SEOUL - South Korea President Moon Jae-in says his government plans to begin a joint railway project with North Korea this year, while also linking “full-scale” inter-Korean economic cooperation with denuclearization progress in the North.

During a speech on Wednesday commemorating the liberation of Korea at the end of World War II, Moon said, “It is the goal to hold groundbreaking ceremonies within this year for the reconnection of railroads and roads as agreed to in the Panmunjom Declaration. The reconnection of railroads and roads is the beginning of mutual prosperity on the Korean Peninsula.”

Moon and North Korean leader Kim Jong Un agreed to pursue increased economic cooperation when they met in April in the Panmunjom village located in demilitarized zone (DMZ) of the inter-Korean border area. At the Panmunjom summit, Kim also agreed to work toward the denuclearization of the Korean Peninsula.

The progressive South Korean president also played a key role in facilitating a historic summit in June between the North Korean leader and U.S. President Donald Trump, where Kim reaffirmed his commitment to denuclearization.

However subsequent bilateral talks to implement the denuclearization agreement have floundered over Washington’s insistence that Pyongyang completely dismantle its nuclear and missile arsenals before any economic concessions are granted. North Korea wants concessions tied to incremental progress.

Sanctions enforcement

Currently international sanctions imposed on North Korea for its provocative nuclear and ballistic missile tests prohibit the estimated $35 billion joint Korean railway project to link not only South and North Korea with high speed train service, but also provide South Korean industries an overland rail connection to China, Russia and even Europe.

The tough international restrictions block most financial transactions and 90 percent of all trade with North Korea.

President Moon did not say if he would seek an exemption from sanctions to proceed with the railway project.

This week U.S. Ambassador to South Korea Harry Harris reiterated the Trump administration’s position that denuclearization progress must precede any easing of the sanctions.

North Korea leader Kim Jong Un inspects Unit 1524 North Korea leader Kim Jong Un inspects Unit 1524 of the Korean People's Army in this undated photo released by North Korea's Korean Central News Agency, June 30, 2018. North Korea leader Kim Jong Un inspects Unit 1524 of the Korean People's Army in this undated photo released by North Korea's Korean Central News Agency, June 30, 2018.

“Sanctions will remain in place until North Korea takes concrete and verifiable steps towards denuclearization,” said Harris during an address at the Korea National Diplomatic Academy in Seoul.

The Trump administration maintains there is no timeline for implementing the denuclearization agreement. But North Korea has called for early sanctions relief and there is concern that China and Russia are already easing economic pressure on the North, in violation of the sanctions.

The U.S. State Department said on Tuesday that no official meetings or negotiations are currently planned between Washington and Pyongyang, but that informal talks continue on a regular basis.

Economic ties

President Moon also stressed that improved inter-Korean relations will foster denuclearization progress, during his speech to mark the 73rd anniversary of the end of WWII, and the 69th anniversary of the founding of South Korea.

“Developments in inter-Korean relations are not the byproducts of progress in the relationship between the North and the United States. Rather advancement in inter-Korean relations is the driving force behind denuclearization of the Korean Peninsula,” he said.

Moon said he intends to play an active role in moving the denuclearization progress forward. He will visit Pyongyang in September to hold another summit with Kim.

Moon held out the promise that restored economic ties could generate $149 billion for North Korea over 30 years. Reopening the jointly run Kaseong industrial complex, which was shut down in 2016 due to a North Korean nuclear test, could bring back over 100,000 jobs. Nearly 9,000 more jobs in the North could be created by restarting the Kumgang mountain tourism project, that ended in 2008 after a visitor was shot by a North Korean soldier.

Unified economic zones in the border regions could further expand economic growth for both Koreas.

Peace treaty

The South Korean leader also voiced support for a peace declaration to formally end the Korean War, to replace the armistice in place since 1953 that suspended hostilities.

There has been speculation in South Korean media that the U.S. South Korea, China and North Korea may issue a peace statement at the United Nations General Assembly meeting in September.

North Korea has called for a peace declaration before moving forward with nuclear talks. The U.S. wants denuclearization progress first, and there are concerns that a peace declaration would undermine the justification for the American military presence in Asia.

Lee Yoon-jee in Seoul contributed to this report.