PROFILE

OFFICIAL NAME:
Democratic People's Republic of Korea

Geography
Area: 120,410 sq. km. (47,000 sq. mi.), about the size of Mississippi.
Cities: Capital--Pyongyang. Other cities--Hamhung, Chongjin, Wonsan, Nampo, and Kaesong.
Terrain: About 80% of land area is moderately high mountains separated by deep, narrow valleys and small, cultivated plains. The remainder is lowland plains covering small, scattered areas.
Climate: Long, cold, dry winters; short, hot, humid, summers.

People*
Nationality: Noun and adjective--Korean(s).
Population (2004): 22.7 million.
Annual growth rate: About +0.98%.
Ethnic groups: Korean; small Chinese and ethnic Japanese populations.
Religions: Buddhism, Confucianism, Shamanism, Chongdogyo, Christian; autonomous religious activities have been virtually nonexistent since 1945.
Language: Korean.
Education: Years compulsory--11. Attendance--3 million (primary, 1.5 million; secondary, 1.2 million; tertiary, 0.3 million). Literacy--99%.
Health (1998): Medical treatment is free; one doctor for every 700 inhabitants; one hospital bed for every 350; there are severe shortages of medicines and medical equipment. Infant mortality rate--25/1,000. Life expectancy--males 68 yrs., females 74 yrs (2004 est.).

Government
Type: Highly centralized communist state.
Independence: August 15, 1945--Korean liberation from Japan; September 9, 1948--establishment of the Republic of Korea, marking its separation from North Korea.
Constitution: 1948; 1972, revised in 1992 and 1998.
Branches: Executive--President of the Presidium of the Supreme People's Assembly (chief of state); Chairman of the National Defense Commission (head of government). Legislative--Supreme People's Assembly. Judicial--Central Court; provincial, city, county, and military courts.
Subdivisions: Nine provinces; four province-level municipalities (Pyongyang, Kaesong, Chongjin, Nampo); one free trade zone (Najin-Sonbong FTZ).
Political party: Korean Workers' Party (communist).
Suffrage: Universal at 17.

Economy*
GDP (2004): $40 billion (purchasing power parity); 30% agriculture, 34% industry, 36% services (2002).
Per capita GDP (2004): $1,700 (purchasing power parity).
Agriculture: Products--rice, corn, potatoes, soybeans, pulses; cattle, pigs, eggs.
Mining and manufacturing: Types--military products; machine building, electric power, chemicals; mining (coal, iron ore, etc.), metallurgy; textiles, food processing; tourism.
Trade (2003): Exports--$1.2 billion; minerals, metallurgical products, manufactures; textiles, fishery products. The D.P.R.K. also earns hundreds of millions of dollars from the sale of missiles, narcotics and counterfeit items such as cigarettes, pharmaceuticals, and U.S. currency. Imports--$2.1 billion: petroleum, coking coal, machinery and equipment; textiles, grain. Major partners--China, R.O.K., Japan, Thailand, India, Russia.
 

*In most cases, the figures used above are estimates based upon incomplete data and projections.

HISTORICAL AND CULTURAL HIGHLIGHTS
The Korean Peninsula was first populated by peoples of a Tungusic branch of the Ural-Altaic language family, who migrated from the northwestern regions of Asia. Some of these peoples also populated parts of northeast China (Manchuria); Koreans and Manchurians still show physical similarities. Koreans are racially and linguistically homogeneous. Although there are no indigenous minorities in North Korea, there is a small Chinese community (about 50,000) and some 1,800 Japanese wives who accompanied the roughly 93,000 Koreans returning to the North from Japan between 1959 and 1962. Although dialects exist, the Korean spoken throughout the peninsula is mutually comprehensible. In North Korea, the Korean alphabet (hangul) is used exclusively.

Korea's traditional religions are Buddhism and Shamanism. Christian missionaries arrived as early as the 16th century, but it was not until the 19th century that major missionary activity began. Pyongyang was a center of missionary activity, and there was a relatively large Christian population in the north before 1945. Although religious groups exist in North Korea today, the government severely restricts religious activity.

By the first century AD, the Korean Peninsula was divided into the kingdoms of Shilla, Koguryo, and Paekche. In 668 AD, the Shilla kingdom unified the peninsula. The Koryo dynasty--from which Portuguese missionaries in the 16th century derived the Western name "Korea"--succeeded the Shilla kingdom in 935. The Choson dynasty, ruled by members of the Yi clan, supplanted Koryo in 1392 and lasted until Japan annexed Korea in 1910.

