Posted on 03/21/2007 9:57:34 PM PDT by TigerLikesRooster
Rice helped unfreeze N Korean funds
By Demetri Sevastopulo in Washington and Andrew Yeh in Beijing
Published: March 21 2007 22:13 | Last updated: March 22 2007 00:48
Condoleezza Rice, US secretary of state, orchestrated a significant shift in US policy towards North Korea by persuading the US Treasury to agree to Pyongyang’s demands to release $25m frozen in a Macao bank since 2005.
Current and former officials say Christopher Hill, the chief US negotiator on North Korea, convinced Ms Rice that the US should sacrifice the issue of the frozen funds to push forward the broader goal of implementing last month’s six-party accord on denuclearising the Korean peninsula.
Several people familiar with the debate said Hank Paulson, Treasury secretary, agreed to overrule officials responsible for terrorism financing, who objected to the move, after Beijing warned that a failure to return the North Korean funds would hurt the Sino-US strategic economic dialogue.
North Korea had insisted that the funds – which were frozen in Banco Delta Asia of Macao after the US accused the bank of turning a blind eye to illicit North Korean activities in 2005 – be returned before it would implement the six-party nuclear deal.
Washington’s shift in policy signals increasing flexibility by the Bush administration in dealing with what it deems rogue regimes. It also represents the increasing influence of Ms Rice following the recent departure of several hardline administration officials.
Sean McCormack, state department spokesman, said the Treasury and state department were ”on the same page.” He also denied that the move to release the entire $25m represented a shift.
However, the move has opened Washington to charges of hypocrisy. The Treasury last week concluded its investigation into BDA by prohibiting US financial institutions from dealing with the bank. While the ruling paved the way for the bank to dispose of its assets, Treasury officials insisted that the US would play no role. They said the Macao government, which assumed control of BDA in 2005, would determine how much would be returned to North Korea.
Many experts, and some White House officials, were dismayed when Daniel Glaser, the Treasury deputy assistant secretary for terrorist financing and financial crimes, said in Beijing on Monday that the US and North Korea had agreed on a mechanism to refund all the money. Critics also derided the explanation that Pyongyang had vowed to use the money for humanitarian purposes.
Gordon Flake, a Korea expert who heads the Mansfield Foundation, said the Treasury shift angered even supporters of the broader nuclear disarmament accord. He said Treasury had insisted for 18 months that the move against BDA was a “law enforcement action” that was not linked to the nuclear talks. But he said the statement in Beijing clearly showed there was a political link.
“We have traded away the pressure we had on them,” said Mr Flake.
Molly Millerwise, a Treasury spokeswoman, said: ”while the Macanese have authority over the funds, both the Macanese and US agreed that the proposal presented by the DPRK was a good solution for moving forward.”
Mr Flake and a former administration official said the state department had also reduced pressure on North Korea in other ways. He said Ms Rice had blocked the sending of cables to US embassies outlining the process for implementing the United Nations sanctions on North Korea. Mr McCormack, the state department spokesman, denied the claims.
Mr Flake and a former administration official said the state department had also reduced pressure on North Korea in other ways. He said Ms Rice had blocked the sending of cables to US embassies outlining the process for implementing the United Nations sanctions on North Korea. Mr McCormack denied those claims.
Until the intervention by Mr Paulson, Treasury had been prepared to tell the Macao government that it would not object to returning about a third of the $25m for which there was less-than-conclusive evidence of illicit activity. Treasury on Wednesday dismissed suggestions that it had succumbed to political pressure.
“Eighteen months ago this money was held in a bank that was, at best, turning a blind eye to illicit activity, and at worst was facilitating illicit activity,” said Molly Millerwise, a Treasury spokeswoman. “We now have assurances from the North Koreans, in the context of the six-party talks, that will allow these funds to be used for the betterment of the North Korean people.”
But Jack Pritchard, president of the Korea Economic Institute and former Bush administration envoy to North Korea, said Treasury had reluctantly acquiesced to the state department.
“The Treasury action seems contradictory,” said Mr Pritchard, who was a critic of the original Treasury move. “Yes, BDA is guilty, but we are giving back all the money – not because we think it is the right thing to do, but because we are being forced to do so politically.”
Mr Pritchard also questioned why the US did not have the foresight not to pursue a two-track policy – of engaging the North Koreans on the one hand, while attempting to squeeze them on the other – two years ago.
The debate over Washington’s handling of the Macao affair came as the six-party talks ran into a stumbling block in Beijing on Wednesday. North Korea has refused to continue negotiations towards implementing last month’s agreement – which provides economic aid in stages as North Korea freezes and then dismantles its nuclear reactor – until the $25m was physically deposited in an account it holds with the Bank of China.
One US official who broadly supports the nuclear deal said the administration was scrambling to find a way to return the $25m, which had been complicated by the fact that some banks were reluctant to help move the money because the US Treasury had previously insisted it was “contaminated”.
The official added that the administration had to be careful that the deal would not “come a cropper” because of delays by the North Koreans that would reduce support for the agreement in Washington.
The same official, who broadly supports making small sacrifices to achieve the larger gain, said it was “very unseemly” to have Treasury publicly acquiesce in Beijing. It also appeared at odds with previous statements by Mr Hill, who in a speech to the American Enterprise Institute in 2006 said he had no influence over the Treasury action on BDA.
“We have a separation of duties and it is not for me to tell law enforcement people not to pursue and not to do their jobs,” Mr Hill said.
