Crackdown on N. Korea strains US-South ties
(Reuters)
Updated: 2006-01-29 11:37

A U.S. crackdown on North Korean finances has not only hit Pyongyang hard but also exposed a divide between Washington and Seoul that the two governments may have trouble bridging, analysts said.

Washington and Pyongyang are digging in their heels over the financial crackdown, and Seoul is looking for compromise.

But unless a solution is found soon, talks on ending North Korea's nuclear weapons programmes -- one of the greatest threats to regional stability -- could stumble.

Analysts said the financial crackdown problem is difficult to resolve because it strikes at the heart of fundamental differences between Seoul and Washington.

"Much of the problem comes from the fact there is a clear mismatch of the top priorities of South Korea and the United States," said Paik Hak-soon, head of North Korea studies at Sejong Institute south of Seoul.

South Korea's priorities under President Roh Moo-hyun have been regional peace, regional prosperity, engagement and eventual long-term unification with the North, Paik said.

The Bush administration has been interested in fighting both terrorism and military proliferation, he said, and it suspects that North Korea's illicit activities have helped fund Pyongyang's nuclear weapons programmes.

Analysts also note the Bush administration is now trying to manage a showdown with Iran over its own nuclear programmes and may be unable to focus fully on North Korea at the moment.

ROH AT ODDS WITH WASHINGTON

South Korea's president took a swing at those in Washington who seek a hard line against North Korea and said they sometimes seem to be seeking a collapse of the regime.

"If the U.S. government tries to resolve the problem this way, there will be friction and disagreement," Roh Moo-hyun told a news conference, referring to U.S.-South Korea ties.

Pyongyang's reaction to the crackdown has been to say it would be unthinkable to reconvene six-party talks on its nuclear arms programmes until Washington lifts the financial limits.

Washington says it wants to separate the crackdown from the nuclear talks -- which include the Koreas, China, Japan, Russia and the United States -- and is ready to return to the table.

Seoul would like to see a compromise under which counterfeiting is separated from the six-party discussions, North Korea promises not to engage in illicit activities and Washington is willing to let bygones be bygones, analysts said.

U.S. Secretary of State Condoleezza Rice made clear in an interview with Reuters that Washington would not back down.

North Korea analysts say Pyongyang is feeling the pinch -- to the apparent glee of U.S. hardliners who feel they have found an Achilles heel -- and North Korean leader Kim Jong-il may have been looking for help from Beijing on a trip this month to China.

SEOUL SEEKS THE MIDDLE GROUND

Roh has talked about becoming a regional "balancer", which analysts take to mean that South Korea would back off slightly from its traditional alliance with the United States and Japan and work to find middle ground with China and North Korea.

Thomas Henriksen, a senior fellow at Stanford University's Hoover Institution in California, pointed out that Roh's domestic political base supports standing tough against the United States, including on the issue of North Korea.

"It caters to his own constituency, young people, people who are anti-American, or who no longer feel obligated to the United States for what happened in the Korean War," Henriksen said.

"It is a peg to hold up a lot of other grievances and problems between the two countries," he told Reuters.

Kim Sung-han, head of North America studies at the Institute of Foreign Affairs and National Security in Seoul, said Roh's tough comments on Wednesday were meant as a direct message to Bush.

"Roh intended to send a message to Bush not to take the view of the hardliners," he said, but added:

"Roh's remark is not going to be taken as a highly important variable in the equation. Washington will take it as one of the many variables," Kim said.

Ultimately, analysts said, both countries know the stakes are too high for them to let public squabbles derail cooperation.

"The differences between the United States and South Korea can be mediated," said Li Dunqiu, director of the Korean Peninsula Centre at the Development Research Centre, a Chinese government think-tank.