KEDO, UNSCOM Financial Woes May Undermine 'Watchdog' Efforts

By Medeiros, Evan S. | Arms Control Today, February 1996 | Go to article overview

KEDO, UNSCOM Financial Woes May Undermine 'Watchdog' Efforts


Medeiros, Evan S., Arms Control Today


THE KOREAN Peninsula Energy Development Organization (KEDO) and the UN Special Commission on Iraq (UNSCOM), the non-proliferation watchdog agencies overseeing the dismantlement of North Korea's and Iraq's weapons of mass destruction programs, are facing serious financial shortfalls that threaten their ability to fulfill their missions.

Established one year ago following the signing of the October 1994 U.S.-North Korean nuclear framework agreement, KEDO is to oversee the financing and construction of two light-water reactors in the North and the delivery of millions of tons of heavy fuel oil until the reactors are online. In return, Pyongyang has promised to freeze all activities associated with its suspected nuclear weapons program and eventually dismantle its weapons-making capability.

KEDO lacks the funds to pay for the 500,000 metric tons of fuel oil-worth an estimated $50 million-to be delivered to North Korea this year under the terms of the 1994 accord. Pyongyang is not required to pay for any of the oil shipments. The consortium is planning to ship 42,000 tons of oil each month until October, with two shipments set for both June and July. KEDO shipped 150,000 tons of oil to North Korea last year.

U.S. Intensifies Efforts

The United States has assumed primary responsibility for the costs of the oil shipments, and co-founding members South Korea and Japan have agreed to pay for most of the $4.5 billion reactor project, which North Korea is committed to pay back. In late January, Congress appropriated only $19 million for the shipments, 40 percent of which could be used to pay off KEDO's debt for previously delivered oil. However, according to the State Department, this money will not be available for months due to the multiple legal waivers and certifications needed when dealing with North Korea.

In response to U.S. requests for assistance, Japan agreed February 23 to provide $19 million in collateral so KEDO can meet its immediate oil commitments. But even with this help, KEDO will continue to accumulate additional debt and will run out of money by the end of the summer. Although France recently donated $2 million to KEDO, it was earmarked for the reactor construction and spent fuel disposition projects that French companies can participate in.

Some analysts say that given North Korea's dire economic situation and the reported food shortages in parts of the country, the oil shipments are the primary incentive holding together the nuclear deal. Some observers are concerned that if the consortium fails to meet its oil delivery obligations under the accord, Pyongyang will claim KEDO is in default and move to resume operation or construction of its nuclear weapon-related facilities.

KEDO is also facing a potential funding crisis involving the reactor project. …

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KEDO, UNSCOM Financial Woes May Undermine 'Watchdog' Efforts
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