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Congress Okays KEDO Funding; Japan Lifts LWR Funding Block
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BACKING AWAY from previous threats, Congress agreed in the final rounds of fiscal year (FY) 1999 budget negotiations to provide the full $35 million requested by the Clinton administration to fund U.S. obligations under the 1994 U.S.-North Korean Agreed Framework. President Clinton signed the $500 billion omnibus appropriations bill on October 21. The appropriation for the Korean Peninsula Energy Development Organization (KEDO) will be used to help purchase the 500,000 tons of heavy fuel oil for Pyongyang required annually by the denuclearization agreement.

Congress, in addition to requiring the president to appoint a "North Korea Policy Coordinator" and mandating North Korea-related reports to Congress from the secretaries of State and Defense, also inserted several policy conditions aimed at prodding the administration to take a more active approach to North Korean security threats. The legislation, however, provided the president with the authority to waive these conditions on national security grounds.

The waiver provision was the key to the legislative-executive compromise on the issue, as it allowed congressional critics of the administration's North Korea policy to signal their displeasure without effectively canceling KEDO funding. Since KEDO's inception in 1995, the administration has provided funding through the use of the standing national security waiver authority in Section 614 of the Foreign Assistance Act of 1961. (U.S. law forbids the provision of foreign aid to states that are communist, state-sponsors of terrorism or are at war with the United States.)

Most recently, on September 29, President Clinton used the so-called "614 authority" to reprogram $15 million of other foreign assistance for use by KEDO in buying heavy fuel oil. Despite a 1998 U.S. contribution of $26.4 million for oil purchases ($30 million total), provision of $17.6 million from the European Union and donations from a few other states, KEDO has been unable to meet this year's $60 million to $65 million oil-buying budget, in part because of redemption of past debts.

The State Department announced on September 10 that North Korea had tacitly accepted a U.S. pledge to complete the delivery of this year's fuel oil by the end of the calendar year rather than the scheduled date of October 20. (See ACT, August/September, 1998.) As of the end of October, KEDO had delivered 315,000 tons of fuel oil to North Korea. It plans to ship another 50,000 to 55,000 tons in November. However, funding for the remaining 130,000 tons of fuel oil the United States committed itself to providing before January 1, 1999 remains uncertain. The money, approximately $12 million, will most likely come from the FY 1999 appropriation following use of the presidential waiver authority.


Light-Water Reactor Project

On October 16, Tokyo announced that it was lifting its suspension of participation in the cost-sharing agreement for construction of the two light-water reactors (LWRs) in North Korea called for in the Agreed Framework. KEDO's Executive Board, which includes the United States, South Korea, Japan and the European Union, had reached a cost-sharing agreement for the LWR project on July 28. Originally the agreement was to have been signed on August 31, but Japan suspended its participation following Pyongyang's launch of a space-launch vehicle that overflew Japan. Despite Tokyo's October 16 announcement, the cost-sharing deal remains unsigned due to what a State Department official called "technical details."

Meanwhile, KEDO is continuing with construction of site infrastructure for the two LWRs. Negotiations between KEDO and the Korea Electric Power Corporation (KEPCO) on the prime contract for the LWR project are continuing as well, though the finalization of a cost-sharing agreement among KEDO members must precede conclusion of the contract.