North Korea: Where Are We?

1. North Korea: Where Are We? Stephan Haggard University of California San Diego and Susan Strange Professor, LSE

2. Hard Target: Sanctions, Inducements and the Case of North Korea 1. Introduction: The Political Economy of Sanctions and Engagement 2. Hard Target: The Political Economy of North Korea 3. North Korea’s External Economic Relations 4. Humanitarian Constraints: The Political Economy of Food 5. The Microeconomics of Engagement: Evidence from Firm Level Surveys 6 and 7. Negotiating on Nuclear Weapons The Rise and Fall of the Six Party Talks, 2001–2008 Permanent Crisis 2009–2016 8. Conclusion

3. Outline: Why This is Hard • A brief overview of the nuclear and missile challenges • The diplomatic process • The Olympic gambit and North-South summits • The US ”maximum pressure and engagement” strategy, the May 2018 and February 2019 summits • The ”Pompeo process” • The Russia-China proposal (which aligns broadly with North Korean vision) and the Xi-Kim summits • Possible summit outcomes

7. The Complexities of Shutting Down the Program • ”CVID”: complete, verifiable, irreversible dismantlement • Fissile material • The focus on Yongbyon: a likely summit outcome • The plutonium track • The enrichment track: the likelihood of a second site plus centrifuge production • But even if this is shut down—a first step--you have to get a credible declaration on: • Stockpiles of fissile material • The weapons themselves • …and then you still have the WMD-industrial complex, which is very large

8. Yŏngbyŏn Nuclear Research Center 8

11. KN-11 • Solid fueled • Quicker launch times • Can be configured for mobile land-launch or SLBM… • ...thus survivable

13. Diplomacy: A Three-Ring Circus • If not regime change or coercion, then how to get back to a diplomatic process? • The Agreed Framework (1994-2003) • The Six Party Talks (2003-2008) • The US-North Korea summit process (2018-19) • Three diplomatic processes have gotten us to today • The North-South process and summits • The US ”maximum pressure and engagement” strategy, the May summit and the ”Pompeo process” • The Russia-China proposal (which aligns broadly with North Korean vision) and the Xi-Kim summits

14. The Moon Initiative • North-South relations stalled under two previous conservative governments (Lee Myung-bak and Park Geun-hye) • The Kim Jong Un New Year’s speech, Olympic gambit and summit proposal • The Olympic truce leads to the three North-South summits: • April: The Panmunjon Declaration (aspirational) • May: in anticipation of Singapore summit and launching military and Red Cross talks (family unification) • September 18-20 in Pyongyang and Pyongyang Declaration, with its (controversial) “Agreement on the Implementation of the Pyongyang Declaration in the Military Domain”

17. What Moon Wants • Moon-–on the center-left—wants the space to engage North Korea • Long-run: ambitious plans for Northeast Asian economic integration, with road and rail links as first step • But short-run, constrained by the US? • A ”declaration” of the end of the Korean War • Small confidence-building steps, such as inspections of Kaesong, survey of two rail lines and humanitarian measures • How much room does Moon have to engage?

18. Rail reconstruction plan (~$34 billion) • Reconstruct main East and West lines • High speed rail from Seoul to Sinuiju • Support for reconstruction of trunk lines

19. Natural gas pipelines as extensions of Irkutsk (through China) and/or Sakhalin pipelines… • With former possibly passing through Pyongyang • …and possible extensions to Japan

20. SEZ’s: failed experiments • 2002 Sinuiju • 2013 SEZ initiative • The closure of Kumgang (2008) • The closure of Kaesong (2013 and 2016) • Rason (1991) still standing

21. The Trump Strategy • Trump approach—even after summit—was to maintain “maximum pressure and engagement” • An example of coercive diplomacy • Understanding the political economy • Sanctions: it’s all about China • Big change in strong diplomacy with China to get 2017 UN Security Council Resolutions (the “Mar-a-Lago understanding”) • …with secondary sanctions as a tool

