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NORTH KOREA NEWSLETTER NO. 88 (January 7, 2009)
*** FOREIGN TIPS

N. Korea's Internal Changes May Pose New Threat to S. Korea

SEOUL (Yonhap) -- North Korea's recent currency reforms and ongoing power succession deepen uncertainties surrounding the socialist state and may pose a new threat to South Korea in the coming year, Seoul's top defense official said on Dec. 31.

   "It is difficult to estimate the threat to us that will arise in the aftermath of the currency reform and from the regime instabilities as leader Kim Jong-il goes ahead with a hereditary power handover," Defense Minister Kim Tae-young said in a New Year's message to South Korea's 655,000 troops.

   Kim Jong-il, apparently moving to hand over power to his third son, ordered a surprise currency revaluation in November to squash free market activities and tighten state control on the economy.

   His regime reportedly placed its 1.2 million troops on alert after the reforms, which outside watchers said sparked anger among those who had accumulated wealth outside of government purview.

   "North Korea is continuing to expand its armaments despite a lack of food and serious economic challenges," Minister Kim said, citing Pyongyang's May nuclear test and a naval clash between the Koreas in November off the west coast.

   "We must deal with the existing military threats (North Korea poses) and have the ability to cope actively with the changing environment," Kim said.

   The Koreas remain technically at war as the 1950-53 Korean War ended in a truce.

  
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Seoul Should Seek Third Summit with N.K. to Discuss Grand Bargain

SEOUL (Yonhap) -- Seoul should seek a third inter-Korean summit with Pyongyang to discuss President Lee Myung-bak's "grand bargain" proposal aimed at bringing an end to the North's nuclear ambitions, a state-run think tank said on Dec. 3.

   In its report on security issues facing the Korean Peninsula, the Korea Institute for Defense Analysis (KIDA) in Seoul said that the South should seek "various contacts" with the North, including a third inter-Korean summit, to move forward with the "grand bargain" plan proposed by Lee last year.

   The grand bargain, which was first made public by Lee during a visit to the U.S. in September, envisions a package deal in which members of the six-party talks on ending the North's nuclear program provide Pyongyang with security guarantees, massive economic aid and other incentives in return for a single-phased denuclearization deal that does not necessitate further negotiations.

   The two Koreas held two summits; the first in 2000 under the administration of President Kim Dae-jung, and the second in 2007 under President Roh Moo-hyun. Both summits were held in Pyongyang and the North Korean leader has yet to pay a promised reciprocal visit to the South.

   Lee recently said he is ready to meet North Korean leader Kim Jong-il "anytime and anywhere" to resolve the protracted nuclear standoff, fueling speculation about the possibility of a third inter-Korean summit in 2010.

   KIDA expressed skepticism that ongoing multilateral efforts aimed at denuclearizing North Korea would reach a breakthrough this year, but underscored the need to maintain the process of negotiations that will ultimately contribute to the establishment of a peace regime.

   The think tank also urged the North to focus its efforts on improving ties with Washington in order to ultimately seal a peace treaty and normalize diplomatic ties.

   "Following U.S. Special Representative Stephen Bosworth's recent trip to the North, there is a possibility for the six-party talks to resume (this year) but the possibility of a swift resolution of the nuclear issue is very small."

   Pyongyang wants to forge a peace treaty with the U.S. to replace the armistice that ended the 1950-53 Korean War, when U.S. troops fought alongside South Korea against invading North Korean troops, aided by their communist ally China.

   The U.S. position is that any peace treaty should be discussed within the framework of the six-party talks, which also involve South Korea, China, Russia and Japan.

   Regarding the North's nuclear capability, KIDA estimates that the North is capable of obtaining an explosion yield of 10-20 kilotons. One kiloton is equal to 1,000 tons of TNT.

   The think tank, however, said it believes the North has yet to acquire the technology to miniaturize a nuclear warhead and that it is highly unlikely that it will achieve the technology in the near future.

  
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N. Korea's New Currency Plummets against Chinese Yuan: Report

SEOUL, Jan. 3 (Yonhap) -- North Korea's new currency introduced in late November has plummeted in value compared to the Chinese yuan, a local radio broadcaster claimed on Jan. 3.

