Tracking Number:  373483

Title:  "US Set to Provide First Shipment of Fuel Oil to North Korea." Background briefing by an unidentified US Defense Department official regarding the 50,000 metric tons of fuel oil scheduled to be delivered to North Korea before January 21. (950105)

Date:  19950105


01/05/95 U.S. SET TO PROVIDE FIRST SHIPMENT OF FUEL OIL TO NORTH KOREA (Transcript: DoD 1/5/95 background briefing) (4960) Washington, Jan. 5 -- The United States is set to ship the first tranche of fuel oil to North Korea under the recently concluded Framework Agreement.

During a background briefing with reporters, a senior Defense Department official said the United States will be delivering 50,000 metric tons of heavy residual fuel oil to North Korea before January 21. The shipment, for which the U.S. Defense Department is paying $4.7 million, is part of a deal to compensate the Democratic People's Republic of Korea for freezing and not refueling its 5-megawatt nuclear reactor -- a reactor capable of producing plutonium for weapons.

The fuel oil set for shipment will be used by North Korea for both electric power generation and heating but has no other applications, the official said.

The United States has also agreed to ship fuel oil to compensate North Korea for abandoning the construction of two larger nuclear reactors which would have begun operation in 1995 and 1996, the official said.

U.S. compensation for the shutdown of the three DPRK reactors "corresponds to about 3.5 percent of North Korea's present electrical generating capacity, so it's a relatively small amount," the official said.

The U.S. will also be paying the costs of stabilizing North Korea's 8,000 spent fuel rods -- rods that have enough plutonium for perhaps five or six nuclear weapons, according to the official.

The official voiced confidence that the new Republican-dominated Congress would not block these expenditures.

Following is a transcript provided by LegiSlate: (begin transcript) DEFENSE DEPARTMENT BACKGROUND BRIEFING SUBJECT: NORTH KOREAN FRAMEWORK AGREEMENT THE PENTAGON THURSDAY, JANUARY 5, 1995 10:14 AM EST SENIOR DEFENSE OFFICIAL: Good morning. The United States is taking the appropriate steps to effect the delivery of the first tranche of bunker fuel oil under the framework agreement. What I want to do this morning is to give you some background on the agreement with North Korea, on progress under it to date, and the details of the oil shipment. And the reason that we asked the other Senior Defense Official to come along is that my knowledge of the details of how the oil shipment works, and the bunker fuel is about that deep. So if you get deeper we have the expert here who knows how it works.

North Korea has, as you know, since the 1980s been building and operating a nuclear complex at Yongbyon in North Korea, which we are confident has as its purpose, or has had as its purpose, the production of plutonium for use in nuclear weapons. The threat that this poses to our ally, South Korea, to our interests in the region, to stability in Northeast Asia, and to the global non-proliferation regime is obvious.

North Korea is a party to the Non-proliferation Treaty and has been since 1985. It signed a safeguards agreement with the IAEA in 1992, but also during 1992 it refused to comply with IAEA inspection requirements intended to confirm the disposition of the plutonium, enough for one or perhaps two bombs in the spent fuel that is removed in its 1991 refueling of the five megawatt reactor at Yongbyon.

The controversy over North Korea non-compliance with the NPT and IAEA safeguards continued from 1992 to mid-1994. In the spring of 1994, as you all remember, the crisis became more acute because the North again defueled the reactor and refused to allow certain IAEA measurements that would have shed light on the disposition of the plutonium removed three years earlier.

In light of this action and the lack of progress in the talks, the United States, in cooperation with the Republic of Korea and other allies, took steps to institute United Nations sanctions against North Korea. Because the North had said that it would regard sanctions as an act of war, we also began a series of measures to increase the readiness and combat power of United States and South Korean forces in Korea.

I may say that those of us who worked in the Department of Defense regarded that as an extraordinarily risky time. I think it is safe to say that it is the closest we have come to facing a major military confrontation, possibly with the exception of the Vigilant Warrior Operation. We faced a real possibility of military operations.

