A suspension of distrust: an alternative route to trust-building and denuclearization on the Korean peninsula

By Ji Hoon Hong  | Attorney-at-law and Myung-soo Lee | Director, KCPC

The euphoria over the inter-Korean summits of 2018 and the elevated expectations

surrounding the US-North Korea summits in Singapore and Hanoi have faded away into distant and fragmented memories.

The developments involving the Biden and Yoon Suk-yeol administrations indicate not only an unmistakable return to more conservative and traditional security-related posture but also the broadening and deepening of the bilateral alliance to incorporate industrial and technological agenda.

Furthermore, the Covid-19 pandemic, the Ukraine war, the Israel-Hamas war, the intensifying US-China rivalry, the resulting disruption in supply chains and the re-emergence of Cold War-like blocs and multilateral arrangements are all exacerbating the global geopolitical environment.

Against this backdrop, any talk about a negotiated approach toward the denuclearization on the Korean peninsula may seem almost idyllic.

However, the authors believe that the ongoing calcification of the international environment makes it even more imperative to redouble efforts to seek a negotiated solution, since the consequences of not doing so would become increasingly destabilizing, if not downright destructive.

Furthermore, the hardening external environment means that the successful negotiated approach must be designed to progress through the pursuit of enlightened self-interests rather than the application of pressures from outside.

Any consideration of the basic contour of such an approach should perhaps begin at the scene of the most recent collapse of negotiations, which by some accounts came tantalizingly close to a bona fide breakthrough.

Reversibility Gap

Negotiations at the US-North Korea summit in Hanoi reportedly broke down over differing conditions to the lifting of international sanctions.

From the US perspective, before international sanctions can be lifted, North Korea’s nuclear facilities or weapons should be closed down or destroyed so as to prevent the country from reversing its course toward denuclearization.

From the North Korean perspective, those conditions should not irreversibly destroy its ability to maintain or reactivate its nuclear weapons program in case things do not work out as envisioned.

While efforts to narrow those differences, which may be called a ‘reversibility gap’, may eventually be successful, the authors are skeptical.

Each side’s position is not irrational from its own standpoint and may be very difficult to change because of deeply entrenched mutual distrust.

What needs to be seriously explored is an alternate approach to bridge the reversibility gap that acknowledges, rather than ignoring or head-on attacking, such distrust.

Put another way, a new approach may be needed, which will enable a suspension of historic distrust and promote a simultaneous and gradual development of trust. What would be the facets of this new approach?

Down Payment and Transition Period

As a threshold matter, both sides should recognize that the full denuclearization of North Korea will take time and that the idea of instant accomplishment of a grand bargain may be unworkable and even counter-productive.

It must also be understood that any drawn-out denuclearization process would not be acceptable unless the core demands of each side, as described above, are respected from the start.

In other words, an alternate denuclearization process must deliver upfront the security benefits of the substantially full denuclearization of North Korea to the US, and meaningful sanctions relief to North Korea, even though North Korea’s nuclear weapons program will not be immediately dismantled in full.

This means there must be an initial ‘down payment’ by each side that is significant enough to justify the drawn-out denuclearization architecture and satisfy such core demand, allowed by ‘installment payments’ during the transitional period.

As ‘down payment’, North Korea could transfer into US custody a portion of its nuclear weapons and permanently shut down one or more of its major nuclear facilities.

In exchange, the US could agree to the lifting of international sanctions. ‘Installment payment’ would basically mean a gradual reduction of North Korea’s nuclear weapons and facilities on reaching certain pre-specified milestones, culminating in the full denuclearization of North Korea at the end of the transition period.

Joint Strategic Command

However, the exchange of such ‘down payment’ doesn’t seem to satisfy the core demand of the US.

If North Korea doesn’t dismantle its nuclear weapons program substantially in its entirety at the outset, how can the US be free from the security threats it poses?

An answer might be as simple as tying Kim Jong-un’s and South Korean President’s hands, so that during the transition period the big button on Kim Jong-un’s desk won’t be pressed unless the President and the Chairman both agree.

In more technical terms, during the transition period, the remaining nuclear arsenal of North Korea could be subject to a joint strategic command (JSC) structure administered by both North Korea and South Korea.

The integrity of the JSC structure would need to be verified at the operational technological level, rather than merely as a matter of policy decision-making.

South Korea obviously won’t allow any use of nuclear weapons against the US.

