Tag Archives: U.S. sanctions

Russia’s Putin, despite sanctions, still hopes for better U.S. ties

MOSCOW (Reuters) – Russian President Vladimir Putin still hopes to pull Moscow’s ties with Washington out of a deep crisis, but nobody will go into mourning if this ambition is not reciprocated by the United States, the Kremlin said on Monday.

Moscow is bracing itself for a slew of new U.S. sanctions despite Putin meeting U.S. President Donald Trump at a summit in Helsinki in July, an encounter both sides said went well.

Initial Russian triumphalism after the summit turned sour however as anger over what some U.S. lawmakers saw as an over deferential Trump performance galvanized a new sanctions push.

The U.S. State Department has said it will impose fresh sanctions by the end of this month, while bi-partisan legislation from senators calls for other curbs to be widened.

Moscow is also bracing itself for potential U.S. measures designed to frustrate its Nord Stream 2 gas pipeline project.

Kremlin spokesman Dmitry Peskov told reporters on a conference call that the new U.S. sanctions proposals were unfriendly, illegal and would harm world trade.

“Let’s wait and see what will happen, if anything,” said Peskov, saying any Russian response would be dictated by Russia’s own national interests.

“The Russian president is hoping for the best and, despite all this, wants to pull our bilateral ties out of the deep crisis they are in. He (Putin) still has that desire. But at the same time, nobody plans to go into mourning if our approach is not reciprocated by Washington.”

(Reporting by Tom Balmforth and Polina Ivanova; Editing by Andrew Osborn)

Russia reels, denounces new U.S. sanctions as illegal, unfriendly

FILE PHOTO: National flags of Russia and the U.S. fly at Vnukovo International Airport in Moscow, Russia April 11, 2017. REUTERS/Maxim Shemetov/File Photo

By Andrew Osborn

MOSCOW (Reuters) – Russia condemned a new round of U.S. sanctions as illegal on Thursday after news of the measures sent the rouble tumbling to two-year lows and sparked a wider asset sell-off over fears that Moscow was locked in a spiral of never-ending curbs by the West.

Moscow has been trying with mixed success to improve battered U.S.-Russia ties since Donald Trump won the White House in 2016, and Russia’s political elite was quick to chalk up a summit last month between Trump and Vladimir Putin as a victory.

But initial triumphalism swiftly turned sour as anger over what some U.S. lawmakers saw as an over deferential performance by Trump and his failure to confront Putin over Moscow’s alleged meddling in U.S. politics galvanized a new sanctions push.

Having bet heavily on improving ties with Washington via Trump, Moscow now finds that Trump is under mounting pressure from U.S. lawmakers to show he is tough on Russia ahead of mid-term elections.

In the latest broadside, the U.S. State Department said on Wednesday it would impose fresh sanctions by the month’s end after determining that Moscow had used a nerve agent against a former Russian double agent, Sergei Skripal, and his daughter, Yulia, in Britain, something Moscow denies.

In an early reaction, the Kremlin said the sanctions were illegal and unfriendly and that the U.S. move was at odds with the “constructive atmosphere” of Trump and Putin’s encounter in Helsinki.

The new sanctions come in two tranches. The first, which targets U.S. exports of sensitive national-security related goods, comes with deep exemptions and many of the items it covers have already been banned by previous restrictions.

However, the second tranche, activated after 90 days if Moscow fails to provide “reliable assurances” it will no longer use chemical weapons and allow on-site inspections by the United Nations or other international observer groups, is more serious.

NBC, citing U.S. officials, said the second tranche could include downgrading diplomatic relations, suspending the state airline Aeroflot’s ability to fly to the United States and cutting off nearly all exports and imports.

The State Department’s announcement fueled already worsening investor sentiment about the possible impact of more sanctions on Russian assets and the rouble at one point slid by over 1 percent against the dollar, hitting a two-year low, before recouping some of its losses.

The U.S. move also triggered a sell-off in Russian government bonds and the dollar-denominated RTS index fell to its lowest since April 11.

“There is local panic on the currency market,” BCS Brokerage said in a note. “At times, the number of those who want to ditch the rouble is becoming so high so there is not enough liquidity.”

