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Happy Birthday, Kim Jong Il; Here's $14 Million

By William Pesek

Feb. 16 (Bloomberg) -- In the annals of birthday gifts, one can think of crummier ones than $14 million worth of energy.

That's essentially what Kim Jong Il, who turns 66 today, is getting in return for taking steps to dismantle his nuclear program. At roughly $281 a ton, the 50,000 tons of heavy oil that Kim will receive amounts to about $14 million in energy aid.

On any list of reasons to view this North Korea deal skeptically, the paucity of cash flowing Pyongyang's way should be near the top.

Here you have Kim shaking up the globe with nuclear tests and more saber-rattling than foreign correspondents can print. And when all is said and done, the Dear Leader of one of the world's most reclusive regimes caves in for a mere $14 million?

There I was thinking North Korea's currency-counterfeiting technologies were so advanced that Kim could order up a few million worth of $100 bills now and again. It seems his government is more pressed for cash than was widely thought.

Or perhaps Kim had a harder-than-expected time going cold turkey on his well-known affinity for Hennessy cognac, fancy cars, fur coats, iPods and caviar. Kim, after all, couldn't have been happy late last year to learn of a United Nations ban on luxury goods for his nation. Maybe his birthday has him thinking about all the goodies of which he's being deprived.

If North Korea complies with this agreement -- and that's a big ``if'' -- it could get, in phases, an added 950,000 tons of fuel and food. The thing is, does Kim intend to follow the terms of the deal in order to see some of that added aid?

Bush Turnaround

That would require Kim to change course as much as the Bush administration. U.S. President George W. Bush went from denouncing his predecessor's 1994 Agreed Framework with North Korea to essentially resurrecting it this week. While Bush should have done it years ago, it's comforting to see him dealing with the North Korea issue instead of exacerbating it.

Let's not get too excited here. For one thing, Bush's change of heart doesn't mark a significant advance from what the administration of President Bill Clinton did in 1994. For another, Kim has rarely proven to be a man of his word.

While agreeing that this is an important step that may lead to the denuclearization of the Korean Peninsula, Bill Richardson, a U.S. presidential candidate, hedged by adding that the ``devil is in the details.'' Richardson should know; the former ambassador to the UN has held discussions with North Korean officials.

No `Golden Key'

Russian Foreign Minister Sergei Lavrov put it well in comments to Interfax: ``It's work that needs daily attention, everyday action.'' He added that the accord ``is by no means the end of the path, the golden key that can solve all problems.''

Questions yet to be answered include whether Kim will try to reopen the bidding on what is expected from North Korea and whether his regime will try to retain a few nukes. Investors figuring North Korean-related risks have been neutralized should remember that lots of negotiating has yet to take place and there are no guarantees.

It's worth noting, too, that markets in the past have gotten excited about signs of an about-face on North Korea from the White House, only to regret it later.

Any deal is better than no deal, though, and seeing the Bush administration actually talk to one of its key enemies is progress. It would be even better to see Bush go further to stop isolating a regime that benefits from that isolation.

Attack With Markets

Kim wants aid, yet the last thing he wants is for his economy to become vulnerable to outside influences. Rather than military brinkmanship, the five other participants in the six- party talks should consider attacking North Korea with capitalism.

It's fascinating to think what might happen if a critical mass of big economies -- like those of the Group of Seven nations -- moved to recognize North Korea's regime diplomatically, name ambassadors, drop sanctions and allow companies to do all the business there they want. Rock music, Coca-Cola and blue jeans are said to have helped bring down Soviet communism. Let's flood North Korea with names like Adidas, Starbucks, Samsung and Sony.

That's not remotely possible in the short run. Yet when a policy doesn't work, what's the point of sticking to it? Decades of sanctions have done more to help Fidel Castro stay in power than to topple the Cuban government. Nor has Myanmar's government fallen.

Bonds, Not Bombs

Hawks in Washington don't seem to realize their policies strengthen tin-pot dictators like Kim. Isolation means he can keep his people in the dark about how poorly North Korea fares in rankings of freedom, prosperity and infant mortality.

The Kims of the world fear markets because they are powerful, democratic and unpredictable forces that thrive on information and transparency. In that sense, it's better to threaten Kim with bonds than bombs.

The good news is that we are seeing clear signs of thawing in North Korea as world powers prepare to hand over the best $14 million they have spent in some time. The bad news is that it remains to be seen whether Kim will want to have his birthday cake and eat it, too.

http://quote.bloomberg.com/apps/news?pid=20601039&sid=axqbONLSTxbU

[Ya-ta Boy]

Does anyone remember if KJI's birthday was this close to Sollal last year? Is he trying to steal one of the two biggest holidays on the Korean calendar, or is this just a coincidence?

[Sincinnatislink]

If a Soviet Russian had suggested this about a Western European country, it would have been called an atrocity and/or warmongering.