KOREAS AGREE TO RICE AID AND TEST RUNS OF RAILWAYS

C O N F I D E N T I A L SEOUL 001175 SIPDIS SIPDIS NSC FOR CHA E.O. 12958: DECL: 04/23/2017 TAGS: PREL MNUC EAID KS KN SUBJECT: KOREAS AGREE TO RICE AID AND TEST RUNS OF RAILWAYS Classified By: A/DCM Joseph Y. Yun. Reasons 1.4 (b/d) ¶1. (C) SUMMARY: In an April 23 briefing on the April 18-22 Inter-Korean Economic Cooperation Promotion Committee talks in Pyongyang, Director-General for Unification Policy Planning Um Jong-sik told A/DCM that the ROKG used the meetings to emphasize the need for the DPRK to implement the February 13 "Initial Actions" agreement. Um said that the ROKG had agreed to provide 400,000 tons of rice to the North, starting in late May, but had told the DPRK that the speed and timing of the aid could change depending on DPRK implementation of the 2/13 agreement. The two Koreas also agreed to conduct test runs of two inter-Korean railways on May 17; last year the DPRK canceled the test runs at the last moment. If the test runs occurred, the ROKG would move forward on its agreement to provide some USD 80 million in light industrial raw materials in June. In a separate meeting on April 23, MOFAT Director General for North American Affairs Cho Byung-jae reinforced the message that North-South talks were tied to Six-Party Talks (6PT),adding that Foreign Minister Song Min-soon stood by his comment that inter-Korean dialogue would remain "one-half step behind the 6PT." See full text of the joint statement in paragraph 11. END SUMMARY. ¶2. (C) A/DCM on April 23 received a read-out of the April 18-22 inter-Korean Economic Cooperation Promotion Committee talks in Pyongyang from Um Jong-sik, Director-General for Unification Policy Planning at the Ministry of Unification (MOU). The talks mostly covered items agreed to in earlier meetings. Um said that the first two days of talks were tense after the ROKG signaled that it would tie rice aid to DPRK implementation of the February 13 "Initial Actions" agreement. Before the plenary session of the talks was to begin, the DPRK, which had insisted that economic issues should be separate from politics, demanded to see (1) the keynote address of ROK chief delegate Chin Dong-soo, Vice Finance Minister; (2) the draft ROK rice loan agreement; and (3) the draft joint statement. The ROK refused these demands, and eventually the DPRK agreed to hold the plenary talks after a seven-hour delay. The DPRK later walked out of the talks, but displayed a better attitude the following day. When ROK delegates later raised the denuclearization issue, �00A;the DPRK side stonewalled, said it had no mandate to discuss the issue, or listened without response. Asked why the DPRK returned to the talks, Um said the ROKG sensed that the DPRK wanted to secure ROK humanitarian and industrial aid. -------------- RICE AID -------------- ¶3. (C) Um said that the ROKG emphasized before, during and after the economic talks that the DPRK needed to fulfill its obligations under the 2/13 agreement. ROK Chief Delegate Chin Dong-soo told the DPRK, and later reporters, that if the 2/13 agreement were not implemented, it would be "difficult" for the ROK to deliver rice assistance to North Korea. This was probably why the DPRK had demanded to see the text of Chin's keynote address and the other documents to see how the 2/13 agreement was addressed, Um said. Um said that while the MOU did not need National Assembly approval to send the rice to North Korea, the ROKG would come under more criticism at home should the DPRK fail to implement the 2/13 agreement. ¶4. (C) In the joint statement, the ROK agreed to provide the North with 400,000 tons of rice on a loan basis, Um noted. While the statement did not link rice with the 2/13 agreement or provide a starting date, Um said that a separate loan agreement indicated that rice shipments would begin in late May. According to the loan agreement, which is on the MOU website, the ROK intends to provide 150,000 tons of Korean rice and 250,000 tons of foreign rice. Um sought to assure A/DCM that the ROKG had made it clear, as issued in a separate MOU supplementary statement, that "the speed and timing of the aid could be changed depending on the North's sincere implementation of the February 13 agreement." While the modalities were still to be determined, Um thought that the rice aid would be delivered over a three to four-month period, which would allow the ROK to calibrate aid with denuclearization progress. ¶5. (C) The ROK intends to ship 350,000 tons of rice by ship and 50,000 tons of rice