South Korea Eyes Purchase of Dead Horse: BDA Takeover
by Richardson ~ April 28th, 2007. Filed under: Diplomacy, Engagement, Six-Party Talks.Although BDA funds have been unfrozen since at least 10 April, North Korea has refused to take receipt, now using it’s inability to use the international banking system as an excuse not to fulfill its obligation under the 13 February (DOC) agreement, even though no BDA issues are included in that document. Initially North Korea demanded that the funds be “unfrozen,” which has occurred; yet North Korea reneged.
Now South Korea is stepping in to assume some risk in getting the funds to North Korea, in what is sure to be a futile attempt at getting North Korea to live up to the numerous nuclear agreements it has made (and broken). From Yonhap:
South Korea’s state debt-restructuring agency may take over Banco Delta Asia (BDA), which is now virtually facing bankruptcy over accusations of engaging in money laundering for North Korea, diplomatic sources here said Friday.
[. . .]
“It is difficult for the U.S. to lift the sanctions on the BDA….so an option to let South Korea’s state-run agency take over the lender is now being reviewed,” a diplomatic source said.
According to the source, a way for the Korea Asset Management Corp. (KAMCO) — which buys bad debts from financial companies and turns them around — to purchase bad loans from the BDA is being studied, thus preventing the lender from going bankrupt.
KAMCO has been seeking to make inroads into overseas countries by taking over bad debts from troubled financial institutions.
North Korean funds frozen at the BDA, estimated at US$25 million, have not been transferred to the communist state so far, holding up progress in a landmark agreement over the North’s denuclearization.
Pyongyang said it will not implement the first 60-day denuclearization measures unless the funds are transferred to another bank, so the North can confirm the free transfer of its funds in the international financial system, upon which the U.S. Treasury Department has a strong influence.
April 28th, 2007 at 12:21 pm
I’d think a smarter play by the North would be to pretend to go through with the nuke deal a little more - invite inspectors in, begin shutting down the plant or shut it down, and so on - to get good press and give think-tank, State Dept, and SK room to praise them, then shut the deal down some time later. Meaning: shutting the deal down so quickly is not in NK’s best interest (even in NK-logic)…
…which means to me - these economic sanctions put into place last year really are hurting Pyongyang greatly. NK breaking the deal immediately and harping on these funds gives me some hint of confidence my “collapse before 2009″ prediction has some merit.
In another light, the call for setting up a bank in Kaesong was a stroke of genius. Even if it failed, it was likely to place SK in a lose-lose situation that would further strain ties with the US (and Japan) - if SK says “no” completely, NK can use it as an excuse not to collect rail lines, grant brief family reunions, shut down Kumgng tours, and so on, which would only make at least the current SK government brainstorm how to through more resources at Pyongyang to make it happy again. And, the SK gov would not blame the North for these acts but blame the US for forcing NK into a corner in the first place.
If SK says “yes” to Kaesong First National, or, tries an alternative plan like the one you highlighted, it will make the US gov eye SK with even more disdain and probably piss Japan off at least a little too. It will make both nations lose even more respect for at least the current SK government.
Pyongyang’s style is ultimately evil because it is geared to isolating as well as maintaining the regime and leads to greater deprivation for its citizens —– but — they do apply it well….
April 28th, 2007 at 9:11 pm
So South Korea becomes the banker for North Korea? It is somewhat insidious, but it could lead to a further relationship between a desparate NK and a SK willing to do anything to stop a collapse, and for both to save face at the same time.I suspect the 25 million either only exists on paper or has long ago been syphoned off leaving the bank and NK in a delema. SK has more than enough to cover such a small “Loan”. Future “loans” to NK and a reopening of the sunshine policy with smiles all around may have political appeal.
April 28th, 2007 at 9:27 pm
BDA is almost certainly bankrupt and since no one can transfer money in or out it’s no longer really a bank at all.
Even if those 52 account holders were to demand their money in cash, it’s not like the bank is going to have anywhere near enough $100 bills lying around to be able to give them back their money.
If SK do take over the bank, as I can easily imagine, it would be as Gerry said, SK giving the money to NK.
April 30th, 2007 at 7:55 am
[...] Would anyone actually try to facilitate that? Of course. You already know who. [...]
May 1st, 2007 at 1:15 pm
well duh…..of course SK, at least this administration, will do ANYTHING to appease KJI. that’s a given.