North Korean Economy Watch

Daily NK
Han Young Jin
8/7/2007

Defector Choi Young Lim [pseudonym] who entered South Korea this past January was a “broker” in North Korea who would receive money from defectors and deliver it to family members in North Korea. He was exposed while mediating money and arrested but was released after giving bribes.

Choi said, “Previously, even with just evidence that there was a connection to a South Korean, you were dragged to a political prison camp and your family members were exiled. However nowadays, even if it is exposed that a defector who entered South Korea sent money, the family members aren’t severely punished.”

“These days, even if there is evidence that you received wired money, unless there is hard evidence of ties to the National Intelligence Service in South Korea the national security agents just impose a fine and release you,” he said.

According to Choi the fine is around the range of USD $2000.

Most of the foreign currency that enters North Korea these days is done through wired transfers from defectors in South Korea to family members. The money that Korean defectors send to family in the North undergoes a 20-30% processing fee and is finally delivered to the individual. The process is from the defector in South Korea through Chinese exchange broker to North Korean broker.

If USD $100 is sent from South Korea, the brokers share $30 and the remaining $70 is delivered to the family.

Until the mid-1990s, regardless of reason, North Korean authorities would take any monetary matter related to South Korea and punish them as “spies”. However, as the number of defectors concentrated in the North and South of Hamkyung increased after the food crisis, a uniform punishment became difficult to impose.

Choi said, “Even the National Security Agency doesn’t consider receiving money from family in South Korea as a spy activity. If they punish everyone, there is a side effect that even their own personal connections will be made adversaries. Thus, they can’t touch this issue.”

The emergence of taxis targeting large city wealthy classes

Trader Hwang Sang Do [pseudonym] who had traveled Chongjin, Hamheung and Shinuiju to collect trade items to export to China entered the South Korea this March.

Hwang introduced a variety of daily activity that he experienced in North Korea. “Even in Hamheung and Chongjin, taxis are operated. The base fare is around 3,000 won. Some cars have the mark that says, ‘taxi’ but some operate as passenger cars without such marks,” he said.

In the North Korean black market 1kg of gasoline (North Korea ordinarily uses kg) costs around 2,000 won. Hwang says, “There are drivers who solicit customers in front of the Chongjin Station or Hamheung Square Station. There aren’t many customers so when veering outside of central city, they receive the round trip fare.” The customers are mainly trade workers, overseas Chinese emigrants or the wealthy class.

It is known that taxi drivers refurbish used taxis or passengers cars that come in from China, then register it as an institution or business entity and start business activity. As there was an order earlier this year to remove all Japanese cars within 3 years, most of the cars that are on the street are manufactured in China.

Massage Parlors, Skincare Salons – Prostitution Secretly Going On

In large cities of North Korea, motels, massage parlors and skincare salons have been established and prostitution has been going on secretly.

Trade worker Hwang says, “There has been an increase of places in Hamheung motels that also function as saunas or skincare salons. A Chinese style massage at a massage parlor is 10,000 won (around US$3.4) per 60 minutes and there is instantaneous prostitution with female masseuse.” It is told that prostitution goes on for about 20,000 – 30,000 won.

With North Korean bathhouses, a service culture to put women at the forefront has taken place. The owners here use jargons such as “selling a bed” or “selling flowers” to feel out a customer’s intention for prostitution. There are cases where women find private homes to prostitute themselves. Hwang says that because it is easy to make money through prostitution, there has been an increase of female prostitutes.

Previously, if prostitution was exposed, you would be sentenced to forced labor. Even now, the authorities ban prostitution. However, the reality is that related entities have secretly been increasing.

On the other hand, there have been several luxury restaurants that opened in Wonsan and Hamheung. These places have implemented the Chinese service system, so the interior facilities are luxurious and female employees greet customers with a “Welcome” at the door.

Previously, only overseas Chinese emigrants or Chinese businessmen invested in such restaurants but recently, there are many cases where North Korean residents open large restaurants as well. Hwang says that as the Chinese restaurant culture that competes with taste and service infiltrated North Korea, North Korea has been undergoing a huge transformation to gain customers through service.

A service concept to “treat the customer as a king” has been emerging different from 1990s.

Korea Herald
8/5/2007

China will begin shipping 50,000 tons of heavy fuel oil to North Korea in mid-August as part of the 950,000 tons promised in exchange for the North’s disabling of its nuclear facilities in the second phase of denuclearization agreement, informed sources here said Sunday.

