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NAPSNet Special Report

Recommended Citation

Victor Gilinsky and William Manning, "A U.S.-TYPE LIGHT WATER REACTOR FOR NORTH KOREA? THE LEGAL REALITIES", NAPSNet Special Reports, December 01, 1993, https://nautilus.org/napsnet/napsnet-special-reports/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 

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 

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 

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 

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 

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 

18. Atomic Energy Act of 1954, as amended,  127(2), emphasis 

19. Atomic Energy Act of 1954, as amended,  127(5), emphasis 

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, 

24. Atomic Energy Act,  123(5).

25. Atomic Energy Act of 1954, as amended,  131(a).

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