Morning Walk-Through at Six-Party Meetings

Christopher R. Hill, Assistant Secretary for East Asian and Pacific Affairs
St. Regis Hotel
Beijing, China
March 15, 2007

QUESTION: Good morning.

ASSISTANT SECRETARY HILL: Good morning.

QUESTION: Ambassador Hill, the BDA issue was announced by Treasury, at the end of the regulatory action announcement at the Treasury overnight, and they did not mention anything about the $24 million [frozen North Korean assets]. You probably know more than anybody what the North Koreans’ expectations are on this issue. Do you think what was announced by Treasury will meet their expectations and that it will not prevent going forward on the nuclear deal?

ASSISTANT SECRETARY HILL: I think we still have some consultations to go. I think we will get ourselves into a situation where BDA will not pose a stumbling block to the Six-Party process.

What’s important about the announcement was the Treasury went final on its ruling and they made two, I think, very important points. The first was that they were very complimentary, very pleased with the degree of support, and the degree of cooperation, and finally the degree of reform that was undertaken by the Macau monetary authorities. I think it’s a very positive assessment of the direction that Macau is going in terms of being a very responsible financial center. So I think it is very important that the Treasury’s comment really began with a very positive assessment of the cooperation with Macau.

The second point Treasury made, of course, was the continued concerns with the long term management. Or, to put it in another way, the ownership of the Banco Delta Asia and the fact that were that long-term management to be transferred to someone else -- I mean, a responsible member of the financial community -- they would immediately have another look at the issue of whether the U.S. financial institutions can do business with BDA. So I think in this announcement they made it very clear that the concerns with BDA today do not reflect broader concerns about Macau. On the contrary, I think they are very complimentary of Macau. But the concerns reflect a concern about the continued long-term management of that bank and that, were that to be changed or to change, they would immediately have another look.

Now with respect to the second issue on the accounts, as you know, these accounts were frozen in the first place by Macau. I think what Treasury has signaled very clearly is that Treasury will provide the information that Treasury has on it, but ultimately this would be determined by the Macau monetary authorities. I know there are a lot of nuances, a lot of issues that derive from that, et cetera. But at this point I don’t have additional details of that except to say to you, as a general proposition, that I think we will get through this and continue on the very important road that we are on -- which is denuclearization in the DPRK.

QUESTION: Given your discussion with the North Koreans on this issue, are you confident that this Treasury announcement is going to satisfy their expectations?

ASSISTANT SECRETARY HILL: We have some consultation in the next couple of days, but I think we can work through this. I can’t go to the details at this point, but I think we can work through this.

QUESTION: So, at this point, that $24 million, the U.S. has no influence any longer over what happens to that $24 million?

ASSISTANT SECRETARY HILL: Again, I don’t want to get into the details of this, except to say that “final” means “final.” I think what we are trying to do in this thirty-day period is to do what we said we would do -- which is to resolve the matter from our point of view and turn this over to Macau authorities, consistent with their obligations. I don’t have much more information for that -- except to say that we will be having some consultations, I’m sure, in the really hours and days ahead, but that with the Six-Party process again getting going this weekend, I think we will be able to continue the Six Party process.

QUESTION: Would this mean that the message carried out its part of the deal and that it’s North Korea’s turn?

ASSISTANT SECRETARY HILL: That’s certainly -- I am sorry, carrying out our part of the deal? Well, let’s wait for that gentleman to answer his telephone, and then I will answer. I think we made very clear that we would like to finalize or resolve, from our point of view, this matter. It’s been some seventeen or eighteen months. That’s pretty consistent with the time it takes to (inaudible) these other cases. For example, we had a case of a bank in Latvia where it was a similar amount of time. I think there were a couple of cases in Burma and I think another one in Lebanon. All of this is designed to protect the U.S. financial system, essentially, by making sure that U.S. financial institutions are not doing business with banks that have engaged in practices that are simply not up to international standards.

I think we have fulfilled what we need to do. Obviously we need some consultation with the parties to make clear some of the details – some of the details I know you are interested in. So I think we will be able to do that. And I am sure, I am confident that the Six-Party process is going to get ahead.

QUESTION: Just to clarify then, the full resolution of the BDA issues is going to resolve the change of the ownership. Is that --

ASSISTANT SECRETARY HILL: No, the change of ownership of BDA refers to the question of whether U.S. financial institutions can do business with BDA. And under this ruling, they cannot do business with BDA or they will not be able to do business with BDA under its current long term management – i.e., its current ownership. But in its statement, the Treasury made it very clear that were that to change -- that is, were there to be a different long term management, a different ownership -- then they would immediately have another look at this issue. But I cannot say – When I say another look, it depends on who the new long-term management would be.

