Negotiations on Negotiations Redux

by | February 23rd, 2016

From: The Peterson Institute for International Economics 

The North Korea community has been stirred up over a piece by Alastair Gale and Carol Lee at the Wall Street Journal. The story argues that “days before North Korea’s latest nuclear-bomb test, the Obama administration secretly agreed to talks to try to formally end the Korean War, dropping a longstanding condition that Pyongyang first take steps to curtail its nuclear arsenal.” The meeting purportedly took place at the UN, but the story does not report who exactly was talking with whom. In a piece at Reuters, State Department spokesman John Kirby was quick to respond, putting a very different spin on events. “To be clear,” according to Kirby, “it was the North Koreans who proposed discussing a peace treaty. We carefully considered their proposal, and made clear that denuclearization had to be part of any discussion. The North rejected our response.”

If there is anything new here, it is extremely subtle. Kirby’s remarks could be read to say “we are happy to discuss a peace regime, but the Six Party Talks come first.” That would suggest absolutely no change in US policy whatsoever. But as the headline suggests, it could be read to suggest that the US considered rolling denuclearization and a peace regime into one omnibus negotiation.

The Joint Statement of September 19, 2005 states clearly that “the directly related parties will negotiate a permanent peace regime on the Korean Peninsula at an appropriate separate forum,” implying that a peace regime would grow out of successful 6PT negotiations. Yet over the last year, the North Koreans have floated the idea that the US should negotiate a peace regime first as a “confidence building” measure; a version of the proposal from last October can be found in a letter circulated by the North Koreans at the Security Council (S/2015/799).

There are so many problems with this proposal that it is hard to know where to start, including the fact that the US would be negotiating the normalization of political relations with a nuclear North Korea without any commitments whatsoever on denuclearization. Moreover, the demand for bilateral negotiations means that South Korea and China would be excluded. Even the North Koreans agreed at the 2007 North-South summit “to work together to advance the matter of having the leaders of the three or four parties directly concerned to convene on the Peninsula and declare an end to the war.” (That Roh accepted the “three or four parties” generated a firestorm at the time, but no one seriously thinks such negotiations could take place without all four parties at the table).

So if there is anything new here—and that is a big if—it is the consideration of negotiations aimed at reaching a grand bargain on denuclearization and a peace regime. It is wrong to dismiss this proposal out of hand. It might complicate the negotiations; it might provide for an expanded menu of linkages and trades.

But the main point of the Gale and Lee piece is not what the American might have hinted, but that the North Koreans immediately said “no” and went on to test. It’s hard to avoid the obvious conclusion: North Korea is uninterested in negotiating over its weapons programs. The looming question: will the closing of Kaesong, the decline in the China trade, US secondary sanctions and perhaps even some new Chinese sanctions change Kim Jung Un’s calculus?

Continuing with Stephan Haggard  replying to a post by ‘Adam’:

As always, extraordinarily useful. I had seen the Dong-a piece and it is worth noting that the two case studies included not only the Chinese investor with mining interests but a processing-on-commission firm using North Korean labor and concerned about possible human-rights related sanctions.

With respect to the banks, Emily Rauhala made some calls along the border and got mixed signals with respect to restrictions: https://www.washingtonpost.com/world/asia_pacific/china-us-cite-progress-on-n-korea-sanctions-deal-but-theres-no-quick-fix/2016/02/24/66bc7081-68db-4612-a9b6-f75bbf73ae82_story.html
One possible hypothesis: the Big Four commercial banks have received instructions but smaller city banks are less constrained. In any case, borrowed-name accounts are almost certainly in use; unless regulators decide to clamp down on large cash transactions these would be very hard to identify as North Korean.

We really don’t know much, but the bits of information provided here and in other sources are consistent with a signaling game, in which China does not cut off trade and financial flows altogether but makes marginal changes to test responses. The agreement on a UNSC resolution will almost certainly take a highly incremental form from existing coverage, designating entities that would in any case be difficult to sanction because of shell company structures.

SH

Here is Adam’s comment:

Adam Cathcart February 24, 2016 | 11:37 pm

My apologies if my comment is misplaced, but I had a few ideas with respect to your concluding rhetorical question: “Will some new Chinese sanctions change Kim Jong-un’s calculus?” Well, that all depends on what China actually does, doesn’t it?