   The Seoul-based Open Radio for North Korea (ORNK), citing unidentified sources along the Sino-North Korean border, said that merchants were exchanging one yuan for 1,000 new North Korean won as of late last month, plummeting from the 50 won traded for every yuan on Dec. 3, right after Pyongyang introduced the new currency.

   Under the move, the socialist country knocked two zeros off its currency without warning on Nov. 30 in the first such value adjustment since 1959.

   The broadcast, which aims to inform North Koreans on events happening in the outside world, said the value of the new North Korean currency fell to 520 won to the yuan by the middle of last month, indicating a steady depreciation throughout the month.

   Before the currency reform took place, 1 yuan was worth around 588 old won, which is equivalent to 5.88 new won.

   The ORNK speculated that the reason for the new currency's weakness may be Pyongyang's decision to not allow foreign currency to circulate in the market.

   "The official proclamation to ban foreign currency use was made on Dec. 28, but there have been rumors circulating after the currency reform took place, causing the new won to depreciate against Chinese money," the radio station report said.

   It said that with Pyongyang unlikely to allow the use of foreign money as a medium of exchange or to bolster its new currency, it may be hard to determine when the value of the new won will stop falling.

   North Korean media reported early last month that authorities were introducing new money to curb the mushrooming free market and raise the value of the country's legal tender.

   There have been unconfirmed reports that the currency reform has drawn resistance from ordinary citizens and merchants, whose savings have been drastically cut by the unannounced measures.

  
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Kim Jong-il Not Likely to Abandon Nukes Due to Heavy Investment

WASHINGTON (Yonhap) -- The current North Korean leadership will not be inclined to abandon its nuclear weapons programs because the impoverished communist state has invested so heavily in the project, a scholar says.

   Edwin Feulner, president of the Heritage Foundation, told Yonhap News Agency in an interview that he does not expect the Kim Jong-il regime to dismantle its nuclear arsenal and terminate its nuclear weapons programs under the six-party talks involving the two Koreas, the U.S., China, Japan and Russia.

   "The current leadership has invested so much in a belligerent attitude," Feulner said. "It is the one piece on the very complicated chess board they have that gives them real influence in terms of the outcome of the chess match. So they are not going to give it up."

   Feulner's remarks come as North Korea said in a New Year's message on Jan. 1 that it will work toward a peace regime and denuclearization through dialogue and negotiations. That brought a positive response from the U.S. State Department, which said on Jan. 4 "there's reason to be more hopeful now than certainly a few months ago" for the reopening of the nuclear talks.

   North Korea conducted its second nuclear test last year, after one in 2006, spawning speculation the reclusive state has manufactured several nuclear warheads.

   Diplomacy is under way to persuade the North back to the six-party talks, which Pyongyang has boycotted due to U.N. sanctions over its nuclear and missile tests.

   Stephen Bosworth, U.S. special representative for North Korea policy, visited Pyongyang last month to meet with Kang Sok-ju, first vice foreign minister, and other officials, and conveyed U.S. President Barack Obama's personal letter to call for an early resumption of the multilateral nuclear talks.

   The meeting was the first high-level bilateral contact since Obama's inauguration in January 2009.

   The U.S. point man on North Korea failed to get the North's commitment to reopen the talks, although he said Pyongyang has "indicated they would like to resume the six-party process," and "agreed on the essential nature of the joint statement of 2005."

   "I don't see the prospect for resumption of the six-party talks soon," Feulner said. "The statement Bosworth issued was a kind of diplomatic, almost double talk. Pyongyang likes parts of the agreement, we like parts of the agreement. We like North Korea's denuclearization and North Korea likes incentives. So we like different parts. It did not change anything in North Korea's action."

   The scholar expressed concerns over a possible military conflict on the Korean Peninsula on the occasion of the 60th anniversary of the breakout of the Korean War in 1950 next year.

   "I worry also, frankly, with the anniversary of the start of the Korean war, whether there will be bellicose talk and the military shows off for the North, etc., as that anniversary comes up," he said. "They are always looking for how they can be respected in the world community. They are unpredictable actors."

