A U.S.-TYPE LIGHT WATER REACTOR FOR NORTH KOREA?
THE LEGAL REALITIES
Victor Gilinsky and William Manning
report to the
Northeast Asia Peace and Security Network
December 1/93
copyright DRAFT
On July 19, 1993, after a second round of talks in Geneva on
resolving the "nuclear issue," the United States and North Korea
issued a brief joint communique that included the following
paragraph:
Both sides recognize the desirability of the DPRK's intention to
replace its graphite-moderated reactors and associated nuclear
facilities with light water moderated reactors. As part of a
final resolution of the nuclear issue, and on the premise that a
solution related to the provision of light water moderated
reactors (LWRs) is achievable, the USA is prepared to support the
introduction of LWRs and to explore with the DPKR ways in which
LWRs could be obtained.
We can only guess at North Korea's motives in raising the LWR
matter, and its apparent specific interest in U.S. technology.
More remarkable is that, despite the obvious drawbacks, the U.S.
has evidently not rejected the idea, perhaps seeing in it the
possibility of replacing North Korea's reactors with others which
are easier to safeguard. This paper addresses the premise of the
communique paragraph: is a solution based on supplying an LWR, in
particular one of U.S. design, achievable under current law?
And, what would be the price, in terms of the effect on U.S. and
international legal antiproliferation framework, of such a
result?
Putting aside, for the moment, the question of whether this
proposal makes sense in terms of preventing the spread of nuclear
weapons -- or even in terms of North Korea's economic needs -- we
need to address three questions related to U.S. law: Can the
U.S. export nuclear parts and technology to North Korea? Can
such an export take place come from a third country that has
obtained the technology from the U.S.? And, what are the legal
and practical bars to financing a multi-billion dollar project,
in particular for the U.S.?
Because nothing can work without financing, we start with that.
Paying For The Reactor: Can the U.S. Participate?
North Korea cannot afford to buy a nuclear power plant on its
own. For all practical purposes the country is bankrupt.
Industrial production has dropped dramatically and North Korea
has halted payment on its $5 billion exterior debt. The
remittances made by the Korean community in Japan are now one of
the principal sources of foreign currency. Neither of North
Korea' historical backers, China and Russia, are likely to
provide aid on the scale needed for an LWR project. This means
that it would have to be financed by some combination of
multilateral aid institutions, which is unlikely, or by the
suppliers.
Insofar as the United States is concerned, there are a number of
significant legal barriers to providing aid to North Korea:
1. The Foreign Assistance Act provides that no foreign assistance
may be given to any Communist country. Only five countries
currently fall within that category: North Korea, Mongolia,
China, Cuba, Vietnam and Tibet. While the President can waive
this prohibition, to do so he must make a formal finding that (a)
such assistance is vital to U.S. security, (b) the recipient is
not controlled by the international Communist conspiracy, and (c)
such assistance will further promote the independence of the
recipient from international communism. North Korea has
apparently amended its constitution to drop reference to Marxism-
Leninism. This would not likely affect the operation of U.S
statutes, and would certainly not affect the operation of those
in which North Korea is specifically named. It is doubtful that
a waiver could be granted unless there were a fundamental change
in North Korea's regime.
2. The Export-Import Bank of the United States, the principal
government agency providing funding and guarantees for exports
from the U.S., is prohibited from extending credit for, or
guaranteeing, any export to any Marxist-Leninist country,
including North Korea. The President can waive this prohibition
but only if he determines that the country in question has ceased
to be a "Marxist-Leninist" country, that is, no longer maintains
a centrally planned economy based on the principles of Marxist-
Leninism and is no longer economically and militarily dependent
on the USSR or any other Marxist-Leninist country. Again, the
nature of North Korea's regime makes such a waiver unlikely.
Any Exim Bank loan or guarantee for a nuclear export must be
approved by the Board of Directors of the Bank unless, prior to
making the loan or issuing the guarantee, the Bank submits a
detailed report on the proposed transaction to Congress, thereby
giving Congress an opportunity to disallow the transaction.
