Global Insight Perspective

Significance

The North Korean threat serves to raises the bar in nuclear diplomacy in north-east Asia, and has significantly heightened tension in the region.

Implications

The international community is expected to continue negotiations under the currently deadlocked six-party talks framework, as the United States is hemmed in by its foreign policy line of separating the nuclear issue from its financial sanctions; North Korea is demanding that these must be lifted before negotiations can be resumed.

Outlook

While stakes have been raised in the nuclear stand-off, the North Korean threat may propel other north-east Asian countries to present a common front on pressuring the regime to return to negotiations, with China and Russia able to play a key mediating role.

Risk Ratings

The nuclear bomb test is mainly a security risk to the neighbouring countries of South Korea and Japan, leading Global Insight to downgrade the Security Risk Rating of the two countries by 0.25, to 2.50 and 1.75 respectively. Meanwhile, due to the fluidity of the current situation and the destabilising moves that may follow a potential test, North Korea’s Security Risk Rating will also be downgraded by 0.25, to 2.50.

North Korea Plays the Nuclear Card

The North Korean foreign ministry threatened yesterday that it would carry out its first nuclear bomb test "at an unspecified time in the future, under conditions where safety is firmly guaranteed”, in a bid to bolster its self-defence deterrent. The move triggered warnings from the U.S. and Japanese governments of a stern response to such a move. According to the North Korean statement, the decision to conduct the nuclear bomb test has been taken in the face of "the US’s daily increasing threat of a nuclear war and its vicious sanctions", with increased pressure having caused "a grave situation on the Korean peninsula". The international community has subsequently denounced the move as a "provocative act", saying that it would pose as a threat to worldwide security in general, and undermine the security balance in north-east Asia in particular. Japan has put forward the strongest response, with its new government (under Shinzo Abe) holding it to be "an intolerable act" that "could never be forgiven". All of the parties to the deadlocked six-party talks on ending North Korea’s nuclear programme (Japan, the United States, South Korea, China and Russia) have called on North Korea to show restraint and return to the nuclear negotiations, which have been at an impasse since last November, with North Korea refusing to resume talks until the United States lifts its financial sanctions.

The Question of Timing

The threat to conduct a nuclear bomb test follows North Korea’s launch of seven missiles, including the long-range Taepodong-2, on 5 July. These test launches caused an outcry within the international community, and triggered sanctions by the UN Security Council against the country's weapons-related programmes, leaving North Korea increasingly isolated (see North Korea: 5 July 2006: International Tension Builds as North Korean Government Test-Fires Long-Range Missile).

With North Korea's previous act of brinkmanship diplomacy having failed to prompt either bilateral talks with the United States or the lifting of financial sanctions, the threat is a bold move to address the international as well as domestic pressures mounting against the political leadership. On the international level, the United States has tightened the financial sanction regime it imposed last year, over the Kim Jong-Il regime’s alleged counterfeiting; the sanctions have frozen North Korean assets in a number of countries, including Macau, Hong Kong, Singapore and Vietnam. It has recently succeeded in pressurising North Korea’s lone ally China to freeze some further North Korean assets in the Bank of China, while Japan and Australia—key allies of the United States—joined the financial sanctions regime last month, leaving Russia as the country's only financial conduit.

With the sanctions increasingly threatening to strangle the North Korean economy, which is highly dependent on revenues from illicit financial activities, including the weapons and narcotics trades, the nuclear bomb test warning is a desperate attempt by an increasingly isolated and impoverished regime to ensure its survival by forcing the United States to lift sanctions and engage in direct talks, with the prospect of North Korea returning to the six-party talks on its own terms. The timing has been chosen carefully, with North Korea hoping to successfully pressure the United States to return to the negotiating table by highlighting the failure of the Bush administration’s policy to bring about its desired results ahead of next month's U.S. mid-term elections.