As you know, negotiations resumed in the middle of 1994 following these military preparations and former President Carter's efforts, which resulted in North Korea's agreement not to refuel the reactor or process the spent fuel rods into separated plutonium capable of being used in nuclear weapons during the negotiations. Those negotiations were successful, and on October 21st of last year, negotiators for the United States and North Korea signed an agreed framework. Under this agreement, to describe it broadly, the North must halt and eventually dismantle its nuclear weapons program to ensure in the long run a nuclear-free Korean peninsula. In exchange for the freeze and later dismantling of the North Korean program and resolving past discrepancies about the 1991 fuel, North Korea will receive alternative energy sources, initially in the form of bunker oil for electric generators and later in the form of more proliferation-resistant light-water reactor technology.

Let me review what North Korea has done in compliance with the agreement to date.

Some critics claim that the North does not have to do anything until several years are past and it has already received important benefits. The fact is that North Korea, under the agreement, has been required to take and has taken critically important steps before getting any benefit from the United States or other countries.

Specifically, to date, North Korea has shut down and not refueled the five-megawatt reactor at the Yongbyon nuclear complex. It has stopped all construction on the two much larger reactors, one a 50-megawatt -- these are all electric rather than thermal -- the 50-megawatt and 200-megawatt reactors. It has placed the 8,000 spent fuel rods, which it removed earlier in 1994, which contain five to six nuclear weapons-worth of plutonium, in long-term storage for eventual shipment out of the country.

It has agreed to seal what they call the radiochemical laboratory, which is used to reprocess plutonium from the spent fuel, and it has sealed that facility, the fuel storage, fuel fabrication and other facilities associated with the gas-graphite nuclear program at Yongbyon. These actions are all being verified by IAEA inspectors and comply with the agreed framework timetable.

Just to review those in more detail, first of all, the 8,000 fuel rods have been put in storage instead of reprocessing. In the time since the agreement was signed, two-thirds of those could be run through the reprocessing facility, and they have some five nuclear weapons' worth of plutonium bound up in them. It sealed the reprocessing facility. It has refrained from refueling and restarting the reactor from which the spent fuel was unloaded. This reactor, ran at -- depending on how rapidly it's run, can produce plutonium for one or more bombs each year it operates. It has stopped construction of the two big new reactors, which, when completed in 1995 and 1996, respectively, would have had a capacity to produce plutonium for a significantly larger number of bombs annually than the five-megawatt reactor.

The agreement has also permitted IAEA inspectors to remain permanently at Yongbyon to verify on a daily basis that the freeze remains in effect. The director general of the IAEA has reported good cooperation and compliance with the freeze by the DPRK. IAEA inspectors will remain in North Korea for the duration of the framework implementation.

North Korea has also permitted a U.S. technical team to visit Yongbyon to do a survey of measures necessary to stabilize the spent fuel so that it can be stored until removed from North Korea as required by the agreement, which will start when the nuclear components for the light-water reactors begin to be delivered. It goes without saying that this is the first occasion on which a U.S. technical team has been shown the inside of any part of that complex.

Thus, the critical initial stage of compliance has been completed in a verified freeze on the North Korean nuclear program. It's important to make the point that the obligations North Korea has undertaken go far beyond what the nonproliferation treaty requires. Thus, there is no issue of rewarding the DPRK for doing what it was already obligated to do. But, of course, there are benefits to North Korea under the agreement as a whole. Unsurprisingly, North Korea was not willing to undertake the broad obligation that it did without something in return.

The judgment of the administration has been that the benefits to us and to the world of peacefully ending the North Korean nuclear weapons program far outweigh the cost or the benefits North Korea will derive, particularly when those costs to us are compared with the alternative, which would be a return to sanctions and the risk of war, or acquiescing in an uncontrolled North Korean nuclear weapons program.