Moreover, no loans may be made or guarantees extended on behalf
of any country that the Secretary of State finds has violated,
abrogated or terminated IAEA safeguards on its nuclear
installations. The President can waive this provision but only if
he determines that such waiver is in the national interest and if
he gives advance notice to Congress.
3. The Overseas Private Investment Corporation, which insures
foreign investments by U.S. persons, and the bilateral
development aid program of the U.S. government, targeted at worst
aspects of poverty in third world countries are both subject to
explicit prohibitions on aid to countries engaged in a consistent
pattern of gross violations of human rights.
Not only is direct U.S. financial aid to North Korea prohibited
but the U.S. government cannot support financial assistance to
North Korea from a variety of multinational financial
institutions:
1. The American Executive Directors of the International Bank for
Reconstruction and Development, the International Development
Association, the International Finance Corporation, the Inter-
American Development Bank, the African Development Fund, the
Asian Development Bank, the African Development Bank, the
European Bank for Reconstruction and Development, and the
International Monetary Fund are required to oppose loans or
assistance to governments which are engaged in "a pattern of
gross violations of internationally recognized human rights." The
Administration is required to consult with the relevant
Congressional committees prior to changing its policies with
regard to countries with a poor human rights record. In light of
North Korea's human rights record and its designation as a
"terrorist country," a loan or guaranty to North Korea, at least
in so far as the United States is concerned, would require formal
action by the Administration.
2. The American Executive Director of the International Monetary
Fund is also directed to actively oppose the use of any Fund
facility by any "Communist dictatorship" unless the Secretary of
the Treasury can certify to Congress that such a use would
correct that country's balance of payments position, would reduce
inefficient labor and capital rigidities and advance market-
oriented forces, and be in the best economic interest of the
majority of the people in that country. It is doubtful that
these findings could be made in the case of North Korea. The
complexity of these restrictions, the fact that North Korea is
unlikely to modify its policies in a fashion which would permit a
waiver of these prohibitions, and the political costs of
overriding these restrictions make it exceedingly unlikely that
the U.S. will provide financial assistance for the reactor.
Exporting The Reactor
The applicable export controls make the proposition even less
likely. The least of these is that any export to North Korea
would have to be specially licensed by the Secretary of the
Treasury. Since 1950, trade with North Korea has been prohibited
under the Trading With the Enemy Act of 1917, absent a special
Treasury Department license. This prohibition may be relaxed or
terminated by the President at any time without Congressional
consultation or review, though not without political cost. It
should be noted that the Department of State authorization bill
presently before Congress would require the President to make an
explicit finding that North Korea continues to be a party to, and
is in full compliance with, the Treaty on the Non-Proliferation
of Nuclear Weapons before any trade with that country can take
place.
The more formidable export controls are those specifically
applicable to nuclear equipment and fuel. No nuclear reactor or
technology can be exported from the United States unless there is
an Agreement for Cooperation between the United States and the
recipient country and the export satisfies the export control
requirements of the Nuclear Non-Proliferation Act of 1978. An
Agreement for Cooperation with an officially non-nuclear-weapon
state such as North Korea must contain, among other provisions,
the following:
(1) an undertaking to maintain safeguards on all nuclear
material and equipment exported from the United States;
(2) an undertaking to maintain IAEA safeguards on all nuclear
materials under the control of the recipient;
(3) a guaranty by the recipient that no nuclear material or
equipment obtained from the U.S. will be used for nuclear
explosives research or other military purpose; and,
(4) an agreement that the U.S. will have the right to require
the return of any equipment or nuclear material in the event that
the recipient detonates a nuclear device or terminates or
abrogates an
agreement providing for IAEA safeguards. While the President can
exempt an Agreement for Cooperation from the requirement that it
contain particular statutory requirements (provided that he finds
that the inclusion of such requirements would be seriously
prejudicial to U.S. non-proliferation objectives or would
jeopardize U.S. security), he cannot waive the requirement that
there be an Agreement for Cooperation in place. This means that
no export of equipment or nuclear fuel from the United States
could be made until such an agreement had been negotiated.