ILLEGAL

The Kremlin said the new sanctions were “illegal and do not correspond to international law.”

“…Such decisions taken by the American side are absolutely unfriendly and can hardly be somehow associated with the constructive – not simple but constructive – atmosphere that there was at the last meeting of the two presidents,” Kremlin spokesman Dmitry Peskov said.

Washington had become an unpredictable player on the international stage, Peskov added, saying “anything could be expected” from it and that it was important that Russia’s financial system, which he described as stable, was prepared.

In a sign the Kremlin was not eager to escalate an already difficult situation however, Peskov said it was too early to talk about Russian countermeasures.

He criticized the U.S. decision to link the sanctions to the British nerve agent case, an incident the Kremlin has long cast as a Western plot to damage its reputation and provide a pretext for more sanctions.

Skripal, a former colonel in Russia’s GRU military intelligence service, and his 33-year-old daughter were found slumped unconscious on a bench in the southern English city of Salisbury in March after a liquid form of the Novichok type of nerve agent was applied to his home’s front door.

European countries and the United States expelled 100 Russian diplomats after the attack, in the strongest action by Trump against Russia since he came to office.

Konstantin Kosachyov, head of the upper house of parliament’s international affairs committee, was cited by the Interfax news agency as saying it looked like Washington was now behaving like “a police state.”

Dmitri Trenin, director of the Carnegie Moscow Center and a former colonel in the Russian army, said the State Department’s move looked like the latest salvo in what he called a hybrid war.

“Sanctions are the U.S. weapon of choice,” Trenin wrote on Twitter.

“They are not an instrument, but the policy itself. Russia will have to brace for more to come over the next several years, prepare for the worst and push back where it can.”

At variance with Moscow over Ukraine and Syria, Western sanctions have already drastically reduced Western involvement in Russian energy and commodities projects, including large-scale financing and exploration of hard-to-recover and deep water resources.

Proposed U.S. legislation prepared by several senators calls on Trump to widen the sanctions further to include virtually all Russian energy projects and effectively bar Western companies from any involvement in the country.

Introduced by Republican and Democratic senators last week in draft form, Senator Lindsey Graham, one of the measure’s lead sponsors, has called it “the sanctions bill from hell.”

(Additional reporting by Dmitry Zhdannikov, Tom Balmforth, Denis Pinchuk, Andrey Ostroukh; Editing by Richard Balmforth)

Russia’s Putin meets Iran Supreme Leader’s aide in Moscow: RIA

Russian President Vladimir Putin shakes hands with Ali Akbar Velayati, a top advisor to Iran's Supreme Leader Ayatollah Ali Khamenei, during their meeting at the Novo-Ogaryovo state residence outside Moscow, Russia July 12, 2018. Sputnik/Alexei Druzhinin/Kremlin via REUTERS

MOSCOW (Reuters) – Russian President Vladimir Putin met Ali Akbar Velayati, a top adviser to Iran’s Supreme Leader Ayatollah Ali Khamenei, on Thursday in Moscow, RIA news agency reported, without providing any details.

Velayati hailed Iran’s ties with Russia on Wednesday as “strategic” and said he would deliver messages to Putin from Khamenei and Iran’s President Hassan Rouhani. His visit comes as Iran braces for renewed U.S. economic sanctions.

(Reporting by Maria Kiselyova; Writing by Kevin O’Flynn; Editing by Gareth Jones)

Iran vows to sell as much oil as it can despite U.S. sanctions

FILE PHOTO: Iranian Vice President Eshaq Jahangiri speaks during a news conference in Najaf, south of Baghdad, February 18, 2015. REUTERS/Alaa Al-Marjani/File Photo

LONDON (Reuters) – Iranian vice president Eshaq Jahangiri acknowledged on Tuesday that U.S. sanctions would hurt the economy but promised to “sell as much oil as we can” and protect its banking system.

Jahangiri said Washington was trying to stop Iran’s petrochemical, steel and copper exports, and to disrupt its ports and shipping services. “America seeks to reduce Iran’s oil sales, our vital source of income, to zero,” he said, according to Fars news agency.

