[Cankor] Report #272

[cankor at cankor.ca]

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CANADA-KOREA ELECTRONIC INFORMATION SERVICE

CanKor # 272

Friday, 2 February 2007
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Six-Party Talks are set to resume in Beijing Thursday, 8 February. 
There are strong expectations of a major move forward. Rumours 
circulate that US Secretary of State Rice has secretly met with DPRK 
chief negotiator Kim Gye Gwan. The USA and the DPRK are said to have 
agreed on what some have dubbed "Clinton Lite" -- the release of the 
legitimate portion of DPRK funds currently frozen in Macau's Banco 
Delta Asia in exchange of a halt in the operation of the Yongbyon 
nuclear reactor under IAEA "monitoring".

China's food exports to the DPRK were down sharply in 2006, half the 
amounts shipped in 2005. However, oil exports have remained stable, up 
0.2% from the previous year.

A European Union ban on luxury goods sales to Pyongyang conforming to 
last October's UN Security Council resolution is being delayed because 
of the unresolved dispute between Spain and the UK over the status of 
Gibraltar.

This week's CanKor FOCUS examines the scrutiny being applied to the 
operations of United Nations agencies in Pyongyang, particularly US 
State Department accusations that the United Nations Development 
Programme (UNDP) has made inappropriate cash payments to the DPRK 
government. UN Secretary General Ban Ki Moon orders a thorough audit 
of UNDP operations, specifically hard-currency transactions, the 
independence of locally hired staff, and the agency's ability to 
monitor ongoing projects. The DPRK Foreign Ministry calls the issue a 
"US smear campaign," but its representative on the UNDP executive 
board does not oppose the board's decision to delay approval of the 
program's 2007-2009 budget until the UN General Assembly's board of 
auditors determines within three months whether the development agency 
violated its own guidelines. South Korean news reports claim that 
North Korea has banned the use of foreign currency in all domestic 
transactions in an apparent attempt to collect hard currency from 
individuals.

An OPINION piece by Paul Stares, vice president for conflict analysis 
and prevention at the United States Institute of Peace recommends that 
Ban Ki Moon initiate a United Nations-sponsored initiative to formally 
end the Korean War and dismantle the present armistice arrangements as 
part of a peace treaty that would commit all six parties in the 
current talks to establish normal diplomatic relations.
*************************************************

Contents:

1.   SIX-PARTY TALKS RESUME 8 FEBRUARY
     http://www.nytimes.com/aponline/world/AP-Koreas-Nuclear.html

2.   CHINA'S FOOD EXPORTS TO DPRK DOWN 53% IN 2006
     home.kyodo.co.jp/modules/fstStory/index.php?storyid=295235

3.   DPRK LEADER FINDS LIFE'S LUXURIES IN GIBRALTAR
     http://www.ft.com/cms/s/72f8c5fc-b229-11db-a79f-0000779e2340.html

FOCUS: Scrutiny of UNDP cash payments to DPRK
4.   US STATE DEPARTMENT REVEALS MISUSE OF UNDP FUNDS
     http://www.foxnews.com/story/0,2933,244799,00.html

5.   WE WELCOME AN INDEPENDENT AUDIT -- UNDP
     http://opinionjournal.com/extra/?id=110009559

6.   BAN ORDERS AUDIT OF UN OPERATION IN DPRK
     http://www.washingtontimes.com/world/20070122-103606-3163r.htm

7.   US SMEAR CAMPAIGN AGAINST DPRK BLASTED
     http://www.kcna.co.jp/item/2007/200701/news01/26.htm#1

8.   NORTH KOREA BANS USE OF FOREIGN CURRENCY
     http://www.iht.com/articles/ap/2007/01/25/business/AS-FIN-NKorea-Foreign-Currency.php

9.   UN PROGRAMME FACING NEW CURBS IN DPRK
     http://www.washingtonpost.com/wp-dyn/content/article/2007/01/25/AR2007012501760.html