Needless to say, that could be a lengthy process.
Assuming that an Agreement for Cooperation with North Korea is in
place, any export of a nuclear power plant, equipment, or fuel
would have to be licensed by the U.S. Nuclear Regulatory
Commission. At the outset, it should be noted that the NRC's
regulations list North Korea as one of the four countries to
which nuclear exports are embargoed. Presumably, the NRC would
respond favorably to an Executive Branch request to either waive
the embargo or drop North Korea from the list of embargoed
countries. It is possible that the Commission would conclude
that a rule-making proceeding is needed to modify the list of
embargoed countries.
In light of North Korea's track record with IAEA safeguards, the
NRC export licensing proceeding may present certain difficulties.
While the Executive Branch Departments are generally permitted to
focus on the foreign policy benefits of allowing a particular
export, the NRC is charged with making a finding "based on a
reasonable evaluation of the assurances provided and other
information available to the Federal Government" that the
statutory criteria governing nuclear exports have been met.
Because of the quasi-judicial nature of the Commission's
proceedings, and because the Commissioners are always aware of
the possibility of having to defend their decision before
Congressional committees, they are likely to be fairly strict in
applying the criteria.
The criteria which are likely to give the greatest difficulty to
the Commission are the following:
1. The requirement that the Commission find that IAEA safeguards
"will be applied" to the nuclear fuel and equipment exported, as
well as to any plutonium produced through the use of such
material and equipment. This is an explicit finding that there
is every reason to believe that safeguards will be applied to the
reactor throughout its several decade useful life, and in
perpetuity to all the fuel that goes through it. In light of
North Korea's on-again, off-again application of safeguards at
its present nuclear facilities, it would seem that there would
have to be substantial changes in North Korean policies,
personnel or institutions before the Commission would have a
basis for asserting that it expects North Korea to abide by its
commitment to apply safeguards.
2. The requirement for a Commission finding that no nuclear fuel
or equipment exported "will be used" for nuclear explosives
research. Once again, North Korea's refusal to apply IAEA
safeguards, as well as the recent experience with the Iraqi
nuclear bomb program, would seem to make it difficult for the
Commission to assert that it expects the North Koreans not to
make use of the exported fuel and equipment for nuclear
explosives research.
3. The requirement that the NRC determine that no nuclear fuel
exported to North Korea and no plutonium formed through
irradiation of that fuel "will be reprocessed"or altered in form
or content without the prior approval of the United States.
North Korea's propensity, since 1945, for taking large risks to
achieve goals of dubious rationality should give the Commission
reason to pause before answering in the affirmative. Is it
likely that the North Korean regime, if it perceived itself to be
threatened, would, in the absence of a major change, ask for U.S.
permission prior to reprocessing its spent fuel to obtain
plutonium for bomb use?
The requirement for an export license may be waived if the
Secretary of State determines that the proposed export will not
be inimical to the common defense and security or that any export
in the category in which the proposed export belongs would not be
inimical to the common defense and security because it lacks
significance for nuclear explosive purposes. A nuclear reactor
and nuclear fuel could not reasonably be described as lacking
nuclear explosives significance as they are the source of
plutonium, one of the two nuclear explosives used in bombs.
If the Commission does not approve an export license application,
the President may, after reviewing the Commission's decision,
nonetheless authorize the export by means of an Executive order
if he determines that withholding the proposed export would be
"seriously prejudicial to the achievement of United States non-
proliferation objectives, or would otherwise jeopardize the
common defense and security." The statute provides that the
President's action is subject to review by Congress, which is
given sixty days during which to disallow the export by means of
a concurrent resolution.
In order to authorize an export, the Commission must also find
that IAEA safeguards are being maintained with regard to all
nuclear activities in North Korea at the time of the export.