Throughout its history, Korea has been invaded, influenced, and fought over by its larger neighbors. Korea was under Mongolian occupation from 1231 until the early 14th century. The unifier of Japan, Hideyoshi, launched major invasions of Korea in 1592 and 1597. When Western powers focused "gunboat" diplomacy on Korea in the mid-19th century, Korea's rulers adopted a closed-door policy, earning Korea the title of "Hermit Kingdom." Though the Choson dynasty recognized China's hegemony in East Asia, Korea was independent until the late 19th century. At that time, China sought to block growing Japanese influence on the Korean Peninsula and Russian pressure for commercial gains there. The competition produced the Sino-Japanese War of 1894-95 and the Russo-Japanese War of 1904-05. Japan emerged victorious from both wars and in 1910 annexed Korea as part of the growing Japanese empire. Japanese colonial administration was characterized by tight control from Tokyo and ruthless efforts to supplant Korean language and culture. Organized Korean resistance during the colonial era was generally unsuccessful, and Japan remained firmly in control of the Peninsula until the end of World War II in 1945. The surrender of Japan in August 1945 led to the immediate division of Korea into two occupation zones, with the U.S. administering the southern half of the peninsula and the U.S.S.R. taking over the area to the north of the 38th parallel. This division was meant to be temporary until the U.S., U.K., Soviet Union, and China could arrange a trusteeship administration.

In December 1945, a conference was convened in Moscow to discuss the future of Korea. A 5-year trusteeship was discussed, and a joint Soviet-American commission was established. The commission met intermittently in Seoul but deadlocked over the issue of establishing a national government. In September 1947, with no solution in sight, the United States submitted the Korean question to the UN General Assembly. Initial hopes for a unified, independent Korea quickly evaporated as the politics of the Cold War and domestic opposition to the trusteeship plan resulted in the 1948 establishment of two separate nations with diametrically opposed political, economic, and social systems. Elections were held in the South under UN observation, and on August 15, 1948, the Republic of Korea (R.O.K.) was established in the South. Syngman Rhee, a nationalist leader, became the Republic's first president. On September 9, 1948, the North established the Democratic People's Republic of Korea (D.P.R.K.) headed by then-Premier Kim Il Sung, who had been fostered and supported by the U.S.S.R.

Korean War of 1950-53
Almost immediately after establishment of the D.P.R.K., guerrilla warfare, border clashes, and naval battles erupted between the two Koreas. North Korean forces launched a massive surprise attack and invaded South Korea on June 25, 1950. The United Nations, in accordance with the terms of its Charter, engaged in its first collective action and established the UN Command (UNC), to which 16 member nations sent troops and assistance. Next to South Korea, the United States contributed the largest contingent of forces to this international effort. The battle line fluctuated north and south, and after large numbers of Chinese "People's Volunteers" intervened to assist the North, the battle line stabilized north of Seoul near the 38th parallel.

Armistice negotiations began in July 1951, but hostilities continued until July 27, 1953. On that date, at Panmunjom, the military commanders of the North Korean People's Army, the Chinese People's Volunteers, and the UNC signed an armistice agreement. Neither the United States nor South Korea is a signatory to the armistice per se, although both adhere to it through the UNC. No comprehensive peace agreement has replaced the 1953 armistice pact.

GOVERNMENT AND POLITICAL CONDITIONS
North Korea has a centralized government under the rigid control of the communist Korean Workers' Party (KWP), to which all government officials belong. A few minor political parties are allowed to exist in name only. Kim Il Sung ruled North Korea from 1948 until his death in July 1994. Kim served both as Secretary General of the KWP and as President of North Korea.

Little is known about the actual lines of power and authority in the North Korean Government despite the formal structure set forth in the constitution. Following the death of Kim Il Sung, his son--Kim Jong Il--inherited supreme power. Kim Jong Il was named General Secretary of the Korean Workers' Party in October 1997, and in September 1998, the Supreme People's Assembly (SPA) reconfirmed Kim Jong Il as Chairman of the National Defense Commission and declared that position as the "highest office of state." However, the President of the Presidium of the National Assembly, Kim Yong Nam, serves as the nominal head of state. North Korea's 1972 constitution was amended in late 1992 and in September 1998.

The constitution designates the Central People's Committee (CPC) as the government's top policymaking body. The CPC makes policy decisions and supervises the cabinet, or State Administration Council (SAC). The SAC is headed by a premier and is the dominant administrative and executive agency.

Officially, the legislature, the Supreme People's Assembly, is the highest organ of state power. Its members are elected every four years. Usually only two meetings are held annually, each lasting a few days. A standing committee elected by the SPA performs legislative functions when the Assembly is not in session. In reality, the Assembly serves only to ratify decisions made by the ruling KWP.

North Korea's judiciary is "accountable" to the SPA and the president. The SPA's standing committee also appoints judges to the highest court for four-year terms that are concurrent with those of the Assembly.

Administratively, North Korea is divided into nine provinces and four provincial-level municipalities--Pyongyang, Chongjin, Nampo, and Kaesong. It also appears to be divided into nine military districts.

Principal Party and Government Officials
Kim Jong Il--General Secretary of the KWP; Supreme Commander of the People's Armed Forces; Chairman of the National Defense Commission; son of North Korea’s founder Kim Il Sung
Kim Yong Nam--President of the Presidium of the Supreme People's Assembly; titular head of state
Pak Gil-Yon--Ambassador to D.P.R.K. Permanent Mission to the UN
Paek Nam Sun--Minister of Foreign Affairs

DEFENSE AND MILITARY ISSUES
North Korea now has the fourth-largest army in the world. It has an estimated 1.2 million armed personnel, compared to about 650,000 in the South. Military spending is estimated at as much as a quarter of GNP, with about 20% of men ages 17-54 in the regular armed forces. North Korean forces have a substantial numerical advantage over the South (between 2 and 3 to 1) in several key categories of offensive weapons--tanks, long-range artillery, and armored personnel carriers.