overland to the DPRK, Um said. Seoul had wanted to send all the rice by land, which would be cheaper and might encourage greater ROK access to the DPRK, but the DPRK resisted. (NOTE: ROK monitoring of the distribution of the rice aid will again be limited. For each shipment of 100,000 MT of assistance, five South Koreans will be permitted to conduct monitoring activities. If the DPRK insists on conditions similar to previous shipments of rice, the monitoring will be limited to watching the rice being taken off the boat and transferred to ground transport. END NOTE.) ¶6. (C) Um said the ROKG viewed rice assistance as important for humanitarian reasons and to help improve inter-Korean relations. In the past the DPRK has informally linked ROK humanitarian aid (rice and fertilizer) with humanitarian projects, such as family reunions. Um hinted that one reason the ROKG agreed to promise rice aid--tied to DPRK denuclearization progress--was to ensure that the DPRK would carry through on its earlier agreement to hold family reunions May 9-14 at Mt. Kumgang. ¶7. (C) In a separate meeting on April 23, Cho Byung-jae, North American Affairs Director-General at the Ministry of Foreign Affairs and Trade reiterated the ROKG message that rice aid was linked to progress in the 6PT. He acknowledged that Foreign Minister Song Min-soon stood by his comment that inter-Korean relations would remain "one half step behind" progress in the Six-Party Talks. Given the DPRK shortage of food, which he estimated at one million metric tons for 2007, Cho said that the DPRK could not ignore that ROK rice aid was a strong leverage point, so the DPRK would see an additional reason to honor its 2/13 obligations. Moreover, although the DPRK had missed the April 14 deadline to meet its 2/13 agreement obligations, since the atmosphere regarding the Six-Party process remained generally positive with signs that the BDA issue might be resolved soon, the ROKG did not see the need to turn off inter-Korean project, again, at this time. If there were no progress by the end of April or next month, however, the ROKG would be prepared to reexamine its alternatives. -------------- TEST RUNS OF RAILWAYS -------------- ¶8. (C) From the ROKG point of view, one key accomplishment of the economic talks was that the DPRK confirmed its agreement to conduct test runs of two inter-Korean railways, slated for May 17, Um said. The two Koreas in March had agreed to carry out test runs "within the first half of this year, as soon as the military guarantee measures are put in place." Asked if the ROK expected the DPRK to actually follow through this time, Um stressed that in 2006 Korean delegates had agreed to "propose" to military authorities that test runs be conducted, but this time that Koreas had agreed to "make positive efforts" to actualize a military safety guarantee, which Um said was a significant improvement. Um said that the ROK's impression was that DPRK officials were more committed this year to making the test run happen. In the short term, the DPRK would benefit from some USD 80 million in raw materials for light industry, something the ROK said was contingent on completion of the trial runs. In the long term, the DPRK would benefit from railways that North Korean workers could use to commute to the Kaesong Industrial Complex and from ROK supplies for the KIC that would be delivered more quickly by railway. (NOTE: The Koreas last year had agreed to hold rail trial runs on in May 2006, but the DPRK canceled at the last minute, after inter-Korean military talks stalled when the DPRK insisted on linking rail crossings with redrawing the Western sea border. END NOTE.) ¶9. (C) Um explained that the ROK had pledged to provide in June some USD 80 million in light industry raw materials, presuming that the Koreas had conducted test runs of the inter-Korean railways. Um said the light industry aid, primarily materials for the DPRK to produce shoes, clothes, and soap, would be repaid in-kind with DPRK natural resources, such as graphite, tungsten, magnesium, and coal. More broadly, the ROK had wanted to improve inter-Korean cooperation on resources, in part to block Chinese acquisition of rights to DPRK resources, in other words to keep Korean resources for Koreans. The two sides also agreed to jointly conduct surveys of North Korean mines and to form a consortium to extract and market mineral resources in the North. A proposal to jointly develop energy and timber projects in Russia was made in the DPRK delegation's opening remarks, and seems to be the basis