East Asia faces Iran sanctions dilemma

In January, I presented the difficulty that East Asian states face when balancing their economic interests in the Middle East and their political and security needs that are intrinsically tied to the US. The issues that were relevant then has remained so throughout the year - now with increased sanctions on Iran, Washington is testing the trans-Pacific ties.

United States sanctions on Iran over Tehran's nuclear program have left South Korea and Japan juggling between satisfying domestic energy demand and keeping relations with Washington sweet. Should loopholes aimed at bypassing punitive measures that are hampering economic recovery and growth close, Tokyo and Seoul will have to re-think the post-World War II trans-Pacific relationship.

read the full article at Asia Times

Korea feels housing shock

South Korea's faltering housing market threatens to undermine broad economic growth, as construction companies struggle to find work and over-indebted homeowners and high-rent tenants curb spending, putting a squeeze on small enterprises that have no exports to fill the gap.

read the full article here

Notes on starvation

Stories of famine and starvation in North Korea are making their way across world newspapers as the release of the United Nations' "Overview of Needs and Assistance" report in May coincided with new accounts of devastation in the country's grain-basket provinces. One thing is clear: North Korea is not once again falling into a food crisis - because that would imply that the country had evaded food shortage at some point in the past two decades. Based on the best estimates, the system appears to be perpetually suffering shortfalls and frequently dipping into a major humanitarian crisis whenever it is brushed by the slightest external pressure: last time it was flooding, this time drought. While the acquisition of food itself remains the key effort in allaying the issue, additional problems exist that significantly further or act as the outright cause of the crisis. Without taking a more holistic approach to this ongoing problem, the situation on the ground will not improve.

read the article here

New blog on North Korea

I am launching a new blog with my friend and analyst Scott LaFoy on the food situation in North Korea. I will continue updating this blog because I will still be writing about much more than the famine in North Korea - but for those looking for a good blog that will keep them informed about the humanitarian crisis in the DPRK, I hope you will frequent our new blog.

DPRK Food Aid Blog

An Uncertain Future Together

A follow-up to the previous post (Prospects for a New Trading Bloc), I feel it is necessary to provide further analysis on the possible motives behind South Korea's acceptance of the joint declaration which underscored the possibility of forming a trilateral free trade agreement (FTA). This new position is different from the more skeptical position that South Korea took in December last year.

Looking at the timing of Seoul's negotiations with its neighbors, economic benefits from closer regional economic integration appear to be only one of the many objectives that President Lee Myungbak had under consideration. Although the finalization of the agreement between Seoul and Tokyo was recently put on hold, a bilateral agreement on sharing military intelligence and logistics was in its final stage before the trilateral negotiations began. Immediately following the summit in Beijing, South Korea approached China about establishing a similar arrangement. The timing of these meetings should be read as an expression of Seoul's foreign policy objectives.

It is likely that President Lee is attempting to achieve a definitive foreign policy victory before his term ends. The biggest challenge to Lee was not just the two North Korean attacks in 2010, but also the meek response he received from the regional powers when he sought to reprimand Pyongyang. In particular, China's lukewarm response has been blamed for encouraging North Korea to continue provocative actions along the Northern Limitation Line. Preventing future attacks will require establishing a diplomatic environment in the region that would deter North Korea from behaving belligerently - with China enthusiastic about the trilateral FTA, Seoul may be hoping to use it as leverage to more closely align Beijing to South Korea's interests.

Despite the efforts, China is unlikely to change its position on North Korea in the near future, especially when the Chinese Communist Party is preparing for its power transition later this year. Furthermore, China needs North Korea to resource the necessary raw materials for the development of the northeastern provinces.

This should also provide a stark reminder to the United States that some of South Korea's needs can only be satisfied by Chinese cooperation. Events this April proved that the United States can only do so much to convince the North Koreans not to do something. With this in mind, there is little reason to brashly pursue policy that will bring the two countries even closer together.  

Please read my article on Asia Times Online

Prospects for a New Trading Bloc

As the European Union teeters towards possible dissolution, a new trading bloc may emerge on the other side of the Eurasian landmass.

On May 12, 2012, Trade Ministers from Japan, South Korea and China agreed to propose to the leaders' summit (held in Beijing the next day on May 13, 2012) that the three countries should start FTA negotiations by the year’s end.

On the following day, Premier Wen Jiabao, PM Yoshihiko Noda, and President Lee Myungbak concluded the Fifth Trilateral Summit Meeting in Beijing and signed the Trilateral Agreement for the Promotion, Facilitation and Protection of Investment in which the three leaders pledged to work towards establishing a free trade agreement between the three countries. In a joint declaration, leaders of the three countries promised to further enhance the “future-oriented comprehensive cooperative partnership” to unleash vitality into the economic growth of the three countries, accelerate economic integration in East Asia, and facilitate economic recovery and growth in the world.

