North Korea: It’s a Cyclical Thing

Nagano, Japan – Here’s a blast from the past:

A 1994 Boston Globe article began: “Former President Jimmy Carter’s talks in North Korea may have provided an ‘opening’ in the confrontation with Pyongyang, a senior administration official said yesterday … Speaking to a group of reporters later, Carter … made clear his belief that the Clinton administration’s plan for sanctions was disastrously wrong …”

It’s a cyclical thing, like the changes of the seasons: North Korea is seen to misbehave, the U.S. tightens the screws — and a debate ensues in which policy critics push instead for engagement, including incentives for isolated Pyongyang to emulate China and Vietnam with economic reform and opening that could make it less of a bad boy on the world stage. The Clinton and George W. Bush administrations concluded such debates by replacing hard-line policies with engagement. North Korea sweetened both deals with concessions.

Now get ready to hear the carrots versus sticks (or carrots after sticks) argument all over again — and, coincidentally or not, just at a time when Carter has reprised a 1994 visit to Pyongyang as a diplomatic freelancer, this time to rescue a hapless American prisoner.

“Each time the U.S. tries economic sanctions it fails,” said London investor Colin McAskill, who lobbied tirelessly until the Bush administration in 2007 ended a two-year crackdown that had paralyzed a Macau bank and frozen $24 million in North Korea-connected accounts including some in which he had an interest.

“When the U.S. is forced to back down and the nuclear issues dealt with directly, there is progress and sometimes a resolution,” McAskill, who is contemplating a repeat match over the Obama administration’s sanctions, said in an email exchange.

As Carter flew to Pyongyang to trade the prestige of such a high-level visit for the release of Christian human rights activist Aijalon Mahil Gomes, who was sentenced to an eight-year prison term for entering North Korea illegally, the Kim Jong-il regime had already appeared to signal a cyclical shift in its own policy. (And as Carter settled into Pyongyang, the news today is that the reclusive leader has taken a surprise trip to China.)

Last Saturday saw the reappearance of former Premier Pak Pong-ju. Considered by some foreign observers an economic reformer, by others as at least a relatively pragmatic technocrat, Pak had disappeared from public mention after his 2007 demotion from prime minister to manager of a barely functioning factory complex.

Reporting the 70-year-old Pak’s attendance at a function Saturday, Central Radio referred to him as deputy director of the ruling Workers’ Party’s central committee. That could be an even more senior position than the premiership, in a system in which government functionaries are expendable and the party and the military hold the real power.

During Pak’s more than three-year banishment, hard line conservatives who took over economic management seriously alienated much of the population. They cracked down on the burgeoning private enterprise that had enabled millions to survive a deadly famine after the state-planned economy crashed in the 1990s.

The last straw for many North Koreans was a currency redenomination late last year in which the regime at a stroke wiped out most of the wealth that had been accumulated by marketplace businesspeople in private transactions. Facing a serious outcry and the risk that economic complaints could turn into political unrest, the regime reportedly issued a rare apology in February and had the purported author of the currency scheme executed by firing squad.

By some accounts Pak advised on 2002-3 economic instructions that took small steps toward encouraging profit making. Some foreign analysts use the term reforms to describe those, while others emphasize that the measures’ overall thrust was to preserve and restore the state-planned economy while slowing the growth of the private sector.

As premier from 2003, Pak sought to give more leeway to state-run enterprises to keep and invest some of their revenues instead of turning them over to the state. Those efforts failed because they were not sufficiently far-reaching — not accompanied by the legal changes that would be needed to enforce them — and were undermined by opponents, according to a senior North Korean economic official who was interviewed secretly in May 2006 by the Japanese magazine “Rimjin-gang.”

There is little indication what if any new economic moves Pak might push for, now that he is back in the power structure. In any case, he and his colleagues surely realize that U.S. Treasury Department financial sanctions could cause a major drain on the North Korean economy and frustrate any plans they might make.

Treasury is expected to release around the end of this month a final list of specific organizations, individuals and bank accounts it will target with the newest sanctions, imposed in response to the sinking in March of the South Korean warship Cheonan. An international panel including the U.S. determined that a North Korean torpedo blasted the ship. North Korea has denied involvement.

The case of Macau’s Banco Delta Asia showed that financial sanctions could bite seriously, inspiring bankers around the world to shun dealings with North Korea and thus shutting off most of the country’s access to the international financial system.

One European businessman in Pyongyang, who requested anonymity, in an email exchange confessed to being apprehensive as the announcement of Treasury’s target list approaches. “I’ve been going over all our transactions with a fine-tooth comb to make sure they are all legal and legitimate,” he said. “That’s taking up pretty much all of my time these days.”

London-based Colin McAskill is another European for whom U.S. sanctions have gotten in the way of business. As chairman of the Hong Kong-incorporated Koryo Asia Ltd., McAskill has sought since 2005 to establish an investment fund focusing on North Korea — an initiative that, at the beginning at least, had U.S. encouragement, he said in an email exchange. McAskill complained that policies of the Obama administration and South Korea’s Lee Myung-bak administration aim at bringing down Kim Jong-il and are counter-productive.

Instead they should encourage and work with Kim, who is “the only real arbiter of change in that country, with enormous internal opposition to his plans for reform,” said McAskill. “He started the market reforms in 2002 and brought in Pak Pong-ju over many opponents.”

“Sure, he is weakened both by illness and internal dissent at the very highest level and by a tunnel-visioned administration in Washington and a neo-con in Seoul giving succor to his enemies by advocating ‘regime change,’” McAskill said of Kim, who reportedly suffered a stroke in 2008. “Tell me this: Who will you change him with?”

North Korea said recently that it’s willing to return to stalled “six-party” nuclear talks with China, Russia, the U.S., South Korea and Japan, and Carter has long been on record favoring engagement. In a speech in Seoul in March the former U.S. president reportedly said, “There is no harm in making a major effort, including unrestrained direct talks. The initiative must be from America and South Korea.”

But even if, in addition to getting Gomes released, his visit has elicited some concessions from Kim Jong-il, Carter could have a difficult time persuading the Obama administration that it’s time once again to trade an easing of sanctions for possible progress on the nuclear issue.

“My impression is that the people with the most influence on policy are very skeptical about North Korea,” said former State Department Korea Desk chief David Straub. That skepticism “deepened after Pyongyang ignored their overtures in early 2009 and proceeded to test a second nuclear advice.”

Worries about crossing signals with the heretofore cooperative South Korean Lee administration combine with political fears that Republicans would cast Obama as “the fool in dealing with North Korea” to reinforce that skepticism, said Straub, who currently is associate director of the Korean Studies program of the Shorenstein Asia-Pacific Research Center at Stanford University.

“Of course, all this might be different if the Obama administration’s analysis were that the North Koreans might actually be willing to agree to a deal giving up their nuclear weapons on terms that the U.S. could accept, but I doubt there is more than a handful of people in the U.S. government who still feel that’s possible,” Straub said.

“As for North Korean economic ‘reform’ specifically, the reforms in 2002-2003 were very limited, nothing even close to what would be required for North Korean to begin to overcome its internal contradictions,” Straub said. “I don’t know why the Obama administration would be encouraged by Pak’s reported rehabilitation.”

Bradley K. Martin is the author of “Under the Loving Care of the Fatherly Leader: North Korea and the Kim Dynasty.”