North Korea's reluctance to permit IAEA inspections to take
place, and its refusal to permit broader inspections of suspected
nuclear sites (not to mention the IAEA's experience with Iraq),
will raise the question of whether North Korea has, in fact,
disclosed the existence of all its nuclear facilities even after
it has promised to do so. While the Commission may be persuaded
by the intelligence agencies that all present North Korean
nuclear facilities have been identified, it will be difficult, in
the absence of changes in North Korea, for the Commission to
explain the grounds for its confidence that all nuclear
facilities in North Korea will be subject to IAEA safeguards in
the future.
In view of the foregoing legal requirements, there is significant
doubt that the Nuclear Regulatory Commission would approve the
exportation of a nuclear power plant, components and fuel to
North Korea. If the export application were not approved by the
NRC, it is likely that granting a waiver of one or more of the
nuclear export licensing criteria would entail significant
political costs for the Administration unless there were a wide
consensus on the desirability of authorizing the export of a
nuclear power plant to North Korea.
Authorizing a Reexport by Another Country
If an export from the United States is effectively impossible in
view of the legal and political difficulties such a proposal
would encounter, is an export of U.S.-type LWR technology to
North Korea possible from an overseas manufacturer, and could the
requisite financing be arranged? European assistance tied to a
European export is conceivable but unlikely. That leaves Japan
and South Korea as the most plausible sources of aid. Both
countries obviously have a great interest in pacifying the North
Korean regime. Japan might package its aid as a form of war
reparations; it is not clear whether this would make the aid more
or less politically acceptable in Japan. South Korea would have
the greatest incentive to provide the financing as it could
reasonably expect to inherit the reactor in the event of Korean
reunification. South Korea has not itself manufactured reactors,
but it owns several U.S.-type nuclear plants and South Korean
firms have had responsibility for large parts of some of the
construction projects. South Korea could probably handle an LWR
project in the North, perhaps with some outside assistance.
What would be the restrictions on the use of U.S. nuclear
technology? Under its Agreements for Cooperation, the United
States retains the right to approve any retransfer of a nuclear
power plant, or nuclear equipment, fuel or technology exported
from the United States. The statutorily prescribed standard for
approving a retransfer of equipment, fuel or technology is
considerably less demanding than that which would be required for
an export as the Secretary of Energy is required only to
determine that the retransfer "will not be inimical to the common
defense and security." The Department of State has lead
responsibility for determining U.S. policy with regard to such
retransfers although the decision to approve such an arrangement
is formally made by the Secretary of Energy. The Department of
Defense, the Nuclear Regulatory Commission, and the Arms Control
and Disarmament Agency must be consulted before a subsequent
arrangement is entered into.
From the perspective of the Executive Branch, it would be
simpler, and politically less risky, to authorize the reexport of
U.S.-provided nuclear technology, components and fuel to North
Korea than to try to export these items directly from the United
States. Nonetheless, authorization of a retransfer would require
an overt act of approval by the U.S. As we have not investigated
the domestic legislation of the other potential suppliers, we are
not expressing any views on the feasibility of such retransfer
from that perspective. We would only note that if South Korea is
persuaded that providing an LWR to North Korea is the best means
of getting North Korea to abandon its nuclear bomb program, it
would find it relatively easy to authorize the necessary exports
to North Korea.
If South Korea, for example, wanted the assistance of U.S.
engineering firms, this would also require U.S. government
approval. Under current Department of Energy interpretations of
federal regulations, any engineering services which would be
provided by U.S. companies in connection with the export of a
power reactor to North Korea would require a license from
Department of Energy. Under the premise that the President had
made a decision to support the supply of an LWR to North Korea,
such an approval would presumably be forthcoming.
Many nuclear vendors and suppliers have expressed concern about
the liabilities that could arise form the equipment and services
provided to countries, such as the Commonwealth of Independent
States, whose political and legal systems are in flux. This is
obviously a significant concern which could deter many suppliers
from participating in a project such as a North Korean LWR. To
deal with this concern, North Korea would have to enact
legislation governing claims arising out of nuclear accidents and
any contracts between North Korea and its suppliers would have to
address the scope of their potential liability to the North
Korean state. Presumably, any country entering into an agreement
to provide nuclear assistance to North Korea would also want to
limit its exposure to liability. Does it make sense to give North
Korea an LWR?