President Donald Trump said in May he would pull the United States out of an international nuclear deal with Iran and reimpose U.S. sanctions. Washington later told countries they must stop buying Iranian oil from Nov. 4 or face financial consequences.

Jahangiri said it would be a mistake to think the U.S. “economic war” against Iran will have no impact, but added: “We will make Americans understand this year that they cannot stop Iranian oil sales.”

The U.S. ambassador to Berlin called on the government of Chancellor Angela Merkel to block an Iranian attempt to withdraw large sums of cash from bank accounts in Germany.

Iran’s foreign ministry and the central bank have taken measures to facilitate banking operations despite the U.S. sanctions, Jahangiri said without elaborating.

The Iranian oil ministry said last week that it exported 2.2 million barrels per day of crude oil in June. The figure is not significantly lower than exports of 2.4 million bpd in April and in May.

ECONOMIC WAR

European powers still support the 2015 deal, under which Tehran agreed to limit its nuclear development in exchange for international sanctions relief. They say they will do more to encourage their businesses to remain engaged with Iran, though a number of firms have already said they plan to pull out.

Foreign ministers from the five remaining signatory countries to the nuclear deal — Britain, France, Germany, China and Russia — offered a package of economic measures to Iran on Friday but Tehran said they did not go far enough.

“We think the Europeans will act in a way to meet the Iranian demands, but we should wait and see,” Jahangiri said.

The pressure on Iran came as Washington had launched an “economic war with China and even its allies”, he said, referring to trade tensions between the United States and many of its main trading partners.

Jahangiri also accused Washington of trying to use the economic pressure to provoke street protests in Iran.

A wave of anti-government demonstrations against economic hardship and alleged corruption engulfed cities across the country in late December and early January.

(Reporting by Bozorgmehr Sharafedin; Editing by John Stonestreet, Andrew Heavens and David Stamp)

Iran bans 1,300 imports as protesters, police clash over currency weakness

FILE PHOTO: A woman looks at exchange rates by the window of a currency exchange shop in Tehran's business district, Iran January 7, 2012. REUTERS/Raheb Homavandi /File Photo

By Andrew Torchia

DUBAI (Reuters) – Iran is banning imports of over 1,300 products, preparing its economy to resist threatened U.S. sanctions, amid rare public protests against the plunge of its currency to record lows.

Police patrolled Tehran’s Grand Bazaar on Monday as security forces struggled to restore normality after clashes with protesters angered by the rial’s collapse, which is disrupting business by driving up the cost of imports, witnesses said.

Traders from the bazaar, whose merchants supported Iran’s 1979 Islamic revolution, told Reuters by telephone that most shops remained closed.

“Police have dispersed the protectors. We are all angry with the economic situation. We cannot continue our businesses like this. But we are not against the regime,” said a merchant in the bazaar, who asked not to be identified.

Industries and trade minister Mohammad Shariatmadari slapped the import ban on 1,339 goods that could instead be produced within the country, Iran’s Financial Tribune newspaper reported on Monday, quoting an official document.

Prohibited imports include home appliances, textile products, footwear and leather products, as well as furniture, healthcare products and some machinery, the Tehran Times said.

The order suggests the U.S. sanctions threat is pushing Tehran back toward running a “resistance economy” designed to conserve foreign exchange reserves and become as self-sufficient as possible in many products.

The rial is under heavy pressure from the U.S. sanctions threat. It sank as low as 90,000 against the dollar in the unofficial market on Monday from 87,000 on Sunday and around 75,500 last Thursday, according to foreign exchange website Bonbast.com. At the end of last year, it stood at 42,890.

After U.S. President Donald Trump decided to withdraw from world powers’ deal with Iran on its nuclear program, some U.S. sanctions are to be reimposed in August and some in November.

This may cut Iran’s hard currency earnings from oil exports, and the prospect is triggering a panicked flight of Iranians’ savings from the rial into dollars.

Hundreds of merchants gathered in front of parliament in Tehran on Monday to protest at the rial’s fall, witnesses said.

In the Grand Bazaar, hundreds staged a similar protest, videos posted on social media showed. A larger, sustained series of protests could put pressure on President Hassan Rouhani, who has already been harshly criticized by hardliners for his economic record.

