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North Korea: Policy Determinants, Alternative Outcomes, U.S. Policy Approaches (Rep. 93-612 F) Congressional Research Service, Report for Congress June 24, 1993 By Rinn-Sup Shinn, Analyst in Asian Affairs, Foreign Affairs and National Defense Division SUMMARY North Korea is undergoing a wrenching phase of adjustment to an uncertain post-Soviet world. Its government is reined in by two major constraints: fear that any political or economic reform would have the same fatal consequence for itself as it had for the former Soviet Union and other erstwhile allies; and fear that the United States, South Korea, and other "enemies" would stop at nothing to overthrow the communist regime of the North. The United States has a major stake in the outcome of North Korea's effort to deal with its daunting task. The challenge in the North has become compelling as Pyongyang has come up far short of its core policy objectives: political self-preservation, undermining South Korea-and by extension, U.S. military presence in the South; and obtaining economic and security support from the outside world. Facing an obvious need to change, Pyongyang is caught in a dilemma about reform.

In the wake of the Soviet collapse, a shaken Pyongyang reaffirmed its resolve to defend a) its centrally planned, autarkic command economy; b) its monolithic, one-party system identified with the persona of Kim Il Sung, the "great leader" (and now with that of his son and de facto successor Kim Jong Il); and c) its policy of reunifying the two Koreas on Kim Il Sung's terms. The two Kims still talk as though time is on their side, and that they can outwait U.S. withdrawal from the South. Nonetheless, they seem to recognize that they need to end their self-enforced isolation, to say nothing of thei unaccommodating foreign policy posture. A sense of urgency and a siege mentality are real and growing in Pyongyang. In particular, the North's economy, which it has long defined as the real underpinning of political stability and military preparedness, is shrinking by all objective criteria.

Still worse, there is no immediate relief in sight. At the same time, Pyongyang is slipping further and further behind Seoul-a situation that has potentially unnerving security implications. Seeking economic help and greater international legitimacy, North Korea in recent years has sought to reconcile with South Korea by promising nonaggression, reciprocal cooperation, and denuclearization of the Korean peninsula. But the regime remains doctrinaire, self-centered, and committed to political control, and has repeatedly undercut its soft approaches by reneging on such promises. The United States has also received numerous promises from Pyongyang.

A number of policy approaches may be considered by the United States: engagement aimed at inducing Pyongyang into the community of nations; military, economic, and political pressure to underscore U.S. concern for the stability on the Korean peninsula; and "outwaiting"-letting Pyongyang chart its own transition by refraining from action that can be reasonably perceived in Pyongyang as provocative and threatening, while avoiding any actions that would give legitimacy or assistance to the North Korean regime. INTRODUCTION North Korea (Democratic People's Republic of Korea-DPRK) is a major foreign policy challenge to the United States because of its intractability as well as its threat to 37,000 U.S. troops in South Korea. Isolated and self-absorbed, its behavior is widely thought to be as irrational as it is unpredictable. The communist regime in Pyongyang regards the United States as its "sworn enemy" and the main obstacle to Korean reunification. It has denounced the United States for its "forcible occupation" and for allegedly turning South Korea into a forward military base from which to plot the collapse of North Korea or to launch a nuclear attack. Since the division of the Korean peninsula in 1945, North Korea has defined its self-preservation in terms of three policy priorities, or core interests: consolidating Kim Il Sung's power base, undermining South Korea to hasten U.S. withdrawal from the South, and securing maximal support from the former Soviet Union and China.

These priorities were designed to assure the security of the Kim regime from domestic critics and against perceived threats from the United States and South Korea (Republic of Korea-ROK). Externally, Pyongyang has pursued anti-U.S. and anti-South Korean policies as interrelated and complementary approaches. Forcing the U.S. out of the South was judged necessary to lay the groundwork for establishing a docile pro-North Korean regime in Seoul. North Korean leaders continue to believe that the end of the U.S. military presence will enhance their chances for overthrowing anti- communist South Korean regimes and for unification on Pyongyang's terms. Pyongyang's current concerns about its own survival are cumulative and derived from three main sources: slow economic productivity since the 1970's, South Korea's insurmountable economic lead over North Korea in the crucial inter-Korean rivalry, and deepening isolation since the breakup of the Soviet Union-Pyongyang's most important source of weapons and economic assistance through 1990. Pyongyang sees no relief in the short run.

In the past, as North Korea became less secure, it sought to attribute its economic troubles to the actions of the United States and its allies, South Korea, Japan and others. But now, North Korean leaders seem convinced of the need to befriend these old enemies; nonetheless, they are wary about opening to these countries on terms over which they have little or no control. In seeking to relate itself to the rest of the world, Pyongyang is both cautious and ambiguous, mixing conciliatory signals with contradictory hardline messages. This report contains four parts. 1 In the first, North Korean policy determinants are identified and examined in terms of motives and rationale as Pyongyang itself appears to have defined them. Variable factors likely to affect economic development and prosperity are also part of the strategy for survival, for they are portrayed as the material foundation of political stability and military effectiveness.

Self-preservation has also meant an unwavering commitment to a Stalinist command economy that, from its inception, was identified with Kim Il Sung's philosophy of self-reliance. Since 1947, he has maintained that a self-supporting economy was the foundation of true national freedom and political independence. He has continued to favor an inward- looking development strategy based on the primacy of a heavy industrial base. Suspicious of even Soviet intentions, he opposed Moscow's attempt in the 1950's to induct North Korea into the now defunct Council for Mutual Economic Assistance (CME A), the Soviet-sponsored instrument for intra-communist bloc trade and economic coordination. Although Pyongyang liked to appear self- sufficient in its own domestic expertise and resources, in fact North Korea depended considerably on Soviet technology and economic assistance.

