Twenty Years On: Who Paid for North Korea’s Nuclear Program

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What is happening?

It all began in a secluded region of a country known as the Hermit Kingdom. On October 9, 2006, the Punggye-ri nuclear test site in the Hamgyong Mountains of North Korea became the stage for a shift in the geopolitical balance. Seismic sensors as far away as South America helped pinpoint the location of the explosion at the site, deep beneath Mount Mantap in the country’s northernmost province. 

From that point on, Punggye-ri became the primary nuclear testing ground for North Korean regimes of supreme leader Kim Jong Il and his son and successor Kim Jong Un. The last nuclear blast, conducted in 2017, caused the otherwise seismically inactive mountain range to start experiencing frequent earthquakes, with Mount Mantap losing approximately half a meter in height and its peak shifting 3.5 meters sideways.

What is the broader picture?

North Korea’s interest in a nuclear bomb dates back to the 1950s, when its early nuclear program was heavily supported by the Soviet Union. In 1959, the two countries signed a nuclear cooperation agreement. Moscow supplied North Korea with its first research reactor and helped establish the Yongbyon Nuclear Research Center by the 1960s.

The collapse of the Soviet bloc had deprived North Korea of a crucial economic and military lifeline. Chronic economic mismanagement, compounded by the isolationist official state ideology of self-reliance, known as Juche, plunged the country into a severe economic crisis. While the exact figures are unknown, the ensuing famine, which became known as the Arduous March (1994–1998), may have killed more than a million people. Food shortages became so desperate that state TV broadcast cooking shows with recipes featuring grass, while authorities started promoting a “Let’s eat two meals a day” campaign.

Ath the same time, North Korea also faced its first dynastic succession. In 1994, the country’s founding father, Kim Il Sung, died and was succeeded by his son, Kim Jong Il. Coming amid the aforementioned socioeconomic woes, the transition made the regime’s survival a pressing matter, with Kim Jong Il apparently surmising that the nuclear option would provide an ideological lifeline for the country.

North Korea’s acquisition of nuclear weapons is often described as a failure of U.S. diplomacy. While Washington certainly bears responsibility, South Korea’s role is usually overlooked. The Sunshine Policy, pursued by Presidents Kim Dae-jung (1998–2003) and Roh Moo-hyun (2003–2008), sought to improve inter-Korean relations through diplomatic engagement and economic cooperation. The resulting financial assistance from the Seoul helped ease the pressure on Pyongyang, freeing up resources for its nuclear program, with the Kim regime treating economic aid as a blank check. As of 2025, North Korea owed South Korea US$620.2 million in unpaid loans. Since 2012, when most of the loans provided between 2000 and 2007 began to mature, North Korea’s Foreign Trade Bank has ignored more than 100 repayment notices. To put this figure into perspective, the total cost of the nuclear program over the past 50 years is estimated at US$1.6 billion.

Following the first inter-Korean summit in June 2000, Seoul expanded economic cooperation and assistance to the North. The most prominent symbol of this rapprochement was the Kaesong Industrial Complex, launched in 2004 just north of the Demilitarized Zone. The complex housed South Korean factories employing North Korean workers, but their wages were paid in foreign currency directly to the North Korean government. Pyongyang retained approximately 70% of these payments, while workers received local currency and ration coupons. The revenue provided the regime with an important source of foreign currency, easing financial constraints on its nuclear development.

Why does it matter?

A 2024 report on North Korea’s nuclear capabilities by the Bulletin of the Atomic Scientists estimated that the Pyongyang possessed around 50 nuclear weapons and had enough fissile material to increase its stockpile to 90 warheads. In May 2012, North Korea amended its constitution to describe itself as a “nuclear-armed state,” and in 2017, it tested its first intercontinental ballistic missile, which is capable of reaching the continental United States.

The DPRK remains a destabilizing force in the Indo-Pacific. Two decades of denuclearization talks have failed, with even South Korean officials acknowledging the need to reassess the long-standing denuclearization-first strategy. Normalizing the DPRK’s nuclear status risks fueling further nuclear proliferation across the region. More than 75% of South Koreans support developing their own nuclear weapons.