Identifier
Created
Classification
Origin
08SHANGHAI218
2008-06-16 09:25:00
CONFIDENTIAL
Consulate Shanghai
Cable title:  

SHANGHAI ACADEMICS SEE MEASURED PROGRESS ON NORTH KOREA

Tags:  PREL ECON KN CH 
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R 160925Z JUN 08
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 6914
INFO RUEHBJ/AMEMBASSY BEIJING 1915
RUEHCN/AMCONSUL CHENGDU 1259
RUEHGZ/AMCONSUL GUANGZHOU 1230
RUEHHK/AMCONSUL HONG KONG 1396
RUEHSH/AMCONSUL SHENYANG 1257
RUEHIN/AIT TAIPEI 1069
RUEHGP/AMEMBASSY SINGAPORE 0161
RUEHKL/AMEMBASSY KUALA LUMPUR 0032
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 7473
C O N F I D E N T I A L SECTION 01 OF 03 SHANGHAI 000218 

SIPDIS

DEPT FOR EAP/CM

E.O. 12958: DECL: 6/16/2033
TAGS: PREL ECON KN CH
SUBJECT: SHANGHAI ACADEMICS SEE MEASURED PROGRESS ON NORTH KOREA

REF: BEIJING 1727

CLASSIFIED BY: Christopher Beede, Political/Economic Section
Chief, U.S. Consulate , Shanghai .
REASON: 1.4 (b),(d)



SUMMARY
-------

C O N F I D E N T I A L SECTION 01 OF 03 SHANGHAI 000218

SIPDIS

DEPT FOR EAP/CM

E.O. 12958: DECL: 6/16/2033
TAGS: PREL ECON KN CH
SUBJECT: SHANGHAI ACADEMICS SEE MEASURED PROGRESS ON NORTH KOREA

REF: BEIJING 1727

CLASSIFIED BY: Christopher Beede, Political/Economic Section
Chief, U.S. Consulate , Shanghai .
REASON: 1.4 (b),(d)



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


1. (C) Shanghai academics concur that the Six-Party Talks are
resulting in real, sustained progress, although, in moving
forward, the pace of progress may not fully meet U.S.
expectations. While the Democratic People's Republic of Korea
(DPRK) seeks friendlier bilateral relations with the United
States, Pyongyang has probably not yet made the strategic
decision to give up its nuclear weapons. In the short term,
China will likely maintain a more passive role in the Six-Party
process, but stands ready to actively reengage following
movement on Second Phase actions. Xi Jinping's planned June
17-19 visit to Pyongyang is meant to establish personal rapport
with Kim Jong-il and members of the regime. END SUMMARY.


2. (U) Poloffs conducted separate meetings June 12-13 with
Shanghai academics on North Korea and the ongoing Six-Party
Talks. Experts included: Ren Xiao, Center for American Studies,
Fudan University; Liu Ming, Director of the Center for Korean
Peninsular Studies, Shanghai Academy of Social Sciences (SASS);
and Xue Chen, Department of American Studies, Shanghai Institute
for International Studies (SIIS).

SIX-PARTY TALKS
--------------


3. (C) The academics agreed that the Six-Party Talks are
resulting in real, sustained progress. Ren Xiao pointed to
Assistant Secretary Christopher Hill's meetings with North
Korean counterpart Kim Kye-Gwan (KKG) in Geneva March 13-14 and
Singapore on April 8, and to the recent release of records
detailing the Yongbyon plutonium program, as indications that
dialogue was moving in a positive direction. Liu Ming was
similarly reassured that the United States and the Democratic
People's Republic of Korea (DPRK) seem to be exploring a range
of potential actions aimed at conciliating all parties. It is
his understanding, Liu stated, that A/S Hill and KKG, at their
Singapore meeting, had even discussed the possible return of two
or three Japanese Red Army terrorists who escaped to North Korea
in 1970. Ren observed that symbolism plays an important role in

creating positive atmospherics for dialogue and encouraging
concrete Six-Party successes. Washington should pursue and
replicate, whenever possible, such opportunities for outreach to
the DPRK as the New York Philharmonic's March visit to
Pyongyang. The physical destruction of the Yongbyon cooling
tower, if achieved, would be a similarly powerful symbolic event.