Through the 1980's, Soviet largess was critical to North Korea; it supplied nearly 70% of North Korea's oil needs at "friendship discount prices" and on barter. Many of North Korea's industrial facilities were built or rehabilitated with Soviet assistance. 2 For decades, the two Kims held the notion that ideology was more important than pecuniary incentives in motivating workers, and that North Korea had the abundance of resources and high levels of science and technology to become an industrial power. A case in point was their optimism in March 1974, when North Korean leaders declared that in the next several years North Korea would "catch up with and outpace the advanced countries of the world" in terms of per capita output of key industrial goods. By the mid-1970's, Pyongyang had concluded it was losing out to Seoul in the economic race. Since the mid-1980's, it has begun to modify its rigid self-sufficiency policy, emphasizing foreign trade and readiness to accept foreign investment and tourism, and, by the late 1980's, even some economic cooperation with South Korea.

Pyongyang is now faced with the challenge of how to realign its foreign economic relations without losing its tight grip on controls over the population. Along with political control and economic development, military preparedness remains vital to North Korean survival. Since the end of the Korean War, Pyongyang has invested heavily in a military buildup to counter has appealed to South Korean leaders for mutual reconciliation, while covertly seeking to destabilize what it calls the "military fascist clique". But Pyongyang also has resorted to assassination, dispatching killers to Seoul in 1968 and 1974, both an attempt on President Park Chung Hee; to Rangoon, in 1983, to kill visiting President Chun Doo Hwan; and terrorists to the Middle East, in 1987, to blow up a South Korean airliner en route to Seoul. In dealing with Seoul and others, North Korea is widely seen to have behaved unpredictably. Even as it prides itself on being unfailingly consistent and "principled" on Korean nationalism or unification, Pyongyang has clearly made tactical changes in its South Korea policy, reversing itself in a number of important instances including the following: Pyongyang unilaterally suspended the historic dialogue with the South in 1973, saying it was a waste of time, but in 1985 resumed the dialogue, concluding that circumstances now favored engaging the South.

In 1979, Pyongyang rejected a South Korean-U.S. proposal for a tripartite conference as a scheme to promote "a two-Koreas" policy, but had a change of heart in January 1984. In September 1981, in bitter opposition to Seoul being chosen as host city for the 1988 Summer Olympics, North Korea reportedly voted for Nagoya, Japan, calling into question its devotion to Korean nationalism, which Pyongyang claims should transcend its ideological differences with South Korea; in 1986, Pyongyang turned around to propose "co hosting" the Olympics with South Korea. 4 In 1991, despite its years of "principled" opposition to the idea of a separate United Nations seat for North and South Korea, Pyongyang changed its mind and applied for UN membership, vowing at the same time it would continue to struggle for a "one-Korea policy". Pyongyang announced on March 12, 1993 that it would withdraw from the nuclear nonproliferation treaty (NPT); on June 11, it reversed itself stating that North Korea would temporarily "suspend" its withdrawal from the NPT-but without agreeing to special inspections demanded by the International Atomic Energy Agency (IAEA).

5 North Korea's approach to Seoul has undergone further, more subtle shift since the early 1980's, when Pyongyang decided to place more emphasis on anti-Americanism in its propaganda activities aimed at South Koreans. The shift helped Pyongyang capitalize on rising anti-American sentiments among South Korean student activists in the wake of a bloody suppression of an urban uprising in Kwangju in May 1980. In 1983, Pyongyang stepped up an anti-U.S. "consciousness-raising" propaganda, asserting that the United States was neither "protector" nor "partner" of the South Korean people. In another effort to disrupt South Korea's relations with the United States, Pyongyang launched an "anti-nuclear war movement" in the early 1980's. The movement had two aims: first, to evoke fear of a nuclear holocaust that North Korea claimed was imminent due to the U.S. nuclear presence in the South and, second, to link the initiative to the Pyongyang-directed "pan-national anti-nuclear movement" for the denuclearization of the Korean peninsula.

Pyongyang hoped the anti-nuclear card would force withdrawal of U.S. nuclear weapons and troops from the South-and eventually undermine South Korean stability and pave the way for reunification with the South. 6 FRATERNAL SUPPORT The third determinant of North Korean policy was based on Pyongyang's presumption that it would receive economic and other support from fellow communist countries. Since 1953, Kim Il Sung has had to cope with the presence of U.S. forces in the South-the bitter and costly legacy of his failed unification venture in invading the South in June 1950. Rhetoric of military self-reliance notwithstanding, Kim's strategy for self-preservation presumed that Soviets and Chinese would render strong support for his eastern "outpost" of socialism. From its inception, North Korea has defined its friends and foes in terms of where they stand on anti-Americanism. Thus, North Korea was allied with Mao Tse-tung's China, which Kim Il Sung judged was more anti-American than the "revisionist" Soviet leadership was.

Kim's 1962 decision to build a foundation for military self-reliance apparently was a function of his growing skepticism about the reliability of Moscow where his own national security was concerned. Nevertheless, military support from Moscow and Beijing was the centerpiece of Pyongyang's security environment, the crucial counterpoint to perceived U.S. threat. In the years after the Soviet collapse, Pyongyang has sought periodically to improve its sometimes cool relationship with China, now its only major source for economic and military support. But with China seeking expanded U.S. trade and investment and having normalized relations with Seoul in 1992, the North's security environment has grown increasingly precarious. Pyongyang's paranoia about its national security can be gauged in part by its shrill reactions to the annual U.S. -South Korean "team spirit" joint military exercise, but more importantly by its determined efforts to develop a nuclear weapons capability and to refuse compliance with the IAEA's demand for special inspections. KEY VARIABLES AFFECTING POLICY DETERMINANTS Few would question Pyongyang's survivability during the next two years.

For the longer term, however, North Korea's future seems to hinge on four main variables: leadership succession, military loyalty, economic recovery, and relations with South Korea and the major powers. KIM JONG Il, THE SUCCESSOR In recent years, observers have suggested that Kim Jong Il, the chosen successor, would not survive long after his father's death. The younger Kim, referred to as "the Dear Leader" in North Korean media, is said to be impulsive, unstable, and of weak character, and to lack his father's leadership charisma and military background. Without them, observers say, he could be either eased out in an intra party power play or toppled in a military coup. So far the 51- year old Kim junior seems to be holding up without any overt sign of opposition. He is also being built up in the North Korean media as "the most outstanding strategist in our age" and "ever-victorious, iron-willed, brilliant commander"; these are honorifics previously reserved for the senior Kim.