Ali Fazeli, the head of Iran’s Chamber of Guilds, a business association, told the semi-official Tasnim news agency later on Monday: “Business is as usual in the Grand Bazaar.”

State TV quoted Tehran’s deputy governor Abdolazim Rezaie as saying “no one has been arrested in the Tehran protests”, adding that all the shops will be open on Tuesday.

On Sunday, merchants at Tehran’s mobile phone shopping centers Aladdin and Charsou shut their shops to protest against the rial’s slide, Fars news agency reported.

RESISTANCE ECONOMY

Iran eased its “resistance economy” policy after many international sanctions were lifted in January 2016 under the nuclear deal. Rouhani announced plans to boost Iran’s foreign trade and give foreign companies a bigger role in its economy.

With Iran now aiming to close its markets to many foreign products and the government intervening to support locally owned companies, those goals look more distant.

Mehrdad Emadi, an Iranian economist who heads energy risk analysis at London’s Betamatrix consultancy, said the sanctions threat was strengthening interests in the Iranian government that favored tighter state control of the economy.

“In the coming months we will see much more intervention in the economy by the government, a centrally imposed style of management by dictat,” he said.

One result is likely to be a shift of influence over Iran’s non-oil foreign trade from the private sector, along with a strong presence by the government’s Revolutionary Guards, to near-complete dominance by the Guards, he added.

Emadi and other Iranian economists noted that Iran had imposed import bans during the previous sanctions era before 2016 with only limited success.

Many foreign goods continued to enter the country at higher prices as a result of corruption and smuggling, benefiting business interests with the close official ties needed to arrange the shipments.

The government is justifying its latest clampdown on imports by citing economic security. The Tehran Times quoted Mohammad Reza Pourebrahimi, head of parliament’s economic committee, as saying the ban would prevent an outflow of $10 billion of foreign currency.

The International Monetary Fund estimated in March that the government held $112 billion of foreign assets and reserves, and that Iran was running a current account surplus. These figures suggested Iran might withstand the sanctions without an external payments crisis.

But as U.S. pressure constricts Iran’s access to the international banking system, its ability to deploy some of those resources may have suffered. Indian government sources told Reuters last week that New Delhi was looking to revive a rupee trade mechanism to settle part of its oil payments to Iran, fearing foreign channels to pay Tehran might close.

Concern about the rial’s vulnerability is prompting ordinary Iranians to pour money into non-cash assets. Tehran real estate prices have climbed and Iran’s stock market has jumped 17 percent since the end of May to a record high. Prices of gold coins have also risen sharply, local media reported.

(Editing by William Maclean)

Iran stands ground on nuclear inspections as France warns of red line

The flag of the International Atomic Energy Agency (IAEA) flutters in front of their headquarters in Vienna, Austria June 4, 2018. REUTERS/Leonhard Foeger

By Francois Murphy and Sudip Kar-Gupta

VIENNA/PARIS (Reuters) – Iran will not cooperate more fully with atomic inspectors until a standoff over its nuclear deal is resolved, its U.N. envoy said, as one signatory warned Tehran against moving ahead with preparations to boost its uranium enrichment capacity.

Tehran meanwhile signaled its resolve to expand its enrichment capability by detailing plans to build advanced centrifuges – the machines that enrich uranium.

European powers have been scrambling to salvage the agreement they signed in 2015 since U.S. President Donald Trump pulled Washington out last month and said he would reimpose far-reaching U.S. sanctions on Iran.

Foreign and finance ministers from those three countries – France, Britain and Germany – have written to U.S. officials to stress their commitment to upholding the pact, and to urge Washington to spare EU firms active in Iran from secondary sanctions.

An Iranian withdrawal from the deal, which lifted sanctions on Tehran in exchange for curbs on its nuclear program, would “further unsettle a region where additional conflicts would be disastrous,” the ministers wrote in the letter dated June 4 and seen by Reuters on Wednesday.

Since the U.S. pullout was announced, authorities in Tehran have sent mixed signals on whether they believe the nuclear deal’s remaining signatories, which also include China and Russia, can salvage it.

Supreme Leader Ayatollah Khamenei said on Monday he had ordered preparations to increase uranium enrichment capacity if the agreement collapsed.

