The Democratic Peoples Republic of Korea (North Korea) occupies a strategic location bordering China, South Korea, and Russia. North Koreas communist ideology has been based on the concept of juche, or self-reliance. The designation of North Korea as a state supporter of terrorism by the United States also effectively precludes lending by international financial institutions such as the World Bank. North Korea relies on coal and hydropower for most of its energy needs. North Korea relies on two domestic sources of commercial energy -- coal and hydropower -- for most of its energy needs. North Korea lacks domestic oil reserves. North Korea lacks domestic petroleum reserves, but the West Korea Bay may contain hydrocarbon reserves, as it is considered to be a geological extension of Chinas Bohai Bay. North Korea is a potential transit route for natural gas to South Korea. South Korea has held discussions with China, Russia, and BP about the possibility of importing natural gas from Russias huge Kovykta gas field near Irkutsk. Six party talks, including the United States, North Korea, South Korea, China, Russia, and Japan, have sought to end North Koreas nuclear weapons program. Japan signed a contract in May 1999 committing to provide its $1 billion contribution to KEDO to fund the new light-water reactors, an action which had been delayed by North Koreas missile test in August 1998.
North Koreas economy, which remains under tight state control (collectivized agriculture and state-owned companies account for about 90 percent of all economic activity) grew by 2.2 percent in 2004, according to estimates by South Koreas central bank. Increases in output from utilities, agriculture, and mining contributed to this growth. The modest growth in real Gross Domestic Product (GDP) over the last seven years followed a steady economic contraction from 1990 through 1998. North Koreas communist ideology has been based on the concept of "juche," or self-reliance. Severe economic problems have, however, forced the country to accept international food aid and embark on a series of limited market reforms. Famine in North Korea has reportedly killed hundreds of thousands of people over the last decade. Several governments, including the United States, have provided funding to the United Nations World Food Program (WFP) for emergency food aid to North Korea. North Korea has permitted a small amount of foreign investment in recent years, mainly by South Korean firms. According to South Korean figures, South Korea surpassed China in 2002 as North Koreas largest trading partner.
In mid-June 2000, the leaders of the two Koreas held their first summit meeting in Pyongyang. The summit led to a joint statement by the two leaders which supported, in general terms, the goal of eventual reunification of the two Korean states, reunification of families divided since the Korean War, and economic cooperation. Developments in inter-Korean relations since 2002 have been mixed. A naval clash near the two countries maritime frontier in June 2002 heightened tensions, but progress has been made in some areas, such as the commencement of work in September 2002 on clearing parts of the Demilitarized Zone (DMZ) to facilitate possible road and rail links. South Korean president, Roh Moo-Hyun has continued a policy of engagement with the North.
The United States announced on June 19, 2000 that it was easing some of the economic sanctions which have been in place with North Korea under the Trading With the Enemy Act since the start of the Korean War in 1950. Licenses are still required from the Treasury Departments Office of Foreign Assets Control (OFAC) for many transactions, and sales of military and dual-use items are still restricted. The designation of North Korea as a state supporter of terrorism by the United States also effectively precludes lending by international financial institutions such as the World Bank.