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Not enough money for LWRs in North Korea

Nuclear Monitor Issue: 

(May 8, 1998) The Korean Energy Development Organization (KEDO) project agreed upon in December 1995 largely consists of two parts: construction of two 1,000-MW Light-Water Reactors and the provision of heavy fuel oil (50,000 tons annually) to North Korea until the two reactors are completed. However, the financial crises in Asia can jeopardize the agreement.

(491.4875) WISE Amsterdam- Since the North Korea-US agreement in December 1995, the South Korean government and domestic nuclear- related businesses have consistently described the accord as a "stepping stone for reunification". The official reason of course is the prevention of the North's nuclear ambitions but what also makes it interesting for the South is the possible export of domestically made light-water reactors.
At the time the "Framework" was signed, it was agreed upon independently that the US should play a "leading" role in paying for the heavy fuel oil, and Korea would play a "central" role in LWR funding. US government officials explicitly told the US Congress that the US would not pay for LWRs, and it was in this light that a skeptical Congress backed down from giving its blessing to the nuclear deal. The US Congress has been skeptical about this "nuclear for nuclear" deal from the very beginning.

South Korea, now facing financial problems due to the severe economic crisis, tries to persuade the US and the other partners in the KEDO deal (for example, the European Union and Japan) from bringing in more money for the two planned Light-Water Reactors. Given the skeptical attitude of the US Congress, it is highly unlikely that the US would suddenly change its position and offer to join in, in the LWR funding.

On May 1, the US Secretary of State Madeleine Albright visited Seoul. On the occasion, Seoul and Washington are expected to finalize the burden-shares debates. She warned South Korea and Japan that North Korea may resume its nuclear weapons program if a pledge to provide Pyongyang with fuel oil and nuclear power technology is not met. But a solution has not been found: "The basis structure of this [1995] agreement and its financing is still intact but the details have not yet been nailed down," one US official said. But details are what it's all about.

It will be interesting to see what happens if the KEDO does not manage to find the money--US$5.2 billion, according to the KEDO Board, in November 1997. Will the US go on with the provision of fuel oil? They promised to do so until the new reactors were installed.
There is quite a big chance that despite the assurance of new President Kim Dae Jung to meet the obligations under KEDO, South Korea would not be able to come up with the funding for LWRs. US Ambassador to South Korea Steven Bosworth who also served as the first executive director of KEDO, has publicly said that since the financial crisis, KEDO members are talking to reduce the initial burden of South Korea. The emphasis here is on the word "initial". Quite likely, in an attempt to keep the KEDO arrangement going, the US would help South Korea out in the first years to come but still end up paying most, if not all, in the end. Even so, the US has a problem for the very near future: the US government budget for the 1999 fiscal year does not list allocations for the KEDO deal at all.

Meanwhile, criticism is growing, mainly in the US. Victor Gilinsky, the former head of the Nuclear Regulatory Commission wrote an article in the Washington Post in which he argues that "since nobody is going to pay for LWRs", the deal should be replaced with a bidding to find cheaper alternatives such as coal-fired plants.
Also, James Liley, former US ambassador to South Korea, recently contributed an article to Newsweek calling for the renegotiation of the agreed-upon framework to replace LWRs with coal-fired plants. The US ambassador, Steven Bosworth, said in an interview in a Korean weekly magazine that if North Korea asks for coal-fired plants instead of LWRs, KEDO members would "seriously consider" the option.

In general, this is also the option supported by the leading environmental organizations in South Korea. Even more environmental sound seems the option of efficiency improvement; according to South Korean researchers, the rate of electricity grid loss in the North is between 30% to 50%. Improvement is relatively easy and far cheaper than building new (nuclear) production facilities.


  • AFP, 12 November 1997
  • KFEM News, fall 1997
  • Korean Herald, 2 February 1998
  • Press release, Green Korea United, 12 February 1998
  • Korea Time, 17 April 1998
  • Reuter, 1 May 1998

Contact: Green Korea, 385-108 Hapjeong-dong Mapo-ku, Seoul, South Korea. Tel: +82-2-325-5525; Fax: +82-2-325-5677