Seoul Denies $40 Billion N.Korea Deal 'for Now'

      July 22, 2009 10:07

      South Korea has denied a report in the Financial Times that it has set up a US$40 billion aid fund to entice North Korea back to denuclearization talks. Officials here said the report resulted from a misunderstanding that a campaign pledge by President Lee Myung-bak had been turned into policy.  

      But oddly, South Korean officials said the article was "not necessarily incorrect from a long-term perspective." One key government official was even more forthcoming. "With South Korea and the United States reaching an understanding on a comprehensive package that envisages putting all issues on the negotiating table, we need to offer North Korea a bunch of carrots if it decides to completely abandon its nuclear program," he said. President Lee's 'Vision 3000: Denuclearization and Openness' concept must form the framework of those incentives. And the FT report appeared just as this idea was gaining traction at the international level, according to the official.

      The "Vision 3000" promises to help North Korea boost its per-capita gross national income to $3,000 if it abandons its nuclear program and opens up. 

      The FT article said South Korea has drawn up a $40 billion aid fund to entice North Korea back to talks, "putting hard figures on previously vague promises of aid." It said the incentives would receive "input from the Asian Development Bank, World Bank and governments."

      The source of the article was U.S. investment bank Goldman Sachs. According to South Korea's Foreign Ministry and the Financial Services Commission, the South Korean government and Goldman Sachs held a video conference on Friday on the North Korean nuclear standoff and Seoul's plans to deal with the crisis. The government says there was no mention whatsoever of a "$40 billion" plan during that meeting. But a report to investors by Goldman Sachs included the points discussed during that meeting and an attachment detailing Lee's campaign pledge, which created a misunderstanding that the $40 billion plan had been discussed.

      U.S. Assistant Secretary of State for East Asia and Pacific Affairs, Kurt Campbell (left), and South Korea's chief nuclear envoy, Wi Sung-lac pose before their talks at the foreign ministry in Seoul on Monday.

      The reason the FT report got so much attention here is that Kurt Campbell, the newly-appointed U.S. Assistant Secretary of State for East Asian and Pacific Affairs who visited South Korea over the weekend, gained wide coverage here by proposing a "comprehensive package" to deal with North Korea.

      A Cheong Wa Dae official said, "South Korea and the United States are discussing a comprehensive package, but it is not as specific as the FT report suggests." But the official added, "As aid to North Korea is discussed, the idea of a $40 billion incentive package for North Korea, expected to be raised through the cooperative efforts of international financial institutions, would eventually be brought up."

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