Tehran also informed the International Atomic Energy Agency (IAEA), the U.N. nuclear watchdog that polices restrictions placed on its activities under the deal, of “tentative” plans to produce the feedstock for centrifuges.

In Paris on Wednesday, French Foreign Minister Yves Le Drian told Europe 1 radio that, while that initiative remained within the framework of the nuclear deal, it was unwelcome and risked sailing close to a “red line”.

U.S. Secretary of State Mike Pompeo said on Twitter that Washington was aware of reports Iran plans to increase its uranium enrichment and he vowed not to allow Tehran to develop a nuclear weapon. “Iran is aware of our resolve,” he said.

Emphasizing that Tehran’s patience with European efforts to save the deal was not unlimited, its envoy to the IAEA said it had granted the three powers a few weeks.

“A few weeks means a few weeks, not a few months,” Reza Najafi said outside a quarterly meeting of the agency’s Board of Governors in Vienna.

STANDOFF

He also dismissed calls by the IAEA to go the extra mile in cooperating with the nuclear watchdog’s inspectors, telling reporters that, while the standoff over the deal continued, “no one should expect Iran to go to implement more voluntary measures.”

“But I should emphasize that it does not mean that right now Iran will restart any activities contrary to the (deal),” Najafi added. “These are only preparatory works.”

Iran’s nuclear chief on Wednesday inaugurated work on a facility in Natanz plant in central Iran designed to build advanced centrifuges and said the center would be fully functional in a month.

“After the supreme leader’s order we prepared this center within 48 hours. We hope the facility to be completed in a month,” Ali Akbar Salehi, the head of Iran’s Atomic Energy Organization, said on state television.

Although the move was not a violation of the nuclear deal, it sent a strong signal to the West that Tehran would not succumb to the pressures.

Answering a question about a remark by Pompeo last month that Iran must halt all uranium enrichment, Salehi said: “We are far beyond that point. That man has been talking for himself.”

The agency has said Tehran is implementing its commitments, but also called for “timely and proactive cooperation” on providing access for snap inspections.

Diplomats who deal with the agency say an inspection in late April went down to the wire in terms of how quickly the IAEA team gained access to one site.

(Additional reporting by Tom Koerkemeier in Berlin, Bozorgmehr Sharafedin in London and Eric Beech in Washington; writing by John Stonestreet; editing by William Maclean and James Dalgleish)

Russian retailers warned of price increase after ruble tumbles

MOSCOW (Reuters) – European electronic and household goods manufacturers have warned Russian retailers of a possible 5 to 10 percent rise in prices after the ruble tumbled this week due to U.S. sanctions, retailers said on Tuesday.

Eldorado, which operates over 400 stores in Russia, said the hikes may mean it has to adjust its retail prices.

“Suppliers have already started warning of a possible 5-10 percent adjustment in prices,” a spokesperson for Eldorado told Reuters, adding that the warnings had primarily come from European manufacturers that do not produce goods in Russia.

A spokesperson for M.Video <MVID.MM>, which operates a network of 424 stores, also said that some of its suppliers had told them of plans to raise prices by between 5 and 10 percent.

The ruble <RUB=> fell sharply on Monday as investors took fright after a new round of U.S. sanctions against Moscow, targeting officials and businessmen around Russian President Vladimir Putin.

The ruble extended its losses on Tuesday, shedding over 3 percent of its value against the dollar, as investors continued a sell-off of assets fueled by fears that Washington could impose more sanctions and a realization that Russian credit and market risks had substantially increased.

(Reporting by Olga Sichkar; Editing by Adrian Croft)

European powers urge Trump to preserve Iran nuclear deal

Britain's Foreign Secretary Boris Johnson attends a news conference with French Foreign Minister Jean-Yves Le Drian, German counterpart Sigmar Gabriel and European Union's foreign policy chief Federica Mogherini after meeting Iran's Foreign Minister Mohammad Javad Zarif (unseen) in Brussels, Belgium January 11, 2018.

By Robin Emmott

BRUSSELS (Reuters) – Britain, France and Germany called on Donald Trump on Thursday to uphold a pact curbing Iran’s nuclear ambitions on the eve of a sanctions ruling by the U.S. president they fear could torpedo an accord he has relentlessly criticized.