From the North’s perspective, South Korea should be expected not to veto North Korea’s right to defend itself using all means available to it in exceptional circumstances involving an unprovoked military invasion or nuclear attack against North Korea, especially if the North complies with its denuclearization commitments.

Of course, the real question remains: why would Kim Jong-un ever agree to such a JSC structure?

It may depend on details – for example, whether the JSC structure would apply to all nuclear weapons or only to long-range ones.

Kim Jong-un may not rule this out, given his ability to maintain the possession of a substantial portion of North Korea’s nuclear arsenal during the transition period and the benefits of immediate sanctions relief.

If he chooses to go along with the JSC structure, it will probably send the clearest and most persuasive signal of North Korea’s intention to improve its relations with South Korea and the US.

Jointly Supervised Accounts

As a corollary to the JSC structure, something would need to be done to ensure that foreign currency earnings of North Korea generated during the transition period wouldn’t be used for improper purposes.

As a way of regulating such financial resources and enforcing its denuclearization commitments, North Korea’s foreign currency earnings could be required to be managed through designated accounts.

Such jointly supervised accounts (JSAs) could be held at a financial institution of the highest repute and situated in a neutral jurisdiction such as the Bank for International Settlement in Switzerland.

North Korea could be required to deposit its foreign currency funds into the JSAs and allowed to withdraw funds to pay for goods or services provided by non-North Korean entities, as long as such goods or services were acquired for legitimate purposes.

The key aim for the JSA system would be to maintain as much transparency as possible

by keeping foreign currency funds outside of North Korea and disclosing the uses of such funds.

If the US and South Korea (and Japan, if it has provided or has committed to provide financial assistance to North Korea) concluded that the proposed purchase by North Korea of any such goods or services was for an improper purpose, they could have a right to block the purchase or in the case of an egregious breach of their denuclearization commitments even freeze North Korea’s assets held in the JSAs.

Any dispute between North Korea on one hand and the US or South Korea (or Japan) on the other, as to the propriety of any use of funds, could be resolved through an accelerated dispute resolution mechanism in accordance with a mutually agreeable set of principles and guidelines.

While the JSA system would be cumbersome, it could promote a transparent and rational management of foreign currency earnings by North Korea and a rule-based infrastructure for its economic and financial activities – and may even discourage corruption within the state.

Multi-Stranded Comprehensive Roadmap

Another important aspect of a drawn-out denuclearization process is that a road map for the entire process must be negotiated and agreed before any implementation step, including ‘down payment’ steps, are taken.

The negotiation process should tackle multiple strands of related issues simultaneously, rather than sequentially or disjointedly, and the end points for each strand should be agreed on as part of the macro road map for the Korean peninsula.

A negotiation process that is sequential or disjointed would inevitably create internal instability and might trip over itself at its most troublesome point.

Such strands will likely need to include North Korea’s other weapons of mass destruction and various politico-diplomatic changes, including the normalization of relations between North Korea and the US or Japan, the definitive resolution of the Korean War through the replacement of the armistice agreement with a peace treaty, the sanctions relief and economic assistance for North Korea and the inter-Korean reconciliation and cooperation.

Furthermore, a freeze of the North Korean nuclear program might be needed at the beginning of, and in consideration for, such comprehensive negotiation process.

Within the multi-stranded negotiation framework, the full disclosure of North Korea’s nuclear program might be made towards the end, rather than the beginning of, the negotiation process, which may be an important consideration for North Korea.

The authors believe that the foregoing elements could collectively represent a viable

alternate route to new trust building and denuclearization in the Korean peninsula.

1. The original version of this article first appeared on the website of the Asia Pacific Regional Forum of the International Bar Association in the summer of 2019 and is reproduced herein with certain factual updates by kind permission of the International Bar Association, London, UK. © International Bar Association.

2. Ji Hoon Hong is a retired partner of White & Case LLP, where he worked at its New York and Seoul offices. Dr. Myung-Soo Lee is a Senior Fellow of the US-Asia Law Institute of New York University School of Law and a member of the Board of Directors of Korea Council for Peace and Cooperation. The views expressed in this article are exclusively those of Mr. Hong and Dr. Lee and should not be attributed to White & Case LLP or any of its partners, associates, employees or agents or New York University School of Law or any its faculty members, directors, officers, employees or agents or Korea Council for Peace and Cooperation or any of its directors, officers, employees or agents.