U.S. State Department Geographic Bureaus: East Asia and Pacific Bureau

95/06/15 BRIEFING: R. Gallucci on US-DPRK Agreed Framework

[Excerpt from Daily Press Briefing of June 15, 1995]

June 15, 1995

MR. BURNS: Good afternoon, ladies and gentlemen. Welcome to the State Department briefing. I'm very pleased that we can begin today's briefing with a special session with Ambassador at Large Robert Gallucci and Deputy Assistant Secretary for East Asian and Pacific Affairs Thomas Hubbard.

Mr. Hubbard recently returned from Kuala Lumpur after reaching agreement on key issues concerning the implementation of the U.S.-DPRK Agreed Framework. Ambassador Gallucci and Deputy Assistant Secretary Hubbard will speak on the successful negotiations achieved in close consultation with our allies in the Republic of Korea and Japan which will keep North Korea's dangerous nuclear facilities frozen and ensure that the Korean Peninsula Energy Development Organization will select the reactor model and prime contractor for the light-water reactor project.

DEPUTY ASSISTANT SECRETARY HUBBARD: Let me open just with a few brief comments. I think you all know that I spent over three weeks in Kuala Lumpur in daily discussion, daily negotiation with my North Korean counterpart, Vice Minister of Foreign Affairs Kim Kye-Gwan.

These were difficult discussions. We spent some rather hard days, but I think we achieved a result that is good for U.S. interests and that of our allies.

During our talks, the United States and the DPRK agreed, number one, that the Korean Peninsula Energy Development Organization, or KEDO, will select the reactor model for the light-water reactor project in North Korea.

Our joint statement has a very detailed technical description of that reactor model, and following a meeting of the KEDO Executive Board in Seoul the same day, Ambassador Gallucci announced that the reactors will in fact be of the type currently under construction, under production at Ulchin, South Korea.

We also agreed that KEDO will select a prime contractor to carry out the LWR project. The KEDO Executive Board in Seoul also announced that the prime contractor will be a South Korean firm. That firm will be responsible for all aspects of the LWR project, including design, manufacture, construction and management.

And finally, as a result of our talks, the DPRK has agreed that it will henceforth negotiate directly with KEDO on outstanding issues related to the agreement on the LWR project.

Besides the LWR project, we and the DPRK delegation also discussed a number of other issues directly related to implementation of the Agreed Framework. The two sides reaffirmed their commitment to implementing all provisions of the Agreed Framework. In this context, the DPRK will maintain the freeze on its existing nuclear program.

The DPRK agreed to receive this month a team of U.S. technical experts to begin implementation of our bilateral understanding on the safe storage of the DPRK's spent fuel rods. This is a very important step forward.

We also agreed to begin discussions as quickly as possible on cooperative steps to monitor the phased delivery of heavy fuel oil KEDO is committed to provide the DPRK. We hope to reach rapid agreement on these monitoring steps and a schedule for delivery of 100,000 tons of heavy fuel by October 21, as called for in the Agreed Framework.

During the meetings, the U.S. side repeatedly stressed to the North Koreans the need to engage in dialogue with the South, as also called for in the Agreed Framework. North-South dialogue is essential, both for the full implementation of the Agreed Framework and for the creation of a stable peace on the Korean Peninsula.

During the course of these talks, we consulted very closely with our allies, the ROK and Japan, throughout the process, both in Kuala Lumpur and in all three capitals. As you know, Ambassador Gallucci and Assistant Secretary Lord went to Seoul and Tokyo while we were engaged in discussions in Kuala Lumpur.

Our cooperation with Japan and the ROK was excellent throughout the course of these negotiations, and we believe firmly that we achieved in Kuala Lumpur an agreement that advances our common interests.

I'd be happy to take questions now.

Q Can you tell us why this agreement will effect the goal of closer economic and diplomatic ties with specific reference to the opening of liaison offices?

DEPUTY ASSISTANT SECRETARY HUBBARD: As you know, we agreed last October in Geneva that we would establish liaison offices in respective capitals as soon as we have resolved the consular and other technical issues related to those offices. We have not yet resolved all of those technical issues.