OPINION
10.  TO BAN THE BOMB, SIGN THE PEACE
     http://www.iht.com/articles/2007/01/30/opinion/edstares.php

*************************************************

1.   SIX-PARTY TALKS RESUME 8 FEBRUARY
     Alexa Olesen, Associated Press, 30 January 2007

International talks on dismantling North Korea's nuclear programs will 
resume Feb. 8, China said Tuesday, as Washington and Pyongyang began a 
new round of meetings over the North's alleged illicit financial 
dealings. The last round of arms talks in December -- held in the wake 
of the North's Oct. 9 nuclear test -- failed to make any progress on 
getting Pyongyang to disarm. The duration of next week's nuclear 
discussions "will depend on the progress made during the talks," said 
Chinese Foreign Ministry spokeswoman Jiang Yu.

Japan's prime minister warned the North would face repercussions if 
the talks don't move forward. "If the six-party talks fail to yield 
results, international pressure on North Korea will be further 
increased," Prime Minister Shinzo Abe said in Tokyo. "It will be North 
Korea that will be in the most difficult situation." The negotiations 
have only resulted in one agreement since they began more than three 
years ago, a September 2005 pact where the North pledged to abandon 
its nuclear program in exchange for aid and security guarantees.

Jiang said the key goal at the next meeting would be to take 
"substantive steps" toward implementing that agreement between China, 
Japan, Russia, the United States and the two Koreas. "We hope the 
relevant parties can make joint efforts ... toward implementing the 
joint statement in a comprehensive way," Jiang said at a regular news 
briefing.

Russia's nuclear envoy was upbeat Tuesday ahead of the talks. "The 
very fact that there was agreement to hold a new round testifies to 
signs of small movement in the positions of the participants," Deputy 
Foreign Minister Alexander Lusyukov, who will head the Russian 
delegation at the talks, was quoted by Russian news agency RIA-Novosti 
as saying.

But the US ambassador to South Korea said setting a date didn't mean 
progress in itself, calling for "continued unity" among the countries 
involved to persuade the North to abandon nuclear weapons. "Pyongyang 
has begun to get the message that the entire world has concerns about 
its provocative actions," Alexander Vershbow said in Seoul. "This 
unified response has in my view been key to the renewal of the 
six-party talks and to the prospects for forward movement at next 
week's session."

The South Korean Foreign Ministry said in a statement that it "expects 
the participating countries to produce a substantial agreement for 
early steps" to implement the 2005 agreement.

Meanwhile, a US Treasury official in Beijing for negotiations with 
North Korea over its alleged illicit financial dealings said he was 
"hopeful" of progress on the issue, which has stymied progress at the 
nuclear talks. Deputy Assistant Treasury Secretary Daniel Glaser was 
to meet his North Korean counterparts Tuesday to talk about US 
financial restrictions, which were imposed due to Pyongyang's alleged 
smuggling and counterfeiting.

"We're prepared to go through these talks as long as it takes for us 
to get through our agenda," Glaser told reporters. "I'm hopeful we'll 
make progress." Pyongyang has tied the two issues together since 
Washington took action against the Macau-based Banco Delta Asia in 
2005, accusing the bank of complicity in North Korea's alleged illegal 
financial activity such as counterfeiting and money laundering. The 
move has caused other banks to steer clear of North Korean business 
for fear of losing access to the US market, hampering North Korea's 
access to the international banking system.

North Korea had refused to discuss its nuclear program until the 
financial restrictions are lifted, and only agreed to return to the 
arms talks in the wake of its nuclear test following a yearlong 
boycott to address the financial issue.
*************************************************

2.   CHINA'S FOOD EXPORTS TO DPRK DOWN 53% IN 2006
     Kyodo News, 25 January 2007

China, North Korea's major food and fuel supplier, exported to its 
impoverished neighbor roughly half the amount of food in 2006 compared 
with a year earlier while shipping about the same amount of oil, 
Chinese customs figures showed Thursday.