4. (C) Despite these positive developments, the pace of
short-term, Six-Party progress may not fully meet U.S.
expectations. Liu sees no alternative to a protracted timeline,
as Pyongyang is reluctant to fulfill its Second Phase
obligations before Washington delivers on its own. The apparent
willingness of the United States to allow the DPRK more time to
submit information on its uranium enrichment and proliferation
activities is therefore a smart move, Liu stated. Ren,
meanwhile, believes the DPRK is anxious to be removed from the
U.S. state sponsors of terrorism list and Trading with the Enemy
Act (TWEA) sanctions. Pyongyang's primary hope for the
Six-Party Talks is that dialogue with the United States will
yield friendlier bilateral relations and, more generally, a less
threatening international climate. Accordingly, a complete
nuclear declaration is still achievable, Ren asserted, though it
may fall outside Washington's desired timeframe.


5. (C) The academics tended toward the view that Pyongyang has
not yet fully committed to giving up its nuclear weapons. Even
Ren, who believes the DPRK has indeed made that strategic
decision, acknowledged that the nuclear weapons are Pyongyang's
only real bargaining chip, and that its probable strategy is to
"kick the can down the road." Liu remarked that -- while no one
can comment with certainty on Pyongyang's opaque decision-making
structure -- the North Korean military is known to view the
possibility of rapprochement with Washington warily, is
insulated from outside thinking on the matter, and might be

SHANGHAI 00000218 002 OF 003


primarily responsible for DPRK foot-dragging in the Six-Party
Talks. Alternatively, Xue Chen argued that North Korean
reluctance stems more from the regime's belief that the U.S.
Congress would not ratify any agreement made by the present U.S.
administration. Xue also thought Washington's friendly
relations with India, which the DPRK hopes could be a model for
its own future arrangement with the United States, might be
distracting Pyongyang from pursuing denuclearization.


6. (C) These experts agreed that, in the short term, China will
take a more passive approach to the Six-Party Talks. China will
continue to push the DPRK to fulfill its Second Phase
commitments, but Beijing's occupation with the Olympics and
Sichuan earthquake relief assistance makes more active
involvement unlikely. Still, Liu asserted, China would quickly
reengage with the process once the DPRK and the United States
are ready to move forward. China would convoke formal Six-Party
meetings as early as July, for instance, if there is sufficient
progress on energy assistance, verification, and abductees --
admittedly, Liu remarked, a rather tall order.

EAST ASIAN MULTILATERALISM
--------------


7. (C) The academics viewed a potential Northeast Asia Peace and
Security Mechanism (NEAPSM) favorably though premature. Ren
argued that the Asia-Pacific Economic Cooperation (APEC) forum
has lost momentum, is too large to achieve consensus on
anything, and is now merely an opportunity for heads of state to
meet. Meanwhile, ASEAN, the ASEAN Regional Forum (ARF),and
related ARF groupings (e.g. +1, +2) are useful fora for
discussion and cooperation on regional economic and security
issues, but their work is mostly tangential to Northeast Asia.
A NEAPSM would clearly fill this niche, Ren opined, although
certain issues, such as Taiwan, still would be off limits.


8. (C) Liu remarked that in the past, China had more
reservations about a NEAPSM, due to U.S. bilateral alliances
with Japan and the Republic of Korea (ROK). The possibility
that those members might "gang up on" Beijing in a multilateral
forum, or raise sensitive issues such as Taiwan, was a
significant concern. However, Liu acknowledged, China is now
coming around to the view that a NEAPSM could prove useful for
dialogue, confidence-building measures (CBMs),and coordinating
economic assistance for and liberalization of North Korea. Of
course, realization will first require success in the Six-Party
Talks -- specifically, on DPRK denuclearization, energy
assistance, and Japanese abductees. Since this will be a long
process, Liu said, the time is not really ripe to discuss a
NEAPSM in much detail.

