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NORTH KOREA NEWSLETTER NO. 113 (July 1, 2010)
*** FOREIGN TIPS

U.S. May Freeze N. Korean Assets in Foreign Banks: State Dept.

  
WASHINGTON (Yonhap) -- The United States on June 23 did not preclude the possibility of freezing North Korean assets in foreign banks to effectively cut off resources for the North's development and proliferation of weapons of mass destruction.

   "I'm not going to predict any particular step that we're contemplating, but these are steps that are available to us under existing U.S. international law," State Department spokesman Philip Crowley told reporters at a daily news briefing.

   He was responding to the question if Washington was considering freezing North Korean assets at foreign banks just like it froze more than US$25 million in North Korean accounts in Banco Delta Asia in Macau in 2005.

   The former Bush administration that year designated Banco Delta Asia as an entity suspected of helping North Korea launder money it earned by circulating counterfeit $100 bills called supernotes.

   The U.S. lifted the freeze in early 2007 to entice the North to come back to the six-party talks on ending its nuclear weapons programs. Washington officials have said the freeze effectively cut off Pyongyang's access to the international financial system and dealt the nation a devastating blow.

   "We are always reviewing options ... because, in fact, North Korea is always moving money and goods around. We are committed to implement existing U.N. Security Council resolutions to restrict North Korea's ability to proliferate technology and know-how," Crowley said. "We have many authorities that exist -- both internationally and domestically -- to take action against North Korea. We have used a variety of steps in the past to send a clear message to North Korea to change course."

   Crowley's remarks come amid heightened tensions on the Korean Peninsula after the torpedoeing of the South Korean warship Cheonan by a North Korean submarine in the Yellow Sea in March. Forty-six sailors died.

   South Korea has brought the incident to the U.N. Security Council for possible sanctions or condemnation of Pyongyang even as China, a veto-wielding council member, appears reluctant to blame its communist ally.

  
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U.S. Mulled Nuke Attack Option against N. Korea in 1969: Dossier

WASHINGTON (Yonhap) -- The United States had prepared for contingency plans for North Korea, including an option for a nuclear strike, after the downing of a U.S. flight by the reclusive communist state in April 1969, a declassified dossier showed on June 23.

   The documents posted on the Web site for the National Security Archive at George Washington University showed that the nuclear contingency plan, codenamed "FREEDOM DROP," seeks to provide "pre-coordinated options for the selective use of tactical nuclear weapons against North Korea."

   The document dated June 25, 1969, that was sent to Henry Kissinger, national security adviser to then President Richard Nixon, by Defense Secretary Melvin Laird, calls for use of a combination of U.S. tactical bombers, Honest John and Sergeant missiles and an aircraft carrier to deliver a wide range of nuclear bombs, with up to 70 kilotons, to a number of command control centers, airfields, naval bases and missile support facilities.

   In case of nuclear attacks on North Korea, the report estimated the losses of U.S., South Korean and other allied forces at less than 10 percent of the forces, while putting civilian casualties at around 100 to several thousands.

   The final version of a series of reports to Kissinger on the North Korea contingency plans since April, written on Sept. 22, 1969, however, does not contain the nuclear options, although several parts of the document were deleted with black ink as classification material.

   Robert Wampler of George Washington University said on the Web site that, "Based on the information available in the earlier documents, the deleted material in the list of completed plans is likely Plan FREEDOM DROP for tactical nuclear operations against North Korea."

   The Nixon administration did not implement any of the aforementioned military options on North Korea, but it prepared for further major provocations from the North after the downing of the reconnaissance flight over the sky of the East Sea between the Korean Peninsula and Japan that killed 31 on board.

  
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North Korean Economy Shrinks 0.9 Percent in 2009: BOK

SEOUL (Yonhap) -- The North Korean economy swung to a contraction in 2009 from a year earlier amid sluggish agricultural production and tougher international sanctions, the South Korean central bank said on June 24.

   The Bank of Korea (BOK) estimated the socialist country's economy shrank 0.9 percent last year from the previous year, a turnaround from a 3.1 percent expansion in 2008. The South Korean economy grew 0.2 percent in 2009.

   North Korea's gross domestic product, the broadest measure of economic performance, contracted in 2007 for the second straight year as heavy flooding weakened its agricultural production and its relations with the international community deteriorated.

   "Last year, the North's agricultural output declined, hit by cold weather and manufacturers' production remained sluggish due to a shortage of raw materials," the central bank said in a statement.

   The North's agricultural sector contracted 1 percent last year from a year ago, compared with an 8 percent expansion in the previous year.

   North Korea's nominal gross national income (GNI) reached 28.6 trillion won (US$24.1 billion) last year, translating into 2.7 percent of South Korea's 2009 GNI of 1,068 trillion won, the BOK said.

   North Korea's exports fell 6 percent on-year to $1.06 billion in 2009 while imports declined 12.5 percent to $2.35 billion, it added.

   The BOK estimated the North faced economic difficulties at home and abroad last year as its food shortages deepened and the North drew strong international condemnation and sanctions from the United Nations following its second nuclear test.

   North Korea has suffered from a chronic shortage of food and energy due to years of isolation, mismanagement and natural disasters. The communist state has relied on international handouts since 1995 to help feed its more than 20 million people.

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North Korea Hastens Power Succession: Spy Chief

SEOUL, June 24 (Yonhap) -- North Korean leader Kim Jong-il's ill health is driving him to hasten the process of another hereditary power succession to his third son, South Korea's spy chief said Thursday in testimony to parliament.

   Kim Jong-il's third son, Jong-un, said to be in his 20s, is widely believed to be the handpicked successor to his father. Kim himself took over power when his father and president, Kim Il-sung, died in 1994 in communism's first hereditary power succession.