China's exports of maize, rice and wheat flour to the country in the 
12 months of 2006 totaled 207,250 tons, down 53 percent from a year 
earlier, according to the General Administration of Customs. Among the 
grains, the biggest drop was in maize, which fell 85.3 percent from a 
year earlier.

Meanwhile, China shipped 524,040 tons of oil to the energy-starved 
neighbor, up 0.2 percent from the previous year. That was despite a 
drop in China's overall oil exports, which totaled 6,337,216 tons, 
down 21.4 percent, according to the data. The country's exports to 
other major countries including Japan, South Korea and Indonesia all 
dropped in volume terms.

China does not reveal the amount of its food and fuel assistance to 
North Korea, and analysts rely on export figures to assess the amount 
of aid Beijing gives Pyongyang. In 2006, China came under pressure to 
use its leverage over North Korea as a major food and fuel provider, 
after North Korea test-fired missiles in July and carried out a 
nuclear test in October, despite warnings from the international 
community. (...)
*************************************************

3.   DPRK LEADER FINDS LIFE'S LUXURIES IN GIBRALTAR
     George Parker and Mark Mulligan, Financial Times, 1 February 2007

Kim Jong-il, North Korea's idiosyncratic leader, may be dispensing 
Hennessy cognac and Cartier watches to his cronies for a little while 
longer, thanks to a 300-year-old territorial dispute between the UK 
and Spain. The precise status of Gibraltar, a hunk of British-owned 
rock at the mouth of the Mediterranean, has caused a new row between 
London and Madrid that is delaying a European Union ban on luxury 
goods sales to Pyongyang. The ban was agreed by the United Nations 
last October as one of a number of sanctions against North Korea, 
following its testing of a nuclear device. The aim was to deprive Mr. 
Kim and his supporters of some of the finer things in life, including 
thoroughbred horses, luxury vehicles, watches, pearls and musical 
instruments. The sanctions were adopted by EU foreign ministers in 
November, but they are still not in force across the bloc.

If Mr. Kim is wondering why, he need look no further than the War of 
the Spanish Succession and the 1713 Treaty of Utrecht that ended it --  
handing Gibraltar to Britain.

Problems arose when Madrid spotted that the EU regulation needed to 
implement the sanctions contained a reference to the "competent 
authorities" responsible for enforcing them: listed in the small print 
was Gibraltar. Spain's foreign ministry wants the reference to 
Gibraltar deleted before the EU regulation can come into force. "We do 
not recognize Gibraltar's authority in international policy," it said. 
"The UK is the only competent authority in this respect."

British diplomats say there would be a legal hole in the sanctions if 
Gibraltar was not included. Both sides are trying to resolve the 
dispute and insist it is a hiccup in improving relations over the 
colony. In September the two countries, along with Gibraltar, signed 
an agreement on airport access, telecoms and border controls, hailed 
as the beginning of a new era of co-operation.

While the wrangling continues, European countries can apply the 
sanctions unilaterally, but Brussels diplomats say the matter must be 
dealt with at an EU level to ensure they are applied uniformly and 
enforced.
*************************************************

FOCUS: Scrutiny of UNDP cash payments to DPRK

*************************************************

4.   US STATE DEPARTMENT REVEALS MISUSE OF UNDP FUNDS
     George Russell, Executive Editor, Fox News, 19 January 2007

Has North Korean leader Kim Jong Il subverted the United Nations 
Development Program, the $4 billion agency that is the UN's main 
development arm, and possibly stolen tens of millions of dollars of 
hard currency in the process? According to a top official of the US 
State Department -- using findings made by the UN's own auditors --  
the answer appears to be a disturbing yes, so far as UNDP programs in 
North Korea itself are concerned.

