation (KEPCO) conducted a pre-project service (PPS) from January 1996 to October 1999. Various kinds of site survey at Shinpo where the reactors are to be built were completed during this period. The preliminary works contract (PWC) was performed from August 1997 to February 2000. Leveling ground of the site and constructing supplementary buildings have been carried out under the contract. At last, the turnkey contract (TKC), signed in December 1999, became effective as of February 2000. The TKC is comprised of four volumes containing more than 800 pages and the contract is priced at $4.08 billion. If the project proceeds smoothly, the first LWR is to be completed in January 2008.

As a component of the Agreed Framework, the LWR project is closely linked to political situations on the Korean peninsula as well as to other elements of the Agreed Framework. It is not surprising that implementation of the project has been frequently interrupted. The submarine incursion incident in September 1996 was a visible demonstration of the project's vulnerability to exogenous factors. Nonetheless, the major players of KEDO--South Korea, the United States, Japan and the EU--have, so far, shared a common view that the LWR project is a key means to deter North Korea from developing nuclear weapons, to protect international nonproliferation regimes and to defend their core national security interests. North Korea also has regarded the project as a bridgehead to expand its relations with the western world. Pyongyang is anxious to see the project meet the target date of 2003.

With ups and downs, the Agreed Framework and the LWR project enjoy relatively successful records of compliance. No severe violation has been reported up until today from either side--North Korea and KEDO. Nonetheless, it has been alleged by the Republican-leaning US Congress that Pyongyang attempted to pursue a nuclear weapon option using different routes, e.g., acquiring uranium enrichment technologies and materials.²⁾ Although deserving attention, these allegations are beyond the Agreed Framework's scope. North Korea's compliance record to the Agreed Framework is fair enough. However, the significant delay of the project has been a thorny issue for all the concerned parties.

Repercussions of the Project's Delay

The project's delay creates two major issues from North Korea and KEDO, respectively. Compensation of the energy losses is the one and replacement of LWRs to conventional power plants is the other.

On July 1, 2000, complaining of the LWR project's delay, North Korea's Foreign Ministry spokesman threatened to operate the graphite-moderated reactor again,³⁾ which means a break-out of the Agreed Framework. On February 21, 2001, Foreign Ministry spokesman demanded compensations for the energy losses from 2003 to the new expected completion date and warned to stop implementing the Agreed Framework otherwise. In fact, North Korea has launched offensive diplomacy asking KEDO to answer for the consequences of the delay.

On the part of KEDO, replacing LWRs with thermal plants has emerged as an alternative especially from the US side. The aim is to allay the DPRK's displeasure with delays and lessen heavy oil delivery burdens. October 16, 2000, a South Korean parliamentarian, Kim Deok-Ryong startled Korean watchers by arguing that in May, ROK Foreign Ministry and the U.S. Department of State secretly agreed in principle that one of the two LWRs be replaced with thermal power plants. He stated that the deal was made due to U.S. pressure. Washington originally proposed to organize a new consortium to be in charge of the heavy fuel oil delivery among South Korea, Japan and the U.S.⁴⁾ Facing strong opposition of South Korea, the U.S. proposed the thermal power plant option, according to Mr. Kim.⁵⁾

Later, it was turned out that Charles Kartman of the US State Department floated the idea of substituting one of the LWRs with corresponding conventional power plants but that South Korea was not supportive of him. Seoul evidently concerned that it might lead to a nearly impossible job of reframing the Agreed Framework and could be doubly costly with no shortening of construction schedule.

Indeed, the U.S. has kept persistent interests to replace the LWRs with thermal power plants. James Lilley, former ambassador to South Korea, expressed that North Korea does not need LWRs but small, coal-fired power plants that fit its antiquated electric grid.⁶⁾  U.S. ambassador to Seoul, Stephen Bosworth also remarked that, if North Korea offer to replace one LWR with thermal power plants, the U.S., South Korea and Japan are ready to have close consultations.⁷⁾ Victor Gilinsky and Henry Sokolski argued for the benefits of thermal power plants particularly in times of economic difficulties faced by South Korea.⁸⁾ Republican representatives including International Relations Committee Chairman, Benjamin Gilman submitted a request in May 1999 of President Clinton to report the result of comparing the LWR and the thermal power plant options.⁹⁾