To implement the agreed framework both the United States and North Korea are required to take actions with specific milestones for follow-on steps throughout the 10 to 14 year duration of the framework. This framework will deal, as it is implemented, with the past problems, and it will eliminate and not just freeze the North Korean facilities. As I said, it is not based on trust, but on step-by-step implementation monitored by international inspectors.

The next milestone in the framework agreement is the initial delivery of bunker fuel. The U.S. performing on that obligation is a continuation both of maintaining the freeze which I have described, and of further steps.

To review briefly what will happen as the rest of the agreement is implemented, during the coming months the United States will continue its effort to arrange financing and contracting for the construction of two 1,000 megawatt light-water reactors in North Korea, and for the continuing supply of bunker fuel. Talks on these issues are underway with the Republic of Korea, with Japan, and other interested nations. Ultimately these countries will bear the overwhelming share of the cost of the overall operation.

We are trying, as you know, to set up an international consortium that will undertake the overwhelming bulk of the financial and technical obligations under the agreement.

With regard to past problems relating to the discrepancies and the amount of plutonium declared by the DPRK under its safeguards agreement, all past plutonium production issues must be resolved to the satisfaction of the IAEA before any nuclear components for the new light-water reactors are delivered.

With regard to eliminating the spent fuel in the existing facilities as potential sources of bomb material, when delivery of nuclear components for the light-water reactor project begins, North Korea must begin to transfer the stored, spent fuel rods out of the country. This transfer must be completed before the first light-water reactor is completed.

When the first light-water reactor is complete and ready for operation, North Korea must begin dismantlement of the existing reactors, the reprocessing and other associated facilities. That dismantlement must be completed before the second light-water reactor is completed.

In addition to going well beyond NPT requirements, which as you know would permit refueling the reactor, permit reprocessing and so on, as long as it's done under IAEA safeguards, North Korea is required to come back into compliance with the NPT in all respects and implement the North-South Denuclearization Accord.

In that connection, the United States will extend to the DPRK the assurances regarding use of nuclear weapons we have long extended to all NPT-compliant nations.

In meetings in Beijing in December of last year, the United States and North Korea made progress on reaching agreement that supplying the light-water reactors is the role of the United States and the role of the international consortium in building the reactors. All U.S. and international laws which apply to nuclear technology and components will be followed. Further meetings on the light-water reactor, stabilizing the spent fuel rods until they're transferred out of North Korea and the treatment of the spent fuel rod pond at Yongbyon will take place in New York, Pyongyang and Yongbyon during the coming month.

The agreement also has a political element. It provides for movement toward normalization of relations between the United States and North Korea, for relaxation of trade and investment barriers -- which, as you know, initial steps have already been take by South Korea -- and for resuming North-South dialogue on the Korean peninsula.

I want to emphasize again that there are trigger mechanisms built into the framework. They are monitored on a daily basis by the IAEA and of course by our national intelligence methods, so that the United States can stop performance on its responsibilities at any time if North Korea violates the terms of the agreement. We will be vigilant in monitoring compliance. If at any point North Korea is not in compliance with its obligations, we with our allies will stop performance on our side. We can then return to a dangerous but what would then be necessary path of sanctions and military preparations if necessary.

Now let me turn in more detail to describe the U.S. actions with respect to the bunker fuel. As alternate energy for the loss of electric power and thermal heat from the DPRK's reactors, the United States agreed to arrange for shipments of heavy residual fuel oil in amounts equal to the potential thermal output of the three nuclear reactors, an ultimate total of 255 megawatts of generating capacity. This corresponds to about 3.5 percent of North Korea's present electrical generating capacity, so it's a relatively small amount.

Within three months of signing the framework, the United States agreed that it would supply an initial tranche of 50,000 metric tons of heavy residual fuel oil to compensate for the DPRK freezing and not refueling its 5-megawatt reactor. That is to say that the oil requirement is geared to the times which the various reactors would've come online. So, the only one which is being compensated for now is the 5-megawatt reactor which was shut down.