Hailed by its admirers as key to stopping Iran from building a nuclear bomb, the deal lifted economic sanctions in exchange for Tehran limiting its nuclear program. It was also signed by China, France, Russia, Britain, Germany and the European Union.

The U.S. Congress requires the president to periodically certify Iran’s compliance and issue a waiver to allow U.S sanctions to remain suspended. The next deadline is on Friday.

In sharp contrast to Trump’s view that the 2015 pact was “the worst deal ever negotiated”, the foreign ministers of the three countries and the EU’s top diplomat said there was no alternative to it and that sanctions should remain lifted.

“We agree on this approach, we want to protect (the deal) against every possible decision that might undermine it,” Germany’s Sigmar Gabriel said alongside his French and British counterparts and EU foreign policy chief Federica Mogherini after meeting Iran’s Foreign Minister Mohammad Javad Zarif.

“It is absolutely necessary to have this to prevent the development of nuclear weapons at a time when other parts of the world are discussing how to get them,” Gabriel said, later specifically mentioning North Korea in his remarks.

Trump’s choice comes at a delicate time for Iran’s government, which faced protests over economic hardships and corruption that are linked to frustration among younger Iranians who hoped to see more benefits from the lifting of sanctions.

The meeting in Brussels was choreographed to send a message to Washington before Trump is due to decide whether to re-impose oil sanctions lifted under the deal. If that happens, Iran has said it would no longer be bound by the pact and could return to producing enriched uranium.

Zarif tweeted that the Brussels meeting had shown a “strong consensus” that Iran was complying with the pact, had the right to enjoy its economic benefits and “any move that undermines (it) is unacceptable”.

“E3 (Germany, France and Britain) and EU fully aware that Iran’s continued compliance (is) conditioned on full compliance by the US,” Zarif added.

European countries have benefited from renewed trade with Iran as sanctions have been lifted, while U.S. companies are still largely barred from doing business with the Islamic Republic due to other sanctions unrelated to the nuclear issue..

“GOOD NEIGHBOUR”

“The deal is working. It is delivering on its main goal which means keeping the Iranian nuclear program in check and under close surveillance,” Mogherini said, adding that the International Atomic Energy Agency had shown in nine reports that Iran is meeting its commitments.

British Foreign Secretary Boris Johnson said the pact was also a way for Iran to show it was “a good neighbour” in the region by complying.

Trump formally rejected the deal in October, although the United States has not yet pulled out.

That major shift in U.S. policy put the United States at odds with its European allies, as well as Russia and China that are also signatories to the nuclear accord, in the most visible transatlantic split on foreign policy since the 2003 U.S. invasion of Iraq.

European governments are troubled by Trump’s “America first” rhetoric and inconsistent statements on NATO and the European Union, while they consider the Iran nuclear deal one of West’s the biggest diplomatic achievements in decades.

In a gesture to Trump, France’s Foreign Minister Jean-Yves Le Drian said Paris shared Washington’s concerns about Iran’s ballistic missile program and involvement in wars in Yemen and Syria, but stressed the nuclear deal should still stand.

“We do not hide other disagreements, which exist … both in the ballistic field and over Iran’s actions in the whole region,” Le Drian said.

Tehran has repeatedly vowed to continue building up its ballistic missile arsenal, one of the biggest in the Middle East, saying it is for defense purposes only. The West sees it as a threat and has installed a U.S.-built missile shield in southeastern Europe, under NATO command.

Gabriel said Zarif agreed at the Brussels meeting to discuss the issues in a more regular and structured way, but diplomats said there was no immediate timetable for talks.

(Additional reporting by Robert-Jan Bartunek and Peter Maushagen; Editing by Robin Pomeroy, William Maclean)

South Korea’s new government proposes military talks with North Korea

A South Korean security guard stands guard on an empty road which leads to the Kaesong Industrial Complex (KIC) at the South's CIQ (Customs, Immigration and Quarantine), just south of the demilitarised zone separating the two Koreas, in Paju, South Korea, February 11, 2016. The Korean characters on the gateway reads "Inter-Korean Transit Office".

