NORTH KOREAN SABER-RATTLING "ON"

Takeaway: The latest saber-rattling out of North Korea is likely little more than a desperate plea for incremental international aid.

SUMMARY BULLETS:

 

  • Our analysis and interpretation of history suggests the most appropriate risk management exercise at the current juncture is to broadly fade any fears associated geopolitical risk emanating from the Korean Peninsula.
  • Specifically, it is our view that this latest saber-rattling is merely just North Korea throwing a glorified temper tantrum in order to bring international organization such as the UN back to the negotiating table. Securing incremental humanitarian aid is likely their ultimate goal and promoting geopolitical conflict has historically been their primary tool for accomplishing that goal.
  • We could obviously be wrong here, but anyone not named Kim Jong-un that proclaims they know exactly what the North’s intentions are now is probably unaware of his/her own ignorance with respect to the situation. That is paraphrased directly from Yale Professor Charles Hill (arguably the world’s foremost source on Korean Peninsula geopolitical risk), with whom we hosted a conference call with back in late MAY of 2010 on this very same topic. In the note below, we list a handful of his key takeaways from the call. 

Less than 18 months on the job (specifically in his role as Supreme Commander of the Korean People’s Army), Kim Jong-un has taken after his late father by selling what old-timers like to call “wolf tickets” in the international community.

 

North Korea’s latest attempts to promote beef include “reentering” a “state of war” with South Korea over the weekend; it should be noted that this act is impossible, as, technically speaking, both sides have remained at war since their 1950-53 conflict ended in an armistice rather than a treaty.

 

Overlooking this misstep, it should be noted that North Korea’s state-run Korean Central News Agency expressed that "every issue raised between the North and South will be dealt with in a wartime manner".

 

Naturally, South Korean President Park Geun-hye (the country’s first female president) said that South Korea would respond to any North Korean attacks on its territory. Not bad for her first 45 days on the job.

 

In addition to the aforementioned wartime proclamation, North Korea announced today that it would restart its only nuclear reactor – a decision that was immediately condemned by regional counterparties, such as China, Japan and, of course, South Korea.

 

It’s actually worth noting that Kim Jong-un’s first real bout of outward aggression is actually rather tame relative to his father’s tactics. Recall that back in 2010, the int’l community came to the conclusion that a North Korean torpedo was responsible for the sinking of the ROKS Cheonan, killing 46 South Korean sailors in the process. This was in addition to an artillery attack that killed four South Koreans and the country’s hosting of a tour by foreign experts to their uranium enrichment facility.

 

Our analysis and interpretation of history suggests the most appropriate risk management exercise at the current juncture is to broadly fade any fears associated geopolitical risk emanating from the Korean Peninsula.

 

Specifically, it is our view that this latest saber-rattling is merely just North Korea throwing a glorified temper tantrum in order to bring international organization such as the UN back to the negotiating table. Securing incremental humanitarian aid is likely their ultimate goal and promoting geopolitical conflict has historically been their primary tool for accomplishing that goal.

 

We could obviously be wrong here, but anyone not named Kim Jong-un that proclaims they know exactly what the North’s intentions are now is probably unaware of his/her own ignorance with respect to the situation. That is paraphrased directly from Yale Professor Charles Hill (arguably the world’s foremost source on Korean Peninsula geopolitical risk), with whom we hosted a conference call with back in late MAY of 2010 on this very same topic. Below, we list a handful of his key takeaways from the call:

 

  • “The problem with the Korean Peninsula is really unique. There’s nothing comparable to it anywhere in international relations, so it’s really hard to know how to deal with this because the problems created by North Korea do not fit any of the mechanisms [or] the expectations that are built into the international system. And we don’t much about North Korea because it is such a closed society. So any kind of prediction is really difficult to come to.”
  • “North Korea is a criminal state – and there’s no [other] state like that… It uses those state powers to run a criminal operation, which no other state formally does. In a sense, it has a monopoly on criminal activity (counterfeiting, drug production and proliferation, abductions, money laundering and illegal arms dealings)… That’s been a major problem for the outside world for 25-30 years.”
  • Not unconnected to that is the nuclear question. In a sense, what North Korea has done is turn a nuclear program into a criminal activity. They’ve figured out that if they violate international norms or international law in the production of nuclear weapons and if they issue threats periodically or actually take action such as tests of missiles that could carry nuclear weapons, then they could get the outside world to pay them off in return for promises to change their ways. And this has happened again, and again, and again. It’s a cycle that repeats itself and it’s really extortion: ‘we threaten you and you give us money or food aid or fuel and we’ll promise to subside for a while and then we’ll come back and do the whole thing all over again.’”

 

To listen to the KOREAN RISK AND GLOBAL MARKETS, WITH PROFESSOR HILL call held May 28, 2010 please CLICK HERE (Professor Hill’s commentary begins at the 9:50 mark).

 

To view the accompanying presentation “RISK ON THE KOREAN PENINSULA: IMPLICATIONS FOR GLOBAL MARKETS” please CLICK HERE.

 

ABOUT PROFESSOR CHARLES HILL

Charles Hill is a diplomat in residence and lecturer in International Studies at Yale University. He is a career minister in the U.S. Foreign Service, serving in a variety of roles such as Deputy Assistant Secretary for the Middle East at the State Department, Chief of Staff of the same, and executive aid to former U.S. Secretary of State George P. Shultz. Dr. Hill has been a fellow at the Harvard University East Asia Research Center, a Clark fellow at Cornell University, and is currently a research fellow at the Hoover Institution. He served as special consultant on policy to the secretary-general of the United Nations from 1992 to 1996. He received an A.B. degree from Brown University in 1957, a J.D. degree from the University of Pennsylvania in 1960, and an M.A. degree in American studies from the University of Pennsylvania in 1961.

 

Darius Dale

Senior Analyst

 

NORTH KOREAN SABER-RATTLING "ON" - 1


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