Arctic states open council to China, India, Korea

KIRUNA, Sweden (AP) — Arctic states have agreed to let nations that are located nowhere near the Earth's north to become observers to their diplomatic council.

The decision Wednesday by the Arctic Council boosts rising superpowers China, India and South Korea that seek to mine the region of its untapped energy and other natural resources. The European Union also was tentatively granted observer status to the eight-state council but must first address several questions about its bid, including concerns about its ban on Canadian seal exports.

Membership to the long-obscure Arctic Council has become increasingly lucrative as the thawing region's waterways open to commercial shipping traffic.

Officials estimate the Arctic holds 13 percent of the world's undiscovered oil reserves, and 30 percent of undiscovered gas deposits.

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Chicago case alleges ties to North Korea

CHICAGO (AP) — A Taiwanese businessman long suspected of ties to North Korea and his Illinois-based son have been charged in Chicago with seeking to bypass a U.S. ban on the export of weapons machinery to the hard-line communist nation, federal prosecutors announced Monday.

Hsien Tai Tsai, 67, and his 36-year-old son, Yueh-Hsun Tsai, are charged with one count each of conspiracy to defraud the U.S. in its enforcement of laws prohibiting the proliferation of weapons of mass destruction, a statement from the U.S. Attorney's Office in Chicago said.

The statement suggests a wider investigation.

Federal agents have been investigating the two Tsais and a network of companies on suspicion of trying to export goods and machinery from the U.S. "that could be used to produce weapons of mass destruction," it said.

The father, who lives in Taiwan, was arrested on Wednesday in Tallinn, the capital of the Baltic Sea-coast nation of Estonia. The statement from prosecutors doesn't speculate about why Hsien Tsai was in Estonia, though it says U.S. authorities are seeking his extradition. The son, a legal U.S. resident, was arrested on the same day last week at his home in suburban Glenview, just outside Chicago, according to prosecutors.

The arrest comes as North Korea, under the leadership of Kim Jong Un, has faced international criticism over its nuclear and weapons-development programs. The federal complaint released Monday doesn't offer details about which weapons systems the machinery could have benefited.

The elder Tsai, who also goes by Alex Tsai, fell under suspicion of U.S. authorities at least as far back as 2008, when he was convicted in Taiwan of forging shipping invoices and illegally shipping restricted materials to North Korea, the U.S. Department of Treasury said in press release at the time.

Treasury officials accused him of shipping items to North Korea that could be used to support its advanced weapons program, and the department in 2009 placed a wide-ranging prohibition on him doing any business in or with the United States. The ban applied to him and several Taiwanese-based companies he helped run, including Trans Merits Co. Ltd. and Trans Multi Mechanics Co. Ltd., the complaint says.

It was the alleged bid to skirt the 2009 prohibition, with the son's alleged help, that led to the charges in Chicago. Among the items they allegedly conspired to export was what prosecutors described as "a Bryant center hole grinder," which is used to drill precise, smooth holes through elongated metal, the compliant says. The machinery got to Taiwan, but the complaint doesn't indicate if it might have reached North Korea.

Yueh-Hsun Tsai, who also goes by Gary Tsai, appeared in a federal courtroom in Chicago on Monday. Magistrate Judge Susan Cox agreed to his release on $500,000 bond. He will be confined to his home and will be under electronic monitoring.

Speaking to reporters later on Monday, the younger Tsai's attorney insisted the machinery involved was "unsophisticated."

"And there is no allegation Mr. (Yueh-Hsun) Tsai knew it was destined for North Korea," the attorney, Ted Poulos, said. He added about the business deals involved, "It amounts to a rather benign business transaction."

In addition to the count of conspiracy to defraud U.S. proliferation laws, the father and son each face one count of conspiracy to violate the International Emergency Economic Powers Act and one count of money laundering. The count of conspiracy to defraud the U.S. carries a maximum five-year prison sentence, while violating the economic powers act and money laundering each carries a maximum 20-year term.

____

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Bank of Korea hikes interest rate to 3.25 percent (AP)

SEOUL, South Korea – South Korea's central bank raised its key interest rate for the fifth time in less than a year as it keeps up a battle against inflation amid solid economic growth.

The Bank of Korea announced Friday that it lifted the benchmark base rate to 3.25 percent from 3 percent at a monthly monetary policy meeting.

Experts had been somewhat divided on the outcome. A total of nine economists out of 15 surveyed by Yonhap Infomax, the financial news arm of Yonhap news agency, predicted the BOK would leave the rate unchanged.