The North has perhaps the world's second-largest special operations force, designed for insertion behind the lines in wartime. While the North has a relatively impressive fleet of submarines, its surface fleet has a very limited capability. Its air force has twice the number of aircraft as the South, but, except for a few advanced fighters, the North's air force is obsolete. The North deploys the bulk of its forces well forward, along the demilitarized zone (DMZ). Several North Korean military tunnels under the DMZ were discovered in the 1970s.

Over the last several years, North Korea has moved more of its rear-echelon troops to hardened bunkers closer to the DMZ. Given the proximity of Seoul to the DMZ (some 25 miles), South Korean and U.S. forces are likely to have little warning of any attack. The United States and South Korea continue to believe that the U.S. troop presence in South Korea remains an effective deterrent. North Korea’s nuclear weapons program has also been a source of international tension (see below, Reunification Efforts Since 1971; Denuclearization of the Korean Peninsula).

In 1953, the Military Armistice Commission (MAC) was created to oversee and enforce the terms of the armistice. Over the past decade, North Korea has sought to dismantle the MAC in a push for a new "peace mechanism" on the peninsula. In April 1994, it declared the MAC void and withdrew its representatives.

FOREIGN RELATIONS
North Korea's relationship with the South has determined much of its post-World War II history and still undergirds much of its foreign policy. North and South Korea have had a difficult and acrimonious relationship from the Korean War. In recent years, North Korea has pursued a mixed policy--seeking to develop economic relations with South Korea and to win the support of the South Korean public for greater North-South engagement while at the same time continuing to denounce the R.O.K.'s security relationship with the United States and maintaining a threatening conventional force posture on the DMZ and in adjacent waters.

The military demarcation line (MDL) of separation between the belligerent sides at the close of the Korean War divides North Korea from South Korea. A demilitarized zone (DMZ) extends for 2,000 meters (just over 1 mile) on either side of the MDL. Both the North and South Korean governments hold that the MDL is only a temporary administrative line, not a permanent border.

During the postwar period, both Korean governments have repeatedly affirmed their desire to reunify the Korean Peninsula, but until 1971 the two governments had no direct, official communications or other contact.

Reunification Efforts Since 1971
In August 1971, North and South Korea held talks through their respective Red Cross societies with the aim of reuniting the many Korean families separated following the division of Korea and the Korean War. In July 1972, the two sides agreed to work toward peaceful reunification and an end to the hostile atmosphere prevailing on the peninsula. Officials exchanged visits, and regular communications were established through a North-South coordinating committee and the Red Cross.

However, these initial contacts broke down in 1973 following South Korean President Park Chung Hee's announcement that the South would seek separate entry into the United Nations, and after the kidnapping of South Korean opposition leader Kim Dae-Jung--perceived as friendly to unified entry into the UN--by South Korean intelligence services. There was no other significant contact between North and South Korea until 1984.

Dialogue was renewed in September 1984, when South Korea accepted the North's offer to provide relief goods to victims of severe flooding in South Korea. Red Cross talks to address the plight of separated families resumed, as did talks on economic and trade issues and parliamentary-level discussions. However, the North then unilaterally suspended all talks in January 1986, arguing that the annual U.S.-South Korea "Team Spirit" military exercise was inconsistent with dialogue. There was a brief flurry of negotiations that year on co-hosting the upcoming 1988 Seoul Olympics, which ended in failure and was followed by the 1987 bombing of a South Korean commercial aircraft (KAL 858) by North Korean agents.

In July 1988, South Korean President Roh Tae Woo called for new efforts to promote North-South exchanges, family reunification, inter-Korean trade, and contact in international forums. Roh followed up this initiative in a UN General Assembly speech in which South Korea offered for the first time to discuss security matters with the North. Initial meetings that grew out of Roh's proposals started in September 1989. In September 1990, the first of eight prime minister-level meetings between North Korean and South Korean officials took place in Seoul. The prime ministerial talks resulted in two major agreements: the Agreement on Reconciliation, Nonaggression, Exchanges, and Cooperation (the "Basic Agreement") and the Declaration on the Denuclearization of the Korean Peninsula (the "Joint Declaration").

The Basic Agreement, signed on December 13, 1991, called for reconciliation and nonaggression and established four joint commissions. These commissions--on South-North reconciliation, South-North military affairs, South-North economic exchanges and cooperation, and South-North social and cultural exchange--were to work out the specifics for implementing the basic agreement. Subcommittees to examine specific issues were created, and liaison offices were established in Panmunjom, but in the fall of 1992 the process came to a halt because of rising tension over North Korea's nuclear program.