This fuel oil will be used by North Korea for both electric power generation and heating.

The Department of Defense agreed to arrange and pay for purchase and delivery of the first tranche under license in order to be able to meet the 90-day deadline and to provide an incentive for North Korean compliance with the framework. By providing this fuel, DOD is enabling the first phase of the framework to continue to proceed. The success of the agreement is in turn in the interest of our overall nonproliferation policy and very much in our national security and national defense interest, particularly, as I say, when complied (sic/may mean compared) with the level of military preparation which we were undertaking in connection with moving to sanctions. While United States economic sanctions under the Trading with the Enemies Act prohibit all unlicensed trade with North Korea, including the sale of fuel, accordingly the provision of the 50 metric tons of heavy fuel oil is being provided under license issued by the Department of Treasury. This one-time license does not alter the ongoing trade embargo with North Korea.

There is little potential for this fuel to be diverted from its intended use in power and heat generation. Heavy residual fuel oil is, I am informed -- has very little high-fraction fuel such as gasoline, diesel and kerosene, so that these fractions cannot be extracted relative to crude or other refined petroleum products. Commonly called Bunker C by those who commonly call fuel oils by name, heavy residual fuel oil can be used to fire boilers, but it cannot be used as motor fuel for vehicles or military hardware.

The first tranche of the 50 metric tons of Bunker C will be delivered to the idle oil-fired power plant at Songbon (ph) in North Korea, where it will be used to produce electric energy for North Hamgyong Province and thermal heat for the surrounding villages. Total cost to DOD will be approximately $4.7 million, including delivery. Fuel will be paid for under long-established statutory authority in the annual DOD appropriation acts for DOD to use funds up to a specific limit for emergency and extraordinary expenses.

Congress has been informed of the overall terms of the deal, of the specific obligation to provide fuel, and of other details of delivery and payment as outlined here.

Cal Tech's South Korean subsidiary, Han Nam (ph) Oil Company, was the low bidder in an international solicitation to contract for the fuel. The run of the fuel at the Han Nam (ph) refinery in South Korea will start in a few days. Final arrangements are being made to contract with commercial firms to deliver the fuel via ocean-going tankers. We expect to award a contract during the week -- during this week, and indeed I am informed that that contract is about to be awarded and that the fuel will be delivered in a Chinese and a Liberian-registered tanker.

We are still awaiting North Korean responses about certain questions which remain about the Songbon (ph) Port Facility in order to finalize the delivery arrangements. Actual delivery to North Korea is scheduled to be made before the January 21st deadline. Should circumstances require it -- and we have no reason to believe it will -- we could halt the delivery and use the fuel for other defense purposes.

Just to fill you in on the rest of the fuel situation, the second tranche agreed to in the framework is 100 metric tons of Bunker C as alternate energy -- I'm sorry -- yeah, 100 metric tons -- of alternate energy for both the five-and 50-megawatt reactors geared to the notional time. The 50-megawatt reactor would have come on line. That is scheduled for delivery in October, 1995, and will be paid for by a multinational consortium.

The third tranche provided for under the agreement is 500,000 metric tons of heavy fuel oil to compensate for the total electric capacity in all three nuclear reactors under the freeze. The first delivery at that level will be in October of 1996, also paid for by the international consortium, and delivery will continue annually until the first light-water reactor is on line producing electricity in North Korea.

I apologize for the length and complexity of this presentation, but it is a complex but we believe very important and meaningful deal, and I wanted to both give you details about the oil shipment and put the whole thing in the context of how the implementation of the agreement is proceeding.

And now I'll be glad to take your questions. Q: You said that before this deal it was the closest we have come to facing a major military confrontation, without -- with the possible exception of Kuwait; "we faced a real possibility of military operations." Are you referring to just the discussions that were going on about a major reinforcement of troops? You're not talking about military operations against North Korea, are you?