The agreement, signed February 13 by the two Koreas, China, Russia, Japan and the U.S., also commits North Korea to declare all of its nuclear programs.

South Korea completed Thursday the shipment of 50,000 tons of heavy fuel oil to the North in exchange for the North shutting down its nuclear facilities in the first phase of the denuclarization agreement.

“We understand China will begin providing 50,000 tons of heavy fuel oil to the North in mid August,” a diplomatic source here said. “A working group dealing with energy and economic aid slated for Aug.7-8 in Panmunjeom will decide on detailed measures of the provision.”

The working group is one of five groups launched under the February nuclear deal. Other groups deal with denuclearization, normalization of ties between North Korea and the U.S. and Japan and the establishment of a peace regime on the Korean Peninsula to replace the current armistice that ended the 1950-53 Korean War.

Daily NK
Han Young Jin
8/1/2007

With the flooding season also starting in North Korea, the electricity situation has taken an upturn with the increase in hydroelectric plants’ water, an insider source relayed on the 29th.

The source said, “Presently, close to 20 hours of electricity out of 24 hours in the day are supplied in big cities and in the provinces, electricity is provided for four to five hours. Compared to an hour a day beginning of the year, the situation has improved significantly.”

Further, he said, “After dinner, the heaven and earth became dark, but nowadays, electric light comes on every household. With the provision of electricity, the People’s Safety Agency is raising a racket inspecting whether or not civilians are watching foreign CDs.”

The source criticized the People’s Safety Agency’s behavior, “During winter, thieves who stole electric lines going into major organizations were threatened with severe punishment, but now, with hours of electric supply, the Agency is going around saying they will severely punish those who watch foreign movies.”

Most of North Korea is supplied by hydraulic power, but in the winter season, there is a shortage of water of hydroelectric dams, so the generation of power shrinks by half. On top of this, the recent production of fossil has decreased, which caused thermal power plants’ rate of operations to fall and worsened the shortage.

In North Korea, the wintertime electricity situation is normally the worst. During summer, the situation gets better, but from winter, it becomes worse again. With the recent flooding season, the precipitation rose and has caused an improvement in the electricity situation as a whole.

The source said, “Generally, with the resolution of the electricity shortage, the amount of operations of North Korean railroads has increased and the speed has become faster as well. North Korean railroads mostly operate by electricity. The railroads have overseen 90% of freights and approximately 60% of travelers.

On one hand, the source said, “The cases of people who can afford trades and use buses over trains are increasing. Traders prefer arriving on time and traveling comfortably, even if that means paying more money.”

He added, “Individuals or organizations can operate buses for three years after receiving business permits, but in three years, it is known that they offer the buses to the state and operate them by charter.”

Now available on Google Earth! 
(click above to download to your own Google Earth)

North Korea Uncovered v.3

Google Earth added a high-resolution overlay of the area between Pyongyang and Nampo.  In it, most of the Koguryo tombs listed with UNESCO are now distinguishable.  In addition, viewers can see the latest Kim Jong Il palace (including a yacht), the DPRK’s premier golf course, and the Chinese-built Taean Glass factory.  I have also made some progress in mapping out the DPRK electricity grid.

This is the most authoritative map of North Korea that exists publicly today.  Agriculture, aviation, cultural institutions, manufacturing, railroad, energy, politics, sports, military, religion, leisure, national parks…they are all here, and will captivate anyone interested in North Korea for hours.

Naturally, I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds on the more “controversial” locations. In time, I hope to expand this further by adding canal and road networks.

I hope this post will launch a new interest in North Korea. There is still plenty more to learn, and I look forward to hearing about improvements that can be made.

Yonhap
7/29/2007

South Korea on Sunday sent 22,590 tons of heavy fuel oil to North Korea, its last oil shipment to the communist neighbor under the first stage of a landmark nuclear disarmament deal.

Under a Feb. 13 deal signed with five other regional powers, North Korea agreed to shut down its nuclear reactor in Yongbyon in return for 50,000 tons of heavy fuel oil aid from South Korea.

The oil shipment, the fifth of its kind, left this southeast port at 1 a.m. and is to arrive at Sonbong Port in northeastern North Korea at 7 a.m. on Monday, South Korean officials said.

North Korea shut down the Yongbyon reactor after South Korea sent the first shipment on July 12. The February deal also calls for North Korea to disclose and disable all its nuclear programs in return for an additional 950,000 tons of oil or equivalent aid.