The Joint Declaration on denuclearization was initialed on December 31, 1991. It forbade both sides to test, manufacture, produce, receive, possess, store, deploy, or use nuclear weapons and forbade the possession of nuclear reprocessing and uranium enrichment facilities. A procedure for inter-Korean inspection was to be organized and a North-South Joint Nuclear Control Commission (JNCC) was mandated to verify the denuclearization of the peninsula.

On January 30, 1992, the D.P.R.K. finally signed a nuclear safeguards agreement with the International Atomic Energy Agency (IAEA), as it had pledged to do in 1985 when it acceded to the Nuclear Non-Proliferation Treaty (NPT). This safeguards agreement allowed IAEA inspections to begin in June 1992. In March 1992, the JNCC was established in accordance with the Joint Declaration, but subsequent meetings failed to reach agreement on the main issue of establishing a bilateral inspection regime.

As the 1990s progressed, concern over the North's nuclear program became a major issue in North-South relations and between North Korea and the U.S. The lack of progress on implementation of the Joint Declaration's provision for an inter-Korean nuclear inspection regime led to reinstatement of the U.S.-South Korea Team Spirit military exercise for 1993. The situation worsened rapidly when North Korea, in January 1993, refused IAEA access to two suspected nuclear waste sites and then announced in March 1993 its intent to withdraw from the NPT. During the next two years, the U.S. held direct talks with the D.P.R.K. that resulted in a series of agreements on nuclear matters, including the 1994 Agreed Framework (which broke down in 2002 when North Korea was discovered to be pursuing a uranium enrichment program for nuclear weapons--see below, Denuclearization of the Korean Peninsula).

At his inauguration in February 1998, R.O.K. President Kim Dae-jung enunciated a new policy of engagement with the D.P.R.K., dubbed "the Sunshine Policy." The policy had three fundamental principles: no tolerance of provocations from the North, no intention to absorb the North, and the separation of political cooperation from economic cooperation. Private sector overtures would be based on commercial and humanitarian considerations. The use of government resources would entail reciprocity. This policy set the stage for the first (and only) inter-Korean summit, held in Pyongyang June 13-15, 2000.

R.O.K. President Roh Moo-hyun, following his inauguration in February 2003, has continued his predecessor's policy of engagement with the North, though he abandoned the name "Sunshine Policy." The U.S. supports President Roh's engagement policy and North-South dialogue and cooperation. Major economic reunification projects have included a tourism development in Mt. Geumgang, the re-establishment of road and rail links across the demilitarized zone (DMZ) and a joint North-South industrial park near the North Korean city of Kaesong (see further information below in the section on the Economy).

In 2003, the D.P.R.K. joined Six-Party Talks--including the U.S., R.O.K., Russia, China, and Japan--and agreed in September 2005, at the fourth round of the talks, to a Joint Statement of Principles, in which the six parties unanimously reaffirmed the goal of denuclearization of the Korean Peninsula in a verifiable manner (see below, Denuclearization of the Korean Peninsula). The D.P.R.K. committed to abandon its nuclear weapons and programs, and the other five participants offered humanitarian and energy assistance, steps toward normalization of relations, and regional confidence-building measures.

Relations Outside the Peninsula
Throughout the Cold War, North Korea balanced its relations with China and the Soviet Union to extract the maximum benefit from the relationships at minimum political cost. In the 1970s and early 1980s, the establishment of diplomatic relations between the United States and China, the Soviet-backed Vietnamese occupation of Cambodia, and the Soviet occupation of Afghanistan created strains between China and the Soviet Union and, in turn, in North Korea's relations with its two major communist allies. North Korea tried to avoid becoming embroiled in the Sino-Soviet split, obtaining aid from both the Soviet Union and China and trying to avoid dependence on either. Following Kim Il Sung's 1984 visit to Moscow, there was an improvement in Soviet-D.P.R.K. relations, resulting in renewed deliveries of Soviet weaponry to North Korea and increases in economic aid.

The establishment of diplomatic relations by South Korea with the Soviet Union in 1990 and with the P.R.C. in 1992 put a serious strain on relations between North Korea and its traditional allies. Moreover, the fall of communism in eastern Europe in 1989 and the disintegration of the Soviet Union in 1991 resulted in a significant drop in communist aid to North Korea. Despite these changes and its past reliance on this military and economic assistance, North Korea continued to proclaim a militantly independent stance in its foreign policy in accordance with its official ideology of juche, or self-reliance.

Both North and South Korea became parties to the Biological Weapons Convention in 1987. (North Korea is not a member of the Chemical Weapons Convention, nor is it a member of the Missile Technology Control Regime--MTCR.)

North Korea has maintained membership in some multilateral organizations. It became a member of the UN in September 1991. North Korea also belongs to the Food and Agriculture Organization; the International Civil Aviation Organization; the International Postal Union; the UN Conference on Trade and Development; the International Telecommunications Union; the UN Development Program; the UN Educational, Scientific, and Cultural Organization; the World Health Organization; the World Intellectual Property Organization; the World Meteorological Organization; the International Maritime Organization; the International Committee of the Red Cross; and the Nonaligned Movement.