The DPRK in recent weeks has indicated that their willingness to continue discussions of the liaison offices was contingent upon our successful conclusion of talks on the light-water reactor project. So now that that has taken place and we have reached a conclusion on the LWR project, we hope that we can move forward and carry out additional meetings with the DPRK on the liaison offices.

Q When will the documents be signed, and will they be made public?

DEPUTY ASSISTANT SECRETARY HUBBARD: There's no document to be signed at this point. We issued a joint press statement, and that is all there is to be now. Hereafter, KEDO and the DPRK will continue their discussions of a supply agreement for the LWR project, and I presume that will be public when it's reached.

Q The earlier tentative agreement was ad referendum. Presumably now both capitals have accepted what was negotiated in KL, and the issuance of the press statement is the final agreement.

DEPUTY ASSISTANT SECRETARY HUBBARD: That's correct. At one point in Kuala Lumpur I thought that I would probably have to return to Washington before I would get authorization to issue the joint press statement. In fact, our discussions in Washington and our consultations with the ROK and with Japan proceeded much more quickly than I had anticipated, and we were able to complete that in Kuala Lumpur.

Q When are technical experts going to see about the fuel rods, and what's the next -- what's the timetable on actually implementing some sort of -- whatever you're going to do with the rods taken out and store them or --

DEPUTY ASSISTANT SECRETARY HUBBARD: We agreed in Kuala Lumpur that that visit would take place as soon as possible in the month of June. We have gone to them and proposed sending a delegation just as soon as possible. I don't believe we've yet had a definitive response from the DPRK, but they told us in Kuala Lumpur they wished that team to arrive just as soon as possible.

Bob (Gallucci), do you have any more on this?

Q Weren't you supposed to provide some canisters for the rods to go in? Has that all been done?

DEPUTY ASSISTANT SECRETARY HUBBARD: We've reached agreement on what will be done. It will, of course, take several steps to get actually to that point. The first point in fact will be to send some chillers into the area where the fuel rods are being stored so that the temperature of the water can be lowered. That's the first step. After that we'll proceed with the rest of the project.

Q And when do you think that whole piece will be finished, when the rods will be removed?

DEPUTY ASSISTANT SECRETARY HUBBARD: Bob, do you have an estimate of that?

AMBASSADOR GALLUCCI: No, but I could take longer to say we don't know than you can. (Laughter) Tom said that you chill the water, then you stabilize the chemistry. You clarify the water so you see what you're doing. And while you're doing all that in Pyongyang, you're having an American company, whose name I don't know, fabricate the canisters into which the rods will be put.

The actual shipment of the canisters -- assuming that all these steps proceed as quickly as they can, and, of course, we'd like them to, then the canisters, I believe, would be there before the end of the year, and the placement of the rods into the canisters would begin some time this calendar year, but I'm not sure how long it will take for everything to be completed. Not a very long time, but the time factor relates to the corrosion of the cladding, as you've been told a million times. Once we get to the point of stabilizing the pond and getting the canisters over there, then the rush kind of diminishes to do that. Then we have time to actually put them in the canisters.

Q Do you have a final destination for those fuel rods?

AMBASSADOR GALLUCCI: We have an initial destination which is right in the pond. Then the shipment of the rods, as you know, is paced to the delivery of nuclear equipment under the Agreed Framework for the light- water reactor which we expect will be about five years into the future.

We did, as I think we have said, some exploration with some countries who have the capability to take spent fuel of the gas graphite type. We have a number of countries that said in principle they would entertain the possibility, and that's all we need at this point. The short answer to your question is no, we have no definite arrangement.

Q What are these remaining outstanding issues that need to be resolved, something you mentioned overseas with the scope of supply? What is that? And I also wanted to clarify -- I've seen several different numbers. I've seen $4 billion for the KEDO project, $4.5 billion, and then there's been talk about another -- discussions over an additional $1 billion for power lines and electric grids. So could you outline the remaining outstanding issues and clarify those numbers?

DEPUTY ASSISTANT SECRETARY HUBBARD: I think the latest estimate of the cost of the LWR project is something around $4.5 billion. We won't really be sure until we undertake some of the initial steps that are in fact called for in the joint press statement that we issued in Kuala Lumpur -- that is, to send a site survey team to do an actual examination of the site where the project will be built, and based on that, we can begin to have a better estimate of the cost.