Bush administration officials who support the move – including those who disagree with the way it was unveiled - argue that returning the full amount was a less-than-ideal compromise that was necessary to ensure North Korea moved forward on the nuclear agreement. They also argue that critics of the deal underestimate the North Korean threshold for pain, meaning the regime is unlikely to crumble because of financial sanctions.
Officials also dismiss suggestions that the US has gone soft on North Korea by pointing out that the BDA ruling sent a very strong message to the international banking community about dealing with North Korea. They add that the US will continue to investigate alleged North Korean illicit activities and that
Jon Wolfsthal, a North Korea expert at the Center for International and Strategic Studies, welcomed the move to test whether Pyongyang was serious about movnig ahead with denuclearising.
”Holding denuclearisation hostage to $25m is short-sighted,” said Mr Wolfsthal.
Selig Harrison, a North Korea expert at the Center for International Policy who has been covering Asia for more than 50 years, expressed support for the policy shift. He said it was “essential” to convincing the North Korean regime that the US was serious about normalising relations, which is one of the stated end goals of the recent nuclear accord.
Mr Harrison said the move would also demonstrate to the North Koreans that US policy was less dysfunctional, because it showed that the administration was not prepared to allow Treasury to block progress towards denuclearisation. But he said further progress would require the US to stop sending the signal to the banking community that all North Korean financial transactions were tainted by illicit activity.
One Capitol Hill staffer said the Bush administration may have calculated that North Korea was finally prepared to move on the nuclear issue, so that it made sense to sacrifice the $25m for the possibility of nuclear disarmament.
“Chris Hill may believe North Korea is on the cusp of making a strategic choice [to disarm] and that is the big prize,” said the staffer.
He added that the Treasury shift came after the departure of Bob Joseph, the former state department hardliner on North Korea who “worked hand in glove” in opposing Mr Hill.
But critics say the deal was a victory for Kim Jong-il, the North Korean leader.
”I think the trade-off was a mistake and that the way it was handled only compounded the problem,” said Bruce Klingner, a former senior Central Intelligence Agency intelligence analyst on Korea now at the Heritage Foundation. “The ‘six-party talks progress uber alles’ philosophy is now running roughshod over principles such as adhering to international agreements and punishing those who violate them.”
The latest deal will likely face questions on Capitol Hill. Ed Royce, a California congressman, on Wednesday said: “The February 13 [nuclear disarmament] agreement is a package - with illicit activities included. It’s done that way because this issue reinforces the North Korean commitment to disarm. Retreating in the illicit activities area harms the overall process and odds for success. What type of signal does this send Pyongyang, which cheated on a previous agreement?”
"What about N. Korea's not-yet-detected secret facilities and bombs? Are you going to take N. Korea's words on it?"
Maybe we can put some language into an agreement along the lines of "and no cheating this time, like you did with Maddie and Bill last time, or we are going to get very angry with you and cut off your energy and food supply except humanitarian aid for North Korean children" ?
Silly Condi, she probably didn't think of that.
Yes, we have. I was referring to Bush admin's actions about N. Korean nuke test, not sorry-ass Clinton's escapade. Bush and China appeared to draw the line on the nuke test, but when it happened, China did not do much, and let it slide.
Remind me again what Bush's options were?
Now you were talking about options. So you admit that I was right on this point.
then why did Kim not just go on doing what he was doing?
With or without agreements, Kim has done what he wanted. What we have to do is to deny him the resource to continue his projects. Not another agreement he would not keep, unless his life literally depends on it. In all likelihood, he is working hard at his projects right now, at the places not known to the West.
Again, what is the price N. Korea has to pay for not keeping the promise? Probably mild rebuking statements from China, even milder one from Russia. A few days of cutting down some key supplies. Some gestures just enough to show that NK's behaviors are not to their liking. However, they would not go ahead and shut down the spigot altogether. N. Korea knows it can still go forward, even if the schedule is delayed a few months.
So tell me, if China repeats the same response for another NK mendacity, what price does China has to pay? After all, Kim was able to set off his nuke despite torrents of criticism from all sides. Even PLA is quiet. If you think Kim would behave, you are really naive. If he is so receptive, we have already accomplished our objective a long time ago.
What is happening now is at best a punt-fake for striking Iran. If U.S. cannot resolve Iran crisis, we can kiss the resolution of NK problem a good bye.
Japan has more leverage to impress China than U.S.. Belligerent posturing by Japan will do much more than U.S. diplomatic initiative, even though U.S. likes to take credit if Japan's posturing works.
Condi's mentor was Maddie's dad.
http://archive.salon.com/politics2000/feature/2000/03/20/rice/print.html
That kind of American exceptionalism was never heard from Albright who lamented our being the sole superpower.
Exactly! And nuke programs like these can not be entirely separate and standalone, so even access to known sites can shed info on some possible others, plus energy use monitoring and other things when inside.
Implementation and execution, not alone and subject to antics and charges and accusations, but with self-interested partners, all (or most) on one side of equation, with the other side isolated and no room for "mistakes". We are the "good guys" now. We can only do what's required of us to make this happen and make sure others are held accountable for their part of an agreement.
Like Reagan said after agreement with Soviets : "Doveryay, no proveryay" "Trust, but verify".
That's interesting Nit, you always know these things!!
See post #25.
Thanks for the link. Interesting information.
Yes, I saw it, thanks nit!
Glad you liked it. You may also find interesting a link in post #18. It's a transcript of her speech I saw on C-SPAN, and there's also a video link on that page.
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