INTERVIEW TRANSCRIPT

C-SPAN’S “NEWSMAKERS”

Guest: Chris Hill, Assistant Secretary of State for East Asian and Pacific Affairs

Reporters: David Sanger, New York Times and Warren Strobel of McClatchy Newspapers

Moderator: C-SPAN

TAPE DATE: Wednesday, June 6, 2007

AIR DATE/TIME: SUNDAY, June 10, 2007 at 10 a.m. and 6 p.m. ET

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PEDRO ECHEVARRIA, HOST, C-SPAN NEWSMAKERS: On this edition of the NEWSMAKERS, we’re joined by Chris Hill, who is the Assistant Secretary of State for East Asian and Pacific Affairs.

And also joining us on the Newsmakers is David Sanger. He’s the Chief Washington Correspondent for the New York Time. And Warren Strobel of McClatchy Newspapers. He’s their Senior Foreign Affairs Correspondent.

Mr. Strobel, you have the first question.

WARREN STROBEL, SENIOR FOREIGN AFFAIRS CORRESPONDENT, MCCLATCHY NEWSPAPERS: Good morning, Chris.

There’s a story on the wires this morning that Russia may be getting more involved in helping to overcome the BDA dispute, and the fact that the Russian bank may be willing to take the $25 million, apparently because they have some accounts previously from North Korea.

Can you update us on this?

CHRIS HILL, ASSISTANT SECRETARY OF STATE FOR EAST ASIAN AND PACIFIC AFFAIRS: Well, there is – obviously, we are having discussions. I don’t want to say too much about it, because we’re really in the middle of these discussions.

I mean, we have tried to be helpful in this process. And I think other members of the six party process are trying to be helpful, namely, the Russians.

And the drill here is to try to get the North Koreans their money. And then, when they have their money, they will then agree to move on and do what they have to do in this February agreement, which is shut down this nuclear facility.

DAVID SANGER, STATE DEPARTMENT CORRESPONDENT, NEW YORK TIMES: Ambassador Hill, after the money is returned, what kind of incentives do you have for the North Koreans not only to shut down the facility, but then to take the next steps that seem so critical in your agreement, which would be to permanently disable the facility and to allow in inspectors, and so forth.

HILL: Right.

SANGER: There’s been a long history, of course, of broken agreements with North Korea.

HILL: Right.

Well, first of all, I think it’s important for the viewers to know that this agreement on implementing, on getting them to shut down the nuclear facilities, really it started in September ’05, when we had an agreement in principle that North Korea will do away with, will abandon all of their nuclear programs, all of their nuclear weapons.

So, this first implementing agreement is pursuant to that overall agreement in September ’05.

So, what we’re trying to do now is to get them to shut down their reactor and reprocessing facility. And they’ve agreed to do that, provided they get their money back, which has been frozen in a bank account in Macao, and right through to today. And they’ve also asked for 50,000 tons of heavy fuel oil. This is heavy fuel oil that they would be using in some conventional power plants.

So, we think that is pretty well teed up. And now the question is – let’s say we get through this. They shut down this nuclear facility; they stop making more plutonium.

And then, what is the next tranche? The next tranche would be that they disable this facility; meaning, break it in such a serious way that you really can’t bring it back on line.

And what we have agreed to do in response to that is to provide them with additional fuel oil – lots of it – something on the order of 950,000 tons. And we would share this with other partners in the process – with the Russians, the Chinese, with the South Koreans.

And so, the total value of that would be something on the order of $240 to $250 million.

SANGER: Just to follow up briefly on that, in your history, in between the agreement on principle and the agreement that you signed in February, there was one significant intervening event. They tested a nuclear weapon in October.

Even if the test was a bit of a fizzle, how does the fact that they have already tested a weapon affect our own thinking about our ability to ultimately get all of the technology and all of the weapons out of the country?

HILL: Well, first of all, it’s important to understand, they have been developing these nuclear weapons programs, not in the last few years, but in the last few decades. I mean, they started this in the 1960s.

