North Korea gets the headlines with sensational reports on its nuclear weapons program, but South Korea also is a nuclear power. The difference is that South Korea’s four nuclear complexes produce nuclear energy, not nuclear explosives, and South Korea is well on its way to emerging as one of the world’s biggest manufacturers and exporters of nuclear reactors. South Korea’s success as a major producer of nuclear energy, however, inevitably arouses suspicions. Might South Korean scientists and engineers want to compete with North Korea in fabricating the material needed for nuclear devices? The specter of a nuclear arms race on the Korean peninsula touches raw nerves around the world, nowhere more so than in Washington. The reason is that South Korea’s policymakers would dearly like to get rid of the deal worked out between South Korea and the United States nearly 40 years ago that keeps their scientists and engineers from reprocessing spent fuel rods – a step, some say, to extracting fissile material for nuclear warheads.

The question of what to do with the fuel rods is fast reaching critical mass. South Korea wants to reprocess rather than store them despite the ban imposed by its nuclear cooperation agreement with the United States. But will South Korea then be able to produce plutonium for warheads? That’s the great question that negotiators face as they engage in secret talks, all against the background of efforts at getting North Korea to do away with its own nuclear program, dedicated to nuclear weapons, not nuclear energy.

South Koreans disavow any ambition other than a desire to extract more uranium for fuel for nuclear energy reactors and then bury the residue. U.S. and Korean officials agree the whole topic is too “sensitive” to discuss openly. The talks are “technical” and “complicated,” says U.S. ambassador Kathleen Stephens. “Both our countries support the global growth of the peaceful use of nuclear energy,” she tells an influential Korean audience. “We will continue our cooperation to guarantee the safety and proliferation-resistance of nuclear energy.”

Americans ask, however, how much faith to place in denials of nuclear ambitions while North Korea refuses to get rid of its nuclear weapons program. The United States insisted on banning reprocessing under the U.S.-Korean nuclear cooperation agreement of 1972 to frustrate the dream of South Korea’s then president Park Chung-hee for the South to become a nuclear power. That agreement expires in 2014, but it’s far from clear if the United States and South Korea can resolve their differences by then. What if pressure mounts in South Korea for a deterrent while North Korea produces ever more fissile material, already estimated at enough for six to a dozen warheads, and conducts more underground tests as it did last May and in 2006?

“Does the U.S. want to treat us as a criminal,” responds Kim Tae-woo, vice president of the Korea Institute for Defense Analyses. “Our concern is not to build a nuclear bomb, but how to dispose of spent fuel rods. If the U.S. government continues to oppose us, that will hurt our sentiment.” Koreans try to allay suspicions. “We do not want to use the word ‘reprocessing,’” says Choi Jung-gae, director of the nuclear policy division at the Ministry of Science and Technology. “We prefer to say, ‘recycling’ or ‘reusing.’”

The difference is more than semantic. “We do not want to produce pure plutonium,” says Choi. “The purpose of recycling is to get only useful elements in spent fuel,” including uranium, in a process called “pyro-processing.” At the Korea Atomic Energy Research Institute in Daejeon, a center of scientific research about 80 miles south of Seoul, scientists call pyro-processing “a longterm solution” for recycling spent fuel rods without producing weapons-grade plutonium.

“The point is pyro-processing cannot recover plutonium,” says Lee Hansoo, director of nuclear fuel cycle process development at the institute. “It cannot compare with normal reprocessing.” Lee Kwang-seok, director for strategy and international studies at the institute, says pyro-processing is “more economical, more problematic-resistant and has more safeguard ability” than do reprocessing systems in use in Japan and France. The problem, however, is that pyro-processing, first developed in the United States, remains in the research and development stage. “We need more than 10 or 20 years,” Lee Hansoo estimates, before pyro-processing will be ready for commercial use.

Koreans ask, however, why Korea cannot use the Japanese and French systems, which hold down the level of fissile material to a percentage lower than that needed for a warhead. They see constraints as an affront that may disrupt the U.S.-Korean alliance – and weaken cooperation on military and diplomatic issues, including North Korea. The rift assumes greater importance as Korea produces ever more nuclear energy – and competes as one of the world’s major producers of nuclear energy reactors. KE PCO, the state-invested Korea Electric Power Corporation, has signed a deal to export four 1,400-megawatt nuclear reactors to the United Arab Emirates for a total of $20 billion – the first of what the government hopes will be many more such agreements.

Korea, moreover, is rapidly becoming reliant on nuclear energy -- 20 lightwater reactors now produce 40 percent of the country’s energy needs with 10 more due to go on line in a decade. KE PCO has overall responsibility while a single company, Doosan Heavy Industries, is building the reactors in the industrial city of Changwon, near the major southeastern port of Busan. Numerous other companies provide parts and expertise.

It is as though the two Koreas were already in a nuclear competition – South Korea feverishly going nuclear in terms of energy while North Korea’s leader Kim Jong-il escalates the nuclear arms race. Doosan was building two nuclear energy reactors for North Korea under the terms of the 1994 Geneva Framework Agreement until the agreement came unhinged two years ago. Under the terms of the framework, negotiated between the United States and North Korea, the North was to get two light-water nuclear energy reactors to go on-line at a site on the northeastern coast in return for giving up its nuclear weapons program. Inspectors from the International Atomic Energy Agency rotated in and out of the North Korean nuclear complex at Yongbyon, making sure North Korea’s solitary five-megawatt nuclear reactor was locked up and the North was living up to terms of the agreement.