for an agreement in the joint announcement to "discuss their advance into third countries in the field of natural resource development." -------------- DPRK PROPOSES BANKING RELATIONSHIP AT KIC -------------- ¶10. (C) Um said that the DPRK also proposed developing a business relationship with the South Korea Woori Bank, which has a branch in the Kaesong Industrial Complex. The ROK delegates replied that the Woori branch was only for the use of ROK companies and ROK employees working in the KIC. What the DPRK was suggesting would require a correspondent banking agreement. The ROK said that this was not the appropriate time to consider the DPRK request. -------------- TEXT OF JOINT STATEMENT -------------- ¶11. (U) The full text of the joint statement follows (ROKG translation): South and North Korea held the 13th round meeting of the Inter-Korean Economic Cooperation Promotion Committee in Pyongyang from April 18 to 22, 2007. At the talks, the two sides discussed issues concerning the further development of inter-Korean economic cooperation projects for mutual prosperity and benefit, and agreed as follows: ¶1. The South and North agreed to take measures necessary for investment and cooperation in order to develop the national (inter-Korean) economy in a balanced manner, and expand and develop the intern-Korean economic cooperation projects. ¶2. The South and North agreed to carry out test runs of trains on the Gyeonggui (Seoul-Sinuiju) and Donghae (East Coast) railway lines on May 17, hold related working-level contact in Kaesong from April 27 to 28, 2007, and make joint efforts to realize the operation of the railroads and roads at an early time. The two sides agreed to actively cooperate so that the military guarantee measures can be implemented before the test run of the railways. ¶3. The South and North agreed to adopt "Amendments to the Agreement on Inter-Korean Cooperation in Light Industry and Mineral Resource Development," which had been adopted at the 12th round meeting of the Inter-Korean Economic Cooperation Promotion Committee. In connection, the South will provide the North with raw materials for light industry starting from June on a loan basis, and the North will cooperate for a smooth promotion of mineral resource development by conducting joint on-site inspections at designated development sites in June as well as securing and providing necessary data. To this end, the two sides agreed to hold a working-level consultation on the inter-Korean cooperation in light industry and mineral resources development in Kaesong from May 2 to 4, 2007 to discuss and decide on detailed matters. ¶4. To vitalize construction of the Kaesong Industrial Complex (KIC),the South and the North agreed to hold the 3rd working-level contact on the construction of the KIC in Kaesong in May to discuss transit, customs, telecommunications, supply of North Korean labor, accommodations, construction of convenient facilities, and the preparation work for the second stage development of the KIC. ¶5. The South and North agreed to hold a working-level contact on joint ventures in third countries in Kaesong in June and discuss detailed matters. ¶6. The South and North agreed to adopt and implement the agreement on the prevention of flooding along the Imjin River by exchanging related documents in early May. In connection, the North agreed to cooperate in allowing the South Korean personnel to visit the sites to provide materials, equipment, and technical support for operation of equipment in implementing the agreement. ¶7. The South and North agreed to hold a working-level contact at the earliest time and promote the project of excavating sand and gravel at the mouth of the Han River, as soon as the military guarantee measures are put in place. ¶8. The South and North agreed to hold working-level contacts on prevention of natural disasters as well as cooperation in science and technology in Kaesong in June; and the two sides agreed to discuss and decide on the schedule for working-level contacts for fishery cooperation, business arbitration committee, and a joint committee for transit and immigration in Kaesong and Mount Kumgang by exchanging documents. ¶9. In the spirit of fraternity and humanitarianism, the South agreed to provide the North with 400,000 tons of rice on a loan basis. ¶10. The 14th round meeting of the Inter-Korean Economic Cooperation Promotion Committee will be held in the South in July 2007, and the detailed schedule will be dQussed and determined by exchanging related documents. END TEXT.QTANTON