The six nations — the two Koreas, the U.S., China, Russia and Japan — met in Beijing earlier this month but the talks ended without setting a date to meet again.

Korea Times
7/18/2007

North Korea has ceased operations of four more nuclear facilities after closing Saturday its key nuclear reactor that produces weapons-grade plutonium, the chief of the U.N. nuclear watchdog said Wednesday.

“We have verified all the five nuclear facilities have been shut down,” Mohamed ElBaradei, head of the International Atomic Energy Agency (IAEA), was quoted as saying in Kuala Lumpur, Malaysia, by the Associated Press.

He said some of the facilities have been sealed by IAEA inspectors who are currently staying in the North to verify the shutdown and disablement of the North’s nuclear facilities.

His remark comes as a new round of six-party talks on North Korea’s nuclear disarmament is set to resume in Beijing Wednesday afternoon.

The talks involving the two Koreas, the United States, China, Japan and Russia are supposed to deal with disablement of the North Korea’s nuclear facilities and the North’s declaration of all of its nuclear programs under the second phase of a February agreement.

Washington Post Foreign Service
Edward Cody
7/15/2007; Page A01

Move Follows Delivery of Oil; U.N. Team to Verify Shutdown

After four years of off-and-on negotiations, North Korea said it began closing down its main nuclear reactor Saturday, shortly after receiving a first boatload of fuel oil aid.

The closure, if confirmed by U.N. inspectors, would mark the first concrete step in a carefully orchestrated denuclearization schedule that was agreed on in February, with the ultimate goal of dismantling North Korea’s nuclear weapons program in exchange for fuel and other economic aid, and increased diplomatic recognition.

More broadly, it constituted the first on-the-ground accomplishment of six-nation negotiations that have been grinding away with little progress since 2003 under Chinese sponsorship. The talks — including North and South Korea, Russia, Japan, the United States and China — are likely to resume next week in Beijing to emphasize the parties’ resolve to carry out the rest of the February agreement and eventually create a nuclear-free Korean Peninsula.

“We welcome this development and look forward to the verification and monitoring of this shutdown by the International Atomic Energy Agency team,” said State Department spokesman Sean McCormack, referring to a 10-member team of U.N. inspectors who flew into North Korea earlier Saturday.

Assistant Secretary of State Christopher R. Hill, the chief U.S. negotiator, warned reporters in Japan, where he was visiting in anticipation of the new talks, that moving forward into further denuclearization would probably prove as difficult as the previous four years of discussions. Given the track record, which includes several North Korean walkouts and long standoffs, some Asian and U.S. analysts have questioned whether North Korea’s leader, Kim Jong Il, has genuinely made the strategic decision to give up nuclear weapons after so many years devoted to developing them.

The next steps, as outlined in the accord, would be for North Korea to permanently disable the reactor, a plutonium facility at Yongbyon, 60 miles northeast of Pyongyang, the capital, and to reveal the full extent of the nuclear weapons, nuclear processing plants and stored nuclear material it has accumulated. That would include an accounting of any uranium enrichment efforts, which North Korea denies it has undertaken but which the Bush administration says have been part of the country’s nuclear research.

Uranium aside, U.S. intelligence estimates have said North Korea has extracted enough plutonium from the Yongbyon facility to build as many as a dozen bombs, although it is not known how many weapons the reclusive Stalinist nation’s military has put together. Last October, while the talks were again stalled, North Korea announced it had conducted its first underground nuclear test and henceforth should be considered a nuclear-armed state.

Kim’s government has based much of its power on the military, and possession of nuclear weapons has been described in North Korean propaganda as a matter of national pride. But the thought of nuclear weapons in the hands of Kim and his aides has unsettled his Asian neighbors, including China. As a result, they have persisted in the six-party negotiations despite repeated delays and abrupt changes of position by North Korean diplomats.

North Korea’s decision to go ahead with the Yongbyon closure, for instance, came only after nearly two years of wrangling over about $25 million in North Korean accounts blocked in a Macau bank.

The funds were frozen because of U.S. Treasury Department allegations in September 2005 that they were tainted by money laundering and counterfeiting. After months of insisting the Treasury accusations were a law enforcement matter separate from the nuclear talks, the Bush administration switched positions and promised to get the money liberated, leading to February’s milestone agreement. But several months more passed while Hill struggled to find a banking system that would handle the allegedly tainted money. Ultimately, the funds were transferred out of Macau via the Federal Reserve Bank of New York into the Russian banking system and, from there, transferred into North Korean accounts in a Russian trading bank near the border with North Korea

Diplomats from the six nations have suggested that, should they be successful, the North Korean nuclear negotiations could eventually evolve into a permanent forum for East Asian security cooperation, bringing North Korea into a closer relationship with its neighbors. But as Hill did in Japan on Saturday, they acknowledge they have a long road ahead before anything like that is possible.