If the three countries are able to produce an exclusive free trade zone between the three countries, it will have a huge impact on the dynamic of the global market. According to the IMF, China, Japan and South Korea accounted for a combined 19.6 percent of global gross domestic product and 17.5 percent of world trade by value in 2010. In addition, the Japanese Ministry of Trade claimed that a trilateral free trade agreement would increase Japan's GDP by 0.3 percent, China's by 0.4 percent and South Korea's by 2.8 percent.

While both Premier Wen and PM Noda expressed enthusiasm for the potential trading bloc, President Lee showed a degree of reluctance during the negotiations. Many suggest that Seoul fears that a trilateral agreement will neutralize potential gains that could be gained through a bilateral FTA with China. Immediately following trilateral talks, South Korea and China held their first meeting on a bilateral FTA on Monday. Some observers say South Korea, which aims to expand its market share in China's automobile, TV, etc., intends to prioritize the bilateral negotiations over the trilateral talks. Sharing the Chinese market with Japanese corporations would not only reduce potential gains, but, according to Professor Kim Young Han, the country would also end up relying more on Japanese core components and other technology.

In addition, the domestic situation in South Korea could play a role in President Lee’s position. Following the ratification of the KORUS FTA in March, increasing number of people are voicing concerns regarding a possible FTA with Japan.

Japan would certainly greatly benefit from opening relations with both South Korea and China. According to Nomura Securities, establishing a bilateral FTA with China will raise Japan’s GDP by 0.68 percent, which is higher than the 0.35 percent growth expected with a bilateral FTA with the United States. Furthermore, the same study estimated that the trilateral FTA will boost Japan’s GDP by 0.74 percent (much higher than the Ministry of Trade estimate), exceeding the 0.54 percent increase offered by the Trans-Pacific Partnership. In a statement, PM Noda suggested that Japan would prefer to pursue both negotiations simultaneously.

From Yomiuri Shimbun Online

However, the trilateral free trade agreement will most likely not bear fruit in the near future. AEI’s Claude Barfield notes that while the ROK-PRC bilateral negotiations have placed pressure on Japan to advance negotiations, the political turmoil and uncertainty prevent Tokyo from moving forward with any regional economic integration.

China has been proposing an intra-regional free trade zone for the past decade. Several attempts at bilateral agreements have also already occurred. In 2003, Seoul and Tokyo attempted to negotiation a FTA, but broke down after the two governments were unable to resolve their differences regarding agricultural products.

Agricultural exports will undoubtedly become a focal point in negotiations between the three countries. Both Japan and South Korea maintain massive farm subsidies and high tariffs to agricultural imports. Even so, the value of Chinese agricultural exports to Japan and South Korea in 2011 was $10.99 billion and $4.17 billion respectively. A quarter of China’s agricultural exports go to Japan and South Korea, thus Beijing is actively negotiating for the reduction of tariffs. While China promises to strike a balance in exports, domestic agriculture remains an extremely sensitive issue for both Japan and South Korea.

Meanwhile, President Ma Ying-jeou suggested on May 16, 2012 that Taiwan should join the trade pact between the three countries. Alongside aspirations for the intra-regional trade bloc, Ma also reiterated his intent to join the Trans-Pacific Partnership (TPP) trade agreement within eight years and said he expected to resume negotiations on the Trade and Investment Framework Agreement (TIFA) with the US in the near future. At the same time, he pledged to complete follow-up negotiations under the cross-strait Economic Cooperation Framework Agreement (ECFA) with the PRC.

Taiwan is most likely prompted to jump start further negotiations on the ECFA and other FTAs because of the bilateral negotiations between the PRC and the ROK. Taiwanese manufacturers compete with South Korean corporations in electronics, steel, machinery, petrochemicals, plastics and textiles. Heavily dependent on exports to China, Taiwan’s competitiveness in the Chinese market relies heavily on the special economic status bestowed on Taiwanese corporations by Beijing. If South Korean firms were given a similar edge in the Chinese market, Taiwan’s industry could be under threat. Beijing has already stated that it expects the negotiations for PRC-ROK FTA to take no more than two years.

According to Liou To-hai, director of the National Chengchi University's Center for WTO Studies in Taipei, "should South Korea sign an FTA with China ahead of Taiwan and China completing agreements on trade in goods, trade in service and investment, all the dividend that Taiwan has gained from ECFA's early harvest program could be neutralized." In addition, foreign direct investment (FDI) in Taiwan would also be affected. Since the signing of the ECFA, Japanese companies have used Taiwan as a gateway into the Chinese market, but Taiwan's special role could end as Japan is likely to shift its investment to South Korea.