South Korea's central bank has raised borrowing costs five times since July of last year from a record low 2 percent amid positive economic growth and concerns about rising prices.

The latest increase came even as inflation has eased for two straight months, though it remains outside the central bank's comfort zone for price increases.

The bank's rate-setting monetary policy committee, chaired by Gov. Kim Choongsoo, said in a statement that South Korea's economy was performing well on strong exports, but that prices remained a concern.

"The committee expects inflationary pressures to continue in the coming months, driven largely by increased demand from the economic upswing and by inflation expectations," the statement said.

South Korea's consumer price index came in at 4.1 percent for May, the government announced earlier this month, which was a slight easing from the 4.2 percent recorded in April. The index peaked this year at 4.7 percent in March, which was the highest level since October 2008.

Still, inflation has exceeded the top of the BOK's inflation "tolerance range" for five straight months through May. That range is plus or minus 1 percentage point from the bank's inflation target of 3 percent.

"The policy statement remains hawkish, signaling further hikes," Kwon Goohoon, economist at Goldman Sachs in Seoul, wrote in a report, adding he expects the bank to raise the rate to 3.75 percent by the end of the year.

South Korea's benchmark stock index fell 1.2 percent to close Friday at 2,046.67 after the rate increase and amid concerns global economic growth is slowing. The South Korean won, meanwhile, rose marginally to 1,082.60 against the dollar.

Separately, the bank announced earlier Friday that the country's producer price index, which measures prices of goods and some services traded between businesses, rose 6.2 percent in May from the same month last year.

The bank's base rate influences a variety of borrowing costs in South Korea, including those on overnight loans between financial institutions and more broadly on debt for mortgages and credit cards.

The current tightening phase comes after the bank slashed the rate by a total of 3.25 percentage points between October 2008 and February 2009 to a record low 2 percent as it joined other central banks in fighting the global financial crisis.

South Korea's economy, Asia's fourth largest, grew a revised 1.3 percent in the first quarter of this year from the previous three months, the central bank said Wednesday. That was slightly lower than the 1.4 percent expansion initially announced in April.

South Korea's rate rise came as the European Central Bank left its key rate unchanged Thursday at 1.25 percent for the second straight month.

ECB President Jean-Claude Trichet, however, signaled that the rate would likely be raised in July given the danger that higher oil and commodity prices could fuel inflation as the European economy expands.

Also Thursday, New Zealand's central bank held its key interest rate at 2.5 percent, citing disruption by a major earthquake in February to the country's recovery from recession as a reason to continue to boost the economy.

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Report: N. Korea test-fires missiles

Missiles are prominently displayed during a Workers Party parade in Pyongyang, North Korea, in October 2010. Short-range missile fired last week, news agency saysSouth Korea won't comment on it

Seoul, South Korea (CNN) -- North Korea test-fired a short-range missile off its western coast in the middle of last week, according to Yonhap News Agency.

Quoting an intelligence source, Yonhap says Pyongyang launched a KN-06 short-range missile in an attempt to improve it and increase its range.

This launch would be the North's first test of a short-range missile in 19 months. In July 2009, North Korea fired a series of short-range missiles off its east coast, a move criticized by the international community.

The South Korean Ministry of Defense tells CNN they cannot comment on the report.

Tensions have been high between the two Koreas since two attacks last year killed 50 South Koreans.

North Korea also announced last week it will cut all ties with the South and threatened to strike with military force. It is not the first time Pyongyang has threatened to attack Seoul.

CNN's Jiyeon Lee contributed to this report.

CNN

After Tensions with North, South Korea Ponders Its 63-Year-Old Draft (Time.com)

If Private Jeon is celebrating inside, his disciplined military exterior doesn't show it. Dressed in khaki with black, wide-rimmed spectacles, the 22-year-old is due to finish his 21 months of military service next month, an obligation for almost all of South Korea's 25 million men. "It's good experience for my job," Jeon says during an educational tour of the Demilitarized Zone, the barb-wired no-man's land that has divided the Korean peninsula for 58 years and counting. "Frankly," he adds, "I don't like the military culture. But there's a lot of economic uncertainty."

A national duty and, in theory, an equalizer in a nation with a growing income gap, South Korea's mandatory military service has become an issue of much debate following last year's sinking of the Cheonan Navy vessel and shelling by the North that killed four people on Yeonpyeong Island close to the maritime border. In response, hawks called on the government to increase the period of service from 21 to 24 months, while other segments of society said Seoul should continue a long-standing policy under which compulsory military service is scheduled to be reduced. At 687,000 strong, South Korea's military is the sixth-largest in the world, requiring all healthy men to serve between the ages of 19 and 36. (See pictures of the shelling of Yeonpyeong.)

