Trump Has Options for Easing Kim's Pain, From Easy to Pricey

(Bloomberg) -- Kim Jong Un has made little secret about what’s at the top of his agenda in his second meeting next week with U.S. President Donald Trump: Easing the sanctions choking North Korea’s moribund economy.

That the Feb. 27-28 summit is happening at all is the clearest sign the Trump administration is backing away from its instance that the sanctions stay in place until the “final, fully verified denuclearization of North Korea.” Kim threatened last month to walk away from talks without relief, while Trump said Wednesday that he would “love to be able to” lift sanctions on North Korea, provided he got “something that’s meaningful.”

The complex web of penalties piled on North Korea by the United Nations, U.S. and American allies such as Japan, South Korea and the European Union now give Trump a sliding scale of possibilities for relaxing that pressure. Current sanctions do everything from curbing the regime’s ability to import oil to preventing small items like laptop computers from being brought into the country.

Preliminary talks are under way between U.S. and North Korean officials in Hanoi, with the goal of producing a draft joint statement at the summit.

The question is how much leverage is the U.S. willing to give up at the Hanoi summit -- and for what? Here’s a look at Trump’s options, from cheap to expensive:

1. Cheap, Easy

Rather than unraveling the entire sanctions net, the U.S. is more likely to snip a few strands and give the regime a taste of what could happen if talks progress. The easiest thing would be to relax U.S. curbs on travel and humanitarian aid to the country, something the State Department has already said it’s moving to do.

South Korean President Moon Jae-in and other officials who favor greater engagement with North Korea have floated the possibility of waiving some sanctions to allow U.S.-North Korean sports and cultural exchanges. The idea gained traction in Seoul after South Korean lawmakers visited Washington this month and decided many American officials have outdated views of conditions in the country, making compromise difficult.

“American citizens’ knowledge of North Korea is very low and this is a problem,” lawmaker Choo Mi-ae, former head of the ruling Democratic Party, told a forum. “In education and culture, the sanctions could be relaxed.”

A boost of about $1 billion a year would mean about a 3 percent growth for North Korea’s tiny economy, which is roughly the same size as Vermont’s.

2. Pricey, Possible

Kim has indicated in recent speeches that he’s got more lucrative projects in mind, namely restarting joint operations with South Korea at the Gaeseong industrial park and the Mount Geumgang tourism hub. South Korean officials have also cited the projects as among the “corresponding measures” they’ve been discussing with the U.S. to reward disarmament steps by North Korea.

Trump gave a “positive response” to Moon’s suggestion during a phone call Tuesday to consider that inter-Korean projects such as railways and roads go forward as part of a deal, Moon’s office said. “If President Trump wants, we are ready to take on that role,” Moon told Trump.

Such concessions -- some of which might require Security Council approval -- will be judged by what Trump gets in return. Kim has suggested that he expects sanctions relief for steps he’s already taken to halt weapons tests and demolish testing sites.

Trump’s envoy to North Korea, Stephen Biegun, said he wanted to “find the right balance” between pressure and diplomacy. The U.S. has continued to push for more substantial moves, such as dismantling facilities where Kim produces bomb fuel or disclosing the regime’s nuclear assets.

“If the United States allows Gaeseong and Mount Geumgang projects, it would lose justification to enforce sanctions on North Korea’s allies such as Russia and China,” said Thae Yong-ho, who was North Korea’s deputy ambassador to the U.K. before defecting in 2016 and becoming a critic of the regime. Kim sees the projects as a “first step to normalize its trade with China,” Thae told reporters Tuesday in Seoul.

3. Expensive, Unlikely

Another way to relax pressure on North Korea without giving up the whole sanctions regime would be for the U.S. to lift measures barring entry to ships and planes that visited North Korea or made a transfer with its vessels within 180 days. Such a move would give Pyongyang access to much-needed cash and commerce.

That’s one reason why the U.S. might balk at such a concession without a clear disarmament commitment from Kim. Any hard currency generated by the transactions could find its way into the coffers of the Korean People’s Army, which was squeezed by the UN’s ban on a key funding source: coal exports.

Passing the Security Council’s sanctions against North Korea required intense U.S. lobbying of China and Russia and deep international alarm that Kim’s provocations could drag the world into a nuclear war. If they go, the U.S. might never get them back.

The resolutions themselves call for North Korea to abandon its weapons of mass destruction in a “complete, verifiable and irreversible manner,” a standard many non-proliferation analysts say the regime is unlikely to ever accept voluntarily.

Similarly, the U.S. Treasury Department blocks the North Korean government and its ruling party members from the export of goods, services, including financial services, and technology to North Korea that could advance its nuclear and missile programs. This probably would not be ended until North Korea completely abandons its nuclear arms and missile programs.

To contact the reporter on this story: Youkyung Lee in Seoul at ylee582@bloomberg.net

To contact the editors responsible for this story: Brendan Scott at bscott66@bloomberg.net, Jon Herskovitz

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