NORTH KOREA'S ECONOMIC TRAJECTORY
--------------


9. (C) The academics differed on whether the DPRK was prepared
to open up economically, and on the significance of reported
food shortages. Ren was sanguine on the prospects for North
Korean economic liberalization, stressing that Pyongyang faces a
dilemma: opening too quickly may jeopardize regime stability,
but some degree of opening is vital to North Korea's future.
North Koreans realize the old system of controlled distribution
does not work; consequently, the role of the market has
expanded, with more people seeking foodstuffs and other goods
through private transactions. The Pyongyang regime has tried to
encourage this shift, Ren claimed, but it does not know how to
do so effectively. The Kumgang Mountain project has generated
some revenue, but the Sonbong SEZ has been a failure, Ren noted.
Pyongyang also lost several million USD intended for
investment, after innocently entrusting the sum to a corrupt
Chinese businessman later detained by Chinese authorities.
Despite these letdowns, the DPRK eventually will open "because
it has no other choice," Ren asserted.


10. (C) Xue was far less optimistic, arguing that Pyongyang need
only continue its brutal policy of providing adequate food and
equipment to members of the regime, military, and their families
-- approximately one in four North Koreans -- to maintain
political stability. On the other hand, Xue agreed that the
rise in food prices and shortage in food production have
combined to put the DPRK in a difficult situation. Prices in
2008 are three times those of 2005, while the World Food
Programme estimates that North Korea's demand for food is

SHANGHAI 00000218 003 OF 003


approximately 5.5 million tons. Jilin University, meanwhile,
has calculated that Pyongyang can only produce between 3.2 and
3.8 million tons. Since the United States has pledged 500,000
tons of food aid toward making up the shortfall, this might buy
Washington some goodwill in the Six-Party Talks, Xue said.


11. (C) Liu opined that the food shortage in North Korea is not
as urgent as is frequently portrayed. North Korea has a history
of famines, its people are resilient and by now accustomed to
adapting to shortages. For example, there is a great deal of
illicit trading on and food raids into Chinese territory by
North Korean citizens, Liu contended. The North Korean military
has also been involved in some of these raids, though it is not
clear they have the backing of the regime. The DPRK is a proud
nation, and China will not offer advice unless asked, because,
Liu said, Pyongyang will resist being told what it ought to do.


12. (C) Poloffs inquired about DPRK Foreign Minister Pak Ui
Chun's reported visit to Shanghai in late April (reftel). Xue
confirmed that Pak indeed had visited, touring Bao Steel, the
Shanghai Stock Exchange, and the Oriental Pearl Tower. However,
Pak's visit was most likely a courtesy call of little
significance. North Korean leader Kim Jong-il has routinely
visited Shanghai on his past tours of China, so the city has
become an obligatory stop for any North Korean official. Liu
seconded this view, noting that no one in the Shanghai academic
community had been alerted to Pak's visit, that Pak was not very
influential in Pyongyang, and was probably in Shanghai "just for
tourism."

XI JINPING'S AGENDA
--------------


13. (C) Asked about Chinese Vice President Xi Jinping's planned
June 17-19 visit to Pyongyang, Liu believed the event is
intended to establish personal rapport with Kim Jong-il and
members of the regime. Liu observed that, as presumptive
successor to President Hu Jintao, it is necessary for Xi to make
his first trip abroad to a fellow Communist state. Ren remarked
that Xi might urge North Korea to allow greater Chinese
investment, stressing that economic assistance is "not a one-way
street." Given the small volume of bilateral trade between
China and the DPRK, the meeting would otherwise be short on
substance.
JARRETT