As heir to leadership, the junior Kim is required in time formally to assume the two posts still held by his father-mentor: president of the state and general secretary of the Central Committee of the ruling KV VP. That will be the easiest part of de jure succession. A more daunting part will be whether he can inherit the senior Kim's charisma as a family right, or inspire the same unquestioning faith that Kim Il Sung has inspired from his followers. In the 1990's and beyond, the true test of succession seems to be whether and how Kim Jong Il can help handle the problems he inherited-the decades-long, unfulfilled promises to ease the shortages of food, clothing, and shelter. Kim Jong Il's chances of firming up his power and carrying out some reform, observers say, will be greater while his father remains a formidable presence. His strength rests heavily on his control of party ideology and organization.

MILITARY LOYALTY From his early days as an anti-Japanese guerrilla leader in the 1930's, Kim Il Sung has had an abiding faith in the power of the military for political survival. The Korean People's Army (KPA) -the collective term for the North Korean armed forces-is a contemporary expression of his faith in the military and in his capacity to endure through adversity. The formidable war machine he built and presided over as supreme commander has been passed on to Kim Jong Il, named supreme commander in December 1991. The looming question is whether Kim Jong Il can inspire the same undivided institutional, but more importantly personal, loyalty from the KPA as his father has. The question is critical, since the KPA is the only organized group that can make or break Kim Jong Il's succession. The KPA is more than a professional institution.

It not only is the guarantor of power, political instrument, and security blanket for the two Kims but plays economic and foreign policy roles as well. It can be likened to a state within the state and, more than any other institution (including possibly the party itself), is crucial to Pyongyang's self-preservation. It may not be an exaggeration to say that, in the North Korean perception, if the KPA cracks, so will the foundations of the DPRK. Probably this explains why the two Rims have taken pains to assure for themselves an iron-fisted grip on the military. 7 In the elder Kim's case, he had built an army before he did the party; and understandably, he wants to have Kim junior gain the same firm control over the KPA. With his blessing, the younger Kim took "familiarization" trips to military bases on his own as early as 1964.

From 1973 onward, when he started to involve himself actively in the party's organizational and propaganda affairs, Kim Jong Il also sought to place his own youthful "trusties" in the KPA hierarchies. Between 1975 and 1979, he asserted himself forcefully in trying to "imbue" the KPA with the philosophy of self-reliance-apparently antagonizing some of the KPA veterans who regarded his "intrusiveness" as incompatible with military discipline and professionalism. 8 By 1980 (when the junior Kim was formally presented to the world as second in command) and certainly by April 1985, the KPA had supported Kim Jong Il, prompting one analyst to suggest that it had become "Kim Jong Il's private army"; the following year, Kim Il Sung let it be known that "the leadership succession issue was brilliantly solved". In 1990, Kim junior assumed the senior vice chairmanship of the National Defense Committee, became the KPA's commander-in-chief in December 1991, a marshal of the army in April 1992, and the chairman of the National Defense Committee in April 1993. Grand Marshal Kim Il Sung and Marshal Kim Jong Il are joined by defense minister Marshal O Jin U to make up the three-member presidium of the party political bureau.

This means the fusion of power at the top, potentially blurring functional boundaries between the KPA and the party and possibly skewing policy decisions toward military options. 9 Under Kim Jong Il, the KPA in the short run seems likely to have a preferential claim to state resources. Some analysts say this now amounts to one-third of annual budget outlays, or as much as a quarter of Pyongyang's gross national product. In the yearly battles over resource allocation, the military has always prevailed, presumably because of its primary mission. But that does not tell the whole story. The KPA's economic role is considerable.

It is called on to provide the bulk of the labor force for major state construction projects. More importantly, arms sales controlled by the KPA have accounted for an estimated $500 million a year in recent years, or nearly a third of Pyongyang's annual export earnings. Lately, Pyongyang's oil crunch seems to be forcing the KPA's attention to the Middle East, reportedly to seek oil in exchange for North Korean Scud missiles and other military supplies. No less significant is the KPA's role as an instrument of foreign policy toward the Third World. In the 1980's, Pyongyang is known to have dispatched military advisors to 33 "nonaligned" countries, had a military training program for 18 countries and exported or granted weapons and other kinds of military aid to 35 countries. 10 This military diplomacy is linked to Pyongyang's overseas propaganda, which pursues sympathy and support from the Third World.

As resources available for foreign arms, crude oil, and food imports continue to dwindle, the KPA's attitudes will become pivotal to the future of the DPRK. The KPA and Kim Jong Il will have to decide whether to channel more resources to the military at the expense of the economy; whether to press for major inter-Korean arms cuts and balanced force reductions; and whether to abandon the nuclear weapons program in exchange for concessions from Washington and Seoul. 11 ECONOMIC PERFORMANCE "Kim Jong Il will have to depend on performance rather than charisma to succeed in leading North Korea in the future", says a 1991 report by a study group of prominent American scholars and specialists on Asian affairs. 12 The "performance" alludes to an economy whose lackluster record has had Pyongyang worried since the 1970's, long before the stagnant economy was severely shaken by the unexpected collapse of the Soviet bloc. In 1984, Pyongyang began approaching the West, albeit unsuccessfully, for joint ventures, expanded trade, and advanced industrial technology. Cheap labor and some abundant underground mineral ores aside, the North has had little to offer except promises of riches for would-be investors.

Nearly at the bottom in international credit ratings, it has a decidedly unappealing investment climate, given its leadership unpredictability and the secrecy of its economic data. Unable to sell its capital import and trade policy on its merits, Pyongyang appears to believe it has no option but to turn grimly inward and practice rigorous austerity. A sense of urgency was evident in Pyongyang's behind-the-scenes contacts with South Korean trading firms beginning in 1987-until then politically unthinkable in light of the North's public disparaging of South Korea's economic achievements. To make matters worse, the crumbling of the Soviet bloc proved devastating for the North's economy, which had depended on the former Soviet Union for half of its trade turnover.

