ROKG FOREIGN AND UNIFICATION MINISTERS ON

C O N F I D E N T I A L SEOUL 002336

SIPDIS

E.O. 12958: DECL: 12/05/2018
TAGS: PGOV PREL KS KN
SUBJECT: ROKG FOREIGN AND UNIFICATION MINISTERS ON
SOUTH-NORTH IMPASSE

Classified By: Ambassador Kathleen D. Stephens. Reasons 1.4(b/d).


1. (C) SUMMARY: Foreign Minister Yu Myung-hwan told the
Ambassador in a December 4 meeting that he did not know
whether the DPRK would take further steps that would result
in the complete closure of the Kaesong Industrial Complex,
but that the ROKG was ready for that eventuality. The
Foreign Minister said the ROKG would not budge from President
Lee Myung-bak's position of offering dialogue while not
conceding on fundamental principles, and that, in any case,
there was not much the ROKG could do to dissuade the North
from its current course. On December 5, Minister of
Unification Kim Ha-joong echoed the Foreign Minister's
resolve that the ROKG would not compromise its principles but
was more optimistic that the DPRK would allow KIC operations
to continue. Kim emphasized the importance of the U.S. and
the ROK presenting a unified front. END SUMMARY.

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FOREIGN MINISTER ON "PSYCHOLOGICAL WAR"
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2. (C) During a December 4 one-hour one-on-one meeting with
the Ambassador, Foreign Minister Yu Myung-hwan reinforced
what we have heard recently from a range of ROKG officials
and members of the National Assembly: The ROKG does not know
whether the DPRK will close completely the Kaesong Industrial
Complex (KIC),but the ROKG is prepared for that eventuality.
The ROKG had a budget of some USD 700 million in unused
appropriated funds for aid to the North that would be used to
compensate the 88 companies now operating at KIC. The
inter-Korean assistance/project account has over USD 1
billion in unused funds.


3. (C) Yu said that if KIC closes, it will not be because of
a ROKG decision but because of DPRK internal reasons. He
assessed that Pyongyang's recent steps to restrict access to
KIC were related to its ongoing assessment of engagement
policy as a whole, with increased anxiety about the
"pollution effect" of ROK tourists and personnel coming into
the DPRK, spreading rumors about Kim Jong-il's health. He
described the current situation as a "psychological war,"
vowing that the ROKG would stay calm about the matter. The
ROKG had earlier and repeatedly offered dialogue that would
include due consideration of the October 2007 Summit
Agreement, but could go no further because President Lee
Myung-bak had pledged during his campaign that he would not
be bound by that agreement, which he charged at the time was
a ruse to influence the ROK presidential election.


4. (C) FM Yu said the DPRK had given mixed signals about KIC,
with DPRK officials on site indicating they wanted economic
cooperation projects to continue, and expressing surprise
when the ROKG began withdrawing personnel from KIC even
before the December 1 deadline. Yu noted that were KIC to
close completely, the DPRK would lose up to about USD 73
million per year (USD 150-170 in pay to each of the 35,000
DPRK workers). The DPRK to date had obtained USD 20 million
from Kaesong City tourism since its inception one year ago (a
USD 10 million initiation fee and about USD 10 million from
daily tours since then). In addition, there were foregone
earnings from the suspension of Mt. Kumgang tours. Yu
thought the DPRK did not want to "kill the golden goose,8
but on the basis of its own internal calculations, the
possibility existed.


5. (C) Asked about contacts with the DPRK following
military-to-military meetings in October, Yu said that the
outcome had not been fruitful. The ROKG had reiterated to
the DPRK by letter that it was ready for dialogue and would
install communications equipment in border areas. The DPRK
had curtly replied by short letter that it was now fully
aware of the ROKG's position, and then publicly announced
that it would restrict cross-border traffic, leading to the
restrictions on the KIC. Yu said nothing short of a pledge
by President Lee that he would fully uphold the October 2007
Summit Agreement would satisfy the DPRK. President Lee,
however, could not make such a statement, because he had made
clear during his presidential campaign that he saw that
agreement as an inappropriate ruse to influence the
presidential election. Moreover, even initial implementation
would cost at least USD 5 billion. In the meantime, there
was &no back channel between South and North,8 and there
was ¬hing we (the ROKG) can do about KIC, because it is
related to the DPRK,s internal stability.


