BILATERAL RICE AID TO START IN LATE MAY BUT 6PT

C O N F I D E N T I A L SEOUL 001557

SIPDIS

SIPDIS

E.O. 12958: DECL: 05/21/2017
TAGS: PREL PGOV EAID ECON KS KN
SUBJECT: BILATERAL RICE AID TO START IN LATE MAY BUT 6PT
LINKAGE PERSISTS


Classified By: POL M/C Joseph Y. Yun. Reasons 1.4 (b/d)

--------------
SUMMARY
--------------


1. (C) Rice assistance: MOFAT North America DG Cho
Byung-jae said that the ROKG would provide some bilateral
rice aid by the end of May, given political and interagency
pressure to do so; ideally, the Banco Delta Asia (BDA) issue
would be resolved by then and the DPRK would start Yongbyon
shutdown. Foreign Minister Song Min-soon made this same
point with the Ambassador on May 18, pleading for a prompt
resolution of the BDA issue. Ministry of Unification
Director-General for Social and Cultural Exchanges Yang
Chang-seok, who oversees rice aid, said that a contract is in
place to ship 5,000 metric tons (mt) of rice -- an
intentionally small 1.25 percent of the 400,000 tons promised
-- to the DPRK on May 30.


2. (C) World Food Program: Cho said that any ROKG provision
of aid to the World Food Program (WFP) would have to be
separate from the 400,000 mt of bilateral rice aid, both
because that amount had already been pledged to the DPRK, and
because it was technically a loan rather than humanitarian
assistance. MOU's Yang said that the ROKG had been under the
impression that its WFP contribution should, like rice aid,
await progress on implementing the February 13 agreement;
ROKG would now reassess this stance based on Washington's
recommendation for prompt assistance. Yang said that he and
his colleagues would appreciate holding consultations with
the USG on the DPRK food situation. END SUMMARY.

--------------
5,000 TONS OF RICE AID BY END-MAY
--------------


3. (C) On May 18, POL M/C met separately with MOFAT North
America DG Cho Byung-jae, MOFAT Nuclear Affairs DG Lim
Sung-nam, and MOU's DG for Social and Cultural Exchanges Yang
Chang-seok to inquire into ROKG plans to provide food aid to
North Korea and to deliver points received by e-mail from EAP
regarding food aid to North Korea (linking rice aid to 6PT
progress; prompt assistance to WFP desirable; interest in
bilateral discussions of food aid).


4. (C) MOU's Yang, who oversees a 50-person bureau with
direct responsibility for rice, fertilizer and humanitarian
aid, explained that a contract was in place to have 5,000 mt
of rice delivered to the North on May 30, timed to coincide
with the May 29-June 1 Inter-Korean Ministerial meeting that
will be held in South Korea. Recognizing the sensitivity of
rice aid commencing while implementation of the February 13
"Initial Actions" agreement was still in doubt, Yang said he
intentionally limited the initial shipment to a small 1.25
percent of the rice aid commitment. He added that it would
be very difficult not to have any rice aid deliveries by the
end of May, especially in view of the coming Inter-Korean
Ministerial meeting and the May 17 test runs of the
North-South rail corridors. As an aside, Yang said that
during the train tests, DPRK Chief Councilor of the Cabinet
Kwon Ho-ung, who has been the DPRK's chief inter-Korean
representative since 2004, sat with MOU Minister Lee
Jae-joung and pressed Lee for prompt rice aid. Yang said
that Minister Lee in turn stressed the importance of
complying with the February 13 agreement. He provided no
further details on their conversation.


5. (C) MOFAT North America DG Cho said that the ROKG
recognized the importance of maintaining the linkage between
assistance to the North and progress on the 6PT, but that
MOFAT was completely isolated within the ROKG on this point.
Ideally, he said, the BDA issue would be resolved before the
rice shipment date and the DPRK would start shutting down
Yongbyon. But even if BDA were not resolved, the political
and interagency pressure to go forward with rice aid would be
difficult to counter, again citing the train test runs.