In the mid-1990s, when the economic situation worsened dramatically and following the death of D.P.R.K.-founder Kim Il Sung, the North abandoned some of the more extreme manifestations of its "self reliance" ideology to accept foreign humanitarian relief and create the possibility, as noted below, for foreign investment in the North. In subsequent years, the D.P.R.K. has continued to pursue a tightly restricted policy of opening to the world in search of economic aid and development assistance. However, this has been matched by an increased determination to counter perceived external and internal threats by a self-proclaimed "military first" policy.

During the present period of limited, extremely cautious opening, North Korea has sought to broaden its formal diplomatic relationships. In July 2000, North Korea began participating in the ASEAN Regional Forum (ARF), with Foreign Minister Paek Nam Sun attending the ARF ministerial meeting in Bangkok. The D.P.R.K. also expanded its bilateral diplomatic ties in that year, establishing diplomatic relations with Italy, Australia, and the Philippines. The U.K., Germany, and many other European countries have established diplomatic relations with the North, as have Australia and Canada.

In the September 19, 2005 joint statement issued at the end of the fourth round of Six-Party Talks, the U.S. and D.P.R.K. committed to undertake steps to normalize relations (see below, Denuclearization of the Korean Peninsula). As part of the normalization process, the two nations agreed to discuss outstanding issues, including D.P.R.K. human rights abuses, biological and chemical weapons programs, ballistic missile programs and proliferation, terrorism, and illicit activities. The D.P.R.K. and Japan also agreed to take steps to normalize relations and to discuss outstanding issues of concern, including abductions. Preliminary talks between the two nations occurred in November 2005.

Terrorism
The D.P.R.K. is not known to have sponsored terrorist acts since 1987, when KAL 858 was bombed in flight. The D.P.R.K. has also been involved in the abduction of foreign citizens. In 2002, Kim Jong Il acknowledged to Japanese Prime Minister Koizumi the involvement of D.P.R.K. "special institutions" in the kidnapping of Japanese citizens between 1977 and 1983 and said that those responsible had been punished. While five surviving victims and their families were allowed to resettle in Japan in October 2002, other cases remain unresolved and the issue continues to be a major issue in D.P.R.K.-Japanese relations. Another unresolved kidnapping case involves Reverend Kim Dong Shik, a missionary working with North Korean refugees in China. In 2000, Kim, who held permanent resident status in the United States, disappeared from his home near the North Korean border. It was feared he had been kidnapped by North Korean agents for helping refugees make their way from the D.P.R.K. through China to South Korea. In October 2005, the D.P.R.K. acknowledged for the first time having kidnapped R.O.K. citizens in previous decades, claiming that several abductees, as well as several POWs from the Korean War, were still alive.
 

The D.P.R.K. has made statements condemning terrorism. In October 2000, the U.S. and the D.P.R.K. issued a joint statement in which "the two sides agreed that international terrorism poses an unacceptable threat to global security and peace, and that terrorism should be opposed in all its forms." The U.S. and D.P.R.K. agreed to support the international legal regime combating international terrorism and to cooperate with each other to fight terrorism. However, Pyongyang continues to provide sanctuary to members of the Japanese Communist League-Red Army Faction who participated in the hijacking of a Japan Airlines flight to North Korea in 1970. The D.P.R.K. became a signatory to the Convention for the Suppression of Financing of Terrorism and a party to the Convention Against the Taking of Hostages in November 2001.

U.S. POLICY TOWARD NORTH KOREA

U.S. Support for North-South Dialogue and Reunification
The United States supports the peaceful reunification of Korea on terms acceptable to the Korean people and recognizes that the future of the Korean Peninsula is primarily a matter for them to decide. The U.S. believes that a constructive and serious dialogue between the authorities of North and South Korea is necessary to resolve outstanding problems, including the North’s nuclear program and human rights abuses, and to encourage the North’s integration with the rest of the international community.

Denuclearization of the Korean Peninsula
North Korea joined the Nuclear Non-Proliferation Treaty (NPT) as a non-nuclear weapons state in 1985. North and South Korean talks begun in 1990 resulted in the 1992 Joint Declaration for a Non-Nuclear Korean Peninsula (see, under Foreign Relations, Reunification Efforts Since 1971). However, the international standoff over the North’s failure to implement an agreement with the International Atomic Energy Agency for the inspection of the North's nuclear facilities led Pyongyang to announce in March 1993 its intention to withdraw from the NPT. A UN Security Council Resolution in May 1993 urged the D.P.R.K. to cooperate with the IAEA and to implement the 1992 North-South Denuclearization Statement. It also urged all member states to encourage the D.P.R.K. to respond positively to this resolution and to facilitate a solution to the nuclear issue.

