The Two Koreas_ A Contemporary History - Don Oberdorfer [116]
Up to 1984, the Soviet Union had provided more than $2 billion in foreign aid and credits to North Korea, much of it in the form of whole factories financed by soft loans that were never repaid. Following the trips to Moscow by Kim II Sung in 1984 and 1986, the Soviet Union had provided an increasing quantity of oil and gas, weapons, and a variety of other goods on easy credit and concessional terms to its Northeast Asian ally. In 1984, however, Pyongyang stopped paying even interest on its smaller debt to Western creditors, and three years later it was officially declared in default, making it ineligible for further commercial loans. By 1988, Moscow was shipping $1.9 billion in goods to North Korea while receiving less than $.9 billion in return. This heavily subsidized Moscow-Pyongyang trade made up nearly three-fifths of North Korea's total trade turnover.
The vibrant economy of South Korea, on the other hand, was booming, with economic growth rates over 10 percent annually and a large global trade surplus, as its automobiles, ships, television sets, and computer chips made their mark on the international economy. No longer the object of foreign aid from the United States and Japan, Seoul in mid-1987 had become an aid-dispensing nation by establishing an Economic Development Cooperation Fund to assist developing countries. In their contacts with Moscow, leaders of South Korea's highly successful international conglomerates, known as chaebols, were expressing intense interest in investment and trade in Siberia, a high priority in Soviet economic plans for which massive foreign investment was needed. Moscow initially had hoped for major Japanese funds, but the unresolved dispute over the Soviet-held Northern Islands interfered with this prospect. The ROK was the logical substitute.
Even before the Politburo decision to move toward ties with the South, North Korea demanded an explanation from its Soviet ally for its growing trade relations with Seoul. In a memorandum in late September, the international department of the Soviet Communist Party's Central Committee responded in astonishingly frank terms:
The USSR, to solve its economic problems, is interested in new partners. South Korea possesses technology and products that can be of use, especially in the Far Eastern regions of our state. As is well known, South Korea maintains commercial links with almost all countries in the world, including such socialist states as the People's Republic of China. The opening up of direct economic contacts between the Soviet Union and South Korea will also benefit peace and stability in the AsiaPacific region. We don't want to rush developing these ties. We'll move gradually, measuring progress in the economic field with the political trend in the region.
The international department added, "At the same time the USSR remains loyal to obligations to the DPRK. We don't intend to start political relations with South Korea."
In December 1988, a month after the unannounced Politburo decision to move toward normalized relations with the South, Seoul passed word that it would favorably consider Moscow's request for a $300 million commercial loan and also study a possible $40 million project to build a trade center in the Soviet Far East.
As Gorbachev had directed in the Politburo meeting, Foreign Minister Shevardnadze traveled to Pyongyang that month to inform the North Korean leadership directly of Moscow's decision to grow closer to South Korea. The North Korean capital struck members of the Soviet traveling party as depressingly cold and gray with unsmiling people and little clouds of dust in the streets. Kim Il Sung, however, did his best to stay on the good side of his important visitors. The great leader Kim Il Sung did not take issue with Moscow in his talk with