Ensuing economic dislocations led to negative economic growth in the 1990-92 period, estimates ranging from -2% in 1990 to -10% in 1992.1 a In December 1991, the North announced it would set up a special economic zone. The following year, it sent an unprecedented government economic delegation to Seoul for first-hand observation of South Korean factories. Since then, the government has announced more steps to make the country's economic climate more attractive to foreign investors. Future prospects for North Korea's economic development are not encouraging, as Pyongyang seems opposed to internal reforms. For a command regime used to doing things its own way, economic reform could be very painful and possibly frightening, particularly given Pyongyang's stormy past relations with the world's major economic powers. Since North Korea's centrally planned, autarkic command economy has been an integral part of Kim Il Sung's vaunted infallible leadership, structural reform appears unlikely for now.

Incrementally adjusting the system could unravel the DPRK, as happened to the socialist regimes of eastern Europe and the former Soviet Union. "For the Kim Il Sung regime", as one analyst put it, "the lessons of history are unequivocal: to 'reform' is to die". 14 Soon the two Kims and their economic planners are bound to confront sobering questions: whether a cautious, controlled economic opening would help answer their prayer, or whether the opening should be substantial, "analogous to the Chinese model, in order to bring in sufficient amounts of technology, capital, essential imports of machinery and oil and other needed goods, and to generate the exports to pay for much of those imports". 15 These questions clearly have implications for Pyongyang's political, military, and nuclear policies. Major shortcomings seen in Pyongyang's economic future will likely remain unresolved unless the two Kims come to realize that their future lies in trade and at least some interdependence with neighbors and the rest of the world. SOUTH KOREA AND THE MAJOR POWERS Reconciliation with Seoul remains a central question for Pyongyang, but will be difficult, given the North's long history of ideological disdain for its archrival.

Kim Il Sung's own dogma leaves no room for a separatist South Korea, and demands that in any case the South must be liberated first from U.S. occupation before it can join the North in a unified confederation. Not surprisingly, North Korea has tried to bend South Korea's agenda for inter-Korean reconciliation to suit its own. 16 Substantively, it can not bring itself to accommodate the much larger South Korea, condemning its agenda for peaceful coexistence as one tantamount to "criminal treason", anti-unification, and unforgivable subservience to foreign interests. In recent years, however, the North Korean regime has come a long way in recognizing that there is an established, robust regime in Seoul it has to reckon with.

This is not surprising, given the regime's awareness of South Korea's relative power and its heightened concern about being "absorbed" by South Korea. Some believe that the more Pyongyang feels threatened, the greater the likelihood that it will appeal to Seoul for a negotiated unity. Pyongyang may even begin to court its former enemy South Korea for its own self-preservation. 17 If so, Pyongyang will obviously have to rethink its policy aimed at "independence" and "democratization" of South Korea. 18 It is possible that Pyongyang may try to have it both ways: substantive linkage with South Korea while maintaining its assertion that South Korea must change its ways first if the two Koreas are to reconcile their differences.

In any case, even as it publicly derides South Korea's "bankrupt" economy, North Korea now seems to have no qualm about asking for its investments and economic assistance. This was evident in its behind-the-scenes contacts in 1992-93 with South Korean business firms represented in Beijing, soliciting their "participation" in Pyongyang's new 7-Year plan slated to begin in 1994. North Korea might get some needed help for three reasons: South Korean firms are eager to bring an end to their own sluggish business by cashing in on the North's "cheap labor"; A perception in Seoul that South Korea should invest in the North to counter a possible Japanese economic dominance developing in the North; 19 And growing perceptions in Seoul and elsewhere that aiding the North now can be a less costly alternative to its collapse that, analysts fear, would impact severely on South Korea's own economic and political stability. Where the two Koreas are concerned, the United States, Japan, China, and Russia all have one interest in common: a stable and nuclear-free Korean peninsula. Pyongyang's relations with each of these countries will be crucial to its overall future direction. The future of Pyongyang's relationship with Washington depends on the outcome of several unresolved issues.

The most pressing now concerns Pyongyang's nuclear weapons program, the existence of which it denies while refusing to establish the veracity of its own claim by allowing IAEA inspections. Pyongyang argues that the nuclear issue can be resolved only through direct meetings between the DPRK and the United States. The U.S. position is that Pyongyang must comply with the IAEA special inspection because of the obligations it assumed under the nuclear nonproliferation treaty (NPT). A second issue involves the U.S. military presence in the South. The communist North wants U.S. troops out of the South, its argument being that the cold war is over and that the U.S. military presence is the primary source of threat to the North. However, given the triangular nature of ties among Washington, Seoul, and Pyongyang, the North's policy toward Washington is bound to affect its policy toward Seoul.

This means that unless Pyongyang's resolve to coexist with Seoul becomes credible, its demand for U.S. withdrawal could be misconstrued in Seoul as a continuing attempt to undermine South Korea. In the short run, it can be argued that the U.S. presence can be in Pyongyang's own interest as the presence could become a potentially stabilizing force as the two Koreas strive for mutual reconciliation. Russia incurred the wrath of Pyongyang in September 1990 by normalizing its relationship with South Korea. Relations have remained tense since then, despite North Korean-Russian bilateral talks in January 1993 aimed at improving the relationship and despite their interim accord that the 1961 mutual defense treaty would remain in place, until 1995, at least. 20 According to Moscow, two major problems are yet to be resolved: Pyongyang's failure to pay off a part of its debt to Moscow (totalling 3.3 billion of hard currency ruble, at the 1990 exchange rate): and North Korea's insistence that Russia should stay out of Pyongyang's dispute with the IAEA over the safeguards inspection issue.

21 Pyongyang has remained silent about China's establishment of diplomatic relations with South Korea in 1992. With its increasingly weakened economic and security ties to Russia, North Korea can ill afford to antagonize China, Pyongyang's last and perhaps only source of outside support. Despite recent unconfirmed reports of border clashes, an intense effort has been under way to cultivate China's good will and economic and military support. So far, China has sought to accommodate Kim Il Sung as far as possible within the framework of its broader domestic and foreign policy agenda. In late 1991, China reportedly promised an increase in military aid. 22 In addition, to help the North weather its crisis of oil and foreign exchange shortages, Beijing reconsidered its decision to require that goods be paid for in hard currency.

