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By Root 1886 0

directions and rejected the proposals announced in Seoul. Kim Il Sung, in private conversations with the East German defense minister later in July, declared that Roh's declaration "was intended to permanently split the country." Kim blamed the interruption of Red Cross talks and other North-South contacts on the annual Team Spirit military maneuvers of South Korean and American forces. "Peaceful negotiations cannot be reconciled with the fact that they are aiming cannons at us and sharpening their swords," he said, seemingly oblivious to the continuous military buildups on both sides. In an effort to regain the initiative, Pyongyang was in the process of proposing that members of the new opposition-dominated South Korean National Assembly meet with North Korean parliamentarians to discuss a "nonaggression declaration." Kim conceded to his German visitor that this, like so many proposals from one side to the other, was a nonstarter. The North Korean leader maintained that even if Seoul were willing, Washington would veto a nonaggression deal because it would destroy the justification for continued stationing of U.S. troops in the South.

The first benefits of South Korea's intensified effort to establish relations with North Korea's allies came in Hungary, whose pragmatic "goulash communism" made it the least ideological of the Eastern European countries, even though it was a member of the Warsaw Pact and Comecon, the East bloc economic organization. A pathfinder for this breakthrough was a businessman, Chairman Kim Woo Choong of the giant Daewoo group, an energetic and successful salesman who became increasingly close to Roh during his presidency. Always looking for new fields to conquer, Kim had pioneered the establishment of business deals and official ties with Sudan, Nigeria, Libya, Algeria, and Somalia, all of which had previously had relations with Pyongyang but not with Seoul. In the early 1980s he began knocking on the door of China but concluded that an early breakthrough was too difficult due to the close relations of Kim 11 Sung with Chinese leaders. The Daewoo chief thereupon turned his attention to Eastern Europe and the Soviet Union.

In December 1984 the Daewoo chairman flew to Budapest aboard his private jet for conversations that broke the ice between the two countries. With Hungarian government and party acquiescence, a series of business exchanges took place, culminating in an agreement between the two chambers of commerce and the opening of trade promotion offices in each other's capitals in late 1987 and early 1988.

As Roh's Nordpolitik drive gathered force, Seoul pressed for full diplomatic relations with Hungary. Its timing was fortunate. In May 1988 a new and more Western-oriented team of officials took office, moving Hungary's orientation sharply toward the West. The following month, word came to Seoul from the chairman of the newly organized Hungarian Credit Bank, Sandor Demjan, who was struggling to bring market forces to an antiquated command economy, that Hungary would be willing to establish diplomatic relations before, during, or after the Olympics on the condition that Korea provide $1 billion in economic aid. The Hungarians were also very interested in increased trade with Korean firms.

Demjan's proposition touched off a series of secret negotiations between the two governments, in which financial aid was a key element. From July 5 to 14, a Korean team headed by Park Chul Un, Seoul's special negotiator with communist countries, visited Budapest, staying in a guarded villa on the outskirts of the capital. Intense bargaining sessions took place, centered on discussions between Park and Ferenc Bartha, the newly appointed president of the Hungarian national bank. The Koreans offered $400 million in loans, while Hungary reduced its asking price to $800 million. In further negotiations, Hungary agreed to establish an official mission in Seoul short of full relations in return for $400 million in loans, and to go all the way to diplomatic relations in return for an additional $400 million.