The North Koreans have repeatedly in a number of places asked for add-ons to the project. Sometimes they've used the figure $1 billion. That figure did not come up in my discussions in Kuala Lumpur. The North Koreans made clear that they will wish some add-ons to the LWR project. I made clear in Kuala Lumpur that for the moment that what we were prepared to do was begin the site survey, to commit to provide the funds needed for site preparation of the actual project site. It can't move forward without that, but that further discussions of all the remaining issues would have to take place with KEDO.

My expectation is that KEDO will be prepared to provide what is normal for a project of this kind and no more than that.

Q Are there remaining outstanding issues?

DEPUTY ASSISTANT SECRETARY HUBBARD: There are a number of things - various technical issues such as reactor safety and the like need to be provided for. There does need to be eventually an agreement on exactly what the scope of supply will be. There are a host of technical issues. What we did in KL, basically, was decide the reactor model and decide the commercial arrangements for carrying out the project. In both cases, this will be a South Korean model and a South Korean prime contractor. Henceforth, it's going to be up to KEDO and the DPRK to work out the additional details.

Q You said the KEDO Executive Board in Seoul would name the prime contractor, and it would be a South Korean firm. Have they named the firm yet?

DEPUTY ASSISTANT SECRETARY HUBBARD: Bob (Gallucci) is the Chairman of the KEDO Executive Board.

AMBASSADOR GALLUCCI: If you look at the announcement we made, it says that we, KEDO, will begin negotiations with KEPCO, which I believe stands for Korean Electric Power Corporation or Company, which is the state utility. The formulation we will begin negotiations is because there must be a contract between KEDO and the prime contractor, and then the South Koreans are nominating KEPCO for that role.

We can't say that KEPCO is going to be the prime contractor, of course, until in legal terms there is a contract, but that's the direction we are heading.

Q What do you think was the key to the North Koreans' willingness to accept South Korea as a prime contractor on the project?

DEPUTY ASSISTANT SECRETARY HUBBARD: I think they realized that we and our allies, the ROK and Japan, were firm in our determination that a South Korean firm would be the prime contractor. I think the North Koreans throughout the course of these weeks in Kuala Lumpur had to weigh the advantages and disadvantages of accepting something that they didn't want to accept.

I think they felt they had a strong interest in actually having this LWR project carried out. It relates very directly to their national development. I think they determined that they had a strong interest in better ties with the United States and a more active involvement in the international community.

When they weighed the potential loss of all of that against the disadvantages from their point of view of accepting South Korean reactors, I think they decided to accept the South Korean reactors.

Q But, Mr. Hubbard, it's correct, isn't it, that there's nothing on the record that binds North Korea to accept the South Korean reactors, right?

DEPUTY ASSISTANT SECRETARY HUBBARD: I think there are two things in this joint press statement that we issued the other day that bind them. First and foremost, they agreed that KEDO will select the reactor model and indicated that they would accept KEDO's choice. They did that knowing that KEDO would, in fact, decide to provide South Korean reactors which it, in fact, did the same day.

Secondly, there's a somewhat arcane technical description of a reactor contained in the joint press statement. It had something to do with two coolant loops combined with a 1,000-megawatt electric power generated capacity.

That technical description describes the reactors currently being built at Ulchin, South Korea, and no other reactors.

Q When it comes time for South Korean technicians to enter North Korea to implement and build the LWR, can't the North Koreans then say, "Oh, we never agreed to this?"

DEPUTY ASSISTANT SECRETARY HUBBARD: There's a third point in there that says the project will be a turn-key project. I think once the supply agreement with KEDO is signed, the North Koreans should have no further say in that. I don't mean to be overly optimistic. Nothing is ever easy in discussions with the North Koreans. Certainly, we don't think carrying out a $4.5 million light-water reactor project with the North Koreans is going to be easy. I think there will be a number of issues to be resolved along the way.

I think one of the most important results in my meetings in Kuala Lumpur was the North Koreans acceptance that these talks -- these negotiations -- would henceforth take place between the DPRK and KEDO.

The Executive Board of KEDO consists of the United States, the ROK, and Japan. In future talks on these subjects, the ROK will, of course, be present through their KEDO representatives.