So far, President Lee Myung-bak has not increased or reduced service. Instead, in December, he froze the current term at 21 months while his government grappled with why last year's attacks happened and what the government and military should do about it. Seoul's military spending has risen nearly 6% this year to $27.7 billion and the government has passed a host of military reforms. But in the end, Seoul did nothing to retaliate - a decision that did not go down well with the average South Korean. A poll by daily newspaper Chosun Ilbo at the end of last year found a majority of people feel the government's response was inadequate.

Disputes over the nation's mandatory military service - a policy that has been in place for the full 63 years of the country's existence - have been brewing for years. Civic and human rights' groups, students, the political opposition, women's organizations, men who have been deemed healthy enough to serve and critics of some privileged few who have not have all asked who should serve, the extent to which objectors should be tolerated and whether those that do their time deserve bonuses upon re-entering the job market. The policy of compensating soldiers returning to work, abolished in 1999 on sexual equality grounds, is now gaining popularity again: A Gallup Korea poll at the end of May found nearly 80% of South Koreans are in favor of reinstating the payment.

Meanwhile, dodging the draft has become something of an art. Conscientious objectors and the rich and famous have gone to extraordinary lengths to escape the draft, an act which carries a minimum 18 months in prison. Some have opted for last-minute full-body tattoos that disqualify them for service; others have lost extreme amounts of weight to fail the medical exam, faked personal records or even changed their nationality. At present, 850 South Koreans are in jail for dodging the draft, including many Jehovah's Witnesses who say it is contrary to the 'love thy neighbor' doctrine, according to Amnesty International.

A number of celebrities and family members of the rich and powerful have in the past tried to elude military service by the use of doctored medical records and even bribes, among other means. South Korea's biggest pop sensation Rain is due to serve in September, and it's not yet clear whether he'll swap his trademark sunglasses and snappy suits for combat boots and khakis. His entourage recently started to bar journalists' questions on the issue.

The backdrop to these shenanigans, however, is more serious. South Korea has in the past year has conducted a greater number of military exercises with the U.S. in and around the DMZ, leading to a series of verbal threats by the North. Popular support for military action against its northern neighbor has risen dramatically in recent months. After the sinking of the Cheonan in March 2010, less than 30% of South Koreans backed a military response. That figure rose significantly after the shelling of Yeonpyeong Island to nearly 70%, according to a December poll by Chosun Ilbo. (See rare photos from inside North Korea.)

At Hongik University in Seoul, the verdict on military service is almost unanimous among male students. "I hated it," says 25-year old math major Lee Sung-hwan. But despite the usual complaints that all cadets have to wear the same clothes and short hair cuts and can't see their girlfriends, Lee believes military service in South Korea is more necessary than ever. Why? "Because of North Korea," he says.

Not surprisingly, it's at the DMZ - both a macabre tourist destination and a very real frontline - where the thousands of young men who comprise South Korea's military might are most visibly on display. The DMZ serves as a temporary home to servicemen enlisted as glorified tour guides in and around sites that attract about five million tourists per year. These draftees are the face of the South Korean military to the world and the enemy - and are, unsurprisingly, tall and easy on the eye. "Is he handsome?" asks a Chinese tour guide in Mandarin as a young, gangly soldier walks onto a tour bus to check passports and ID cards before crossing into the DMZ. A handful of (mostly female) tourists on the bus have a look. "Handsome," they reply.

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North Korea: One of the Happiest Places on Earth? (Time.com)

According to a global happiness index released in North Korea, the country and its allies are the most cheerful countries in the world. Naturally, the "American Empire" strikes Pyongyang as just plain sad.

Shanghaiist reports that North Korea's Chosun Central Television recently came out with a happiness index compiled by local researchers. Their findings? China is the happiest place on the planet, earning 100 points (a perfect score!). At number two is none other than North Korea itself. Cuba, Iran and Venezuela (in that order) round out the top five.

(VIDEO: How one man caught secret video inside North Korea.)

The United States places dead last, coming in 203rd. South Korea is nearly just as depressed a nation; it ranks 152nd on the list. Some spots, North Korea's research indicates, are just nowhere near as smiley as the Axis of Evil.