So, the fact that they went ahead and tested a weapon, obviously was a culmination of decades of effort.

So, the real question is, can we dissuade them from these decades of efforts they’ve made toward making nuclear weapons to getting out of that business?

And so, the question is, do we have enough on the table to get them to do that? And, you know, to get someone to do something, you’ve got to give something.

So, we’re trying this on a step-by-step basis. We’re saying, OK. Let’s shut down the additional plutonium. We know they’ve got something on the order of 50 kilos of plutonium, some 110 pounds of it.

Depending on how big a weapon is, you can make maybe eight, 10 weapons out of this plutonium.

What we don’t want is for this 50-kilo problem to become 100-kilo problem or a 200-kilo problem. So, first step, shut down the facility so the problem won’t get bigger.

The second step is, we’re going to have to run to ground what they’ve got in terms of a so-called highly enriched uranium program. This is a different way of making bomb-making material.

And so, we’ve got to work on them to see, you know, what they have purchased. We know, for example, they’ve purchased some centrifuges. We know that they had plans to reverse engineer these centrifuges and product additional centrifuges.

So, we really need to run to ground that program. It’s not going to be easy, because they’ve essentially denied having that program. But that’s step two.

And then step three has got to be to get rid of these weapons.

So, you know, we’ve got a long road ahead of us that’s very difficult. And as you can see, we’ve been held up for a long time over $25 million in Macao.

ECHEVARRIA: Mr. Strobel?

STROBEL: Chris, on that very note, I have sort of a broader question.

The action against Banco Delta Asia was taken under something called Section 311 of the Patriot Act – a very powerful, new tool. It has proved difficult to sort of reverse what is done there.

Is this a tool that, A, has complicated diplomacy, and B, maybe one should use only sparingly, sort of a like a nuclear weapon itself?

HILL: Well, look. I mean, the problem we face with the North Koreans is, in addition to making nuclear weapons – and by the way, they’re not hiding it. They’re not like some other countries who are doing it, but not telling. They’re quite proud about it.

In addition to doing that, they’ve also engaged in some illicit activities that used banks for money laundering – you know, this sort of stuff. And finally, they’ve actually been involved in counterfeiting our currency. So, you know, these are big problems for any country, not just the U.S.

So, I don’t think you can ask any government – not ours, not any other government – just to ignore these things and to pretend it’s not going on. So, we did need to take action.

Now, I think we will find a solution to this problem of getting them back their money. So, I’m not too worried about this in the long run.

What I’m much more concerned about in the long run is whether North Korea is prepared to get off of this track, a track they’ve been on for several decades, to make nuclear weapons. And that’s what we’ve really got to keep the focus on.

SANGER: Ambassador Hill, you made a brief reference to the highly enriched uranium program, which is a second pathway to a bomb.

As you know, there were some disclosures about two months ago, that raised the question about how certain we are that they are actually building such a second path to a weapon, or whether they simply went ahead and purchased some of this equipment from A.Q. Khan, one of the founders of the Pakistani bomb.

As you read the intelligence, what is your conclusion on this issue? Do you believe they have an accurate program? Or do you believe that they simply purchased this and either resold it or didn’t know what to do with it?

HILL: Well, as you know, the issues manager for Korea, Joe DeTrani, involved with this intelligence, said that in the past we had a high degree of confidence that they were pursuing this. And now we have a moderate degree of confidence. So, I’m not here to assess the intelligence.

But what I will tell you is, we know they made certain purchases. Now, they didn’t buy centrifuges to, you know, to decorate some palace somewhere. I mean, the centrifuges are used for a specific purpose, to enrich uranium.

So, the question is, what did they do with this?

And what we can’t have is a situation of, you know, they come up with some explanation and somehow we pretend to believe them. We need to find out what they did with these centrifuges, and we need to find out what is the status of the program.

How far they got has always been – it’s been tough to assess. You know, this is a very opaque society. They don’t have a lot of interaction with the rest of the world. They regard their opaqueness as probably their great asset. They regard everything as a secret.