The decision was to go into effect in 1993. China also retains considerable leverage over Pyongyang's foreign affairs and has played a key role in bringing Washington and Pyongyang together for direct talks over the nuclear inspection and NPT issues. North Korea stands to receive several billion dollars from Japan as part of Tokyo's pre-World War II compensations (For injuries to Korea during Japan's occupation from 1910 to 1945). That would have been the case if its talks for diplomatic normalization, begun in 1991, had been completed. The talks were stymied by discords, notably the nuclear safeguards inspection issue. In time, there seems to be no question about Japan becoming perhaps the most important contributor to the development or resurrection of Pyongyang's economy.

That prospect remains a concern of South Korean economic planners and policymakers. 23 POSSIBLE OUTCOMES Four outcome scenarios seem likely in the 1990's: status quo, reform, hardline, and collapse. Although these scenarios are analytically discrete, they could overlap to a degree. THE STATUS QUO Suppose that North Korea believes effective internal control is crucial both to ensuring self-preservation and to facilitating reform. If so, the Kim Jong Il regime seems certain to continue rigorous political control to enforce discipline and obedience-and try to keep the North Korean society insulated from foreign ideas and cultures. Economically, however, the regime would continue to search for low-risk ways to increase productivity and improve the standard of living.

That will require a reshuffling of priorities, with more resources being allocated to economic development and away from military expenditures. Yet, as long as Kim Jong Il feels insecure in the near term, his dependence on the military will continue undiminished. The KPA is bound to retain dominant influence over the North's domestic, inter-Korean, and foreign policy issue areas. And Pyongyang is likely to continue to view the military as its only leverage with Washington and Seoul. The dilemma for Kim Jong Il will be how to balance these two conflicting priorities. The status quo would have other consequences.

Under the cloud of international suspicions about its nuclear intentions, Pyongyang will likely remain isolated and feel its security threatened, and may have trouble appearing credible in making any overtures to Seoul, Washington, and Tokyo. 24 Nor will the status quo solve Pyongyang's endemic shortages of daily necessities. REFORM This scenario assumes a moderation in Pyongyang's current pattern of economic, inter-Korean, and foreign policy approaches, since Pyongyang's trustworthiness as a partner for foreign investment and trade will be pivotal to reform. Probably the most plausible scenario of this type is a gradual, modest reform. In the near term, a major structural reform would appear ruled out in order to protect the myth of Kim Il Sung's "brilliant leadership".

There are two qualifications. A substantive reform (along with wrenching pains of uncertain transition) will come as a last resort if the political elite led by Kim Il Sung and Kim Jong Il become convinced that their collective survival depends on major changes. Another scenario for a comprehensive change postulates a possible coup by a counter elite made up of reformist generals and technocrats. Near-term reform can be essentially an extension of the current effort to increase output of consumer goods, promote tourism, provide some monetary incentives to workers and farmers, and attract South Korean and Western investment and technology.

Although these steps fall short of what outsiders might call "real reforms", their success is crucial if more comprehensive reform is to occur. In any case, the future of the regime's reforms, real or otherwise, could be gauged by the following, selective indicators: A tangible shift in resource allocation in favor of nonmilitary and light industrial sectors; Economic transparency through release of comprehensive, verifiable data; Significantly increased investment in science and technology, coupled with willingness to dispatch North Korean students, scientists, and technicians to advanced countries most actively interested in North Korea's economic productivity; Relaxation of restrictions on in-country business-related travels by foreign businesspersons and technicians including South Koreans; A substantial boost in manufacturing of labor-intensive, higher-grade consumer goods for exports to South Korea and Southeast Asian countries to earn hard currency; and Rescheduling of foreign debt payments. Reform can be measured also by Pyongyang's good faith involvement in inter-Korean confidence building in both the political and military sectors. Heading the list will be new efforts to resolve the impasse over inspections of North Korea's nuclear facilities. Other steps include initiation of a regular, controlled inter-Korean family reunions; inter-Korean mail exchanges; a joint development of tourist facilities at Mount Kum gang just north of the DMZ on the east coast, or at Mount Paektu on the North Korean-Chinese border; and a reconnection of severed railroad lines. Moderation could be also largely symbolic such as the possible disbanding of the Pyongyang-sponsored anti-South Korean political underground-the "Korean National and Democratic Front".

A moderate scenario would also have implications for North Korea's foreign policy. In dealing with the United States, North Korea could drop its fixation with anti-imperialism in favor of a more pragmatic and flexible approach. The North might initiate a formal proposal to exchange semi-diplomatic "liaison offices", embark on a good faith attempt to return the remains of American MIAs, and / or be willing to participate in a possible Northeast Asian regional security dialogue. With Japan, Pyongyang could press for an early normalization of relations with Japan, even before the resolution of old pending issues. Of course, change in relations with both Washington and Tokyo will be contingent on increased efforts to resolve differences over North Korea's nuclear program. HARDLINE A hardline scenario presumes that North Korea will forgo its fledgling reform program and intensify its coercive domestic and foreign policy efforts.

For decades, North Korea's domestic and foreign policy has tended to feature more hardline than moderate approaches. Its combative mind-set has not allowed much room for sustained soft approaches, which Pyongyang views as compromising and defeatist. Inured to decades of confrontation with South Korean and U.S. troops, Kim Il Sung and Kim Jong Il could find the notion of compromise or peaceful coexistence with Washington and Seoul unsettling and repulsive. But they might find it necessary to temper-but not abandon-their old hardline stance that sometimes worked to their advantage in dealing with Washington and Seoul. Benchmarks for a hardline scenario would include: Open defiance of international pressure regarding inspection of Pyongyang's nuclear weapons program; Intensified ideological exhortations and loyalty checks on the populace; A greater emphasis on an "all-people" or state ownership of the means of production rather than collective ownership; A primacy of Marxist and nationalist ideological motivation over pecuniary incentives in production drives; Preferential allocation of resources for heavy industry (for arms manufacturing) and the KPA; Warlike threats against Seoul and Washington; An uncompromising attitude toward South Korea, including increased united popular front tactics against the South Korean government; and Dispatching saboteurs, guerrillas, and terrorists to the South; increasing anti-government, anti-U.S. propaganda and disinformation in South Korea; and provoking incidents along the DMZ. COLLAPSE North Korea's problems mount to bring about its disintegration-even without external stimuli.