Saturday’s announcement, while widely applauded, essentially returned the East Asian landscape to what it was in 2002, when operations had been suspended at the Yongbyon reactor under an earlier deal put together in 1994 under the Clinton administration.

U.S. diplomats said in 2002 that North Korean representatives acknowledged a secret uranium enrichment program — something North Korea has steadfastly denied since then — and the Bush administration stopped the oil shipments that were part of the 1994 deal. In return, North Korea expelled U.N. weapons inspectors, quit the nuclear Non-Proliferation Treaty and restarted operations at Yongbyon.

The North Korean government had made no formal announcement by early Sunday. But a diplomat at the North Korean U.N. mission, Kim Myon Gil, told the Associated Press that the reactor was shut down Saturday and its closure would soon be verified by the U.N. inspectors. The State Department said in Washington that it got official word from North Korea shortly after a South Korean ship pulled into Sonbong, a port in northeast North Korea, with a cargo of 6,200 tons of heavy fuel oil to power generators in the rickety North Korean electricity grid.”

The delivery represented a down payment on a scheduled 50,000 tons of fuel oil aid in return for shutting down the reactor. In all, the February accord promised North Korea up to 1 million tons of oil and other economic aid as it takes further denuclearization steps over the months ahead.

The accord also held out the prospect of improved relations with the United States, which has long been a goal of North Korea. In signing the accord, for instance, the Bush administration undertook to review whether it could remove North Korea from the list of countries said to sponsor terrorism and to engage in diplomatic discussions aimed at dissipating the hostility that remains more than half a century after the Korean War.

NY Times
CHOE SANG-HUN
7/13/2007

A South Korean ship loaded with 6,200 tons of heavy fuel oil left for North Korea on Thursday under an agreement intended to end the North’s nuclear program.

The United Nations’ chief nuclear inspector said the North was expected to begin shutting down its main nuclear facilities early next week, after four and a half years of operation, during which time enough plutonium was thought to have been produced to make several atomic bombs.

The ship is expected to arrive at Sonbong, a port in northeastern North Korea, on Saturday, the same day a team of inspectors from the United Nations International Atomic Energy Agency is scheduled to arrive in the North to monitor and verify the shutdown.

Mohamed ElBaradei, the director general of the atomic agency, told reporters in Seoul that shutting down five nuclear facilities in Yongbyon, 62 miles north of Pyongyang, the capital, would not be difficult and should be completed “within maybe a month or so.” His agency and North Korea have already agreed on the procedures.

The shutdown would be significant because it would halt the North’s only declared program for producing fuel that can be used in nuclear weapons. The five facilities to be frozen in Yongbyon, including the country’s sole operating nuclear reactor and a radiochemical laboratory, can yield more than 13 pounds of plutonium a year, enough for one atomic bomb, according to experts.

But the steps to be taken after the initial freeze of the nuclear program remain “very much open questions,” Dr. ElBaradei said. Those include whether North Korea will provide the agency with a complete inventory of its nuclear materials, and when it might return to the Nuclear Nonproliferation Treaty.

“It’s going to be a very long process,” he said. “It’s going to be a complicated process. How smoothly the rest of the operation will go very much depends on how progress will be made in six-party talks.”

Chief envoys to the six-nation nuclear talks will meet in Beijing next Wednesday and Thursday, the Chinese Foreign Ministry said. The envoys, gathering for the first talks since March, were expected to discuss moves beyond the reactor shutdown.

North Korea agreed to shut down its Yongbyon facilities in a February agreement with the United States, South Korea, China, Russia and Japan. The deal called for shipping 50,000 tons of fuel oil to North Korea, and South Korea volunteered.

It plans to complete shipping the oil by early August, starting with the installment on Thursday.

North Korea indicated last week that it would undertake the long-delayed shutdown after the first shipment arrived.

When United Nations inspectors return to Yongbyon, they will face the same problems they had faced there before they were expelled in late 2002. They will put in seals, install cameras and leave monitors to ensure that the facilities remain shut. But they will not be allowed to collect samples or access North Korean data, much less travel around the country, to determine how much nuclear material North Korea has produced in Yongbyon or elsewhere.