QUESTION: Another issue is the denuclearization working group. Could you just explain to us what that working group is intending to achieve?

ASSISTANT SECRETARY HILL: As you recall from the February agreement, we have five working groups. We did two of the bilateral working groups last week in New York and Hanoi, so we have three more to go. The one that I think is getting going today is the energy and economics assistance. What we need to do there is to work out how we can provide energy and economic assistance pursuant to the agreement.

With regard to denuclearization, what I think we will look at is the process of getting the reactor shut down and the IAEA back in place. Obviously, the report of Mr. El Baradei will be very important. In fact, I will be seeing him early tomorrow morning with my South Korean counterpart and with the Japanese as well. And we’ll get a first hand report, although he’s already, I think, spoken to the press about this.

I think the denuclearization working group will also look at the provision of the February agreement which gets into the next phase – that is, the disablement phase and the overall declaration phase. As you recall from February agreement, we have laid out that the DPRK is obliged to talk about what would be in their final declaration, their complete declaration. I think there will be some discussion on that. And then we have to figure out when the next working group is. Essentially, as a first meeting, I think there’s probably some organizational effort involved.

Then we’ll all get together at a Six-Party heads of delegation and assess the work of the five working groups and probably recommend additional meetings of the working groups. Some, I think, are more urgent than others. Probably denuclearization is important because I think there are a lot of aspects of it. We’ll have to see what information we have about the DPRK energy sector because that will obviously -- when we go to this next phase and we get into amounts of fuel oil in the neighborhood of 950,000 tons, we need to know how that’s going to be handled, what’s the storage capacity, et cetera. It becomes a lot of technical issues, which are appropriate to be done in a working group.

QUESTION: Have the North Koreans agreed to preserve the Yongbyon facility? And will it be possible to analyze their operational history and how much plutonium was produced in the past?

ASSISTANT SECRETARY HILL: Again, that has to be worked out in a working group. Clearly, when we get to the point of a declaration, a full declaration of their nuclear programs – for example, they will declare a certain amount of fissile material that they posses. That is, fissile material that’s been produced from the fuel rods at Yongbyon. So we have to have a means to verify the amount of fissile material. Verification can be done in a number of different technical ways. Clearly we have to be able to do that, and I’m sure we will be able to do that.

QUESTION: Ambassador Hill, who is chairing the U.S. side of the economic and energy working group?

ASSISTANT SECRETARY HILL: We have Sung Kim, who is director of the Korea Desk in the State Department; and Kurt Tong, who is a director in the National Security Council Staff who deals with economic issues in Asia. Kurt Tong, T-O-N-G. Sounds Chinese but it’s actually English.

QUESTION: What’s your schedule for the rest of the day?

ASSISTANT SECRETARY HILL: I’ve got to go over to the embassy. I’ve got a number of consultations with Washington. I need to make some phone calls. I need to read traffic. I’m keeping this afternoon open in anticipation of a number of bilateral meetings -- including with the Japanese delegation, who are coming in later this afternoon.

QUESTION: And just one more thing on the energy working group. There’s a report out of Seoul, I think, that the U.S. has considered providing North Korea with a small-scale generator. Can you say anything about that?

ASSISTANT SECRETARY HILL: We are committed, together with the ROK and Russia and China, to deal with the economic and energy issue in an equitable way. But we are also very much interested in what we can do on a humanitarian basis to address the needs of the DPRK people. We had some ideas for quick start humanitarian projects. One of the projects under consideration is an issue of providing some generators that could be useful in, for example, hospitals. I want to emphasize that we need to work through these issues; we need to figure out how they would be managed. So there’s a lot of work to do. We are very interested, very concerned about the humanitarian situation in North Korea, and that situation is affected by a number of things, including energy shortages.

QUESTION: And this will be discussed when?

ASSISTANT SECRETARY HILL: I think we’ll talk about it at our economic and energy working group. It’s a fairly small project at this point. I don’t want to compare this project to the issue of the 950,000 tons of fuel oil, but it’s a small project. But I think it’s indicative of our desire to move ahead, especially in the humanitarian area because we believe the North Korean people are suffering a lot.

QUESTION: (Inaudible)

ASSISTANT SECRETARY HILL: This particular issue on the generators, you’re talking about? Yes, this is an idea that has been proposed. It hasn’t been finalized. I don’t know how much of it is out there in the press, but obviously we’ll raise it and see, first of all, see what the interest is in the DPRK side. We’re not interested in providing humanitarian assistance if it’s not desired. So we have to work that through, work through the technical issues. This is why we have working groups.

Okay, thank you, good-bye.

Released on March 15, 2007