And just as disturbingly, the UN aid agency bureaucracy has kept the 
scamming a secret since at least 1999 -- while the North Korean 
dictator and his regime were ramping up their illegal nuclear weapons 
program and making highly publicized tests of intermediate range 
ballistic missiles. Nothing was disclosed even to the UNDP Executive 
Board, which oversees its operations and is composed of 
representatives of 36 nations -- including the United States and, this 
year, North Korea itself. That fact is sure to be a bombshell at the 
Executive Board's regular annual meeting, which begins Friday and 
extends through Jan. 26. Among the main items to be discussed is the 
UNDP budget in North Korea.

Moreover, the period of scandal and secrecy in the UNDP's North Korean 
operations coincided in large measure with the tenure of Mark Malloch 
Brown, most recently Deputy Secretary General of the United Nations 
itself, as administrator of the UNDP. Malloch Brown took over the UNDP 
in July 1999, and stayed in his post even after August 2005, when he 
also became chief of staff for then UN Secretary General Kofi Annan, 
who at the time was reeling under the effects of the Oil for Food 
scandal.

In March 2006, Malloch Brown took over as Deputy Secretary General 
from Louise Frechette, who suddenly left the UN ahead of schedule, 
after her own role in Oil for Food became widely known and criticized. 
Only then did Malloch Brown give up his UNDP fiefdom. Malloch Brown 
left the UN along with Annan at the end of last year and has since 
been harshly critical of the Bush Administration and its former 
ambassador to the UN, John Bolton, for their demands for greater UN 
transparency and reform.

>From at least 1999 to at least 2004, it appears the UNDP, and the UN 
itself, had no idea what Kim Jong Il did with the aid agency's money, 
ostensibly intended for aid programs ranging from development of 
energy programs and small and medium sized businesses, and for 
environmental protection.

But the UNDP had plenty of warnings from auditors it had contracted to 
look at the program during that period, and who signaled loudly that 
something was badly awry. In a letter sent to the UNDP on Jan. 16, 
Mark Wallace, the US State Department ambassador at the UN for 
management and reform, wrote that the auditors' testimony shows it is 
"impossible" for the UN aid agency to verify whether its funds "have 
actually been used for bona fide development purposes or if the DPRK 
has converted such funds for its own illicit purposes."

Ironically enough, neither Wallace nor the US government has been 
allowed to obtain copies of the audits, which are deemed "management 
tools" by UNDP bureaucrats and therefore not even available to 
governments that pay for the organization. Their contents came to 
light only after Wallace and the US demanded an opportunity to view 
the audits at UNDP headquarters, and took careful notes based on the 
documents. Wallace reiterated the contents in his letter, addressed to 
Ad Melkert, the UNDP's No. 2 official.

The difficulties in finding out what the UNDP was doing in North Korea 
were apparently something that US diplomats and UNDP auditors shared. 
Wallace relates in his letter that whenever the auditors, contracted 
from the consulting firm KPMG, tried to discover what was going wrong, 
they were either limited in what they were allowed to investigate, or 
they were forced to accept "sham" audits done by the North Koreans 
themselves. The picture painted by the auditors, according to Wallace, 
shows a UN agency that "operated in blatant violation of UN rules."

The UNDP allowed members of Kim's regime to "dominate" local UNDP 
staff, who were apparently first selected by the North Korean 
government itself, the auditors said, and added that Kim's operatives 
even ran "core" financial and managerial functions directly. The 
regime also demanded cash payments from the aid agency in violation of 
UN rules, and kept UNDP officials from visiting many of the sites 
where development projects were supposed to be underway.

On at least three occasions, in 1999, 2001 and 2004, the KPMG auditors 
filed reports that brought troubling aspects of the situation to the 
attention of UNDP headquarters, recommending "timely corrective 
action." There is no evidence that any such action took place.

Just exactly how much money the UNDP funneled into North Korea in all 
those years is not revealed in Wallace's letter. But he notes that in 
1999 there were 29 ongoing UNDP projects in North Korea, with a total 
budget of $27.86 million. Two-thirds of the programs were so-called 
"National Execution programs" run by North Korea directly, using UNDP 
money. The other third was ostensibly run by UNDP itself. But that may 
not have made a difference. The auditors complained that even UNDP-run 
programs paid for everything in cash, which is against UNDP policy, at 
prices set by the Kim regime, and to suppliers that the regime 
designated. There were not even any purchase orders involved. The 
regime provided no audits of the programs under its own direct 
control.