The five-megawatt reactor in Yongbyon began operating in the mid-1980s. When suspicions about North Korea’s nuclear activities emerged in the early 1990s, a key dispute was how much plutonium had been produced at Yongbyon until then — 90 grams, about 3 ounces, as North Korea reported to the I.A.E.A., or up to 10 kilograms, about 22 pounds, as the agency suspected.

The dispute has never been resolved, although North Korea agreed to suspend operations at Yongbyon in an agreement with the United States in 1994. The accord collapsed in late 2002, when North Korea expelled the United Nations inspectors and restarted the Yongbyon operation.

North Korea has since claimed to have taken spent fuel unloaded from the reactor and reprocessed it into plutonium. Last October, it conducted its first nuclear test.

“It remains an unanswered question: how much plutonium has North Korea so far produced?” said Lee Un-chul, a nuclear scientist at Seoul National University. “North Korea won’t easily give up its operational data.”

Bloomberg
Bradley Martin
7/10/2007

A black Volkswagen Passat with smoked windows glides down a suburban Pyongyang road. Its license plate begins with 216 — a number signifying Kim Jong-il’s Feb. 16 birthday, and a sign the car is a gift from the Dear Leader.

Even without a 216 license plate, a passenger sedan bestows VIP status in a country where traffic is sparse and imports are limited by external sanctions and domestic restrictions alike.

Just across the border, South Korea is the world’s fifth-largest automotive manufacturer. To an ordinary North Korean, though, a private car is “pretty much what a private jet is to the ordinary American,” says Andrei Lankov, author of a new book “North of the DMZ: Essays on Daily Life in North Korea.”

He estimates there are only 20,000 to 25,000 passenger cars in the entire country, less than one per thousand people.

Discouraging private car ownership is not just a matter of ideology in a communist country, Lankov said in a phone interview from Seoul, where he teaches at Kookmin University. The passenger car, usually black and chauffeur-driven, “is the ultimate symbol of the prosperity of high officials,” he says. They keep the vehicles scarce “so everybody knows they are the boss.”

Measuring, copying

North Korea moved early — shortly after the Korean War, and ahead of the South — to mass produce trucks and 4-wheel-drive Jeep-type military vehicles. Craftsmen took apart imported Soviet tractors, trucks and utility vehicles, measuring the parts to make copies.

The indigenous civilian passenger-car industry, too, mostly made knockoffs of models produced elsewhere. After importing a fleet of Mercedes-Benz 190s, the country produced replicas under local model names into the 1990s. Unfortunately, the domestically-made copies were dogged by reports about “terrible overall quality,” says Erik van Ingen Schenau, author of a new pictorial book, “Automobiles Made in North Korea.”

Lee Keum-ryung, a former used-car trader who defected from North to South Korea in 2004, agrees. The knockoffs came with “no air conditioning, no heater, and they’re not tightly built or sealed,” he says. “If you drive out of the city and return, your car will be full of dust. It’s like an oil-fueled cart.” Lee, 40, uses a pseudonym because he fears repercussions from North Korea.

Slow recovery

Material and energy shortages that accompanied a famine in the 1990s brought state-run factories to a halt. Recovery has been slow, and Schenau said he believes even domestic production of Jeep-style vehicles has been replaced by imports from Russia and China.

Imports have similarly come to dominate what passes for the passenger-car market. Used cars — mostly Japanese-made — are the mode of transit for many members of the new trading and entrepreneurial class that has emerged in the last couple of decades. Under a loophole in the country’s long-standing private-car ban, these vehicles typically enter the country disguised as gifts to North Koreans from their relatives in Japan’s Korean community, Lankov says.

Lee says “a relative abroad” helped him buy his first car when he was 23. “But as an ordinary person, I couldn’t keep it under my name, and I didn’t have a number plate of my own,” he says. “A friend was a high police official with many cars under him. I borrowed a plate.”

‘A very affluent life’

Lee had “a very affluent life” before he defected, importing 10-year-old cars from Japan and selling them both in North Korea and, for a time, across the border in China. “I had money, status,” he says. “I enjoyed everything people my age could have.”

A small passenger vehicle for which his agent paid $1,500 at the docks in Japan would sell for $2,500 to $3,000, Lee says. A bigger car — say, a Toyota Crown — might cost him $4,000 to $5,000; he would sell it for $8,000.

