U.S., allies tightening noose on N. Korea

SEOUL, South Korea -- The Americans halt shipments of fuel oil to North Korea. The Japanese detain the communist state's cargo ships for inspections. The Australians impound a North Korean ship carrying narcotics.

For North Korea, the noose is tightening at an especially bad time: Reforms, initiated a year ago, are wreaking havoc on the country's already shattered economy and its key industries are shrinking again after four years of growth, experts say.

"What we see is a form of light containment on North Korea," says Yon Ha-chong, a North Korea expert at Seoul's Myungji University. "But the pressure will increase if things get worse."

The United States and its allies are mustering pressure on North Korea to give up its nuclear weapons programs. Help has come from unlikely accomplices: the hard-line regime's bungling economic policymakers.

North Korea's economy grew 1.2 percent in 2002, the fourth- straight year of growth, but its key mining, manufacturing and power industries began shrinking for the first time since 1999, with output in those sectors declining by up to 3.8 percent, says South Korea's central Bank of Korea.

Things will be worse this year, experts say. President Bush and Japanese Prime Minister Junichiro Koizumi have vowed to stop North Korean smuggling of narcotics, counterfeit money and missile technology -- believed to be the regime's main source of hard currency for its weapons programs.

Australian Foreign Minister Alexander Downer said Wednesday he is considering working with the U.S. and Japanese navies to intercept North Korean smugglers.

"North Korea's economy had received a death sentence long ago, but it keeps afloat thanks to international aid and the country's trading in weapons and illicit goods," said Yang Woon-chul, a North Korea expert at Seoul's Sejong Institute.

U.S. Deputy Defense Secretary Paul Wolfowitz said last week that North Korea "is teetering on the edge of economic collapse," and that is "a major point of leverage" in regional efforts to use economic pressure to force it to halt its nuclear ambitions.

Pyongyang's dependence on its illegal trade has grown amid failed economic reforms.

A year ago, Pyongyang dismantled its rationing system, increased wages and let prices of goods assume their real value in reforms aimed at motivating workers to be more productive.

Today, inflation runs higher than 300 percent, the currency has plummeted and goods are scarcer than ever, said Kwak Dae-jung, an official at the Seoul-based Network for North Korean Democracy and Human Rights.

The North's economic problems began with the breakup of the former Soviet bloc. In the mid-1990s, widespread hunger killed hundreds of thousands of people. By 1999, international aid had helped restore growth.

Last year, North Korea's official economy, measured by its gross national income, was estimated at $17.8 billion.

Secret trading would add significantly to the figures. The U.S. military estimates Pyongyang reaped $560 million from missile sales in 2001, and recent seizures in Australia of alleged North Korean narcotics valued at $120 million suggest a sizable drug trade.

Pressure has built up, albeit slowly, for months.

Late last year, Washington cut off free oil shipments after U.S. officials said Pyongyang admitted running a clandestine nuclear weapons program in violation of international agreements.

In December, a shipment of North Korean Scud missiles bound for Yemen in the Arabian Sea was briefly stopped as a U.S. warning against North Korea's role in missile proliferation. In April, Australian authorities raided a North Korean-owned ship and charged its crew with importing 275 pounds of heroin.

Japan barred a North Korean cargo ship from leaving port for a day this week after Tokyo ordered tougher inspections of all North Korean cargo ships and ferries entering Japanese ports.

North Korea sees its nuclear weapons programs as a bargaining chip to win aid and security guarantees from Washington. But the Bush administration says it won't be blackmailed.

"On the one hand, North Korea may be saying it wants economic help. On the other hand, it's saying it wants nuclear weapons. And as far as we're concerned, the two are incompatible," said U.S. Ambassador to Seoul Thomas C. Hubbard.

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