SENIOR DEFENSE OFFICIAL: In a sense I am, because we were moving toward sanctions. We were having long meetings at the U.N. and here with our allies, with other countries, drafting sanctions resolutions which would have imposed increasingly strict sanctions on North Korea. The North Koreans said that they regarded the imposition of sanctions as an act of war.

It was for that reason that we were taking what would have been -- had they been carried out -- very, very substantial military reinforcements. But we were taking those because we felt we had no choice except to take the North Korean -- maybe they were bluffs, but we had no choice but to take them seriously.

So, from my personal point of view, I don't say we were close to war, but were in a situation where we were gearing up for a course of action of pressure that had very real military risks to it. I think it's also true that because of the resolve which the United States, which South Korea would have borne the great bulk of the burden of both the preparations and the war if, God forbid, it had come. And our other friends and allies in the region -- I think those gestures of resolve were critical to North Korea making the decision that they wanted to step back, take the sensible course, freeze, reopen negotiations and eventually enter into an agreement.

But my point is that the alternative -- unless you're simply going to ignore the North Korean nuclear weapons program, the alternative to solving it by negotiations is to solve it by sanctions and of course pressure, and that course has serious risks.

Q: Do we have any assurance North Korea will indeed initiate a dialogue with South Korea? I mean, isn't that kind of the Achilles' heel of this whole deal?

SENIOR DEFENSE OFFICIAL: It certainly is a problem. We regard this as both a complex technical agreement and also as an agreement that has a political element. We regard the part of the agreement that calls for resumption of North-South dialogue as an integral part of the agreement. As the agreement itself recites, the implementations of the agreement will improve the climate for such dialogue. We think it's important that that move forward. It obviously has not done and that's something that we regard with concern.

Q: If it doesn't go forward, does the whole deal fall apart? SENIOR DEFENSE OFFICIAL: I think it is clear that we will have to continue to review all aspects of the implementation of the deal. All of them will be reviewed in conjunction with South Korea and that one in particular.

Q: You say the next shipments of oil will be paid for by -- (inaudible) -- consortium, but you have not reached agreement with anyone -- established that consortium -- which is why we're coughing up out of DOD money for this --

SENIOR DEFENSE OFFICIAL: The reason we're coughing up out of DOD money is that we realized that we were not going to be able to put together the arrangements in three months to be confident we could meet the January 21st deadline.

We are making progress on putting together a consortium for all the various aspects. That in itself is a mind-boggling complexity and we would have to get someone who is more familiar with the details to brief you on the intricate details of it, but we're moving forward. We do not expect the Department of Defense will pay for future oil.

Q: As the father-to-son transition occurred in North Korea, has -- and in light of this Bobby Hall North Korean capture, has any of -- sense any of the terms of the agreement were fluctuating or changing at any point over the last year and a half, or has it remained pretty constant the whole time? And what have we learned new about North Korea since Hall's return?

SENIOR DEFENSE OFFICIAL: A lot has happened over the last year and a half because it was in the middle of 1994 that we were moving toward sanctions, so there's been a -- and that followed not very good progress in the talks and it followed North Korean insistence that is was going to go ahead refuel the reactor, start reprocessing. So there's been a big break. That, of course, happened before Kim Il Sung died. Lord knows to what degree he was actually making decisions, but my recollection is that he saw Carter; I mean presumably he was in charge at that point. And the agreement was then signed, obviously after his death, and presumably with the approval of Kim Jong Il or whoever is in charge in North Korea.

I do not pretend -- unlike some of my colleagues, I do not pretend to understand the intricacies of internal North Korean politics. I do see them as having, under both the pre- -- you know, before Kim Il Sung died and then afterward -- negotiated this agreement, and so far carried it out.