Q I have two questions. First question is, when is KEDO supposed to begin the negotiations with North Korea to conclude the supply contract?

DEPUTY ASSISTANT SECRETARY HUBBARD: As soon as possible, as indicated in the joint press statement.

Q Do you know the target date?

DEPUTY ASSISTANT SECRETARY HUBBARD: We haven't set any finite date. But I think both sides want to move forward just as quickly as we can.

Q The second question is, why you had the discussions in Kuala Lumpur, the North Koreans requested Tokyo to supply further aid. Do you think the acceptance of the South Korean model and their request for further aid had something to do with the formal transition of power to Kim Jong-Il?

DEPUTY ASSISTANT SECRETARY HUBBARD: That's hard to say. In dealing with the North Koreans, I try to speak only from what I've actually experienced and heard from the North Koreans. They said nothing to me during the course of three and a half weeks of discussion in Kuala Lumpur about the leadership transition in North Korea.

Q What happens next on the heavy oil shipments? Are there further talks on that regarding working on a mechanism to make sure there's no future diversion?

A second question is, is the U.S. prepared to supply a percentage of that oil ahead of the October deadline as requested by the North Koreans?

AMBASSADOR GALLUCCI: A team left this morning for Pyongyang to discuss modalities or methodologies for monitoring the disposition of future heavy fuel oil deliveries. That's something that we said was necessary to set in place before we delivered anymore in light of our conclusion that some of the heavy fuel oil that was delivered in January was diverted for non-permitted purposes -- namely, for steel manufacture.

Our willingness to phase the delivery of the fuel oil that is due under the terms of the Agreed Framework between now and October 21 of this year will depend upon (a) the successful conclusion of the discussions and the placement of whatever equipment is necessary to monitor the fuel oil; and (b) our own conclusions about the best way to proceed, and certainly (c) our financial capability to pay for the fuel oil.

The "b" part of that is that it is probably in our interests to make sure that the fuel oil is delivered in a phased way so that the North Koreans can more easily do what they said they would do with it -- namely, use it simply and only for electrical and energy generation, or directly for the production of heat rather than dumping a quantity of heavy fuel oil on them which they have difficulty in managing. Sort of a mutual interest here.

But the first element I want to emphasize is that we've got to have a monitoring system in place.

Q When are those talks about to begin?

DEPUTY ASSISTANT SECRETARY HUBBARD: The team left this morning. It'll take a couple of days.

DEPUTY ASSISTANT SECRETARY HUBBARD: I think they begin on the 17th.

Q What do you mean, "our ability to pay" in regards to the fuel oil?

AMBASSADOR GALLUCCI: As you know, heavy fuel oil cost money. KEDO is responsible, in a general way, for the provision of this heavy fuel oil. We, together with the Japanese and South Koreans, as the Executive Board of KEDO, are encouraging participation in KEDO, both political and financial. We have a number of countries who have joined KEDO and have made contributions and some who have indicated their intention to do so.

But let me take this opportunity to encourage others to do likewise so that KEDO can fulfill its obligations. That's what I mean.

Q Is it a U.S. commitment; not a KEDO commitment?

AMBASSADOR GALLUCCI: No. If you look at the Agreed Framework and the President's letter, the obligation we took on was to form an international consortium, which we did, to provide the light-water reactor and the heavy fuel oil. We formed the heavy consortium. That consortium is KEDO, and it is beginning to do its work. We have, as I said, attracted financial and political support. We certainly wish to attract more of both.

Q A follow-up. If KEDO had to buy the oil and ship it today, could it afford to do so?


Q Does it have the funds to fulfill the obligation?

AMBASSADOR GALLUCCI: The remaining obligation to be fulfilled by October 21, 1995, is for an additional 100,000 tons, which is in the neighborhood of $9 to $10 million, I think -- million, million.

The answer is right at this moment in the bank account. If the question is "Is there $9 or $10 million?", there is not.

Q How much is there and how much more do you need for that and other activities?

AMBASSADOR GALLUCCI: Let me go to the U.S. Treasury question, lest there be any ambiguities on that point.