The replacement idea is getting growing voices in and outside of the Bush administration. Herny Sokolski and Victor Gilinsky, long-time foes against the LWR project, have intensified circulating the dangers and uselessness of the LWRs in North Korea and the merits of the replacement.¹⁰⁾ Edwin Feulner, President of the Heritage Foundation, threw a fundamental question of whether the LWR unfitted to the DPRKs electricity system is worth the money.¹¹⁾ Three high-profile Republicans sent a letter to President Bush on March 2, 2001, asking the Bush administration not to be tied up with the Agreed Framework and to replace the LWRs with conventional power plants.¹²⁾ Within the administration, it is Secretary of State, Collin Powell who hinted first at the possible replacement. Powell spoke that "There are others who have also suggested that perhaps one might want to substitute different kinds of energy generating capacity. So for the moment we are in accord with the 1994 agreement, but that doesnt prevent us from looking at aspects of it that we might wish to revisit or change."¹³⁾ Citing circumstances to require a fresh collective look at the LWR project, Council of Foreign Relations also recommended that “President Bush undertake a deliberate and careful review of the status of the Agreed Framework together with Japan, South Korea, and the European Union.¹⁴⁾

Reasons Why the Replacement Idea is Wrong

There are many reasons why replacement is an improper idea to take on. Politically, replacement is plain absurd for South Korean government. In retrospect, it is North Korea to mostly blame for the delay of the project. What the Agreed Framework guaranteed North Korea was "the US will organize under its leadership an international consortium to finance and supply the LWR project to be provided to the DPRK." According to this, Americans have chaired the KEDO as an executive director--Stephen Bosworth first and Desaix Anderson later.

With this condition met, what was allowed for North Koreans was just to accept the reactors given by KEDO. But they have tried to do more and interrupted the LWR process by putting unjustifiable demands. In the first place, they rejected the central role of South Korea which bears 70 percent of the project expenses--estimated 4.6 billion dollars. Then, Pyongyang refused to accept the US-origin and Korean-modified standard power plant. Later, they disliked KEPCO (Korea Electric Power Corporation) as a prime contractor. North Koreans nagged KEDO in the subsequent negotiations as well. Still worse, the North Korean spy submarine incident happened in September 1996.

With all these turbulences, the turnkey contract could barely become effective. The DPRK keeps disturbing the process, however. For example, North Korean workers sabotaged the construction work with a demand of wage increase far beyond the level agreed with KEDO.

The replacement is indeed worse than the LWR project because it means KEDO's submission to the DPRK's thuggish diplomacy. It is also an embarrassment to South Korean government that is under criticism for too much concession to the North. It is obvious that replacement will be given far less public support than has been the LWR project. At this moment, sticking to the principles is very important in dealing with North Koreans. This means that in any event, KEDO should not bear the burden of the project's delay. North Korea should be. And so, the North's compensation demand for the energy losses should not be seriously taken. Simply, the target date of the project is shifted to a later time mostly due to North Korea.

From technical and legal perspectives, the replacement idea is flawed as well. In the first place, it is argued that the thermal option is better suited for the fast recovery of North Korean economy since it has shorter construction period than LWRs.¹⁵⁾ It is true that the DPRK has shown strong interests in conventional power plants. For example, at the last meeting with his staff, just two days before his death, Kim Il-Sung emphasized the importance of resolving electricity problem and urged on constructing power plants using heavy oils instead of nuclear or hydrogen power plants.¹⁶⁾ In the latter half of the 1990s, North Korea put enormous efforts to build small-scale power plants all over the country. According to a news report, North Korea has built more than 500 power plants--each has estimated capacity less than 10,000KW.¹⁷⁾

Certainly, a shorter construction period must have been an important merit in many respects at the beginning of the project. But it is not true any more. More than 6 years have passed since the Agreed Framework was signed. Under the current schedule, the first LWR is to be complete in January 2008, after 80 months or so. This figure has no meaningful difference from that of the thermal power plant. It will take 80-88 months for a coal power plant and 84 months for a heavy oil power plant. In terms of construction period, replacement is too a late hindsight.

Secondly, cost saving is not an advantage of replacement either. A lot of money has been already poured into the project--$0.8 billion by the end of 2001. And the conventional power plants are not that cheap either. Two conventional plants using coals of 500MWe each will cost about 70 percent of the 1,000MWe LWR. But 30 percent cost saving cannot be secured. A separate infrastructure of ports, transportation and others for conventional plant construction will add to the expenses. The fact also increases financial burden that constructing one LWR--not two is contrary to the economies of scale.