I imagine you’re gathering data on precisely that question, not just watching discussions in New York City and the top floor of Foggy Bottom, but along the border as well. That Dong-A Ilbo report about Chinese banks in Dandong clamping down on North Korean transactions (the report received rapturously — and in my mind prematurely — by some sanctions advocates as affirmation of a kind of victory) has finally been engaged by Chinese state media which, I think, is worth reading in the present case.

Dong-A report, 22 February, the principle sources for which are an employee at a Dandong branch of ICBC and “an entrepreneur in Shenyang”: http://english.donga.com/Home/3/all/26/525957/1

Yonhap summary (in English): http://english.yonhapnews.co.kr/news/2016/02/24/0200000000AEN20160224011500315.html

Huanqiu Shibao/Global Times, “South Korean Media Says Some Chinese Banks have Frozen North Korean Accounts; ICBC Says it Will Respond After Checking,” 23 Feb 2016 (in Chinese) http://world.huanqiu.com/exclusive/2016-02/8585154.html

PRC Foreign Ministry Spokesperson neither confirms nor denies another rumor about Chinese firms ceasing cooperation with North Korean mineral interests in Dandong (this breakdown allegedly having started in December), 24 Feb. 2016, http://world.huanqiu.com/article/2016-02/8599530.html (in Chinese)

If you’ve already absorbed the Dong-A report, the Huanqiu/GT piece is probably most interesting. In it, we can see expressed by the “responsible official with a foreign trade portfolio” in Dandong that trade can “return to normal in May…depending on North Korea’s attitude.” Another person quoted involved in the import of North Korean coal also expresses his hope that “things can get back to normal.” No one mentions Jang Song-taek but there was indeed a rebound in that spring of 2014 (as per Yanbian Chenbao, April 2014).

So perhaps these are merely temporary pressure tactics; certainly they whet the appetite of the US Secretary of State, and give Bob Corker some hope that his on-stage bellyaching to Fu Ying at Munich has been earnestly conveyed to Zhongnanhai. Naturally PRC editorialists (see Wang Haiyun) advocate treating Kerry like a lovesick teenager who wants to talk and cajole endlessly about something that isn’t going to happen, and seem to ignore Corker altogether, but that’s not the point.

Along the lines of analysing the sources being quoted in the Dong-A report, it’s quite easy to find sources in Shenyang who will complain or otherwise pour scorn on the North Korean minerals business; a Friedmanesque two out of four taxi drivers I met there a few fiscal years ago were positively loquacious (or was it vicious?) on the subject. http://sinonk.com/2012/08/26/reading-north-korean-reform-in-shenyang-reportage/

I’m not suggesting that the Dong-A report or other sources from Shenyang are total bunk, but there are plenty of people in the Xiyang firm alone who would like to make Pyongyang squirm and would probably be more than happy to be interviewed without attribution to say whatever they need to say, particularly if those comments were useful to friends with good contacts in the provincial or central government.

It is also worth asking: if the North Korean accounts in China had been frozen or otherwise restricted back in “late December,” as per Dong-A Ilbo, wouldn’t we have heard about this well before the middle of February? Or maybe the Chinese news media is that watertight (thanks to the New Helmsman, who I know we all admire deeply; “our dream is your dream”). Maybe Daily NK and other outlets do not have access to the traders they ought to be speaking to. Maybe the North Korean state media did not want to display the Chinese knife in their collective back, even obliquely.

Andrei Lankov, who typically, is not in the least clear about if he was physically in the city or not, says his contacts in the city of Dandong in late January 2016 seemed more worried about “slowdown in the Chinese economy and a decline in demand for North Korean exports, i.e. coal and other raw materials,” but makes no mention of new difficulties in banking, which in the Dong-A narrative would have already been causing pain for a whole month. https://www.nknews.org/2016/02/for-n-koreans-in-dandong-its-business-as-unusual/

Frankly I find the focus on banks and sanctions somewhat limiting; China (again Xi Jinping) is in the middle of reorganizing the Shenyang Military Region. Do you think anyone in Pyongyang, or some alert and upwardly-mobile KPA brass in Ongjin county have noticed, and wonder what the studied ambiguity means for their future?

Apologies for the tirade; you just maintain such a clean and well-lighted place here that it is hard not to scribble a bit.

Adam Cathcart February 24, 2016