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DONG Yong-Sueng

Why Does North Korea Want a Light-Water Reactor?

DONG Yong-Sueng

July 25, 2007

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The sixth round of the six-party talks aimed at ending North Korea’s nuclear program finished on July 20. North Korea, somewhat surprisingly, accelerated the timeline for a potential resolution as Kim Kye-Gwan, the North Korean deputy foreign minister, maintained a far less obstinate tone compared with previous rounds. The North’s change in strategy is likely due to two factors. First, North Korea saw little utility in maintaining its traditional hard-line stance, particularly given the lag in implementing the February 13 agreement to shut down nuclear facilities in exchange for the return of money deposited at Banco Delta Asia (BDA) in Macau. Second, and perhaps more importantly, North Korea decided to repeat its request for assistance in building a light-water reactor. The re-emergence of the light water reactor issue is emblematic of Pyongyang’s deteriorating economic condition and the need to exert control over emerging pockets of market activity.

The energy issue was first broached was in 1994, when the US promised to provide two light water-reactors (via the Korea Peninsula Energy Development Organization or KEDO) if the North stopped activity at its graphite reactors and allowed on-site inspections by the International Atomic Energy Agency. Ultimately, the arrangement collapsed. In October 2002, the Bush administration said that Pyongyang had admitted that it had obtained uranium enrichment technology from a rogue Pakistani scientist and canceled the 1994 Clinton-era agreement. North Korea denied having a uranium enrichment program and accused the United States of reneging on the 1994 deal.

The motivation for a light-water reactor is simple: lack of electricity. Two light water reactors can generate two million kilowatts of electricity, which satisfies most of North Korea’s power demand. Ever since the mid-1990s, North Korea has faced massive power shortages as a result of moribund equipment, inefficient operation, and lack of coal. Indeed, North Korea currently produces one million kilowatts of electricity yearly, less than one quarter of its actual power generation capacity. North Korea depends on thermoelectric power plants, notably the Bookchang and Pyongyang power plants. The shortage of electricity, however, masks an even deeper economic problem as the coal-rich North has been unable to extract enough supply for power generators.

Indeed, the underlying reality is that the North Korean economy is over reliant on electricity and uses it extremely inefficiently. Railroads, the lifeline of the economy, are electrified. Furthermore, steel and heavy industries, the economy’s mainstay industries, have large-scale factories. For example, Huichon Machine Tool Factory and heavy industry factories and munitions factories (both of which are concentrated in Jagangdo) are located underground, requiring a huge amount of electricity to operate. More power plants have gone on online, but not fast enough to accommodate the expansion of those factories.

North Korea originally turned to nuclear power in order to deal with its energy shortages. The introduction of graphite reactors (from the Soviet Union), however, quickly raised suspicions about nuclear ambitions. When KEDO-led construction of the light-water reactors was shelved, North Korea was set adrift. Since it lacks enough funds to build graphite reactors, it has no other recourse than to resurrect its demand for foreign assistance.

Any aid in the form of light water reactors, however, will take a minimum of 7-8 years in order to come online, a time span that may mean life and death to the Kim Jong Il government. Indeed, this time period will likely see the spread of the market economy to every part of the society. To be sure, pockets of market activity already are actively emerging in North Korea. Against this backdrop, the government is obsessed with putting markets under its control and recovering its total grip on the economy by increasing the capacity utilization rates of state-owned corporations and reviving supply capabilities. North Korea must therefore seek to increase capacity utilization rates by acquiring one million tons of heavy oil while ultimately calling for aid from South Korea.

South Korea offered North Korea electricity assistance under a July 2005 proposal. At that time, the South said that it would construct transmission facilities that would deliver two million kilowatts of electricity to the North by 2008. In exchange, Pyongyang would have to end its nuclear programs. The proposal accompanied another plan, which called for the US, China, Japan, Russia and South Korea to jointly provide power to North Korea while the transmission facilities were built. None of the countries, however, accepted the idea.

Nonetheless, the proposal stimulated participants of the six-party talks to adopt the September 19 Joint Statement, which reconfirmed South Korea’s energy proposal. Later, the February 13 Agreement underlined the proposal again. Three points in the February agreement were especially notable: 1) one million tons of heavy oil to the North by the US, South Korea, China, Japan and Russia; 2) reaffirmation of joint energy supply by those five nations; and 3) oil assistance by the five nations during construction of the South’s transmission facilities, as first proposed by Seoul in 2005.

Although events have changed the dynamics since the 1994 energy-for-cooperation agreement, i.e. the North’s nuclear tests, both sides are searching for a way to move the talks forward. With an agreement on resuming light-water reactor construction, South Korea’s energy aid to the North would serve as a useful leverage for the South during the construction period. Also, sharing the provision of one million tons of heavy oil to the North with other nations for the two to three years of construction would allow the South to offer the amount equal only to the two years’ worth of the yearly assistance of 500,000 tons of heavy oil.

Regardless of what ultimately happens, the North will need to understand the limitations of relying on outside assistance to solve domestic problems. Although the North’s guiding philosophy of “Juche” stresses independence, reliance on foreign powers for energy compromises its ability to control foreign and economic policy. The move towards light water reactors illustrates an interesting turn that will likely have implications for the North Korea’s economic policy.

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