Some analysts judge that it is not whether, but when North Korea will crumble, if Pyongyang's isolation deepens and its economy continues its slump-especially if prosperity mounts among its Asian neighbors. Several collapse possibilities can be constructed. First, collapse could occur in the event of a massive popular uprising precipitated bif worsening living conditions and internal repression. Some point to unconfirmed reports of 150,000 to 200,000 prisoners of conscience, in 12 North Korean concentration camps, as evidence of sufficiently widespread dissent to cause a massive uprising. But other analysts discount such a possibility, given Pyongyang's rigid internal control. A coup could be initiated bif members of the Kim Il Sung clan opposed to Kim Jong Il; or there could be a coup bifthe military, with or without support from reformist technocrats and party functionaries.

An intra-family coup would be likely to succeed only with backing bifthe KPA and internal security agencies. A KPA coup, initiated bif junior- to mid-level officers, could rally around Kim P, yong Il, half-brother to Kim Jong Il. Observers say that these officers will be concerned not so much about overhauling the North Korean system as about improving its economic performance. A collapse in the next several years could result if the North's economic performance continues to slide, particularly if food and energy shortages worsen. If Pyongyang's ambiguity on its nuclear program continues, resulting economic sanctions could hasten this crisis. U.S. POLICY APPROACHES Current U.S. policy is designed to firmly deter North Korea's military adventurism, while exploring contacts with Pyongyang to reach a negotiated settlement of the impasse over its refusal to allow nuclear inspections. Some U.S. officials believe that current U.S. policy toward the North ought to facilitate an end to Pyongyang's isolation and help promote a stable unification acceptable to both sides of the DMZ.

But there remains substantial U.S. and South Korean suspicion about North Korea's motives in the current situation. To underscore its concern for peace and stability on the Korean Peninsula, the United States maintains 37,000 troops in the South, an unresolved legacy of the Korean War. Although the United States has never formally recognized the DPRK, many analysts argue that an isolated and brooding North Korea may increase the risks of instability for the Korean Peninsula. It is not in U.S. interests to promote the rapid collapse of North Korea, according to a finding in a recent Washington roundtable, as the shock of a precipitous disintegration could severely affect South Korea's fragile democracy. 26 Differences exist over how to draw Pyongyang out of isolation, but that U.S. policy approaches can take the form of engagement, pressure, and outwaiting. ENGAGEMENT A policy of engagement would presumably help to sound out Pyongyang's intentions, encourage its transparency and openness, and promote understanding for mutual confidence-building.

26 This would be difficult, given Pyongyang's ingrained, exclusivist attitude toward foreigners and Americans, residual antipathy toward North Korea's invasion of the South and subsequent military adventurism. U.S. diplomats since 1988 have maintained low-level contacts with North Korean counterparts in Beijing to discuss possibilities for improving U.S. -DPRK relations. Through these contacts, Washington has stressed such policy interests as progress in a North-South Korean dialogue, including the need for Pyongyang's compliance with nuclear inspections; an end to acts of terrorism; cooperation in returning remains of American soldiers missing in action during the Korean War; respect for human rights; and a cessation of incendiary and misleading rhetoric against the United States. In January 1992, Washington had its first high-level meeting with North Korea to urge Pyongyang to allow its suspected nuclear-related facilities at Yongbyon to be inspected by the IAEA. The same concern was again the focus of high-level talks in June 1993.27 At the end of four rounds of talks on June 11, North Korea said that it would temporarily "suspend" its decision to withdraw from the NPT, 28 but it still refused to agree to international inspections of its nuclear-related facilities. 29 For its part, the United States side gave "assurances against the threat and use of force, including nuclear weapons"; and pledged to respect Pyongyang's "sovereignty" as well as its "internal affairs". In time, engagement might improve U.S. -North Korean relations.

One way would be by promoting more nongovernmental educational, cultural, sports, and business contacts. Other steps could include: easing the U.S. trade embargo against the North; 90 conditional suspension of the Team Spirit exercise; upgrading the existing inter-governmental channel of dialogue; and resumption of the gradual U.S. troop withdrawal from the South. While pursuing these steps on the basis of reciprocity, the United States would presumably remain committed to South Korea's security and, equally important, receive concrete assurances from Pyongyang to renounce its policy of undermining South Korea. PRESSURE A second U.S. policy option would be to increase pressure on Pyongyang. North Korea is steeped in a garrison-state mentality that it is surrounded by unfriendly powers. This mind-set seems to have worsened since the end of the Soviet empire in 1991, as evidenced in Pyongyang's growing sensitivity to what it regards as intensified U.S. attempts to topple the Kim Il Sung regime.

And, in fact, many analysts suggest that the North would be highly vulnerable to foreign pressure, particularly economic. 31 In these circumstances, the United States could choose to underscore, with various forms of pressure, its own concerns about Pyongyang's policies and actions. Such pressure, which would be applied as appropriate to different circumstances, could include the suspension of dialogue with Pyongyang; strong support for international economic sanctions; resumption of the Team Spirit exercise; stepped up aerial surveillance on North Korea's forward military deployments along the Korean DMZ; denial of visas to North Koreans wishing to visit the United States; strict enforcement of the Trading with the Enemy Act; a tougher stance against Pyongyang's missiles sales; demand for improved human rights situations in the North; and a collective regional security stand against Pyongyang. Sale of advanced weapons to South Korea could be another form of sending a message to Pyongyang. Advocates of greater pressure believe it may deter North Korean adventurism and give the rigid Pyongyang regime tangible negative incentives to be more cooperative with the outside world. Opponents argue that it could not only stiffen Pyongyang's already truculent behavior, but could lead Pyongyang to renew its efforts to destabilize South Korea through terrorism, subversion, and infiltration.