   "Work on a hereditary power succession has been progressing fast in North Korea, as Kim Jong-il is throwing his full weight behind it," Won Sei-hoon, director of the National Intelligence Service, told the National Assembly's intelligence committee.

   "North Korea is making efforts to have its people worship Jong-un as the next leader by propagating poems and songs glorifying him and holding contests to recite them," he said.

   The heir apparent is also known to be accompanying his father frequently when he makes on-the-spot inspections to military and industrial facilities, Won added.

   Kim Jong-il, 67, is known to have suffered a stroke in the summer of last week. He was seen limping on his left leg during a trip to China in May.

   In a meeting with Chinese leaders in Beijing during the trip, the North Korean leader asked China to shield his country from international criticism over the sinking in March of a South Korean warship blamed on Pyongyang, Won said.

   South Korea has asked the U.N. Security Council to take up the issue and censure North Korea. North Korea has denied any involvement, warning that it would go to war if penalized over the ship sinking.

  
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Cheonan's Sinking Seems to Be Part of N.K.'s Succession Scenario: Panetta

WASHINGTON (Yonhap) -- North Korea might have torpedoed a South Korean warship to bolster the credibility of leader Kim Jong-il's son as heir apparent, the head of the Central Intelligence Agency said on June 27.

   "Our intelligence shows that at the present time there is a process of succession going on. I think that could have been part of it, in order to establish credibility for his son," CIA Director Leon Panetta said in an interview with ABC's "This Week," while responding to the question if the sinking of the Cheonan is part of the North's succession scenario.

   He drew a comparison to the rise of current North Korean leader Kim.

   "That's what went on when he took power," Panetta said. "His son is very young. His son is very untested. His son is loyal to his father and to North Korea, but his son does not have the kind of credibility with the military, because nobody really knows what he's going to be like."

   He was referring to the allegation that Kim Jong-il was behind the downing of a Korean Air plane that killed all 115 passengers aboard in 1987 while he was being groomed to succeed his father, Kim Il-sung. The senior Kim died of a heart attack in 1994.

   An international team last month concluded that a North Korean mini-submarine torpedoed the Cheonan in the Yellow Sea in March to kill 46 sailors, but North Korea denies involvement and has threatened all-out war if sanctioned by the U.N. Security Council.

   On June 26, U.S. President Barack Obama supported South Korea's bid to have the council punish Pyongyang for the incident, and leaders of the eight richest countries issued a joint statement to condemn the attack and demand North Korea "refrain from committing any attacks or threatening hostilities" against South Korea.

  
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Cheonan's Sinking Does Not Ensure Relisting N.K. As State Terror Sponsor

WASHINGTON (Yonhap) -- North Korea's torpedoing of a South Korean warship is a violation of the armistice that ended the 1950-53 Korean War, but does not merit relisting North Korea as a state sponsor of terrorism, the State Department said on June 28.

   "The sinking of the Cheonan is not an act of international terrorism and by itself would not trigger placing North Korea on the state sponsored terrorism list," spokesman Philip Crowley said. "It was a provocative action, but one taken by the military of a state against the military of another state. We believe the Cheonan was in fact a violation of the armistice."

   Crowley was asked if Washington was considering putting North Korea back on the list, from which it was dropped in late 2008 under the Bush administration amid progress in the six-party talks on ending the North's nuclear weapons programs.

   Crowley, however, said that the administration will continue to keep a close eye on North Korea for any terrorist acts.

   "We continue to evaluate information that is consistently coming in to us regarding North Korean activities, and we will not hesitate to take action if we have information that North Korea has repeatedly provided support for acts of terrorism," he said. "We've sought meetings at various levels. And thus far they have not been set up. So that is an ongoing process."

   North Korea was first put on the list after the downing of a Korean Air flight over Myanmar in 1987, which killed all 115 people onboard.

  
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IMF Willing to Help N. Korea Escape from Isolation: Strauss-Kahn

WASHINGTON (Yonhap) -- The International Monetary Fund (IMF) said on June 28 it is ready to provide assistance to North Korea to help the reclusive communist state get out of isolation if Pyongyang makes such a request.

   "We could have (provided) if North Korea was asking some technical assistance or things like this," Dominique Strauss-Kahn, managing director for the IMF, told reporters at the headquarters of the leading global agency. "We could consider having some relationship with them. But until now we have not been asked to do something on this."

   He was responding to a question about whether or not the IMF will play a role in defusing tensions on the Korean Peninsula by either inviting the North to an IMF meeting or providing assistance to help improve the impoverished country's economic system.

   Strauss-Kahn said the IMF basically deals with 87 member states alone, but added that it is still flexible.

   "There is no reason why we could not do it," he said. "We did provide technical assistance to Kosovo. We were working with the Palestine Authority even though it's not a Palestinian state. So it's flexible. And wherever we provide technical assistance, of course, the request has to come first. We don't go somewhere, saying we are going to provide you with technical assistance that you are not asking for."

   The IMF also provided technical assistance to Vietnam and East Timor before their membership by sending staff to train officials and through consultations on economic reform policies and providing limited financial assistance.

   North Korea unsuccessfully applied for membership to Asian Development Bank in 1999 due to opposition from the U.S., which is not supposed to engage North Korea under various laws imposing sanctions on the communist state.
U.S. officials have said Pyongyang needs to join the IMF first by taking measures to ease tensions, agreeing to provide adequate economic statistics and preparing to undergo major economic reform.

   The U.S. is the biggest shareholder of the IMF with a 17 percent equity that gives it virtual veto power due to the regulations requiring at least 85 percent of approval for decision-making.
The IMF invited North Korea, which has never applied for IMF membership, to its annual conferences in 2000 and 2003 as a special guest, although the North did not appear due to short notice and rising tensions with the North's nuclear weapons programs.

  (END)