To reverse the North’s decision, the U.S. opened talks with the D.P.R.K. in June 1993 and eventually reached agreement in October 1994 on a diplomatic roadmap, known as the Agreed Framework, for the resolution of the nuclear standoff. The Agreed Framework called for the following steps:

• North Korea agreed to freeze its existing nuclear program and allow monitoring by the IAEA.
• Both sides agreed to cooperate to replace the D.P.R.K.'s graphite-moderated reactors with light-water reactor (LWR) power plants, by a target date of 2003, to be financed and supplied by an international consortium (later identified as the Korean Peninsula Energy Development Organization or KEDO).
• As an interim measure, the U.S. agreed to provide North Korea with 500,000 tons of heavy fuel oil annually until the first reactor was built.
• The U.S. and D.P.R.K. agreed to work together to store safely the spent fuel from the five-megawatt reactor and dispose of it in a safe manner that did not involve reprocessing in the D.P.R.K.
• The two sides agreed to move toward full normalization of political and economic relations.
• Both sides agreed to work together for peace and security on a nuclear-free Korean Peninsula.
• Both sides agreed to work together to strengthen the international nuclear non-proliferation regime.

In accordance with the terms of the Agreed Framework, in January 1995 the U.S. Government eased economic sanctions against North Korea in response to North Korea's freezing its graphite-moderated nuclear program under U.S. and IAEA verification. North Korea agreed to accept the decisions of KEDO, the financier and supplier of the LWRs, with respect to provision of the reactors. KEDO subsequently identified Sinpo as the LWR project site and held a groundbreaking ceremony in August 1997. In December 1999, KEDO and the (South) Korea Electric Power Corporation (KEPCO) signed the Turnkey Contract (TKC), permitting full-scale construction of the LWRs.

In January 1995, as called for in the 1994 Agreed Framework, the U.S. and D.P.R.K. negotiated a method to store safely the spent fuel from the five-megawatt reactor. According to this method, U.S. and D.P.R.K. operators would work together to can the spent fuel and store the canisters in the spent fuel pond. Actual canning began in 1995. In April 2000, canning of all accessible spent fuel rods and rod fragments was declared complete.

In 1998, the U.S. identified an underground site in Kumchang-ni, D.P.R.K., which it suspected of being nuclear-related. In March 1999, after several rounds of negotiations, the U.S. and D.P.R.K. agreed that the U.S. would be granted "satisfactory access" to the underground site at Kumchang-ni. In October 2000, during Special Envoy Jo Myong Rok's visit to Washington, and after two visits to the site by teams of U.S. experts, the U.S. announced in a Joint Communiqué with the D.P.R.K. that U.S. concerns about the site had been resolved.

As called for in Dr. William Perry's official review of U.S. policy toward North Korea, the U.S. and D.P.R.K. launched new negotiations in May 2000 called the Agreed Framework Implementation Talks. The U.S. and D.P.R.K. also began negotiations for a comprehensive missile agreement, pursuant to the Perry recommendations.

Following the inauguration of President George W. Bush in January 2001, the Administration halted the nuclear and missile talks that were under way, specifying that it intended to review the United States's North Korea policy. The Administration announced on June 6, 2001, that it was prepared to resume dialogue with North Korea albeit on a broader agenda of issues--including North Korea's conventional force posture, missile development and export programs, human rights practices, and humanitarian issues.

When U.S.-D.P.R.K. direct dialogue resumed in October 2002, a U.S. delegation confronted North Korea with our assessment that it had a uranium enrichment program. North Korean officials acknowledged to the U.S. delegation, headed by Assistant Secretary of State for East Asian and Pacific Affairs James A. Kelly, the existence of the program. Such a program violated North Korea's obligations under the NPT and its commitments in the 1992 North-South Denuclearization Declaration and the 1994 Agreed Framework. The U.S. side stated that North Korea would have to terminate the program before any further progress could be made in U.S.-D.P.R.K. relations. The U.S. side also made clear that if this program were verifiably eliminated, the U.S. would be prepared to work with North Korea on the development of a fundamentally new relationship. Subsequently, the D.P.R.K. has denied the existence of a uranium enrichment program, despite evidence to the contrary. In November 2002, the member countries of KEDO’s Executive Board agreed to suspend heavy fuel oil shipments to North Korea pending a resolution of the nuclear dispute.

In late 2002 and early 2003, North Korea terminated the freeze on its existing plutonium-based nuclear facilities at Yongbyon, expelled IAEA inspectors, removed seals and monitoring equipment at Yongbyon, quit the NPT, and resumed reprocessing of spent nuclear fuel to extract plutonium for weapons purposes. North Korea announced that it was taking these steps to provide itself with a deterrent force in the face of U.S. threats and the U.S.'s "hostile policy." Beginning in mid-2003, the North repeatedly claimed to have completed reprocessing of the spent fuel rods previously frozen at Yongbyon and publicly said that the resulting fissile material would be used to bolster its "nuclear deterrent force." There is no independent confirmation of North Korea's claims. The KEDO Executive Board suspended work on the Light Water Reactor Project beginning December 1, 2003.

President Bush has made clear that the U.S. has no intention to invade or attack North Korea. He has also stressed that the U.S. seeks a peaceful end to North Korea's nuclear program in cooperation with North Korea's neighbors, who are directly affected by the threat the nuclear program poses to regional stability and security. North Korea's neighbors have joined the United States in supporting a denuclearized Korean Peninsula.