Q: What have we learned new since Hall? Anything new? SENIOR DEFENSE OFFICIAL: I have not had an opportunity, and I'm not sure anybody in the Pentagon has -- I just don't know what the state of Hall's debriefing is so I can't comment on what we may or may not have learned from Hall. I mean, I glanced at the transcripts of what he said on television this morning, and there's no point in my trying to repeat to you what you presumably saw on television this morning.

Q: Speaking of compliance and risks, what about the risk that Congress is not going to comply with this? There have been some very definite noises from Capitol Hill, from Republican leaders, including Senator Dole, that they don't like this agreement. First of all, what are their powers to stop it? Do they have sort of the treaty review power to stop this thing in its tracks? And secondly, what's being done to try to convince the Congress?

SENIOR DEFENSE OFFICIAL: We have been consulting with Congress all along, including with the Republicans when they were in the minority, and we believe we have a good story to tell on why this agreement is in our interest, particularly because I think you have to begin with the proposition that we have a real problem with the North Korean nuclear weapons program.

And there are as far as I can see only three ways to solve it: You either solve it by agreement; you solve it by ignoring it, or you solve it by sanctions. Ignoring it is, I think, clearly the worst of the answers because it simply kicks a worsening problem down the road. Obviously, if we could have -- as Secretary Perry likes to say, if we could have had Bob Gallucci negotiate both sides of the agreement, it would have been more favorable to the United States. But that's neither here nor there. We regard, and we think we can convince the Congress on both sides of the aisle that this agreement is in our interest particularly when compared with the alternative, emphasizing that we will be very vigilant in insisting on strict compliance with the rather intricate set of interrelated obligations. But if North Korea does not continue the freeze, does not take the various steps it has to take at various stages, the agreement will be off and we will then be forced back to consider our other alternatives.

Without getting into the intricacies of the constitutional position, the United States -- as a practical matter, this agreement has to have the support of Congress in order for the United States to continue to implement it. We will -- there will be other things we will be spending money on. For example, we will be undertaking to pay the cost of stabilizing the fuel rods -- that's the 8,000 rods that have several, some five or so nuclear weapons worth of plutonium in side -- so that in principle, if Congress wanted to block the agreement, I suppose, subject to some arcane constitutional limitations, they could prohibit the expenditure of funds. They could prohibit people from working on the -- maybe -- by the power of the purse, they would have the effective power. I don't think we're disputing that. I think we will be able to convince them that while it is a complex agreement, it is one which, A: it doesn't depend on trust, and B: it very much in our interest to use this method rather than the alternative to stop the North Korean nuclear weapons program.

Q: Was the agreement ever threatened when Bobby Hall was captured? SENIOR DEFENSE OFFICIAL: Let me put it this way. I think if the Hall incident had not been satisfactorily resolved, the agreement would have been, just as a practical matter, in jeopardy. That's one of the many -- the first reason to be glad that Hall was returned -- as a human sympathy (in/and ?) that it was unreasonable not to return him once it was clear that -- what had happened and so on, but it's also true this removed a shadow over the agreement.

Q: Can North Korea use this fuel out of the North Hamgyong Province? Do you have any agreement? They can use in another place, another province or another -- SENIOR DEFENSE OFFICIAL: I do not hold myself out as an expert on the North Korean power grid and how it's integrated. You'd have to get that from --

Q: No regulations on North Korean side to -- SENIOR DEFENSE OFFICIAL: Well, the North Koreans are obligated to use it for power generation, and by its nature it is not good for much except power generation, heating oil, as well. That it will be used for thermal heat, but as to how the grid works, I'm not sure I know.

Q: Which oil-producing companies have agreed to join the consortium or at least provide some of the fuel oil?

SENIOR DEFENSE OFFICIAL: While those negotiations are still going on, I'd rather not comment on the details.

(end transcript) NNNN

File Identification:  01/05/95, EPF404; 01/05/95, EFS405
Product Name:  Wireless File
Product Code:  WF
Document Type:  TRA
Target Areas:  EA; EU
PDQ Text Link:  373483
USIA Notes:  *95010501.EPF *