So, we need to find out what they did with all this.

So, I think that is really going to be our task. And if it turns out they were successful in reverse-engineering some 12 to 20 centrifuges that we know they bought from the A.Q. Khan network and were able to make a few hundred or a few thousand, and put them together in a cascade to produce highly enriched uranium, well, then, they’ve got to stop this.

And they’ve got to stop it. And they’ve got to abandon the program. And get rid of all the equipment. And we’ll work with them on that.

If it turns out they weren’t successful, that they made purchases and found that there were further complications – sort of like someone who assembles or tries to bring home something from a store that says “some assembly required,” and it was too difficult – you know, maybe they just stuffed it in a tunnel somewhere. Fine. Show us where it is in the tunnel and let’s talk about what happened.

The point is we need clarity, and ultimately we need to make sure they’re not doing this.

You know, one other point, high enriched uranium, you can put together a cascade. You can do it underground. There’s no smoke coming out of the top of it. It’s hard to see through our means, through national technical means. It’s quite different from running a plutonium reactor where we can look at that thing everyday and tell you whether it’s working or not working.

So the problem with highly enriched uranium is that you can have a clandestine operation. So we’ve got to get clarity on that.

I have made this point to the North Koreans on many occasions. And the point they’ve made to us is that they are prepared to sit down and talk about this, which is interesting because they’ve also said they don’t have it, but they’re prepared to talk about it. And they said they’re prepared to talk about it to mutual satisfaction. So we have to see how that’s going to go, but first we’ve got to get through this banking matter in Macau and then shut down the plutonium reactor and see how we do.

STROBEL: Chris, a little bit of a change of subject if I might. You sometimes jokingly describe yourself as the Assistant Secretary of State for North Korea. I think our viewers would just be interested generally what else is at the top of your inbox these days. You’ve got counterinsurgency in the Philippines, political changes in Thailand, China and Japan and their relationships. What are you focused on?

HILL: Glad you asked me that. I just got back from a trip through Southeast Asia. I was in Thailand where I had meetings with very senior people to discuss the fact that, you know, we’re coming on one year since Thailand had a military coup, and we’d like to make sure that they’re on schedule to get back to civilian rule. They just promulgated a new constitution a month ago. There’s a lot of discussion about it in Thailand. They’re expecting to have a referendum on their new constitution in September and then general elections in December.

So for us, it’s very important they stay on this schedule and we don’t have any further delays. So that’s very much on the agenda.

You know, Thailand is a traditional friend of the U.S., a treaty ally of the U.S. We work with the Thai on many, many issues. And we want to get them back on parliamentary democracy.

Another country I visited who has not been a traditional friend of the U.S. but is emerging as an important partner for the U.S. is Vietnam. This is a country that has really embraced capitalism, and I think for many Americans for whom Vietnam is a very, very bitter experience, to see what Vietnam has been doing in its economy and to see it emerging in a very sort of open economy is very inspiring.

Now Vietnam on the political side is not as inspiring. And so I had to have a lot of discussions with them on that. We have human rights concerns in Vietnam, but overall we have a relationship there that we’re trying to build.

My next stop on this trip last week was the Philippines. And indeed we talked to them about this insurgency.

You know, the Philippines, they’ve had a tough time. They’ve been fighting a communist insurgency on one of their islands, and then fighting an Islamic fundamentalist insurgency on another in a southern place called Mindanao.

So we have, we have been working very closely with the Filipinos. I mean that is a country who is very much – as the, one of the best history books on the Philippines, the title is “In Our Own Image.” I mean that’s a country that really has a very close relationship with the U.S., another treaty ally, and a country that, whose success we have a great interest in.

And then finally, after the Philippines, I went to Indonesia. And, you know, a lot of Americans don’t know much about Indonesia, but, you know, this is a country with 225 million people. It has more Muslims in that country, it’s a Muslim majority country, more Muslims in Indonesia than in the entire Middle East put together.