Pressure from within the Military Establishment

The threat is also believed to serve a domestic purpose, as there has been increasing speculation that Kim Jong-Il’s position is weak. Observers believe that the all-influential military establishment is pressuring him to launch another long-range missile, following the failure of the Taepodong-2 test launch in July, to deter what is portrayed as the threat of "a U.S.-launched nuclear war". As such, the nuclear bomb threat is intended to reinforce Kim’s credibility as a leader. Amid severe food shortages, following large-scale flooding in July and general economic mismanagement, there is also a possibility that famine may return during the upcoming winter months if international aid is not ensured. The threat may be a way to rally the North Korean population "at a time when they have to tighten their belts" even further, according to Jesper Beck from the International Institute for Strategic Studies (IISS).

Outlook and Implications

The North Korean threat has generally served to raise tension in north-east Asia, and is primarily a security risk to the neighbouring countries of South Korea and Japan, leading Global Insight to downgrade the Security Risk Rating of the two countries by 0.25, to 2.50 and 1.75 respectively.

Japan: The announcement has triggered serious concern in Japan, given the proximity of the countries, and the fact that North Korea launched a long-range missile over Japan in 1998. Following last month's election, the new —supposedly hawkish—prime minister Shinzo Abe will be forced to show his hand sooner rather than later, and the move is likely to consolidate a hard line in Japan’s foreign policy vis-à-vis North Korea, and further consolidate the U.S./Japan Security Alliance.

South Korea: The North’s continuing brinkmanship will further undermine President Roh Moo-Hyun’s engagement strategy with the country, and will galvanise the opposition Grand National Party ahead of next year's elections, as it has called for a stronger line on North Korea.

China: As North Korea’s main ally, China can be expected to take a pragmatic approach to the issue, as has been the case in the past. China has no interest in seeing its troublesome ally acquire a nuclear weapons capability, as it could destabilise the north-east Asian region; any conflict between North Korea and the alliance partners of Japan, the United States and South Korea would risk China becoming involved. Another key concern is the risk of destabilising refugee flows on its north-eastern border, and the political vacuum that would ensue from the implosion of North Korea. China’s priority is maintaining its economic growth strategy, and it does not wish to thoroughly alienate the United States, but at the same time it is keen to take advantage of its position as a key player in the six-party talks to use North Korea’s brinkmanship as leverage against the United States, as well as Japan.

Russia is traditionally a more neutral player in the six-party talks, but has generally taken sides with China to prevent harsh punitive measures, with the two countries holding permanent seats (and power of veto) on the UN Security Council. However, as North Korea has considerable assets in Russia, which is now its only banking option, the latter may come under pressure from the United States to freeze North Korean assets.

The United States has traditionally been the focus of North Korean foreign policy, and the Bush administration has taken the threat seriously. However, the country remains constrained by its foreign policy line of delinking the financial sanctions issue from the six-party talks, holding them to be separate entities, while only engaging with North Korea through the framework of six-party talks, rather than unilaterally. Nevertheless, there have been some recent moves towards engagement, and the U.S. ambassador to South Korea last week offered the possibility of holding a bilateral meeting, on the condition that North Korea commits to returning to the six-party talks. U.S. Secretary of State Condoleezza Rice also said late last month that she would go to Asia within the next six weeks, in an attempt to kick-start the six-party talks.

North Korea: While the United States has little latitude for giving concessions, due to its declared policy line, North Korea is similarly committed to its strategy of juche (self-sufficiency), and can not be seen as giving in to U.S. demands.

Regional Diplomacy: The resolution of the problem will depend on China and Russia acting in a mediatory capacity to bring North Korea back to the six-party talks. However, while the current situation points towards a consolidation of foreign policy hawks in Japan and South Korea, it also holds the promise of unifying the countries of north-east Asia to find a common solution to the problem, with the item being high on the agenda this weekend, when PM Shinzo Abe holds Japan’s first summit with China and South Korea for two years. It may also propel China, Russia and South Korea towards forming a unified front and exerting the necessary pressure on North Korea to return to negotiations. Due to the fluidity of the current situation, and the potentially destabilising risks pertaining to the international reaction if North Korea proceeds with its test, the country’s Security Risk Rating will also be downgraded by 0.25, to 2.50.

Contact

Raul Dary

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