In his letter to Melkert, Wallace called for a "full independent and 
outside forensic audit" of UNDP's programs in North Korea, going back 
to at least 1998. Only "the bright light of real oversight" would 
allow the UNDP's overseers to decide whether any or all of the 
programs should be continued, he said.
*************************************************

5.   WE WELCOME AN INDEPENDENT AUDIT -- UNDP
     The UN's program for North Korea's poor strives to forestall 
corruption
     Ad Melkert, Opinion Journal, WSJ, 22 January 2007

[Ad Melkert is the associate administrator, under-secretary-general of 
the UN Development Programme.]

In response to Melanie Kirkpatrick's Jan. 19 Wall Street Journal 
editorial-page commentary "United Nations Dictators Program" 
[http://online.wsj.com/article/SB116918095254881312.html?mod=article-outset-box] 
and the accompanying editorial "UN Cash for Kim" about the United 
Nations Development Program's work in North Korea, I would like to 
offer some important context and relevant facts.

Here are the facts: There is no reason to believe that our programs 
were subverted to fund nuclear activities in North Korea, and the most 
recent audits conducted in 1999, 2001 and 2004 did not raise this 
concern. We would also welcome an independent and external audit of 
our operations in North Korea. Moreover we strongly support the 
secretary-general's call to have an inquiry into the operations of the 
UN's funds and programs worldwide to ensure there are no 
misperceptions about our activities in North Korea or elsewhere.

UNDP operations in North Korea are in accordance with decisions of the 
36 countries on its board, which includes the US, and with resolutions 
passed recently by the Security Council. They are also in accordance 
with UNDP's board-approved financial regulations. All of UNDP 
activities in North Korea have been and continue to be subject to 
regular audits and controls.

Here is the context: Operating a development agency in North Korea is 
a complex business. To give an example, operating in North Korea 
entails an unavoidable transfer of foreign currency. Either we pay our 
local staff and contractors directly in Euros or we exchange euros for 
North Korean won via the central bank. In light of the current 
context, we are taking all possible steps to reduce to an absolute 
minimum of hard-currency transactions and have decided that direct 
recruitment of staff is pre-requisite for our continued cooperation in 
the DPRK. The only way to prevent all hard currency from finding its 
way into North Korea would be to cease operations there.

Our organization works in North Korea because the member states of the 
UN and UNDP's board have made it very clear that they want us there. 
UNDP and its sister UN agencies have helped the North Korean people 
cope with a devastating famine in the 1990s and continue their 
assistance to improve the lives of North Korea's impoverished people. 
If the member states of the UN and UNDP's board were to decide that 
our presence there were no longer useful, we would leave immediately.
*************************************************

6.   BAN ORDERS AUDIT OF UN OPERATION IN DPRK
     Betsy Pisik, Washington Times, 23 January 2007

UN Secretary-General Ban Ki-moon yesterday ordered a thorough audit of 
the UN Development Program's operation in North Korea, the first in a 
sweeping assessment of all UN agencies, funds and programs. The audit 
will specifically look at hard-currency transactions, the independence 
of locally hired staff, and the agency's ability to monitor ongoing 
projects. UNDP, which spends about $3.6 million annually on a dozen 
projects inside the repressive country, yesterday welcomed the audit 
and promised to cooperate. Mr. Ban said he wants the UNDP audit 
completed within three months, the first phase in an ambitious 
accounting that could take years and millions of dollars to complete. 
UN officials yesterday could not say how much the effort would 
eventually cost.

The United States -- which funds 11 percent of UNDP's annual budget 
but does not contribute to the North Korea program -- has raised 
serious concerns that hard currency from UNDP may be finding its way 
into the government's nuclear weapons program. An editorial in 
Friday's Wall Street Journal suggested that hundreds of millions of 
dollars had been diverted by the government from UNDP programs, and 
said the agency was undermined by permitting the Pyongyang government 
to choose local personnel for its programs.

