EAP PDAS STEPHENS DISCUSSES KOREA WITH CCID

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 000398

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/17/2027
TAGS: PREL PGOV CH KN KS
SUBJECT: EAP PDAS STEPHENS DISCUSSES KOREA WITH CCID
DIRECTOR GENERAL MIAO WEICHENG


Classified By: Political Minister Counselor Daniel Shields. Reasons 1.
4 (b) and (d).

Summary
--------------


1. (C) Resumption of the Six-Party Talks in December 2006
was highly significant and no easy task, Miao Weicheng,
Acting Director General for Asia at the International
Department of the Communist Party Central Committee (CCID),
told visiting EAP PDAS Kathy Stephens on January 16.
Financial issues remain Pyongyang's paramount concern, Miao
stated, urging the United States to show flexibility on
financial issues in order to induce Pyongyang to make
concessions on nuclear issues. According to Miao, recent
DPRK newspaper editorials suggest possible important
changes in North Korean economic policy, with an emphasis
on economic development and improving the North Korean
people's standard of living. PDAS Stephens said the United
States is extremely serious about our joint effort to solve
the North Korean nuclear problem, but Pyongyang needs to
engage seriously and begin to implement the 2005 Joint
Statement. Miao said China is greatly concerned about the
North Korean issue because Beijing desires to create a
peaceful and stable international environment enabling it
to concentrate on domestic challenges. He expressed
concern that changes in South Korean domestic politics
could be destabilizing for the Korean Peninsula, noting the
rise in the conservative Grand National Party's popularity.
End Summary.

North Korea: Six-Party Talks
--------------


2. (C) Resumption of the Six-Party Talks in December 2006
was highly significant, Miao Weicheng, Acting Director
General for Asia at the International Department of the
Communist Party Central Committee (CCID),told visiting EAP
PDAS Kathy Stephens on January 16. Getting the DPRK back
to the negotiating table was no easy task, particularly in
light of Pyongyang's missile and nuclear tests, as well as
its previous insistence that financial issues be resolved
first. Nevertheless, it is clear that financial issues
remain Pyongyang's paramount concern. Because "sanctions"
were imposed right after the conclusion of the 2005 Joint
Statement, the DPRK has doubts regarding implementation of
that agreement. DG Miao urged the United States to show
flexibility on the financial issues in order to induce
Pyongyang to make concessions on nuclear issues. He also
advocated direct talks between the United States and North
Korea and welcomed reports that U.S.-DPRK financial
discussions will be held soon and that A/S Christopher Hill
will travel to the region this weekend. Direct dialogue
will increase mutual understanding and enable progress on
both financial and nuclear issues, Miao argued, emphasizing
that these were his personal views.


3. (C) Acting DG Miao pointed to a number of remaining
challenges in the Six-Party talks. DPRK VFM Kim Gye-gwan
apparently was not authorized to discuss U.S. and Chinese
proposals at the last round of Six-Party Talks. The DPRK
also has a "strong sense of self-esteem," meaning that
issues of face are involved in its stance on financial
sanctions, Miao said. Mutual distrust and Pyongyang's
miscalculations based on its isolation and reliance on
third parties to convey its messages are other obstacles to
solving the North Korean nuclear issue, Miao argued, again
making the case for direct dialogue between Washington and
Pyongyang. In addition, some believe that the United
States pays more attention to the Middle East, especially
Iraq and Iran, than it does to the Six-Party Talks. North
Korea is serious about talks with the United States, Miao
asserted, arguing that North Korea has long had as its goal
the improvement of relations with Washington.


4. (C) Recent DPRK newspaper editorials suggest possible
important changes in North Korean economic policy, Miao
stated. According to these editorials, economic
development and improving the people's standard of living
are priorities for the DPRK government. In the North
Korean economy, investment is minuscule, volume of foreign
trade is low and limited mostly to China and South Korea,
and domestic consumption has risen only slowly. These
economic challenges are an additional reason why the DPRK
is so concerned about the financial issue, Miao said.


5. (C) PDAS Stephens said the United States is extremely
serious about working with our partners to solve the North
Korean nuclear problem and implement the 2005 Joint
Statement. Despite the lack of progress in the last round,
we hope Pyongyang is considering the ideas presented by

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China and the United States in December. We continue to
have doubts about Pyongyang's readiness to engage seriously
on implementing the Joint Statement. We are ready to
continue discussions on the financial issues with the North
Koreans, though we remain puzzled why Pyongyang would be
willing to sacrifice everything for the sake of USD 24
million in Banco Delta Asia-related accounts. It is
entirely unacceptable for another country to counterfeit
U.S. currency and then take no responsibility for it, PDAS
Stephens underscored. She assured DG Miao that the United
States is a great power with great responsibilities and
that we have the ability to pay attention to a range of
issues around the world simultaneously. It would be a
serious miscalculation for Pyongyang to think that it could
wait in the hopes of getting a better deal down the line,
she stated. PDAS Stephens expressed the hope that, working
together with our other four partners in the Six-Party
process, we can make progress.

China's Stance
--------------


6. (C) Miao said China is greatly concerned about the North
Korean issue because Beijing wants to create a peaceful and
stable international environment enabling it to concentrate
on domestic challenges. This year and next are
particularly important for domestic stability, given the
17th Party Congress scheduled for this fall in Beijing and
next year's Beijing Olympics. China's myriad domestic
problems include rural issues, regional economic
disparities and environmental degradation, as well as
resource allocation and employment challenges.

South Korean Politics
--------------


7. (C) Miao expressed concern that changes in South Korean
domestic politics could be destabilizing for the Korean
Peninsula. The Grand National Party appears to be gaining
in popularity, Miao said, noting that politicians such as
former Seoul Mayor Lee Myung-bak and former GNP leader Park
Keun-hae are popular and viewed as possible presidential
candidates. A general election at the end of this year
could, therefore, bring into power a new ruling party. If
that were the GNP, South Korean policy toward Pyongyang
would likely become much tougher and this could lead to
increased distrust, misunderstanding and instability on the
Korean Peninsula. PDAS Stephens replied by emphasizing
U.S. appreciation for South Korea's democratic process and
stating our desire not to interfere in the ROK's domestic
politics. She told DG Miao that in terms of foreign policy
principles, there may be less difference among ROK
political parties than is apparent, as a majority of South
Koreans favor some degree of dialogue with the North.
South Korea and the United States have different, important
roles to play in resolving the North Korea problem, PDAS
Stephens stated.


8. (U) PDAS Stephens cleared this message.
RANDT