There is an initial obligation in the Agreed Framework for the United States to provide -- and we did take on that obligation -- the first 50,000 tons, which cost between four and five million dollars. That delivery was made on January 21 of this year. It was made out of Defense Department emergency funds.

Future shipments, we said, would be paid for and arranged by KEDO. That's our intent. In this fiscal year's reprogramming activity, we haven't reprogrammed money for heavy fuel oil. We have reprogrammed money for KEDO; for the headquarters costs -- some money for that. We plan to make a reprogramming notice on the Hill. We have reprogrammed money, in the Department of Energy budget, for the spent fuel.

We have made a request in next year's budget -- FY-96 -- for money for heavy fuel oil. So our plan intent is to arrange for and pay for heavy fuel oil out of contributions to KEDO this year.

Q Can I ask you, on allocation of the money for the reactor itself -- the $4.5 billion estimated right now -- is that going to be paid for by the three KEDO members? If so, is there a rough percentage breakdown? And are you going to solicit political and economic contributions from other countries?

AMBASSADOR GALLUCCI: We have had some very good consultations and communications with both the Japanese and the South Korean Governments in this connection before the President wrote his letter to the North Korean leader which accompanies the Agreed Framework of October 1994.

The understanding we have, which has been reaffirmed several times by both governments, is that South Korea, in financial as well in the manufacturing, construction, and design modes, would play a central role in financing the North Korean reactors and the reactor project. Japan has said they will play a significant financial role.

So this leads you, I know, to ask how much, in percentage terms, does a central and a significant role add up to? The answer is, quite a lot. It is our intent to complement the remaining percentage that may be necessary to generate from other sources to have KEDO do that. But we are confident, and both countries have been free to say this -- most recently at a press conference after the Executive Board meeting on Tuesday evening in Seoul -- that they are prepared to take on this financial burden.

But we are looking for both political and financial reasons to broaden the base. The United States should play a role there. In our request to Congress for FY-96, we asked the Congress to allow us to play a small role in that consortium.

As the Secretary of State said in testimony before the Senate Foreign Relations Committee in January, the bill to the United States taxpayer over ten years, we could expect would be in the neighborhood of $20 to $30 million a year. That would be for heavy fuel oil, for headquarters costs, and for our participation in the light-water reactor. We are asking for $22 million for all three together in the next fiscal year. While it's not a negligible amount of money in absolute terms, in relative terms it is a relatively small contribution to a $4.5 billion project. But it is politically significant and important and we, indeed, do believe we need it.

Q I'll ask either or both of you for a fingertip question: Did you get any feel how the North Korean decision process is working? Who is making the decisions? Do you have a feel of a deliberate, systematic command system there or is it more ad hoc?

DEPUTY ASSISTANT SECRETARY HUBBARD: I've had a number of opportunities to try to gage that, including when I went to Pyongyang in January to bring back our captured helicopter pilot and in these talks. The North Koreans talk about their decisions being made by the supreme leadership or the supreme leader. They talk about interagency disputes, not too different from the kind of interagency disputes most governments have as far as I can determine.

They do seem to get their instructions when they need them. They are sometimes unpredictable in their response, but I think that's to be expected from a country as isolated and as different from us as North Korea is.

I did come away from a series of meetings convinced that there is a functioning government in North Korea that is capable of making important decisions in a reasonably orderly way.

Q And would you think that the military is playing a primacy role?

DEPUTY ASSISTANT SECRETARY HUBBARD: I would say primacy -- a primary role. But, certainly, the military is a factor in decisions in the North Korean Government.

Q It's my remembrance that when we provided the first tranche of oil, we hoped to be able to recoup that cost from KEDO. Do you think that we will recoup that cost? Is my remembrance wrong?

AMBASSADOR GALLUCCI: Yes, it is. (Laughter)

Q Tom, can you tell us why several of the North Korean delegates returned home early?

DEPUTY ASSISTANT SECRETARY HUBBARD: I think the North Koreans were becoming frustrated with these talks just as we were. They went on for a long time. Many members of my delegation wanted to go home. They weren't permitted to.

You have to ask the North Koreans why their delegates went home. I suspect it was a signal of their frustration with the pace of the talks, and certainly the pace of discussions and developments seemed to quicken after those members went home.

MR. BURNS: Thank you.


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