North Korea Hints at Change, but U.S. Isn’t Paying Attention : A year after a nuclear deal defused a crisis, the world’s most secretive society is opening its door even as Washington still dwells on the nuke threat.

The White House spin-meisters proudly cite it as yet another foreign-policy success: a dangerous nuclear wanna-be was stopped in its tracks. But one year after a controversial U.S.-North Korea deal, Washington is caught between skeptical Republicans and a Pyongyang still haggling, amid blustery threats, over details. As if to offer a reality check, North Korean infiltrators were twice captured by South Korea in recent weeks, which serves as a reminder that the heavily armed and divided Korean Peninsula remains one of the world’s flash points.

The contrast between these two events--the possibilities of diplomacy ending the nuclear threat and opening the door to North-South reconciliation, on the one hand, and the subversion dramatizing the continued military confrontation, on the other--illuminates both the promise and the perils of the Korean predicament. Perhaps most important, the infiltration episodes, as well as certain developments inside North Korea, dramatize why it is a grave mistake to define the nuclear-proliferation threat as the issue, rather than as part of a larger regional problem of Korean reunification.

The October, 1994 Agreed Framework was a political bargain. North Korea immediately froze its nuclear-weapons program in exchange for two light-water nuclear reactors, heavy oil and improved relations with the United States. South Korea and Japan agreed to pay the bulk of the cost of the $4.5-billion reactor project.

Still, resolution of the issue that triggered the crisis--North Korea’s refusal to allow the International Atomic Energy Agency (IAEA) to investigate its past nuclear activities to determine how much plutonium it had reprocessed--remains uncertain. Under the accord, the North promised to allow IAEA inspectors to examine its nuclear past before key components of the new nuclear reactors would be delivered about four years from now. Critics of the agreement charged that it propped up a failing totalitarian regime that has rarely met its commitments, and got too little in return.

Despite its flaws, the nuclear accord did halt a drift toward war and prevented North Korea from reprocessing spent fuel rods containing enough plutonium to make about five nuclear bombs. It not only closed down Pyongyang’s reprocessing facility, but stopped construction of two large graphite reactors, which, if completed, could have produced enough plutonium to manufacture 30 bombs a year. Moreover, the accord generated larger hopes that a “soft landing”--peaceful reconciliation leading to a unified Korea--might be possible.

But the signals from North Korea have been ambiguous, at best. Agreement on a contract to actually start the reactor project remains elusive. In high-level talks still under way in New York between North Korea and the Korea Energy Development Organization, a consortium set up by the United States to manage the project, Pyongyang has tried to bid up the price, seeking additional aid. Curiously, however, after threatening to walk out on several occasions, North Korean negotiators have backed off their demand.

Pyongyang’s new-found humility shouldn’t be too surprising, though. North Korea is in desperate shape and has no good choices. Fifteen months after the death of Kim Il Sung, who ruled for half a century, there is no formal head of state. His son, Kim Jong Il, who is rarely seen in public, is de facto leader, though he commands less authority than his father. The country has endured five years of negative economic growth, while both Russia and China have distanced themselves from the North and cultivated ties to South Korea. Earlier this month, Moscow formally announced it would scrap its security treaty with Pyongyang when it expires next year. To top it off, North Korea has suffered through horrible floods affecting 5 million people, 20% of its population.

Still, these circumstances have produced some intriguing hints of change in North Korea’s outlook. The floods have forced Pyongyang to publicly beg for food. Japan and South Korea are providing more than 600,000 tons of rice. At the same time, North Korean officials are globe-trotting to recruit foreign investment in Chinese-type special economic zones. They even floated the idea that they might set up a stock market in one of the zones. And though they stiff the South Korean government, they are signing new deals with South Korean companies. In a remarkable turn of events for the world’s most secretive society, one deal will allow 13 South Korean businessmen to live in the port city of Nampo. No less astonishing, senior North Korean officials recently told a visiting American that they would not oppose the presence of U.S. troops in the South once a peace treaty was signed.

Few are optimistic that Pyongyang’s belated efforts to lure foreign investment will succeed. It has yet to allow any internal market reforms, as China and Vietnam did; it lacks a legal system, and in the economically dynamic Pacific Rim, it faces enormous competition. A handful of U.S. companies have begun to explore possibilities, despite a U.S. trade embargo. In the end, however, only South Korea is likely to jump at the chance of large-scale economic involvement in the North, which would require a major political breakthrough.

The point is that the nuclear deal could be a catalyst for progress in other areas--and progress on other issues would help finalize the nuclear deal--if the United States and South Korea can craft a broader strategy that offers the economic goodies and political benefits sought by the North. For Washington and Seoul, the larger problem is the military threat posed by 1.2 million North Korean troops, two-thirds of whom are deployed within 100 miles of the Demilitarized Zone. Even if the nuclear deal is wildly successful, this threat would remain. Reducing this military threat, part of a reconciliation, should be a top priority.

But several factors are blocking any such movement and may imperil the nuclear deal as well. Lacking a more comprehensive strategy and intimidated by a Republican Congress, the Clinton Administration is reluctant to embark on any new initiative toward the North. Indeed, the United States is short $30 million in funds needed to provide 500,000 tons of oil to North Korea, as required by the accord. South Korea is entering an election cycle, with parliamentary and presidential elections in the next six months. Its politicians are exceedingly cautious.

A year after the Korean nuclear crisis has been defused but not resolved, the Administration seems incapable of building on, let along responding to, the foreign-policy success it trumpets.*