David Morrison, UNDP director of communications, told a small group of 
reporters yesterday that the program has four international staffers 
in North Korea. Those staffers have been able to visit 10 out of 11 
projects in the country and have few concerns over access and 
monitoring issues, he said. He rejected comparisons to the Iraq 
oil-for-food program, which Saddam Hussein was able to manipulate to 
siphon hundreds of millions of dollars into private pockets.

"Working in [North] Korea is a tough job," he said. "We always have to 
be wary of the possibility of any kind of misrepresentation of 
activities in any country in the world." Mr. Morrison noted that UNDP 
long ago switched to using euros rather than dollars as the 
convertible currency in North Korea, in part because of US concerns 
about counterfeiting and partly because Pyongyang prefers it for 
political reasons.

UN officials routinely refused to publicly criticize the governments 
of countries where they are running development or humanitarian work, 
saying that would only make life more difficult for international 
staff on the ground, and possibly draw new restrictions on their 
efforts.

Many of these issues have been identified in UNDP's three internal 
audits of the North Korea program, in 1999, 2001 and 2004; a fourth 
will be under way shortly. Those audits are not made public or even 
shared with the 36 nations that serve on UNDP's Executive Board, which 
will discuss the North Korea program on Thursday. Instead, the reports 
are reviewed by an external auditor, then distilled further and 
presented to the executive committee. US officials, among others, have 
demanded access to the initial audits, as well as source material, 
saying that as major donors to UNDP programs they have a right to know 
how those programs are managed.

However, UNDP officials have maintained the audits are internal 
management tools and not intended for general distribution. "We are 
aware that there is a difference between the regime I've just 
described and practices the secretariat has just introduced, and we 
are reviewing whether we should ... change our practice," Mr. Morrison 
said. UNDP is also the coordinating agency for other UN efforts in the 
country, including programs of the World Food Program and UNICEF.

US law prohibits using taxpayer money in repressive regimes such as 
Iran, Cuba and North Korea. Therefore, Washington subtracts its share 
of the North Korea program's costs from its overall contribution to 
the agency.
*************************************************

7.   US SMEAR CAMPAIGN AGAINST DPRK BLASTED
     Korean Central News Agency (KCNA), 25 January 2007

A spokesman for the DPRK Foreign Ministry on Thursday gave the 
following answer to a question put by KCNA as regards the recent smear 
campaign conducted by the US against the DPRK over UN organizations' 
aid to it: The DPRK has maintained good relations of cooperation with 
different bodies of the United Nations for several decades. And aid 
projects of the above-said bodies, including the UNDP, in the country 
have been carried out strictly in conformity with the UN regulations 
and in a transparent way.

Nevertheless, the United States is kicking up another anti-DPRK racket 
over not much aid funds of the UNDP from the outset of the year to 
meet its dirty political aims. It talks about "offer of illegal funds" 
and cries out for "investigating aid projects" and "shelving aid 
program", asserting for no reason that the DPRK might have used the 
aid funds for the development of nuclear weapons.

The United States has made every possible effort to put serious 
sanctions and blockade against the DPRK. And it is now seeking to 
intensify pressure on the DPRK and tarnish its image externally by 
means of blocking the legal aid projects of UN organizations with 
unjust reasons.

As the UNDP has denied, the US assertions admit of no argument as they 
are a sheer fiction. News services of different countries have said 
that the US hard-liners, who set in motion the unilateral financial 
sanctions on the DPRK as soon as the September 19 joint statement was 
published and drove the six-party talks to a deadlock, invented what 
it called "suspected diversion of illegal funds", timed to coincide 
with the DPRK-US talks in Berlin. Such comment is by no means 
accidental.