In considering whether it makes sense to stretch laws and
regulations in order to give North Korea an LWR -- and, as a
practical matter, it would be a gift -- it is vital to get back
to basics. The "nuclear issue" to which the joint communique
refers obliquely concerns North Korea's failure to meet its
obligations as a signatory of the Nonproliferation Treaty. So
far as we can tell, and as is widely believed, North Korea has
been cheating with the obvious purpose of obtaining plutonium for
nuclear weapons. It now resists inspection of waste sites by the
International Atomic Energy Agency, apparently because such
inspections would demonstrate that North Korea has, in fact, made
false declarations to the Agency. When pressed by the IAEA,
North Korea gave notice of its withdrawal from the Nuclear Non-
Proliferation Treaty ("NPT") within 90 days.
In retrospect, we can see that North Korea never approached its
NPT responsibilities, which it accepted with its 1985 signature,
straightforwardly. It dragged out the process of providing the
IAEA with a list of declared facilities and initiating IAEA
inspection. (It must be added that the IAEA allowed the process
to drag on and, until a couple of years ago, gave the North
Koreans every reason to think the international inspections were
superficial and could be easily circumvented.) Fortunately, the
IAEA did in time inspect carefully and identify discrepancies in
North Korean accounts. Everyone is now on notice that the North
Koreans are in violation of the NPT, although the Agency has so
far only declared North Korea to be in noncompliance with its
obligations to the IAEA.
Still, it is the first time this has ever happened. It is the
first instance in which the IAEA has identified an illicit bomb
program. (In the case of Iraq, the agency did not focus on this
possibility until after the Gulf War.) It is also the first case
of an NPT party threatening to withdraw from the Treaty. The
North Korean situation is, as Robert Manning recently said, a
"benchmark test" of the whole international system of treaties,
agreements and understandings for preventing the spread of
nuclear weapons.
In these circumstances, how does one reduce the possibilities of
a North Korean bomb (assuming we are not too late) and at the
same time make sure the rest of the world, including any other
would-be bombmaker, learns the right lesson. Up to now, the U.S.
and international emphasis has been on convincing the North
Koreans to remain members of the NPT. The fear in official
nuclear establishments is that a withdrawal from the NPT by North
Korea, especially coming so close to the 1995 NPT Review
Conference, would be a serious blow to the goal of universal
Treaty adherence. This accounts, in part, for the relatively
soft line the United States has taken with North Korea. The
emphasis has been on bringing North Korea back into compliance
with its Treaty Obligations. This means cooperation with the
IAEA, allowing special inspections of the disputed waste sites to
proceed, and abiding by the bilateral North and South Korean
declarations on maintaining the Korean Peninsula as a non-
nuclear zone.
It is significant that there has been no hint in the discussions
or communiques of imposing stricter than normal safeguards on
North Korea because of its past violations. On the contrary, the
joint communique speaks of "nondiscriminatory" application of
IAEA inspections. In fact, North Korea is more or less being
promised that past violations will be overlooked if it agrees to
play by the rules from now on. Such sanctions as have been
discussed have been mentioned only in the context of continued
North Korean violations. It is not clear how far the U.S. will
go in demanding that North Korea dismantle its nuclear bomb
program. The message is that to protect the "NPT regime," the
Treaty will be enforced prospectively, but not retrospectively.
Perhaps this is all that can realistically be accomplished in the
context of the Treaty in view of its weakness. Still, wiping the
slate clean of North Korea's past sins if it will only return to
the fold gives the impression that universal adherence to the
Treaty is being obtained at the cost of relaxing its enforcement.
To go further, to reward the sinner, for example by providing an
LWR, would in effect penalize those who have complied in good
faith. It would seriously weaken the Treaty. Additionally, as
the U.S. would have to be an overt accomplice to an LWR
technology transfer to North Korea, if this is to happen, a
further result of such an arrangement would inevitably an
impression of U.S. weakness.