6. (C) Lim Sung-nam, the ROKG's Ambassador for North Korean
Nuclear Task Force, took a similar line, saying that the
"best case" scenario was for Washington to announce a
resolution to the transfer of North Korean funds in BDA early
next week. This would allow Seoul to make a decision on rice
assistance. If a resolution took much longer, Seoul would be
placed in a difficult position. Political currents were
shifting in Seoul, Lim said. Senior South Korean officials
were now using the phrase "mutually reinforcing" to describe
the relationship between the Six Party Talks and the
North-South dialogue, compared to "half step behind" only a
couple of weeks ago. Lim agreed that some rice had to flow
by the end of this month, whether the BDA issue was resolved
or not. Perhaps, a decision on this could be held off for a
short period of time, but the ROKG must see some end in
sight. If Washington believed the BDA issue would be behind
us by the end of the month--and conveyed this to Seoul--MOFAT
would have a good reason to postpone a decision for a week or
so, Lim said.

--------------
WFP AID AWAITING FEBRUARY 13 PROGRESS
--------------


7. (C) Regarding prompt contribution to the WFP, MOU's Yang
said that it had been delayed pending progress on the
February 13 agreement. When POL M/C explained that
Washington was concerned about the WFP's DPRK program running
out of funds imminently, and recommended a prompt ROKG
contribution, Yang said he would recommend an immediate
review with an eye toward making a contribution announcement
some time in June.


8. (C) Similiarly, MOFAT's Cho said that the ROKG would take
into consideration Washington's request that some food aid to
the North be provided through the WFP, but was firm in saying
that this could not be an alternative to bilateral rice
assistance, both because the ROKG had committed to providing
400,000 mt of rice aid at the February 27 - March 2
Inter-Korean Ministerial, and because the bilateral rice aid
was technically a loan, rather than (grant) humanitarian
assistance.


9. (SBU) WFP's Seoul representative told us on May 18 that
the ROKG has indicated that it will provide 50,000 mt of
maize, 1,000 mt of vegetable oil, and 1,000 mt of dried skim
milk, perhaps in 2-3 months, after not providing any aid
through the WFP in 2005/6. Based on the values of these
commodities as indicated in the WFP's project report for the
DPRK, WFP/EB.1/2006/8/3, Annex 1, this aid would be worth USD
10.6 million.

--------------
FOOD SITUATION
--------------


10. (C) Yang said that the food situation in the DPRK was
serious, with the DPRK likely to be running short of food by
the end of May, in part because China had provided only
500,000 mt of grain last year instead of the usual 1 million
mt. He said that the DPRK government could try to extend the
food supply by allocating only 500 grams per person per day,
instead of the 700 grams per day that ROKG calculations
assume. Yang agreed enthusiastically with Washington's
suggestion, conveyed by POL M/C, to hold in-depth bilateral
discussions on food aid to North Korea, saying that he would
prefer to come to Washington with colleagues soon for such
talks. Embassy will follow up.


11. (SBU) In reply to POL M/C's question about the current
food situation in North Korea, MOFAT gave us a summary of
Ministry of Unification/National Intelligence Service
information:

-- The DPRK's grain shortfall for 2007 is expected to be 1.7
million mt, worse than in recent years (about 1.1 million mt).

-- The above figure is based on (a) expected demand for 6.5
million mt (in turn based on 700 grams/per person/per day;
population of 25.4 million),and (b) expected supply of 4.4
million mt produced domestically, plus 0.3 million mt of aid,
not counting the 400,000 mt that the ROKG plans to provide.

-- MOFAT agrees with Washington's point that the DPRK faces a
serious food supply deficit.

-- The above estimates do not take into account grain
purchased from abroad (nfi).

--------------
COMMENT
--------------


12. (C) We believe that the ROKG will send 5,000 mt of rice
to North Korea around the end of May whether or not there is
progress on the February 13 "Initial Actions" agreement.
This amount has already been contracted, and the ROKG would
face a penalty payment if the contract is not exercised.
Even MOFAT is no longer resisting this initial shipment.
Thereafter, overall ROKG assistance to North Korea gets
complicated by the 6PT and domestic ROK politics. President
Roh wants to show greater progress in inter-Korean relations,
especially in the form of additional family reunions,
expansion in the Kaesong Industrial Complex, and
confidence-building measures like General Officer-level talks
or Defense Ministerial talks. The big prize for Roh, of
course, is a North-South summit, which, many South Koreans
are convinced, has the potential to influence the
presidential election in December in favor of the
progressives. For the Roh administration, rice assistance is
a small, but an important, part of intensifying engagement
with North Korea. END COMMENT.
VERSHBOW