The DPRK will continue to develop the cooperative relations with the 
UNDP and other bodies of the UN. However, it will not allow any 
attempt to politicize the aid project nor accept conditional or unjust 
aid at all. The US will be wholly accountable for all consequences to 
be entailed by its ongoing reckless campaign against the DPRK.
*************************************************

8.   NORTH KOREA BANS USE OF FOREIGN CURRENCY
     Associated Press, 25 January 2007

North Korea has banned the use of foreign currency in all domestic 
transactions in an apparent attempt to collect hard currency from 
individuals amid international economic sanctions over its nuclear 
test, a news report said Thursday. The ban was announced Monday and 
took effect immediately, South Korea's Dong-a Ilbo newspaper reported, 
citing unidentified "reliable sources" familiar with North Korean 
affairs. The measure was believed to be aimed at rounding up hard 
currency under individual possession as the cash-strapped communist 
regime suffered a further lack of foreign exchange following 
international economic sanctions over its nuclear test in October, the 
paper said.

Foreign money can be exchanged for North Korean currency at 
government-designated booths, it said. However, the North has a black 
market for currency where the unofficial rate is many times higher 
than the government-set rate. Before the ban, foreign currencies, such 
as the US dollar and euro, could be used at stores in capital 
Pyongyang and other major cities.

South Korean officials were not immediately available to confirm the 
report. (...)
*************************************************

9.   UN PROGRAMME FACING NEW CURBS IN DPRK
     Colum Lynch, Washington Post, 26 January 2007

The UN Development Program's executive board decided Thursday to stop 
paying for its local staff and supplies in foreign currency, and to 
call for the UN General Assembly's board of auditors to determine 
within three months whether the development agency violated its own 
guidelines by doing so. The board also decided to delay approval of 
the program's 2007-2009 budget until the audit is finished.

The action comes just weeks after the United States charged that the 
UN program had been "systematically perverted" by channeling millions 
of euros in hard currency to North Korean leader Kim Jong Il's 
repressive government. Alejandro D. Wolff, the acting US ambassador, 
expressed concern Thursday that the money could be used to finance 
North Korea's illicit activities, including a nuclear weapons program.

The debate over the United Nations' oversight of its North Korea 
operations coincides with renewed calls for the Development Program to 
pull out of North Korea. Japan said the United Nations should end its 
development assistance to North Korea, citing the country's defiance 
of two UN Security Council resolutions calling for an end to its 
nuclear weapons program. The United States -- which has stepped up 
efforts to cut off hard currency to Pyongyang after its October test 
of a nuclear device -- said it is considering supporting Japan's 
position.

"A member state that does not comply with the obligations of the UN 
Charter should not receive funds from [the] United Nations," said Koji 
Tsuruoka, director general for global affairs in Japan's Foreign 
Ministry. "Assistance to such a country should be limited to that of a 
humanitarian nature directly delivered to the people."

North Korea's delegate, Jang Chun Sik, said that the board's decision 
was "unfair and unacceptable" and that it was designed to further US 
and Japanese efforts to "isolate and stifle" North Korea's people.

Russia, China and scores of developing countries voiced concern that 
the board was responding to political pressure from its most 
influential powers and they insisted that it should not set the stage 
for audits of other poor countries.

The Development Program is one of four UN agencies, including the 
World Food Program and UNICEF, that carry out development and relief 
work in North Korea. They are required to hire government-appointed 
workers and pay salaries through state-controlled offices. The 
program's operations in North Korea, which are managed by eight 
international workers, cost about $3.7 million, according to its 
figures. Between $1.5 million and $2.5 million of that is spent each 
year inside North Korea, including hundreds of thousands of dollars to 
pay for local staff, supplies and accommodation, according to program 
officials. Last year, it spent more than $1 million in salaries, rent 
and travel costs, as much as half of which was distributed through 
government-controlled agencies, according to a spokesman.

Thursday's action will freeze all development operations managed by 
the North Korean government, including training programs in trade and 
international finance. It also calls for more extensive monitoring of 
assistance programs and bans the recruitment of government-selected 
workers.

