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Coping with North Korea's Energy Future: KEDO and Beyond
Published May 25, 2011
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The subject of the energy future of North Korea (the Democratic People’s Republic of Korea or DPRK) has many dimensions, conceptualized in a broad variety of ways. For engineers, the energy future can be a problem in boiler efficiency and reactor safety. For energy economists, the future is an issue of trade-offs among fuel sources such as coal, natural gas, and nuclear power.

For economists with structural perspectives, energy is a constraint on economic growth in North Korea. For specialists in regional integration, energy is a catalyst for bringing Northeast Asia together. And for many security analysts and policymakers, energy is a lever for simultaneously blocking dangerous nuclear proliferation and subverting unwanted geopolitical change.

The central economic and security elements of the North Korean energy equation are inseparable in policy terms. Nuclear proliferation in North Korea, a security problem of global importance, deserves its central place in the minds of policymakers. Yet for analytical purposes it is important to disentangle economic and security aspects of the energy problem without denying their legitimate policy interdependence. North Korean politics, after all, could change radically over the coming years, altering the security equation profoundly. Yet the DPRK’s resource endowments, which must inevitably shape economic calculations, will remain constant.

Amid the myriad uncertainties of the North Korean energy equation, one strong likelihood is that the Korean Peninsula Energy Development Organization (KEDO), as presently constituted, has little future. Much of the U.S. Congress, not to mention the Bush administration, has been consistently skeptical of KEDO, and economic assistance to North Korea has never had much constituency in the United States in any case (Sigal 1998). The program has, to be sure, survived a remarkable number of crises, including the North Korean submarine incursion into South Korean waters in the fall of 1996 and the North Korean Taepo-dong missile launch of August 1998 (Snyder 2000). Yet KEDO will find it much harder to survive the major, direct violation of the Agreed Framework involved in North Korea’s covert highly enriched uranium (HEU) program, especially given the December 2002 suspension of the heavy fuel oil supply program, the extended suspension of reactor construction activities after November 2003, the lack of U.S. congressional budgetary authorization for future operations, and the continuing heavy skepticism in the Bush administration regarding a seemingly dysfunc- tional institution inherited from the past.

During KEDO’s more than seven years of operation, from its establishment in March 1995 until the HEU program revelations in late 2002, that tri-national organization did, to be sure, quietly foster useful interpersonal networks between North Korea and the broader world while it scored important technical accomplishments in consolidating U.S.-Japan-Korea triangular relations. There are also substantial sunk costs that—rhetoric aside—it is rational to recoup. The United States has expended more than $700 mil- lion on heavy-fuel-oil supplies to North Korea and on the administrative costs of running KEDO. South Korea (also, Republic of Korea, or ROK) and Japan have together already invested well over $1 billion in construction of a now partly built light-water reactor (LWR) in Kumho, North Korea (KEDO 2001; KEDO 2002; Brooke 2004).

Future international efforts to cope with North Korea’s energy problems can reasonably build, either figuratively or even literally, on these foundations. Yet the duplicity in the covert North Korean HEU program, coupled with the economic irrationality of much of the 1994 Agreed Framework that established KEDO, and domestic political controversies regarding the organization in virtually all of the participating nations make it likely that KEDO will need to be scrapped and reconfigured. Thus, a pressing need exists for a post-KEDO framework for North Korean energy, which is the analytical focus of this paper.

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