It is against this backdrop that we see the proposal to transfer
LWRs to North Korea. We have not addressed the practical
questions of whether it makes economic sense to introduce large
reactors into North Korea. However, given North Korea's weak
economy and the inefficient use of its current electricity
supply, an expensive prestige project such as a large nuclear
power plant does not seem a very sensible choice on these
grounds, either. While North Korea may not be sensitive to
market tests, that does not mean that we should not be, as well.
In any event, the transfer of an LWR to North Korea is an idea
that should be put on the shelf until such time as North Korea
has transformed itself into a much more open and responsible
state. The notion that nuclear technology is an effective
pacifier for unruly countries should have died with the Atoms for
Peace Program. It is both outdated and dangerous. REFERENCES
REFERENCES 1. Reuter's wire service, July 19, 1993.
2. The Foreign Assistance Act of 1961, as amended, 22 U.S.C.A.
2151 et seq., 2370(f).
3. Alexandre Y. Mansourov, "Bringing North Korea Back In: a
Creeping Elite Revolution?,"
paper prepared for Michigan State University Conference,
"Transformation in the Korean
Peninsula toward the 21st Century: Peace, Unity, and Progress,"
July 7-11, 1993.
4. One might get a different impression from a New York Times
article of November 29,
1993, "U.S. Laws Catch Up to the New Russia," but that article
deals only with changes
that affect Russia and other post-Soviet republics.
5. 12 U.S.C.A. 635(b)(2). The other countries currently
classified as Marxist-Leninist are Cambodia, Afghanistan, Laos,
China, Cuba, Yugoslavia, Vietnam and Tibet.
6. 12 U.S.C.A. 635(b)(3).
7. 12 U.S.C.A. 635(b)(4).
8. 22 U.S.C.A. 2199 (i) and 2151n.
9. International Financial Institutions Act, 22 U.S.C.A. 262d.
10. Department of State determination of January 20, 1988.
11. Section 43 of the Bretton Woods Agreement Act, as amended, 22
U.S.C.A. 286aa.
12. 50 U.S.C.A. App. 5; 31 CFR 500.201 et seq.
13. Section 710 of the pending authorization bill for the
Department of State, proposed by
Senator Robb.
14. 22 U.S.C.A. 3201 et seq..
15. Atomic Energy Act of 1954, as amended, 123; 42 U.S.C.A.
2073, 2074, 2077, 2094, 2112, 2121, 2133, 2134, 2164.
16. Atomic Energy Act of 1954, as amended, 126(a)(2).
17. Atomic Energy Act of 1954, as amended, 127(1), emphasis
added.
18. Atomic Energy Act of 1954, as amended, 127(2), emphasis
added.
19. Atomic Energy Act of 1954, as amended, 127(5), emphasis
added.
20. Atomic Energy Act of 1954, 126(b)(2).
21. In Immigration and Naturalization Service v. Chadha, 1983,
462 U.S. 919, 103 S.Ct. 2764,77 L.Ed.2d 317, the Supreme Court
declared unconstitutional provisions of former 8 U.S.C.
1254(c)(2) which authorized a House of Congress, by resolution,
to invalidate an action of the Executive Branch. Whether the
provisions of section 126 of the Atomic Energy Act providing for
Congressional invalidation of a Presidential waiver would be
found unconstitutional under that analysis is beyond the scope of
this paper.
22. Atomic Energy Act of 1954, as amended, 128.
23. For a discussion of South Korea's nuclear export potential
and its export procedures see: Peter Hayes, "South Korea," in
W.C. Potter, ed., International Nuclear Trade and
Nonproliferation, Lexington Books, Lexington, Massachusetts,
1990.
24. Atomic Energy Act, 123(5).
25. Atomic Energy Act of 1954, as amended, 131(a).
A U.S.-TYPE LIGHT WATER REACTOR FOR NORTH KOREA? THE LEGAL REALITIES
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