6. (C) Yu assessed that one of the DPRK's goals in placing
restrictions on KIC was to create political divisions in the
ROK body politic. This policy of &nam-nam kal-dong8 was
evident, Yu said, in progressive groups' December 2 protest
against NGOs sending leaflets to the North, saying there was
evidence some of these groups were instigated by the DPRK.
He reiterated the ROKG would remain calm in the face of this
"psychological war."


7. (C) Yu suggested that it would be useful for the USG to
make clear to the DPRK that the rapidly deteriorating
inter-Korean relations would damage the DPRK's overall
international credibility, such as it is. He said it would
be important for the DPRK to hear from the incoming U.S.
administration that the U.S. would not allow the DPRK to
pursue a policy of engagement with the U.S. while shutting
out South Korea (Yu cited the oft-heard expression &tong-mi;
bong-nam8).


8. (C) FM Yu reiterated his deep regret at not being able to
travel to Washington for Strategic Consultations with
Secretary Rice, citing the tense situation with the North and
ongoing budget hearings at the National Assembly as the
reasons. He also said that the ROKG still wants to pass the
KORUS-FTA this year.

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Minister of Unification on DPRK's Mixed Signals
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9. (C) Minister of Unification Kim Ha-joong, in a December 5
meeting with the Ambassador, repeated Foreign Minster Yu's
resolve that the ROKG would not compromise its principles to
meet DPRK demands but would remain calm in the face of DPRK
rhetoric and actions. Likening North-South dialogue and
cooperation to an apple, Kim said the ROK was ready to eat
the apple. He cautioned, however, that an apple harvested
too soon would be sour. It is worth waiting, he said, for
the apple to ripen.


10. (C) Kim said the ROKG has no official line of
communication open with the DPRK and regularly declines
offers from private South Korean citizens to serve as
messengers. Kim said he has offered to meet DPRK officials
"any time, any place" and that DPRK officials know how to
reach him or other ROKG officials. In the meantime, there is
nothing for the ROKG to do but wait patiently for the DPRK's
response to invitations to dialogue.


11. (C) Among other explanations for the DPRK's actions on
Kaesong, Kim said the North Korean leadership might be
putting pressure on the ROK in preparation for negotiations
with the new U.S. administration. He emphasized the
importance of the U.S. and ROK cooperating closely on an
approach to the DPRK and not allowing the DPRK to ignore the
ROK while moving forward with U.S.-DPRK bilateral
cooperation. Kim said he appreciated the Ambassador's recent
public comments reaffirming U.S.-ROK coordination on DPRK
policy.


12. (C) Acknowledging the slim possibility that the DPRK
could close KIC, Kim said he was confident that the DPRK
would keep Kaesong open because of its financial benefits.
Moreover, the DPRK does not have many cards left to play with
the ROK and Kaesong is a big one, he said. Adding to Kim's
confidence that Kaesong would remain open, on December 4 the
DPRK made an additional 500 workers available to Kaesong
companies, fulfilling a request from the companies who want
to expand the current 35,000 labor force.


13. (C) Kim said the 88 factories in Kaesong, despite the
loss of half the South Korean management, were operating
smoothly. Eight companies, however, have experienced a
reduction in orders due to the uncertainty of the situation.
And some companies have requested the ROKG to extend the
terms of government-backed loans, a request the ROKG is
willing to consider. Another 45 factories are in the process
of opening operations in Kaesong, and Kim said with a total
of 133 factories the total labor force could exceed 70,000 by
the end of 2009.

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Comment
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14. (C) Both FM Yu and MOUM Kim were on message with the
ROKG's position that it remains firm in its "wait and see"
mode of not making concessions to the DPRK and of
demonstrating its readiness to live with a further
downgrading of inter-Korean activities if the DPRK chooses
that path.
STEPHENS