And it’s very important to us that that country succeeds. They’ve got good political leadership. And by the way, they haven’t always had good political leadership. They’ve got good leadership. They’ve got a thriving democracy, and now they’re getting some economic growth. Their growth rates were on the order of six and a half percent. Some very encouraging things there. But it is a country that is constantly challenged.

I think for, to the extent Americans are familiar with Indonesia, they probably see that every week it seems there’s some new catastrophe. They had earthquakes there. They had the tsunami. They were one of the countries that were really affected by the tsunami. They’ve had some volcanoes.

And most recently they actually had, there was an accident involving some drilling for oil and gas and it resulted in a mud volcano, mud that is just spewing out of this place near a place called Surabaya where we have some Americans working in our consulate. And this mud is covering up village after village of something on the order of 80,000 people who have been displaced by this mud, which just covers up the village. It’s this extraordinary thing to see mud covering up some 20, 30 feet deep covering up villages. So, you know, Indonesia has many of these environmental catastrophes to deal with, yet they’re moving ahead and it’s very important to us that they succeed.

And finally, let me just mention the relationship with China. I mean there’s no relationship in the world that’s more important to the U.S. then somehow getting this very difficult relationship with China addressed and moving in a positive direction. I mean we have extraordinary economic issues.

I mean for many Americans going through difficult economic times where, you know, manufacturing jobs are being lost, part of globalization, part of structural transformation in our country, for those many Americans, they look at the cause of why they’ve lost their jobs, and for many of them the answer is China. And sometimes that’s right, sometimes the answer is China. But sometimes it has to do with broader and deeper forces.

But whatever it is, we need to get that relationship right, or we need to understand that 1.3 billion people over there in China are people we need to reckon with and somehow we need to work with. So dealing with China, and we’re dealing with them very closely on the issue of North Korea.

But we’re also dealing with them closely on some other issues around the world. We have problems with this little country, Burma, which has been a very brutal dictatorship and a country that we need to work with China to try to effect change there. China is a key to a lot of things. We need to figure out a way to deal with them for a long time.

ECHEVARRIA: Mr. Sanger.

SANGER: Many of the countries that you visited, the Philippines, Indonesia, Thailand for certain, have seen in recent years a huge influx of Chinese investment. Back in the days when I was a correspondent in Asia and when you were a young diplomat in Asia …

HILL: You were young too, by the way.

SANGER: Right, I was. It was a long time ago though. At that time, it was both American and Japanese money that was seen throughout the region. Tell us how you think this wave of Chinese investment has affected American influence in Southeast Asia in particular.

HILL: Well first of all, we don’t fear Chinese investment there. We don’t fear Chinese relationships there. We think Southeast Asia is a pretty big place. There’s room for the U.S. There’s room for China. That is, more China doesn’t mean less of the U.S.

You know, one of the things that we’ve grappled with in those countries is the fact that economically they’ve been behind. And now, as you go through the region, in Thailand was at up four and a half percent, Indonesia about six and a half, Vietnam about eight and a half percent, Philippines six and a half percent. These are very encouraging growth rates. When you get these kinds of growth rates, good things can happen. You can start dealing with problems that you didn’t have the money to deal with. You can start getting yourself a little political space so you can start dealing with some political reforms.

So why are all these countries having good positive growth rates? And part of the answer is China. You know, the world looked for a long time for a second engine of development. For a while we all thought it would be Japan. It turned out not to be Japan. So that second engine of development is turning out to be China, so we don’t, we’re not concerned about that. What we are concerned about though is that as China moves in, invests in these countries, it does it in a responsible, long-term way.

Now what do I mean by that? For example, in China they have some pretty tough laws that are designed to protect China’s forests and that’s very positive. I think we all should see, regard that in a very positive light. But we also see Chinese companies going down to Southeast Asia and engaging in some forestry practices that frankly are not sustainable. So, I mean that’s a type of issue we need to work on with the Chinese.