The Geneva deal broke down completely in 2008, however, after North Korea was revealed to have an entirely separate, super-secret program for producing the highly enriched uranium needed to produce warheads. Doosan was producing those two nuclear energy reactors right up to the time in which the Korean Peninsula Energy Development Corporation, widely known by the acronym KE DO, was finally and formally disbanded. South Korea, under the Geneva framework, was to have been by far the biggest contributor to KE DO, spending $5 billion or so for those reactors. Fulfillment of the agreement would have cost Japan about $1 billion while the United States was obligated only to ship 50,000 tons a month of heavy fuel oil to North Korea to fuel its decrepit power plants until those two reactors were finally installed.

Doosan’s program for building twin reactors for North Korea came to screeching halt with the failure of the Geneva framework, but the company was already immersed in plans for building many more reactors for domestic use as well as export. “The vision for the Korean government,” as outlined at Korea’s four nuclear complexes, is to produce 100 or so reactors in 20 years, including 80 for export in competition with the United States, Japan, France and China. Korea by 2030 expects to derive 60 percent of its energy from nuclear power. Patriotism and nationalism are major motivators. South Korea’s President Lee Myung-bak, who rose to position of chairman of Hyundai Engineering and Construction during its drive for contracts in the Middle East in the 1970s and 1980s, places the export of nuclear reactors among his priorities. He pressed for the deal with the Emirates – and lobbied Indian leaders to consider Korean reactors during a visit to New Delhi.

The nuclear energy complex at Uljin, about 100 miles southeast of Seoul, offers a window, literally, on the problem of what to do with spent nuclear fuel rods. Through thick glass visitors can stare down at huge tanks of water at the bottom of which lurk cylindrical canisters containing spent nuclear fuel rods. That’s where they’re stored after having powered one of the four reactors at the Uljin complex. “Currently we have space for spent fuel rods until 2016,” says Park Chan-sung, an official at the site, the newest of the four nuclear complexes operating under the aegis of the state-owned Korea Hydro and Nuclear Power Co. “Plans for after 2016 are under discussion,” he said.

Atop a hill overlooking the complex at Kori, down the east coast from Uljin, where Korea’s first reactor began producing power in 1978, Lee Soo-il, a director, points to silos housing six nuclear reactors – and to two more silos awaiting the installation of reactors. “We are trying to sell many more reactors in the Middle East and all over the world,” he says. “We are trying to make our unit cost-competitive,” he says. “We worked very hard to develop the technology.” Lee stresses the absence of a long-range system for dealing with spent fuel rods. “Everything is stored here at this site,” Lee says, “We are trying to figure out ways to deal with reprocessed spent fuel.”

With all the emphasis on building reactors, the question of what to do with spent fuel rods assumes ever more urgency. L. Gordon Flake, director of the Mansfield Foundation in Washington, with a long background in investigating Korean issues, cites the reprocessing controversy as “very dangerous” – so much so that he ranks it as “the most important” longterm issue between the United States and South Korea. “The challenge is to put the focus on nuclear responsibility, not nuclear sovereignty,” says Flake, a frequent visitor to Korea. “If it becomes cast as a question of national pride and sovereignty, it could be very damaging.”

Koreans may have trouble, however, convincing skeptics. At the Korean Atomic Energy Research Institute, physicists were discovered to have enriched tiny amounts of uranium in 2000 without even notifying their own government. The International Atomic Energy Agency, in a report issued in 2004, scolded Korea for not having reported the experiments, but concluded they had stopped. Analysts fear, however, that the IAEA investigation gives North Korean leader Kim Jong-il another reason for going ahead with his own program while calling for a “denuclearized” Korean peninsula.

Any new U.S.-South Korean nuclear cooperation agreement, says Evans Revere, president of the Korea Society in New York and a former senior U.S. diplomat here, “will have to be in strict compliance” with Korea’s international commitments under the nuclear non-proliferation treaty. Lee Chung-min, a professor at Yonsei University and ambassador for international security affairs, says South Korea is building “safeguards into our proposal” and “any reprocessing will be under the full purview of the IAEA.” He links the issue to Korea’s rise as an exporter of reactors. “At stake,” he says, “is a matter of energy independence.”

South Korea’s desire for “energy independence” parallels North Korea’s stubborn insistence on the right to be able to build nuclear explosives in case war breaks out on the Korean peninsula. The saddest irony is that North Korea, proud of its place as one of nine nations with nuclear warheads, has not attempted to build a single reactor for the purpose of producing badly needed electrical power. Obsessed with achieving the status of a nuclear power, Kim Jong-il does not appear to have considered the possibility of the North’s constructing its own nuclear energy reactor.

Instead, North Korea is sure to go on demanding the twin light-water energy reactors promised under the Geneva Framework Agreement if North Korea ever returns to six-party talks on its nuclear weapons program. The need for those talks assumes special urgency while South Korea rapidly emerges as a nuclear powerhouse – with the know-how to fabricate nuclear warheads if tensions rage out of control in some unforeseen conflict, the dreaded “Second Korean War.”