By Christine Kim

SEOUL (Reuters) – South Korea on Monday proposed military talks with North Korea, the first formal overture to Pyongyang by the government of President Moon Jae-in, to discuss ways to avoid hostile acts near the heavily militarized border.

There was no immediate response by the North to the proposal for talks later this week. The two sides technically remain at war but Moon, who came to power in May, has pledged to engage the North in dialogue as well as bring pressure to impede its nuclear and missile programs.

The offer comes after the North claimed to have conducted the first test of an intercontinental ballistic missile (ICBM) earlier this month, and said it had mastered the technology to mount a nuclear warhead on the missile. South Korea and the United States, its main ally, dispute the claim.

“Talks and cooperation between the two Koreas to ease tension and bring about peace on the Korean peninsula will be instrumental for pushing forth a mutual, virtuous cycle for inter-Korea relations and North Korea’s nuclear problem,” the South’s Unification Minister Cho Myoung-gyon told a news briefing.

The South Korean defense ministry proposed talks with the North on July 21 at Tongilgak to stop all activities that fuel tension at the military demarcation line.

Tongilgak is a North Korean building at the Panmunjom truce village on the border used for previous inter-Korea talks. The last such talks were held in December 2015.

Cho also urged the restoration of military and government hotlines across the border, which had been cut by the North last year in response to the South imposing economic sanctions after a nuclear test by Pyongyang. In all, the North has conducted five nuclear tests and numerous missile tests.

The South also proposed separate talks by the rival states’ Red Cross organizations to resume a humanitarian project to reunite families separated during the 1950-53 Korean War in closely supervised events held over a few days.

The South Korean Red Cross suggested talks be held on Aug. 1, with possible reunions over the Korean thanksgiving Chuseok holiday, which falls in October this year.

The last such reunions were held in October 2015 during the government of Moon’s predecessor under a futile push for reconciliation following a sharp increase in tension over border incidents involving a landmine blast and artillery fire.

 

BEIJING IN FAVOR

China, which has close ties to Pyongyang despite Beijing’s anger over North Korea’s missile and nuclear tests, welcomed the proposal, saying cooperation and reconciliation between the two Koreas was good for everyone and could help ease tensions.

“We hope that North and South Korea can work hard to go in a positive direction and create conditions to break the deadlock and resume dialogue and consultation,” Chinese Foreign Ministry spokesman Lu Kang told a daily news briefing.

The proposals come after Moon said at the G20 summit in Hamburg earlier this month that he was in favor of dialogue with the North despite the “nuclear provocation” of its latest missile test.

When Moon visited Washington after being elected president, he and U.S. President Donald Trump said they were open to renewed dialogue with North Korea but only under circumstances that would lead to Pyongyang giving up its weapons programs.

“The fact that we wish to take on a leading role in resolving this (North Korean) issue has already been understood at the summit with the United States and the Group of 20 summit meetings,” Cho said on Monday.

In the proposal for talks, South Korea did not elaborate on the meaning of hostile military activities, which varies between the two Koreas. South Korea usually refers to loudspeaker propaganda broadcasts by both sides, while the North wants a halt to routine joint U.S.-South Korea military drills.

Moon suggested earlier this month hostile military activities at the border be ended on July 27, the anniversary of the 1953 armistice agreement that ended the Korean War. Since no truce was agreed, the two sides remain technically at war.

When asked if South Korea was willing to “be flexible” on military drills with the United States should North Korea be open to talks, Cho said the government had not discussed the matter specifically.

Pyongyang has repeatedly said it refuses to engage in all talks with the South unless Seoul turns over 12 waitresses who defected to the South last year after leaving a restaurant run by the North in China.

North Korea says the South abducted the 12 waitresses and the restaurant manager and has demanded their return, but the South has said the group decided to defect of its own free will. Cho said this matter is not included on the talks agenda.

In an act to rein in the North, the United States is preparing new sanctions on Chinese banks and firms doing business with Pyongyang possibly within weeks, two senior U.S. officials said last week.

 

(Additional reporting by Ben Blanchard in BEIJING; Editing by Raju Gopalakrishnan)