Beginning in early 2003, the United States proposed multilateral talks among the most concerned parties aimed at reaching a settlement through diplomatic means. North Korea initially opposed such a process, maintaining that the nuclear dispute was purely a bilateral matter between the United States and the D.P.R.K. However, under pressure from its neighbors and with the active involvement of China, North Korea agreed to three-party talks with China and the U.S. in Beijing in April 2003 and to Six-Party Talks with the U.S., China, South Korea, Japan and Russia in August 2003, also in Beijing. During the August 2003 round of Six-Party Talks, North Korea agreed to the eventual elimination of its nuclear programs if the United States were first willing to sign a bilateral "non-aggression treaty" and meet various other conditions, including the provision of substantial amounts of aid and normalization of relations. The North Korean proposal was unacceptable to the United States, which insisted on a multilateral resolution to the issue and eschewed provision of benefits before the D.P.R.K. completed denuclearization. In October 2003, President Bush said he would be willing to consider a multilateral written security guarantee in the context of North Korea's complete, verifiable, and irreversible elimination of its nuclear weapons program.

China hosted a second round of Six-Party Talks in Beijing in February 2004. The United States saw the results as positive, including the announced intention of all parties to hold a third round by the end of June and to form a working group to maintain momentum between plenary sessions. China, Japan, Russia, and the R.O.K. accepted the position of the United States that the central objective of the process was the complete, verifiable, irreversible dismantlement (CVID) of the North’s nuclear programs.

At the third round of Six-Party Talks in Beijing, in June 2004, the United States tabled a comprehensive and substantive proposal aimed at resolving the nuclear issue. All parties agreed to hold a fourth round of talks by end-September 2004. Despite its commitment, the D.P.R.K. refused to return to the table, and in the months that followed issued a series of provocative statements. In February 10, 2005, Foreign Ministry statement, the D.P.R.K. declared it had “manufactured nuclear weapons” and was “indefinitely suspending” its participation in the Six-Party Talks. In Foreign Ministry statements in March, the D.P.R.K. said it would no longer be bound by its voluntary moratorium on ballistic missile launches, and declared itself a nuclear weapons state.

Following intense diplomatic efforts by the U.S. and other parties, the fourth round of Six-Party Talks were held in Beijing over a period of 20 days from July-September 2005, with a recess period in August. Discussions were substantive and useful, and resulted in all parties agreeing to a Joint Statement of Principles. In the September 19 joint statement, the six parties unanimously reaffirmed the goal of verifiable denuclearization of the Korean Peninsula in a peaceful manner. The D.P.R.K. for the first time committed to abandon all nuclear weapons and existing nuclear programs and to return, at an early date, to the NPT and to IAEA safeguards. The other parties agreed to provide economic cooperation and energy assistance. The United States and the D.P.R.K. agreed to take steps to normalize relations subject to bilateral policies, which for the United States includes our concerns over North Korea’s ballistic missile programs and deplorable human rights conditions. While the joint statement provides a vision of the end-point of the six-party process, much work lies ahead to implement the elements of the agreement. The six parties agreed to hold a fifth round of talks in Beijing in November 2005.

ECONOMY
North Korea's faltering economy and the breakdown of trade relations with the countries of the former socialist bloc--especially following the fall of communism in eastern Europe and the disintegration of the Soviet Union--left Pyongyang confronted with difficult policy choices. Other centrally-planned economies in similar straits opted for domestic economic reform and liberalization of trade and investment. Despite the introduction of wage and price reforms in 2002, the North Korean leadership seems determined to maintain tight political and ideological control. While it has increasingly tolerated markets and a small private sector as the state-run distribution system has deteriorated, the D.P.R.K. announced in October 2005 the banning of grain sales at private markets and a return to the rationing system. Another factor contributing to the economy's poor performance is the disproportionately large percentage of GNP (possibly as much as 25%) that North Korea devotes to the military.

North Korean industry is operating at only a small fraction of capacity due to lack of fuel, spare parts, and other inputs. Agriculture is now 30% of total GNP, even though output has not recovered to early 1990 levels. The infrastructure of the North is generally poor and outdated, and its energy sector has collapsed.

North Korea suffers from chronic food shortages, which were exacerbated by record floods in the summer of 1995 and continued shortages of fertilizer and parts. China and South Korea have responded by providing food on the basis of grants and long-term concessional loans in-kind. (The R.O.K. also gives fertilizer as well as materials for North-South economic cooperation projects, while China gives energy assistance.) In addition, international organizations and non-governmental organizations are providing significant amounts of food. In response to international appeals, the U.S. provided more than 2 million tons of humanitarian food aid between 1996 and 2005, the large majority of which has been delivered through the UN World Food Program. This total includes 50,000 metric tons of food that the United States pledged in response to the World Food Program’s 2005 appeal. However, in August 2005, the D.P.R.K. Government asked the United Nations to end all humanitarian aid programs by the end of 2005, saying that it would now only accept "development" aid administered by North Korean nationals.