Mark D. Wallace, the US representative for UN management, said the 
United States would press the World Food Program, UNICEF and the UN 
Population Fund to follow suit and stop using foreign currency to pay 
staff and hiring government-selected employees in North Korea. US 
officials have privately pressed the Development Program to ask the 
auditors to hire a private firm to conduct an independent review of 
its operations. They expressed concern that the auditing board had 
previously failed to flag problems in the North Korea program. "We 
need a fresh set of eyes," Wallace said.
*************************************************

OPINION

*************************************************

10.  TO BAN THE BOMB, SIGN THE PEACE
     Paul B. Stares, International Herald Tribune, 30 January 2007

[Paul B. Stares is vice president for conflict analysis and prevention 
at the United States Institute of Peace.]

Of all the crises facing the new United Nations secretary general, Ban 
Ki Moon, the fraying nuclear nonproliferation system is arguably the 
most consequential. Mohamed ElBaradei, head of the International 
Atomic Energy Agency, has warned of 30 "virtual new weapons states" on 
the horizon. Obviously, the more countries that possess the bomb, the 
higher the risk of a nuclear accident, the theft of a weapon, sales of 
technology and hardware, and a serious miscalculation leading to 
nuclear war.

So where should Ban start? With North Korea having declared after its 
test last October that it now possesses a nuclear deterrent, the 
understandable temptation will be to focus on Iran. This would be a 
mistake. North Korea is still some way off from having a reliable 
nuclear weapon, and to accept its having this capacity as a fait 
accompli would not only play into its game plan but also convince Iran 
and other countries that the international community lacks the will to 
prevent them from developing the bomb. A new approach is required.

The logical place to look is to examine the lessons of "nuclear 
reversal" - that is, what has made states in the past give up the 
nuclear option. At first glance, the historical record doesn't look 
encouraging: South Africa is the only country that has developed 
nuclear weapons and then destroyed them. Yet other nations have 
abandoned advanced research programs - including Australia, Argentina, 
Brazil, South Korea, Sweden and Taiwan - or, like Belarus, Kazakhstan 
and Ukraine, given up the nuclear arsenals they inherited from the 
Soviet Union. One big reason for these countries' decisions, not 
surprisingly, was the efforts of major powers to reassure them about 
their long-term security, so that nuclear weapons offered no 
appreciable benefit.

How would this approach be applied to North Korea? The answer is not 
unilateral assurances from the United States. American officials have 
vowed many times that they harbor no hostile intent; repeating that 
mantra will not make it any more credible to Pyongyang.

Similar guarantees from all five of the permanent members of the 
Security Council, however, could be more persuasive. Enter Ban. The 
diplomatic vehicle for such security assurances would be a United 
Nations-sponsored initiative to formally end the Korean War and 
dismantle the present armistice arrangements. As part of a peace 
treaty, the principal signatories -- the United States, China and the 
two Koreas -- would commit themselves to establishing normal 
diplomatic relations, recognizing the territorial integrity of both 
Koreas and, most important, ensuring a nuclear-free peninsula.

To sweeten the deal, the Security Council's permanent five would 
extend security guarantees, similar to those given Ukraine, to both 
Koreas. These would remain in effect as long as each side fulfilled 
its nonproliferation commitment. If one or the other reneged, all bets 
would be off.

Complementary agreements involving conventional arms control, economic 
assistance, access to international financial institutions and 
humanitarian aid could also be discussed, but not as prerequisites for 
replacing the Korean armistice with a permanent peace settlement.

The United States has already signaled its willingness to sign a peace 
treaty -- but only after North Korea verifiably dismantled its nuclear 
weapons. Reversing the order, however, with upfront but still 
conditional security guarantees, would provide North Korea with 
immediate incentives to take the first step.

For Ban, such an agreement would be not only a gift to his native 
Korea but a much-needed boost to his organization's stature. Above all 
else, he might just save the nonproliferation system by using the same 
approach elsewhere, not least with Iran.
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End CanKor # 272

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