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Termination of Oil Subsidy to North Wastes 3.6 Billion Won

Termination of Oil Subsidy to North Wastes 3.6 Billion Won

Posted April. 21, 2007 03:13,   


The government nullified a contract it signed with GS Caltex in order to give North Korea an oil subsidy as part of the measures included in the 2-13 Agreement at the six-party talks. The damages the government has to pay for the termination of contract total 3.6 billion won.

The government disclosed that it "terminated the contract on April 20 since the fulfillment of the agreement concerning oil subsidies is being delayed because of problems with North Korea`s account at Banco Delta Asia, and because the contract day for the supply provision has expired."

The damage from the termination of contract is calculated to be 3.6 billion won: 2.5 billion won for demurrage and charterage plus 1.1 billion won for the costs of storing the oil. The government plans to confirm the amount after an estimate is completed by the Public Procurement Service.

The government signed the contract to supply the oil with GS Caltex on March 7 after deciding to spend 21.9 billion won for an oil supply from the reserve of the South-North Cooperation Fund. It has also been taking related measures such as preparing 3 ships to stand by at Yeocheon Port in Jeonnam on March 23.

South Korea is in charge of 50,000 tons of oil to be supplied to North Korea in the form of emergency aid on the condition that North Korea follows the 2-13 agreement and takes measures such as closing down the Yongbyon nuclear facility.

The government will revise the date of the supply provision through close cooperation with the parties of the six-party talks and other related government bodies.