Riding a Tiger in North Korea.

Byline: Selig S. Harrison, Harrison, director of the Asian program at the Center for International Policy, is the author of "Korean Endgame." He recently made his eighth visit to North Korea.

When you go to Pyongyang, the place to look for the keys to resolving the nuclear crisis is not the Ministry of Atomic Energy, the Foreign Ministry or the headquarters of the Korean People's Army. It is the Tong-Il Market, the showcase for Kim Jong Il's bold new market-based economic reforms. There some 2,200 vendors compete in a frenzy of newly released capitalist fervor, selling everything from farm produce to TV sets.

Twenty more indoor markets patterned after Tong-Il are now under construction in Pyongyang, and more are planned for other cities. Small-business start-ups, including mom and pop stalls and shops, are sprouting up with government approval. Even more important, state-owned factories no longer receive subsidies to cover their losses and are encouraged to find their own markets for products, to trade with each other and to reinvest any profits. This decentralization of economic power amounts to a "halfway house to privatization," as one resident diplomat observed, and has created a spurt of increased economic activity as well as a budding class of hustlers and would-be entrepreneurs.

What does all this have to do with the nuclear issue? Unless North Korea can get large-scale foreign aid to rebuild its infrastructure, especially its electricity, water and transportation systems, its economic problems will mount. If the economic potential of the reforms isn't realized, the net social and political effects could be destabilizing for the regime, stirring up new economic aspirations that are not fulfilled and tensions between "winners" and "losers" in the new competitive environment. Kim Jong Il is riding a tiger. He urgently needs a nuclear deal with the United States in order to open an influx of aid, trade and investment, and he wants to start negotiating one at six-nation talks in Beijing scheduled for May 12. But Kim can't afford a deal at any price. He can get military hard-liners to go along only if the deal includes significant aid commitments and clearly removes the armed forces' fears of a U.S. pre-emptive strike.

Four days of high-level conversations in Pyongyang recently made clear that Kim is not likely to accept the Bush administration's demand for the "complete, verifiable, irreversible dismantling" (CVID) of his nuclear-weapons program, all at once, without knowing what Pyongyang will get in return. What Kim wants is a step-by-step ...