Thirdly, a prime argument for replacement is that North Korea might use LWRs to obtain weapon-usable plutonium. According to one estimate, if the two LWRs are to be built and optimized for power production, the DPRK could produce about 500kg of reactor-grade plutonium annually.¹⁸⁾ This proliferation concern is simply wrong with little persuasiveness. What LWRs produce is reactor-grade plutonium. To turn this material into nuclear weapons can be done only by a few nuclear weapon states with extensive weapon-test experiences. North Koreans do not have such secretive know-how. Nor do they have a technical infrastructure such as a large reprocessing capacity to extract even proliferation-resistant plutonium. Moreover, the two LWRs will be under the intensive IAEA surveillance, making any attempt to circumvent virtually impossible.

Fourthly, the surly mood in the US Congress against the LWR project is cited as a legal obstacle. The point is that the reactors cannot be built without exporting the US nuclear items, the shipment of which is only possible under the US-DPRK nuclear cooperation agreement, but that the agreement is unlikely to be endorsed by the Congress. This will not be a serious problem if KEDO has a political will. For example, when Japanese Mitsubishi and Toshiba replace the General Electric of the US as a provider of turbine generators, the US-DPRK nuclear agreement is not a necessity for the component. With export permission from the Department of Energy and political will of Washington, most of the key components can reach the DPRK.

Finally, the last technical argument is concerned with the North Korea's insufficient grid system. North Korea's capacity to distribute electricity is far too meager to absorb even one of the proposed 1000MWe nuclear power reactor. Knowing this well, North Korea requested of South Korea in 1994 that one of the generating stations be non-nuclear.¹⁹⁾ The grid capacity has been a contentious issue from the start of the LWR project. The DPRK demanded KEDO that it construct electrical grids able to absorb the massive amount of electricity from the LWRs. KEDO articulated its position that it has no responsibility for the grid construction, estimated cost of which is about 1 billion dollars. Instead, it showed its willingness to provide good offices to help North Korea to find commercial loans. Grid cannot be an excuse for replacing the LWRs. It is a KEDO's tool to distribute the products of the LWR project in a most peaceful, safe and efficient way.

All these suggest that keeping the LWR project as it is does better serve the interests of the concerned parties. What has been missing so far is the efforts of KEDO not to be driven by North Korean thuggish diplomacy, to awaken North Koreans to their misdemeanor and teach them the importance of following the rules of the game. The LWR project is indeed a disciplinary opportunity for KEDO as well as North Korea.

Roles of the European Union

At this critical juncture, what kind of positive role could we expect from the European Union? There exist at least three areas where the EU can exercise unique position and strength for the benefit of peace and prosperity on the Korean peninsula.

Firstly, the EU could be a fair and objective mediator between North Korea and KEDO and also among the KEDO members. Diplomatic drive since the beginning of the last year, culminating at its President Perssons' visit to Pyongyang this May, has made the EU-DPRK relationship closer than ever before, which means that North Koreans are more likely to listen to Europeans and accept their fair refereeing role. The EU's growing and active efforts to coordinate its members' foreign and security policies away from tilting toward the US, highlighted by the creation of High Representative on Common Foreign and Security Policy in 1999, will be greeted as fresh and favorable by North Koreans obsessed with American dominance. That much, North Koreans will be willing to accept advice and consents from its new European friends.

Secondly, the EU's stronger assistance in the financial sector is highly desired. The EU's financial contribution to the LWR project does not match its political and economic weight. As of July 2000, South Korea spent $2.9 billion, United States $1.9 billion and Japan $1.3 billion. The EUs payment was $82 million. The EU is strongly encouraged to pay more attention to the KEDO process and show more willingness to pay for bigger peace dividend. There are many areas where the EU could play its bigger role. One important area would be to refurbish North Korea's outdated and deficient grid system. As no firm prospect is seen for Pyongyang to find a resolution, the EU could be a financial and technical source of renovating North Korea's grid capacity.

Finally, the EU could provide North Korea and members of KEDO with its rich experience on multilateral cooperation. The EU is indeed a successful emblem of enduring process of cooperation among the countries with many differences in their national interests, cultural backgrounds, languages, etc. In terms of regional cooperation in North East Asia, KEDO has well-meaning significance in itself. KEDO is first official multilateral organization to settle an important security issue in this region that has scarce experience in multilateral government-to-government collaboration. North Korea is much less exposed to the norms and patterns of international cooperation. It is not a surprise that KEDO has gone through many hurdles, some minor and some serious. Under such circumstances, the EU's past and ongoing experiences present really valuable and important lessons. The EU is strongly encouraged to hold various exchange programs--both academic and governmental between the EU and North Korea. It also should play a proper mediator role within KEDO and to persuade KEDO members whenever necessary with its affluent experiences in state-to-state cooperation.