25. Linkage to Trade Politics • The complication of US-China trade tensions: how much cheating? • Ship-to-ship transfers • Satellite imagery of Longkou coal docks • Prices of gasoline in Pyongyang have stabilized as has black market exchange rate • Tourism and flights revived • Construction in Pyongyang and on border bridge (Tumen-Namyang) • …which complicates US negotiations • Secondary sanctions

26. The Diplomacy Part • Under Tillerson, some assurances: • No collapse or regime change; no forced unification; no troops above the 38th parallel, or if so, they would be removed following mission; no hostile intent • Stated willingness to negotiate, coming ultimately from Trump… • …and on March 8, 2018 Trump accepts the invitation • The summit risks • No time… • …but also allowing North Koreans to set agenda

27. The Summit StatementAn Exegesis • President Trump committed to provide security guarantees to the DPRK, and Chairman Kim Jong Un reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean peninsula. • Convinced that the establishment of new US-DPRK relations will contribute to the peace and prosperity of the Korean Peninsula and of the world, and recognizing that mutual confidence building can promote the denuclearization of the Korean Peninsula, President Trump and Chairman Kim Jong Un state the following: • 1. The United States and the DPRK commit to establish new US-DPRK relations in accordance with the desire of peoples of the two countries for peace and prosperity. • 2. The United States and the DPRK will join the efforts to build a lasting and stable peace regime on the Korean Peninsula. • 3. Reaffirming the April 27, 2018 Panumunjom Declaration, the DPRK commits to work toward complete denuclearization of the Korean Peninsula.

28. The Collapse—and Revival?--of the “Pompeo Process” • Misguided assumption that the US could conduct a “nuclear only” negotiation • The failure of high-level talks • July Pompeo visit: no meeting with Kim Jong Un, no substance, and proposals derided as “gangster-like” • August Pompeo visit canceled • The appointment of a North Korea point person (Steve Biegun) • To coordinate with South: a working group • To lead working-level and technical talks

29. The Russia-China Proposal by Default? • China and Russia firm on denuclearization, but differ with US on tactics • A freeze of testing and development—perhaps with inspectors—in return for a freeze in exercises • The Olympic truce looks somewhat like this, as North Korea has paused tests and US suspended exercises • …and Kim Jong Un did not object to their ultimate resumption • The assumption: the “freeze for freeze” would create confidence • But also arguing for a “words for words, action for action” approach with reciprocal steps

30. The Options • Biegun at Stanford (January 31, 2019) • Accept a broadening of the agenda and a more incremental step-by-step process • Biegun: U.S. prepared to move "simultaneously and in parallel" on Singapore Summit agenda • Trump: repeated comments in last week that in “no rush” • What this means • The main summit outcome will be on process: a timetable • Small deliverables on both sides: maintaining the freeze, humanitarian assistance, something symbolic on nuclear front • Something on North-South front?

31. The Wider Agenda • “Normalize relations” means: adjust sanctions incrementally and at the margin • A liaison office • Humanitarian and cultural • Widen discretion to South Korea • Peace regime: parallel negotiations to replace the armistice • A declaration on the end of the war • Security assurances and broader security architecture • Regional security issues: a permanent Six Party Arrangement • The nuclear negotiations • Buried in process • The ”Yongbyon first” strategy

32. “Yongbyon First” • The US strategy in 2008 under Christopher Hill • North Koreans have allowed for it • Steps • Rumors of inspectors (IAEA) • Suspension of activities (”freeze”) • But “disablement” and “dismantlement” are much longer processes • Centrifuges, reprocessing facility and 5MW reactor itself • Waste • Peaceful uses? • The technical challenges and costs (Chesser, Wit and Pitz at 38North) • And what are the “corresponding measures” from US?

33. The Fallback: Containment • Trump: “as long as they are not testing…”. Has North Korea followed Pakistan? • Containment: why the US doesn’t like it • The broader non-proliferation objectives: maintaining the Non-Proliferation Treaty • Alliance decoupling: fear that North Korean nuclear weapons would weaken the Northeast Asian alliances • Risks of miscalculation and the stability-instability paradox: if North Korea has a weapon, will it take more risks? • A return to “fire and fury”

34. Witness to Transformation blog at: https://piie.com/blogs/north-korea-witness-transformation