  
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U.S. Welcomes Possible Beijing Trip by Kim Jong-il

WASHINGTON (Yonhap) -- The United States will welcome any trip to China by North Korean leader Kim Jong-il to help reopen the stalled six-party talks on ending the North's nuclear ambitions, a senior State Department official said on Jan. 5.

   "We have always welcomed interaction with North Korea by our partners in the six-party process, and we welcome that interaction if Kim Jong-il travels to Beijing," the official said, asking anonymity. "China has had multiple trips to Pyongyang to make clear to Kim Jong-il what needs to be done now. If Kim Jong-il comes to Beijing and tells Chinese leaders that he is ready to return to the six-party process and move forward, we will welcome that news."

   Reports said that the reclusive North Korean leader will soon make another trip to Beijing, apparently to seek China's help amid tightening international sanctions after Pyongyang's nuclear and missile tests early last year.

   Kim's possible Chinese tour, the fifth after trips in 2000, 2001, 2004 and 2006, will also likely address ways to quell skyrocketing inflation and tighten market control after the redenomination of the won, the North Korean currency.

   Kim Jong-il is also likely to seek Chinese support in his effort to consolidate his youngest son, Jong-eun, as heir apparent. Kim apparently suffered a stroke in the summer of 2008.

   In the most recent high-level visit to Pyongyang, Chinese Premier Wen Jiabao met with Kim in October, and offered hefty economic aid, including construction of a bridge over the Aprok River linking the two communist allies.

   The visit resulted in a breakthrough as the North Korean leader expressed willingness to return to the six-party talks pending the outcome of bilateral discussions with the U.S.

   North Korea has boycotted the nuclear talks due to U.N. sanctions.

   Stephen Bosworth, U.S. special representative for North Korea policy, visited Pyongyang a couple of month later, and U.S. officials said that another high-level bilateral contact is expected to lure the reluctant North back to the six-party talks.

  
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FM Says N. Korea's Uranium Program Likely Began in Mid-1990s

SEOUL (Yonhap) -- North Korea likely began its uranium-based nuclear weapons program soon after it agreed to give up its nuclear ambitions in a 1994 deal with the United States, South Korea's foreign minister said on Jan. 6, accusing Pyongyang of using negotiations to buy time for its clandestine nuclear programs.

   In an exclusive interview with Yonhap News Agency, Minister Yu Myung-hwan said little is still known about the socialist country's secret nuclear program, including how much uranium they have produced or in what stage of development the program is.

   "Still, what is certain is that North Korea began its (uranium) enrichment program for nuclear weapons from very early on. It appears that North Korea began the enrichment program shortly after signing the Geneva agreement, or at least in 1996," Yu said, referring to the 1994 agreement, better known as the Agreed Framework, signed between Pyongyang and Washington.

   Under the landmark deal, Pyongyang promised to freeze its nuclear activities in return for a set of two light-water reactors to be built and financed by an international consortium.

   Suspicions over a clandestine uranium program in the reclusive North first flared in late 2002 when then U.S. assistant secretary of state for East Asian and Pacific affairs, James Kelly, following his trip to Pyongyang quoted North Korean officials as saying that their country was secretly continuing a nuclear weapons development program.

   The North later denied having a uranium-based program, though it entered six-nation negotiations on ending its plutonium-based weapons program in 2003.

   Pyongyang admitted to having a uranium program in September 2009, saying the enrichment program was in its final stage.

   Yu's remarks could indicate that the North's uranium program may be closer to completion than earlier suspected.

   The minister noted the North may have also used, and is continuing to use, the six-way talks in a similar way to win international concessions while securing enough time and resources to further its nuclear programs.

   "There, of course, may have been times when North Korea used its nuclear issue as leverage for short-term economic gains, but there is a need to look at it as a more serious issue because, more fundamentally, the North Korea nuclear issue has to do with the North's regime," he said.

   The multilateral nuclear talks have stalled since late 2008 while the North said in April that it will permanently quit the negotiations, which also involve the U.S., South Korea, China, Japan and Russia.

  (END)