Dithering in Europe leaves Korea staring into nuclear abyss

The fragile peace on the Korean peninsula, the world's last Cold War flashpoint, is in jeopardy if European governments fail to agree on a 15 million ecu (pounds 11.5m) package to provide oil to the stricken government of North Korea.

European Commission officials are engaged in delicate negotiations with the Korean Energy Development Organisation (Kedo), a joint American-Japanese- South Korean body formed after a scare in 1994, when Pyongyang appeared to be developing nuclear weapons. A funding crisis has left Kedo on the edge of collapse and it has asked the Europeans for a 15 million ecu annual contribution in return for membership of the organisation.

But differences between European Union member states threaten to thwart the deal. And, without European money, Kedo officials fear it will fall apart, increasing the risk that Pyongyang will restart its nuclear programme and plunge the peninsula back into crisis.

Kedo represents the best hope in decades for peace on the peninsula. The organisation was born as a consequence of the Framework Agreement, signed in Geneva in 1994, which temporarily defused fears of a nuclear confrontation. In spring that year, American spy satellites revealed that the North Koreans were stockpiling spent fuel rods from Soviet-made nuclear reactors. These had the potential for generating plutonium capable of being used in nuclear warheads. After months of negotiations, North Korea agreed to freeze their operations.

Kedo was formed to fulfil the other side of the bargain: the provision of safer, light-water reactors costing $5bn (pounds 3bn), to be paid for by South Korea and Japan. The Geneva accord also promised heavy fuel oil to tide the North over while the safe reactors are being installed.

The annual cost of the fuel shipments is around $55m, of which $25m has been approved by the US. Britain and Japan have made lesser contributions. But without more substantial participation by Europe, Kedo has little hope of fulfilling its obligations. And, last week, Pyongyang's official news agency threatened a restart to nuclear development if there were delays to the Kedo programme.

Kedo's troubles come at a time of increasing instability in Korea, which has been divided between the Stalinist North and the US-backed South since the end of the Second World War. With the collapse of the Soviet bloc, North Korea's economy plummeted. In 1995 the North made an unprecedented appeal for foreign aid, raising hopes of dialogue. But Pyongyang refuses to talk directly with anyone but the US - which insists that any settlement must be reached between the two Koreas. Hopes were pinned on a proposal for four-way talks, including the two Koreas, the US and China - but these were dashed in September when a North Korean submarine ran aground in the South, while engaged on an apparent spy mission. The outrage this provoked in Seoul has jeopardised the Geneva agreement.

"We cannot keep the nuclear programme frozen any longer only to get heavy oil ... with no importance given to when the light-water reactors will be provided," Pyongyang's news agency said last week, accusing the US of "breaking its promise" in "unilaterally" delaying the implementation of the agreement.

Pyongyang yesterday closed its liaison office in the demilitarised zone between the two countries in protest.

"We're at a very dicey point, and the European contribution is very important to the whole thing," said one observer in Seoul yesterday. "It seems people have to be brought to the point where they're staring into the abyss before they make up their minds. We were close to the abyss in 1994, but people have forgotten that."