About 80% of North Korea's terrain consists of moderately high mountain ranges and partially forested mountains and hills separated by deep, narrow valleys and small, cultivated plains. The most rugged areas are the north and east coasts. Good harbors are found on the eastern coast. Pyongyang, the capital, near the country's west coast, is located on the Taedong River.

Development Policy
In 1991, following the collapse of the Soviet Union and termination of subsidized trade arrangements with Russia, other former Communist states, and China, the D.P.R.K. announced the creation of a Special Economic Zone (SEZ) in the northeast regions of Najin, Chongjin, and Sonbong. Problems with infrastructure, bureaucracy, and uncertainties about investment security and viability have hindered growth and development of this SEZ. The government announced in 2002 plans to establish a Special Administrative Region (SAR) in Sinuiju, at the western end of the D.P.R.K.-China border. However, the government has taken few concrete steps to establish the Sinuiju SAR, and its future is uncertain. In addition, North Korea has established a special economic zone near the city of Kaesong, where R.O.K. companies are building manufacturing facilities that will employ North Korean workers (see further information under North-South Economic Ties).

North Korea implemented limited micro- and macroeconomic reforms in 2002, including sharp increases in prices and wages, changes in foreign investment laws, a steep currency devaluation, and reforms in industry and management. Though the changes have failed to stimulate recovery of the industrial sector, there are reports of changed economic behavior at the enterprise and individual level. One unintended consequence of the 2002 changes has been severe inflation. An increasing number of North Koreans now try to work in the informal sector to cope with growing hardship and reduced government support. The D.P.R.K. Government has made increasing agricultural production its top economic priority for 2005.

North-South Economic Ties
Two-way trade between North and South Korea, legalized in 1988, had risen to $697 million by 2004, much of it processing or assembly work undertaken in the North. This total includes a substantial quantity of non-trade goods provided to the North as humanitarian assistance or as part of inter-Korean cooperative projects. Approximately half of the total trade was commercial transactions and trade based on processing-on-commission arrangements. In particular, the processing-on-commission trade increased from $0.8 million in 1992 to $176 million in 2004.

Since the June 2000 North-South summit, North and South Korea have reconnected their east and west coast railroads and roads where they cross the DMZ and are working to improve these transportation routes. However, the railroads have not been tested to date. Much of the work done in North Korea has been funded by the R.O.K. The west coast rail and road are complete as far north as the Kaesong Industrial Complex (six miles north of the DMZ), but little work is being done north of Kaesong. On the east coast, the road is complete but the rail line is far from operational. Tour groups are now using the east coast road to travel from South Korea to Mt. Geumgang in North Korea. The D.P.R.K. Government had previously allowed only cruise tours from South Korea to Mt. Geumgang, The overland tours to Mt. Geumgang began in 2003, five years after the cruise tours started.

Groundbreaking on another North-South cooperation project, the Kaesong Industrial Complex (KIC) took place in June 2003. In an effort to reassure potential R.O.K. investors, in August 2003 North and South Korea ratified four agreements that they had signed in 2002: an investment guarantee agreement; an agreement to avoid double taxation; a dispute settlement agreement; and an agreement on clearance of accounting transactions. The two sides have also reached agreement on the lease arrangement, workers’ wages, telecommunications, electric power, and other matters necessary for the facility’s operations. In the complex’s pilot phase, 15 R.O.K. companies are constructing manufacturing facilities. Three of those companies had started to manufacture products as of mid-March 2005. As of April 2005, the South Korean Government approved a total of 57 "Economic Cooperation Projects" to North Korea, worth around $5.6 billion. Plans for the complex’s first phase envisage participation of 250 R.O.K. companies by 2007 and another 100 technology incentive companies by 2008.

Economic Interaction with the U.S.
The United States imposed a total embargo on trade with North Korea in June 1950 when North Korea attacked the South. U.S. law also prohibited financial transactions between the two countries. However, since 1989, and most notably in June 2000, the U.S. eased sanctions against North Korea. The U.S. now allows a wide range of commercial and consumer products to be exported to North Korea without requiring an export license. It permits imports from North Korea, subject to an approval process. The U.S. allows direct personal and commercial financial transactions between U.S. and D.P.R.K. persons. Restrictions on investment also have been eased. The U.S. Government also now permits commercial U.S. ships and aircraft carrying U.S. goods to call at D.P.R.K. ports. To date, these sanctions-easing measures have resulted in little economic activity.

The Departments of Treasury, Commerce, and Transportation have issued regulations, published in the Federal Register of June 19, 2000, addressing trade and financial transactions with North Korea. Points of Contact:

• Treasury--Dennis P. Wood, Chief of Compliance Programs, Office of Foreign Assets Control, Tel. (202) 622-2490, http://www.treas.gov/ofac;
• Commerce--Joan Roberts, Director, Foreign Policy Controls Division, Bureau of Industry and Security, Tel. (202) 482-0171;
• Transportation--Christopher T. Tourtellot, Office of the Assistant General Counsel for International Law, Tel. (202) 366-9183.