While Japanese trade figures show annual exports of some 1,500 passenger cars, mostly used, to North Korea in 2005 and 2006, the total for this year is zero. After Kim’s government tested a nuclear device last October, Japan placed passenger cars on a list of banned luxury exports.

Perhaps as a sign of displeasure with Japan’s sanctions, Kim ordered most Japanese cars confiscated, according to a February 2007 dispatch by South Korea’s Yonhap news agency. The order, if it indeed was issued, hadn’t been carried out by the time of a May visit to Pyongyang, when a number of Japanese cars could be seen.

German inroads

When a European-made import passes by, it’s often owned by the state, used by high officials and foreign dignitaries. Sweden’s Volvo had a hefty market share in the 1970s; Germany’s Audi and Volkswagen have made inroads lately. Mercedes is particularly well-represented in Kim’s personal fleet of hundreds of vehicles, according to Lee Young Kook, a defector who served in Kim’s bodyguard force.

In a 2003 Yonhap story, Lee said the security-conscious leader traveled in motorcades of identical cars to confuse would-be assassins and generally maintained 10 units each of any model so five would always be road-ready.

With the nation’s access to imports constricted, a relatively new player in the market, Pyonghwa Auto Works, has attempted to fill the gap. The company was created when Seoul-based Pyonghwa Motors, which began as a car importer affiliated with Rev. Sun Myung Moon’s Unification Church, teamed up as majority partner in the 70-30 venture with the North Korean state-owned trading firm Ryonbong Corp.

Kits of parts

The first assembly line was set up in 2002 at the west coast port city of Nampo to produce, from kits of parts, a version of the small Fiat Siena, called the Hwiparam (Whistle) in Korean.

So far, the factory has built about 2,000 cars and pickup trucks, according to Noh Jae Wan, a spokesman in Seoul for Pyonghwa Motors, who said it is the only manufacturer now turning out passenger cars in North Korea. According to a February announcement by Brilliance China Automotive Holdings, Pyongyhwa has agreed to let Brilliance use part of the Nampo plant to assemble Haise minibuses.

While some news accounts have mentioned the possibility that the North Korean cars may eventually be sold in the South, “this will take time,” Noh said in an interview. “It can only happen when the two Koreas reach some significant agreement on trade or other international circumstances change.”

Yonhap
Sohn Suk-joo
7/10/2007

South Korea has signed a contract with a local refinery to provide heavy fuel oil to North Korea for shipment next week as part of a multilateral aid-for-disarmament deal, the Unification Ministry said Tuesday.

The contract comes on the heels of international nuclear watchdog monitors preparing for entry into the North next week for verification of the North’s shutdown of its nuclear facilities. Reports also said China is planning to host a fresh round of six-party talks on the North’s denuclearization next Wednesday.

“On Monday, the government signed a contract with SK Energy to provide 50,000 tons of heavy fuel oil to North Korea valued at 22.2 billion won (US$22 million),” Unification Ministry spokesman Kim Nam-sik said. The contract includes transportation fees and insurance premiums.

The first shipment of 6,200 tons will be sent to North Korea next Thursday as part of a six-party deal calling for the communist state to take steps to denuclearize in exchange for economic rewards and other incentives.

The date of delivery, originally set for July 14, has been advanced as North Korea is moving to shut down its main nuclear reactor under the Feb. 13 agreement with South Korea, the United States, China, Japan and Russia. The five regional players have engaged North Korea in the six-party nuclear disarmament talks since 2003.

With the earlier than expected oil delivery, South Korea expects that North Korea will accelerate its process of shutting down its nuclear reactor at Yongbyon, about 90 kilometers north of Pyongyang.

North Korea is entitled to one million tons of heavy fuel oil as a reward for a series of steps to shut down and disable its key nuclear facilities. South Korea is responsible for the first shipment of 50,000 tons.

In late June, working-level officials from the two Koreas agreed on the shipping arrangements. The South Korean portion of the aid should be sent within two weeks. The remaining 950,000 tons, to be split equally between the five parties involved in the six-way talks, will be given when the North takes further steps to disarm.

The cost of the aid is to be shouldered equally by the other nations in the six-party talks. But Japan has vowed not to provide any assistance to the North until the decades-old issue of Japanese citizens abducted by Pyongyang is resolved.

Implementation of the February deal had been delayed pending resolution of a banking dispute over US$25 million of the North’s funds that were frozen in a Macau bank. The issue was resolved in June after the money was transferred to Pyongyang with the help of the U.S. and Russian central banks.