So I think China, China’s presence there is something that we should see on the whole as a positive development with some, with some accompanying problems. And I think we can, I think we can deal with those problems. We want those countries to succeed, and to succeed, they’re going to have to have some positive economic growth.

SANGER: Let me ask briefly about our relationship directly with China. You’ve mentioned that they’ve been very helpful. You could even say critical in the North Korea negotiations. Some of your critics would say that, in fact, we have outsourced much of the policy to the Chinese, simply because they seem to be the gatekeeper about the pace of negotiations and so forth. And their priorities are different. Yes, they would like to see a non nuclear North Korea, but mostly they want stability in North Korea, and they don’t want those refugees from North Korea coming over their border.

Do you have any sense at this point, that the Chinese are just running the clock out on the North Korea negotiations, keep stability there, but less interested in achieving the objectives you set out at the top of the show.

HILL: I’m not sure about that. I think China has a real interest in achieving the objectives. I mean the last thing China wants to see is North Korea developing an arsenal of nuclear weapons such that other countries in the region, namely your old haunt Japan, or South Korea would feel somehow a necessity to go nuclear.

Frankly, right now, I think that’s a pretty remote possibility. I don’t think South Korea or Japan has that interest. But I don’t want to make a prediction for the long term if North Korea is allowed to get away with this. And the Chinese, I think, look ahead, and they worry about that.

So the real issue comes down to tactics. And the dynamic is always the same. The Chinese ask me for more patience, and I ask them for less patience. I mean the Chinese do have a sense of how to do things, that frankly for an average American like myself is on a little longer timeframe that I’d like to see. So I don’t think they are trying to run out the clock.

I think what they are trying to do is to say look, these things take time. You Americans have to understand the problem didn’t come up in a day, it’s not going to be solved in a day. Don’t worry if you miss a deadline or two, we’re on track. We do worry when we miss deadlines. And I think part of my job has really been to push them. But the notion that somehow we are outsourcing this problem, I mean you are talking to someone who has become to some extent the assistant secretary of North Korea. I mean I do a lot of work on this. I mean I work on this day and night. In fact, just this morning, and last night, I was working on this issue.

I think the U.S. is perceived as very much engaged in this. But what we’re doing is not to be engaged just bilaterally with the North Koreans, been there, done that. What we really need to do is be engaged with partners, who should also have an interest in resolving this, countries like China. So this is not just an American problem. It’s not just a problem that we can solve on our own. We need partners. I think what the six party process has been able to do is build a framework and push the problem towards resolution. It hasn’t been easy, you know, the North Koreans, I mean that is a country with shortages of just about everything except for time. They seem to have as much time as there is in the world, and it’s very frustrating. I mean you call them up, you say you need an answer, they say OK, we will be back in touch next Tuesday and they have absolutely no sense of time there, so that is a problem.

But we’ve been able to work together with other partners, and frankly, if we’re going to – if we can solve this problem, and I do believe we are making progress on it. I mean Lord knows, it’s not the pace I want to see, be we are making progress on it. And then, I think we could actually use the framework for setting up a little more of a multi lateral set up in northeast Asia. You know, southeast Asia has the Ostean (ph) countries, the countries of southeast Asia have an organization together. In Europe, Lord knows, there’s quite an alphabet soup full of multi lateral structures, but in northeast Asia there’s been very little.

SANGER: And could you get the Chinese, the Japanese and the South Koreans to play well long enough to establish some kind of permanent structure?

HILL: Well David, as you know, just three days ago, the South Korean, the Chinese and the Japanese foreign ministers met together in an island called Cheju just off the coast of...

SANGER: Without us.

HILL: Without us, to talk together about things that they might do in their neighborhood. And by the way, they briefed us heavily before and after. We encourage these types of meetings. I mean they should try to work together. But, you know, they don’t have a lot of experience. And, you know, people always talk about the historical legacy in Europe, you know, how difficult it was to get France and Germany together, well, you know, a lot of those problems have been present in Asia, so we’ve got to keep working on them.

