U.S. and South Korean army soldiers stand guard during South Korean Unification Minister Lee In-young's visit to Panmunjom between South and North Korea in the demilitarized zone on September 16, 2020 in Panmunjom, South Korea.
Washington CNN  — 

Washington and Seoul are narrowing in on a new cost-sharing agreement for US forces in South Korea and could be just weeks away from striking a deal, according to five sources familiar with the discussions.

The deal taking shape is likely to be a multi-year agreement that increases Seoul’s contribution to cover the presence of US troops at around the 13% increase South Korea had suggested in 2020 as their best possible offer, according to two sources familiar with the talks. The final agreement could include mandated increases in South Korea’s defense budget, as well as an understanding that Seoul will make certain military equipment purchases, one of the sources said.

Negotiations over the Special Measures Agreement, or SMA, badly strained the US alliance with South Korea during the Trump administration after the former President demanded Seoul pay up to 400% more for the presence of the 28,500 troops on the peninsula.

Reaching a cost-sharing agreement is expected to boost the alliance and fits into the Biden administration’s goal of repairing alliances and returning to “regular order” – engaging with allies using established, formal and accountable structures.

Video conference talks

Seoul’s cost-sharing conversations with the Biden administration, which began last week, come as the White House conducts a review of North Korea policy, engaging with South Korea and other allies and partners as it does so. The policy review, which was already underway when the UN released a report last week saying Pyongyang has continued to seek and develop nuclear material and technology, is expected to take months to complete, according to two sources familiar with the administration’s thinking.

CNN has reached out to the South Korean embassy for comment.

During the video conference between US officials and their Korean counterparts about the SMA last week, “both sides engaged in sincere discussions to resolve longstanding differences and seek a mutually acceptable agreement in the spirit of the alliance,” said a State Department spokesperson.

The spokesperson would not comment or confirm details of the ongoing diplomatic conversations and said the State Department did not yet have a date to announce for follow-up meetings, but said the US and South Korea agreed to continue negotiations in the near future “and are committed to expeditiously conclude the SMA and thereby further strengthen the ROK-US Alliance.”

“The US-Republic of Korea alliance is the linchpin of peace and prosperity in the Korean Peninsula and Northeast Asia. US and ROK negotiators are committed to expeditiously concluding an updated Special Measures Agreement that will strengthen our alliance and our combined defense posture,” the State Department spokesperson said.

Last year, former President Donald Trump’s negotiators had been demanding South Korea pay about 50% more to host the 28,500 US troops on the peninsula, after initially demanding a 400% increase, two sources said. South Korea offered to raise its contribution by around 13% in 2020, the sources said. The entire process was fraught with tension. At one point last year, the inability to reach an agreement led to the furlough of some 4,000 Korean nationals who work for US Forces Korea.

North Korea review

Honing in on a joint strategy for North Korea is expected to be more challenging than striking a cost-sharing agreement, according to regional experts. South Korean President Moon Jae-in faces an election later this year and is eager to deliver a diplomatic accomplishment with North Korea in the short term, while the Biden administration has said that they will take their time in developing a strategy.

State Department spokesman Ned Price said, “We will adopt a new approach that keeps the American people and our allies safe, and that will begin through a policy review of the state of play in North Korea. And we’re going to do that in close consultation and coordination with the Republic of Korea, with Japan, with other allies and partners on ongoing pressure options and potential for future diplomacy.” He added that the “diplomatic legwork” is necessary to ensure that the US and their allies are on the same page.

The confidential UN report alleged that North Korea “produced fissile material, maintained nuclear facilities and upgraded its ballistic missile infrastructure,” while continuing “to seek material and technology for these programs from overseas.”

The report has not changed much for the Biden officials who are considering the challenge of North Korea, according to sources familiar with their thinking. In the four years since Biden was in government, it is well-known that North Korea now has more nuclear arms, better means of delivery and is that much more dangerous, and the report underscored that reality.

The Biden administration’s deliberate policy process stands in stark contrast to frenetic nature with which the previous administration treated the North Korea challenge.

On his final day in office, former President Barack Obama told then incoming-President Trump that he believed North Korea is the biggest national security threat to the US. Trump then made it a top priority – he deployed his secretary of defense to make his first international trip to South Korea and Japan less than a month into the administration.

Months later, he sent his secretary of state to the same countries, and by the summer, he was sending provocative tweets threatening military action against North Korea.

Tensions between the US and South Korea grew as Trump conducted personal diplomacy with Kim Jong Un later in his presidency and burdened the alliance with his demands for them to pay more for US troops in the country.

CNN’s Barbara Starr and Jennifer Hansler contributed to this report