In this view, a beleaguered North Korea would not be receptive to economic reform and political openness. OUTWAITING A third U.S. policy approach, "outwaiting", is designed to deal with Pyongyang's penchant for mixing soft and hardline approaches-and its calculated ambiguity in policy toward Washington and Seoul. It would be an eclectic counterpoint to Pyongyang's opportunistic stance designed to catch Washington and Seoul off guard, extract concessions from them, and outwait U.S. troop withdrawal from the South. Outwaiting employs aspects of both engagement and pressure. Neither embracive nor hostile, it would refrain from actions that Pyongyang could perceive as provocative or threatening, while avoiding actions that would give support or legitimacy to the Kim Il Sung / Kim Jong Il regime. Crucial to outwaiting are an informed awareness of North Korea's past tactics in dealing with Seoul and, just as important, a U.S. policy continuity.

In addition, the United States will need to consult and coordinate with Seoul and Tokyo on their respective policies toward Pyongyang so as not to allow the North to play one party off another. One potential drawback to the "outwaiting" is that without concerted international pressure, North Korea could well end up producing a nuclear weapon. In response, some argue that, left alone to chart its own "self-reliant" transition, North Korea may find that its self-preservation could be better served by collaboration than by what might be called "nuclear isolation". 1 For comprehensive background information on North Korea, consult the Selected Bibliography at the end of this report.

2 In a retrospective commentary on Soviet-North Korean economic relations, Soviet economist N. Baha nova reports that Soviet aid was responsible for construction of more than 70 facilities producing over one-fourth of the North Korean gross industrial output but that North Korea lost out to South Korea in economic competition. He blames both Moscow and Pyongyang for North Korea's "problems" partly on "the administrative-edict system of economic management... developed on Korean soil at Moscow's bidding, on Soviet lines... Its innate defects still bind [Pyongyang's] productive forces hand and foot". Moscow Pravda, August 6, 1990, in FBIS Daily Report / Soviet Union, August 10, 1990, p. 10.4 Harm P yong Choon, "National Division and the Olympics", Choson Ilbo [Seoul], October 25, 1981; and Kulloja [Pyongyang], July 1986, pp. 74-77.5 For what the temporary "suspension" means, see Engagement below. The March 12 announcement was foreshadowed by Pyongyang's argument at a February 1990 meeting of the Vienna-based International Atomic Energy Agency (IAEA), hinting at a possible North Korean withdrawal from the NPT rather than accepting safeguards inspection. Andrew Mack, "North Korea: The Nuclear Card", Far Eastern Economic Review, May 31, 1990, p. 24; and Lee Chang Choon, The Half-Century of South Korean Diplomacy Revisited.

Seoul: Nan am, 1993, p. 179. [in Korean]. 6 It is unclear whether the anti-nuclear card included a North Korea's intention to make its own bomb and, if it did, when the North began its program in earnest. An unconfirmed report suggests that Kim Il Sung's nuclear ambitions can be traced back to the 1950's. A Japanese specialist maintains, without offering evidence, that in 1959, Kim Il Sung wrote to Mao Tse-tung proposing a "joint nuclear development; Mao is said to have declined.

Kim tried again in 1964, when China succeeded in its "nuclear development program"-this time Kim asked if China could "share" its data on "nuclear bomb development" and uranium samples with North Korea. China turned him down, with a reminder that North Korea would be covered under a Chinese "nuclear umbrella", according to Katsuichi Tsukamoto, "Kim Jong Il's Recklessness", Shogun [Tokyo], May 1993, p. l 88.7 Such control includes freedom from any Soviet or Chinese meddling. A Japanese specialist maintains (citing an unidentified, Tokyo-based "East European source in September 1984) that the Soviet Union proposed (in the spring of 1984) a 5-point package of military cooperation to Pyongyang. The five points were: (1) a training in modern warfare for North Korean officers in the Soviet Union; (2) stationing in the North of a Soviet military advisory group; (3) the standardization of Soviet-North Korean 'tactics' and 'weapons'; (4) Soviet naval access to Wonsan; (5) and $200 million worth of Soviet economic aid, conditioned on Pyongyang's acceptance of the above.

North Korea is reported to have accepted (1), rejected (2), said "depends on future developments" to (3) and refused Wonsan (offering instead Naj in). See Akira Kun i, n, Change, in North Korea: Direction in Post-1984 Developments", Kai gai Jij o [Tokyo], No. 6, 1989, pp. 29-30. [In Japanese] 8 For an in-depth analysis of Kim Jong Il's "political entanglements" relating to the KPA, see Masayuki Suzuki, North Korea: Vying for Socialism and Tradition. Tokyo: Tokyo University Press, 1992, pp. 111-117. [In Japanese] 9 Paul Ensor, "Pyongyang's Military: A State of Perpetual Alert", Far Eastern Economic Review, February 2, 1984, p. 26.10 Kim Kong-joon, "The Role of the Military in North Korea's Foreign Relations", Vantage Point [Seoul], April 1933, pp. 10-11, 11 For an in-depth discussion on Pyongyang's nuclear program, see Congressional Research Service.

North Korea's Nuclear Weapons Program. By Larry A. Nitsch. CRS Issue Brief IB 91141. Continually Updated. 12 The Asia Society, The Current Situation on the Korean Peninsula.

New York: The Asia Society, 1991, p. 7.13 According to reports compiled by East European and Russian diplomats in Pyongyang, the North's GNP may have shrunk 30% in 1992. Tokyo Kyodo wire service, March 31, 1993.14 Nicholas Eber stadt, "Can the Two Koreas be One" Foreign Affairs. Winter 1992/93, p. 154.15 The Asia Society, op. cit., p. 6.16 Significantly, both Pyongyang and Seoul agree that relations between them are intra-Korean rather than inter-state but they do not agree on what that definition means. Whereas South Korea tends to view the definition as meaning a special relationship marked by peaceful coexistence analogous to the two Germany's prior to unification, North Korea tends to see the relationship more in a moralist than legalistic term.