ECHEVARRIA: Mr. Secretary, we’re out of time, we appreciate your time with us today.

HILL: Thank you.

(break)

ECHEVARRIA: And we’ll be back in just a few moment to talk with our reporters.

ECHEVARRIA: David Sanger is the Chief Washington Correspondent for the New York Times, what did you get from the discussion with Mr. Hill?

SANGER: You know, what struck me the most about his discussion of North Korea was impatience but not great urgency right now about getting to the point where the North Koreans comply with the agreement that they made to shut down their reactor, which is producing them more nuclear fuel. They are now, at this point, probably about two months past the deadline, and it’s turned out to be much more difficult, as he described, to get the money returned from this bank in Macau.

But what’s interesting to me is that you have not see the President of the United States or the Secretary of State or others out pounding the table saying this has to happen now.

ECHEVARRIA: Why not?

SANGER: Well I think that on the one hand, they believe that these problems are somewhat genuine. But I think on the other hand, they know that there is not a whole lot of muscular backup to the threat to the North Koreans, that if they don’t comply with the agreement, we could do something else about it. Our army is tied up on the other side of the world. The North Koreans may be isolated. They may be hermits. But they get CNN. And they know, at this point, we don’t have the flexibility to go and force much of that agreement.

ECHEVARRIA: Mr. Strobel what did you get from that discussion with Mr. Hill?

STROBEL: I have to agree with David. I mean I think the fact is they don’t have a lot of other choice, and not lot of other policy options for them to pursue, vis-à-vis North Korea right now.

On the other hand, the Bush Administration, look around the world, they need a success somewhere. They’re having lots of problems, from the Balkans to the Indian nuclear deal, to obviously the Middle East, so patience is about the only way they can go.

What I took from Chris, I thought I detected a little bit of a note of optimism and of course, he’s paid to be optimistic, as a diplomat dealing with these problems he has to be optimistic by nature. But he seemed to be saying that maybe something is underway where this problem where the Bank of Delta Asia money could be solved. And the fact that he was on the phone working it last night, and this morning, I don’t know, we’ll have to see in the days ahead. But I thought I detected a note of optimism on that score.

ECHEVARRIA: So where does China fit into this whole thing. Both of you brought it up and he brought it up?

SANGER: Well China is the 600 pound gorilla or 6,000 pound gorilla of both the North Korean negotiations and the future of our diplomacy in Asia. And I think, one of the questions that is legitimate to ask, is that despite Ambassador Hill’s very good and very persistent efforts, China was a very high agenda item no the Bush Administration’s list when they came to office, and dropped nearly to the bottom as soon as 9/11 happened.

And it’s only in the past year that I think many in the administration have come to see the cost of that neglect. And it hasn’t been that there has been a huge military cost, or anything else, it has simply been that China’s influence has grown and we haven’t had a strategy about how to go deal with that. We’re not fabulous as a country in dealing with rising, emerging powers. And I think the Chinese have been perfectly happy to see us distracted on the other side of the world.

ECHEVARRIA: And Mr. Strobel do you think that this initiates a new type of strategy towards China when it comes to diplomacy?

STROBEL: For this administration?

ECHEVARRIA: Yes.

STROBEL: No, not necessarily. I do think there’s been a lot of, sort of almost listening past the graveyard and looking the other way. You have China moving not only to southeast Asia, but very heavily into Africa and Latin America. I don’t see much of a strategy, really to deal with that, at all. And I thought, you know, Chris was talking about being in southeast Asia, and there’s a lot more investments, and a lot more political influence, in a way that helps the United States, because countries there don’t want just China. They want the U.S. to remain in the region, but it’s a huge sort of long term problem that this administration has not grappled with.

ECHEVARRIA: Warren Strobel is a Senior Foreign Affairs Correspondent for McClatchy Newspapers. We’ve also been joined by David Sanger, the Chief Washington Correspondent for the New York Times. To both of you, thanks for joining us on the Newsmakers.

SANGER: Thank you.

STROBEL: Thank you.