The Chinese net is ablaze with the results, screen grabs of which have been posted to popular sites. Implored one commenter on the Chinese online forum Mop: "Please send me to the U.S. so I can suffer, too." (via Shanghaiist)

(PHOTOS: Rare pictures inside North Korea.)

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U.N.: N. Korea still trades banned arms

North Korea is doing deals in banned weapons with Iran and others, a U.N. report saysThe investigating panel finds "loopholes" and "vulnerabilities" exploited by North Korea"Prohibited ballistic missile-related items" are suspected to have been traded with Iran

United Nations (CNN) -- A new unpublished U.N. report claims North Korea continues to trade banned weapons technology with several countries, including Iran.

The report, which was examined by CNN Monday, was compiled by a U.N. panel of experts looking into Security Council violations by the Democratic People's Republic of Korea.

The report asserts that North Korea has "continued to defy the bans on imports and exports of nuclear-related items, of conventional arms and of luxury goods." In addition, the document says that "the panel has discovered loopholes and other vulnerabilities in shipping and transportation practices that the Democratic People's Republic of Korea and others have exploited."

One of those trading partners in weaponry and technology, according to the report, is the Islamic Republic of Iran. The panel of experts found "prohibited ballistic missile-related items are suspected to have been transferred" between North Korea and Iran "on regular scheduled flights of Air Koryo and Iran Air."

The North Koreans have also used cargo flights and handling because such flights "lack the kind of monitoring and security to which passenger terminals and flights are now subject."

North Korea was targeted with sanctions by the U.N. Security Council starting in 2006 after it had conducted several nuclear and ballistic tests over the years.

The report detailed several examples of illicit arms or technology sales by North Korea that were stopped:

-- Thailand reported North Korean arms seized in December 2009 at Dom Muang Airport. The markings of crates suggested the 35 tons of arms were probably part of multiple shipments, possibly headed to Myanmar.

-- The panel learned about weapons that would have been delivered to Burundi in October 2009 by a Ukrainian company, possibly by the same aircraft that was impounded two months later in Thailand from North Korea.

-- Two states inspected a seized shipment containing propellant for use in Scud-type missiles en route from the North Korea to a Middle Eastern country that diplomats identified to CNN as Iran.

Calls seeking comment from the North Korean mission at the United Nations were not immediately returned.

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Jimmy Carter in S. Korea to revive talks

Former U.S. President, Jimmy Carter waves as he arrives for a press conference in Beijing on Monday.The Elders will hold a news conference on ThursdayTensions between North Korea and the West have spiked in recent years South Korea accuses the North of torpedoing and sinking its warship

(CNN) -- Former U.S. President Jimmy Carter and three other ex-leaders will arrive in Seoul on Thursday on the third leg of a trip that hopes to restart long-stalled talks between North and South Korea.

The visit will come after two days of meetings with North Korean officials.

Carter and the group known as "The Elders" -- former presidents Martti Ahtisaari of Finland and Mary Robinson of Ireland, and former Norwegian Prime Minister Gro Brundtland -- will hold a news conference to talk about what they have learned during their visits to China, and North and South Korea, a statement from the group said.

The Elders is an independent group of global leaders founded by former South African President Nelson Mandela.

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While in China, the group met with Chinese Foreign Minister Yang Jiechi, and a Chinese expert on North Korea's nuclear situation.

Currently in North Korea, the Elders expect to meet with North Korean leader Kim Jong Il, along with other senior officials and diplomats. Carter said they went to Pyongyang at the invitation of the North Korean government.

The group will meet with South Korean officials on Thursday.

Tensions between North Korea and the West have spiked in recent years due in part to concerns over Pyongyang's nuclear development program.

The United States and South Korea held joint military drills in February, despite North Korea's warning to the South not to carry out the drills, calling them a provocation.

South Korea accuses the North of torpedoing and sinking one of its warships in March 2010, killing 46 sailors. In November, North Korea shelled Yeonpyeong Island, killing two South Korean marines and two civilians.

Carter has a long history of dealing with North Korea. His 1994 talks with the late Kim Il Sung, Kim Jong Il's father, paved the way for the "Agreed Framework" the same year -- an agreement designed to rein in Pyongyang's nuclear ambitions.

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North Korea says it has detained U.S. citizen

hard labor for crossing into the North from China. He was detained for seven months in all.

In 2009, journalists Laura Ling and Euna Lee were arrested for trespassing in North Korea and released only after former President Bill Clinton made a similar trip to Pyongyang to plead for their freedom.

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