On Kim Il Sung's expansive concept of "internal affairs" and its implications for Seoul, and possibly Washington as well, see Rinn-Sup Shinn, "North Korea: Squaring Reality with Orthodoxy", pages 114-115 in Donald N. Clark (ed. ), Korea Briefing, 1991. Boulder: Westview Press (Published in Cooperation with The Asia Society), 1991, pp. 114-115.17 A new policy twist in Pyongyang's approach to Seoul is its appeal that North and South Korea take a joint nationalist stand against Washington- appeal that has become apparent since mid-1990. For an elaboration, see Kang Sok Ju, "North and South Must Cooperate with One another in the International Arena to Defend the Common Interests of the Nation", Kulloja, December 1990, pp. 81-85.18 Independence (chajuhwa) and democratization (minjuhwa) are Pyongyang's code-words for national liberation and pro-North Korean political restructuring, respectively. Depending on the context, minJuhwa can also mean "communization". 19 FBIS Daily Report / East Asia, February 10, 1993, p. 21.20 According to a senior Russian official visiting Seoul in May 1993, Moscow seems determined to regain its former influence over North Korea by supplying crude oil and weapons to Pyongyang.

The official's public comment could be seen also an attempt to nudge South Korea toward greater economic contributions to Russia. See FBIS Daily Report / East Asia, May 28, 1993, p. 19.21 Moscow ITAR-TASS, February 5, 1993, as carried in FBIS Daily Report / SOV, February 8, 1993, p. 11.22 As noted by Kong dan Oh, North Korea in the 1990's: Implications for Future of the U.S. -South Korea Security Alliance. A RAND Note. Santa Monica: RAND, 1992, p. 20. This source, citing South Korean reports, refers to military aid in four areas: an increase in "outright" aid from $300 to $600 million; an increase in military sales from $0.6 to $1 billion; training of 5,000 North Korean military specialists in China; and "a promise" to sell Beijing's "most modern missiles" to Pyongyang.

23 "National Unification Board Urges More DPRK Trade To Counter Japan", Seoul YONHAP in English, February 10, 1993, as carried in FBIS Daily Report / East Asia, February 10, 1993, p. 21.24 A senior Japanese government official is quoted as saying that Pyongyang's decision to stay in the NPT without allowing international acceptance would be "totally useless". Asahi Shimbun, June 13, 1993. In Seoul, President Kim Young Sam said, June 12, 1993, that he would not accept Pyongyang's recent proposal for a summit conference unless the nuclear inspection issue is resolved. The Korea Herald, June 13, 1993, p. 2.

In the last several years, given Seoul's eagerness to cash in on a summit with Kim Il Sung, Pyongyang dangled a "summit card" before South Korean eyes. On this apparently divisive issue, some analysts claim that Seoul's decision to sign the December 1991 agreement on reconciliation, nonaggression, and exchange and cooperation with Pyongyang-even before the resolution of the nuclear issue- was prompted in part by the wishful thinking of the Blue House (Seoul's equivalent of the White House) that the signing would lead to a summit. See "Divided Perceptions Over Policy Toward North Korea", Chung " ang Ilbo, October 29, 1990. For a view that President-elect Kim Young Sam should not be "tempted" by a possible Pyongyang call for a summit in 1993, The Korea Herald [Seoul], December 19, 1992.25 See The Summit Council for World Peace.

American Foreign Policy and the Future of the Two Koreas: Proceedings of a Summit Council Roundtable. December 17, 1992, Washington, D.C. pp. 16-17; also American Foreign Policy, the Future of the Two Koreas, and World Peace, II. Proceedings of a Summit Council Roundtable, March 29, 1993, pp. 18-20. For an argument that Pyongyang's unravelling would be "staggeringly costly in economic, political, and human terms", see John Merrill, "Prospects for Korean Unification", a paper given at a Conference on Unification in Korea, The American University, February 18, 1993.

However, not all analysts are alarmed at the prospect of a collapse of regime in the North, seeing analogies in eastern Europe and central Asia. 26 For an opinion in favor of this approach, see Gus Constantine, "Open Channels to Pyongyang, Expert Tells U.S. ", The Washington Times, January 10, 1992, A 7; also Doug Band ow, "Its Time to End the Korean Cold War", the Christian Science Monitor, October 14, 1992, p. 19.27 For discussion of the possible impact of U.S. -North Korean negotiations on Japan and South Korea, see Divided Korea: Report of the Second Asia Society Study Mission. New York: The Asia Society, 1993, p. 33.28 Pyongyang. K CNA. June 12, 1993. The ambiguous wording, "suspension", preserves Pyongyang's option to bail out on the NPT whenever it chooses.

So far at least, Pyongyang's actions seemed to have staved off much-feared UN sanctions. The North may regard the June 12 joint statement between the two sides as a major political victory; that is because Washington's pledge to "respect" the DPRK's sovereignty and "internal affairs" may undercut the U.S. insistence that Pyongyang discontinue its human rights violations. For a South Korean perspective that North Korea registered "a diplomatic Victory" having gained the upper hand over the United States in the June negotiations, see "North Korea's, Suspension, : Back to Square One and Piles of Unresolved Tasks", Chung, ang Ilbo [Seoul], June 14, 1993; also Seoul, YONHAP, June 11, 1993.29 R. Jeffrey Smith, "N. Korea Won, t Quit Nuclear Ban Treaty", The Washington Post. June 12, 1993, A 1; and Douglas Jel, "North Korea Says It Won, t Pull Out of Arms Pact Now", New York Times, June 12, 1993.30 Currently, exporting goods to the North for humanitarian use is exempt from the embargo; in 1991, an American firm obtained a permit to export $1.2 billion worth of wheat to North Korea. The unused license was renewed for two more years in February 1993. (In-person interview with a U.S. State Department official, May 18, 1993).

31 For a summarized South Korean government study to that effect, see FBIS Daily Report / East Asia, May 7, 1993, p. 19. A Japanese source suggest that economic sanctions would deny Pyongyang an estimated equivalent of $500 million to nearly $900 million per year from pro-Pyongyang Korean resident groups in Japan; these sums would be equal to 33 to 60% of North Korea's annual government budget. For this estimate, see Katsumi Sato, "Kim Jong Il's 'Devil's Choice, ", Bunge i Shun ju [Tokyo], May 1993, pp. 205-207; Japan's connection seems significant also because 80% of $200 million total foreign investment in the North are accounted for by the pro-Pyongyang Korean groups in Japan. Chung " ang Ilbo, May 28, 1993.

For a report that Japan is playing "

Bibliography

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