In conclusion, despite all the challenges and problems, it is sure that KEDO has an impressive record of diplomatic success. But it is also true that there exist many already known or not-yet-known obstacles. At this crossroads, a former KEDO official's following remark deserves attention: "It is essential that KEDO receives both top-level attention by senior officials in Washington, Seoul, Tokyo, and Brussels, and adequate diplomatic and financial support."²⁰⁾

Footnote

1) See annual report of the KEDO at (On-line) http://www.kedo.org

2) North Korea's exogenous efforts to acquire nuclear-weapon-related technologies are highlighted in the report of the U.S. House of Representatives' North Korea Advisory Group published in November 1999. The report claims that there is significant evidence that a nuclear weapons development is continuing, including its efforts to acquire uranium enrichment technologies and its nuclear-related high explosive tests. As possible foreign routes for technology imports, the report hinted such countries as Pakistan, Russia, Kazakhstan, Europe and Japan. North Korea Advisory Group, Report to the Speaker U.S. House of Representatives (Washington, D.C.: the U.S. Congress, 1999). The Advisory Group, comprising of nine representatives, was formed with the request of House Speaker, J. Dennis Hastert to answer the question of "Does North Korea pose a greater threat to U.S. national security than it did five years ago?" The group's conclusion is that "the comprehensive threat posed by North Korea to [U.S.] national interests has increased since 1994."

3) Korean Central News Agency, July 1, 2000.

4) According to the Agreed Framework, the U.S. is responsible for providing North Korea with 500,000 tons of heavy fuel oil until the first LWR is completed. The U.S. administration has been in difficulties with funding the heavy oil. For this issue, see U.S. General Accounting Office, Nuclear Nonproliferation: Heavy Fuel Oil Delivery to North Korea Under the Agreed Framework (Washington, D.C.: GAO, 1999).

5) JoongAng Ilbo, October 17, 2000.

6) Newsweek, March 9, 1998.

7) The Weekly Economist, April 1, 1998. (in Korean)

8) Gilinsky, V. and H. Sokolski, "A silver lining to Asia's financial cloud," Washington Post, January 19, 1998, p. A25. Henry Sokolski reiterated his views in his article, "North Korea's unaffordable nuclear power," The Asian Wall Street Journal, February 10, 1998.

9) Segye Times, May 21, 1999.

10) Henry Sokolski, a former DOD official under Dick Cheney and Victor Gilinsky, a former member of US Nuclear Regulatory Commission first spoke out their opposition to the LWR project at the US Senate hearings on the Agreed Framework. See Henry Sokolski, "The Korean accord: worries and what to do,"?/FONT>Testimony Before the U.S. Senate Committee on Foreign Relations Subcommittee on East Asian and Pacific Affairs, Washington, D.C., December 1, 1994. Testimony of Victor Gilinsky on the U.S.-North Korea Nuclear Agreement Before the Committee on Foreign Relations, United States Senate, January 25, 1995.

11) Chosun Ilbo, January 7, 2001.

12) Steven Mufson, "Flexibility urged on N. Korea," Washington Post, March 3, 2001, p. A16.

13) Hearing of the Senate Foreign Relations Committee on the Fiscal Year 2002 Foreign Operations Budget, March 8, 2001.

14) A Letter by Council on Foreign Relation's Task Force on Managing Change on the Korean Peninsula to US President George Bush, March 22, 2001.

15) Testimony of Victor Gilinsky on the U.S.-North Korean Nuclear Agreement Before the Committee on Foreign Relations, United States Senate, January 25, 1995.

16) JoongAng Ilbo, November 1, 1996.

17) Korean Central News Agency, January 27 & 28, 1998.

18) Albright, D. and H. Higgins, Light Water Reactors and Nuclear Weapons in North Korea: Let's Be Fair with Our Comparisons, Institute for Science and International Security, Washington, D.C., October 27, 1999, p. 2.

19) Sokilski, H., "This is no way to curb the North Korean threat," Washington Post, October 29, 2000, p. B02.

20) Reiss, M., "Problems and prospects on the road ahead," in D. Albright and K. O'Neill, eds., Solving the North Korean Nuclear Puzzle (The Institute for Science and International Security: Washington, D.C., 2000), p. 197.