2013 will see several key negotiations take shape and their results will most likely establish norms in the political economy of the region for decades to come. Northeast Asia is yet unready to establish an economic zone like the European Union, but steps that Seoul, Beijing, and Tokyo (and possibly Taipei) take today will definitely set the stage for their future growth.

How to tango with Pyongyang

New evidence unearthed by the North Korea International Documentation Project suggests that the 1968 hijacking of the USS Pueblo and the dramatic increase in violence between 1967 and 1968 were motivated by Pyongyang's desires to mend ties with Beijing. According to Romanian sources, Kim Il Sung believed that following Mao's anti-US strategy of opening a "second front" on the Korean Peninsula would bring much needed aid and supplies to the DPRK from the PRC.

This new interpretation of the Pueblo Crisis would remain consistent with how North Korea suddenly changed its behavior towards South Korea (despite maintaining hostile intentions) when China began its rapprochement with the US.

The new narrative of the Pueblo Crisis characterizes Pyongyang as malleable and responding to international conditions, running counter to how many have implicitly portrayed the state.

In a recent article in Foreign Affairs, Jennifer Lind forwarded three elements that facilitate North Korea's deterrent capabilities:

• unpredictability 
• the catastrophic consequences of North Korea’s collapse
• the regime’s nuclear capabilities.

While Professor Lind is correct to pin point North Korea's strengths, she provides no policy recommendation for Washington in the article because she is unconvinced of Pyongyang's responsiveness to external pressures. From Lind's perspective North Korea's history of provocations from USS Pueblo to the shelling of Yeonpyeong Island in 2010 is a single narrative of a state acting without a long-term strategy.

However, the new Romanian evidence on the Pueblo Crisis challenges this view.

If North Korea does indeed react to outside forces, then it is likely to want, first and foremost, to reduce its overwhelming insecurity. This may create an opportunity for Washington to work with - Ambassador Morton Abramowitz suggested dispatching a senior-level politician (like the VP) to negotiate trading security, recognition, etc. for Pyongyang's missiles and nukes.

Alternatively the US could do nothing and see the entire region descend into paranoia and North Korean children starve to death. Washington ought to take the step to change the region for good.

Read my slightly less hyperbolic article on Asia Times Online

Missiles, oh my!

North Korea's pronouncement that it will launch a satellite to celebrate the centennial of Kim Il Sung's birth has thrown the world into dismay. The thinly veiled decision to test its ballistic missile was even more shocking because Pyongyang had agreed to a missile test moratorium not a month before.

The timing could not have been worse for US foreign policymakers: the domestic situation in the US is fragile, weakening the resolve of Washington's close allies, while the ongoing crises in Syria and Iran continue to vie for Washington's attention. The "Leap-day Deal," the result of a year long negotiation, could have been President Obama's sole diplomatic accomplishment with humanitarian assistance rolling in (albeit late) behind IAEA inspectors and the ground works for restarting the Six-party Talks. Instead, the president's trip to Seoul for the nuclear summit was completely sullied by the foretold provocation.

So what has been the general talk on the whole crisis?

North Korea appears surprised by all the international condemnation, claiming that the launch will be for peaceful, scientific purposes. In November of 2011, Pyongyang published a white paper titled “Space Is Common Wealth of Humankind” where it claimed that space "serves as a powerful engine propelling the future development of science and technology as well as economy" and criticizing the US for "spurr[ing] the scenario for converting the space into the theatre of a war for realizing its strategy for world domination." This should have been read as a possible sign of North Korea's intent to test its ballistic missile capabilities under the guise of a satellite launch as it did in 2009.

This may have been disregarded because Washington probably assumed that Pyongyang knew that a satellite launch violates UN Security Council Resolution 1874 which banned the North Koreans from conducting anything involving their ballistic missile technology. Perhaps it should have been made more explicit.

Stephen Haggard summarized several legal issues surrounding North Korea's satellite launch and possible rationale behind Pyongyang's actions. Here are three hypotheses that he presents in why Pyongyang backed away from the deal.

• That the February 29 deal was effectively vetoed by powerful groups in the military or elsewhere; 
• That it’s all about inexperience; Kim Jung Un was sold a bill of goods by advisors who thought they could exploit the missile-satellite issue and get away with it; 
• That this was completely calculated; Kim Jong Un knew the risks but rolled the dice in an effort to have it both ways (domestic political benefits of the launch plus substantive benefits of the deal). 

With the launch most assuredly moving forward, the question now is how to move forward in this time of uncertainty.

President Obama's first plan was to rally support from the Chinese. However, despite his tacit support against the launch, Hu Jintao will probably not move to really antagonize North Korea.

Both Japan and South Korea have announced that they will intercept the rocket if it strays from its expected trajectory. Those are very serious claims considering the well-known prowess of North Korean rocket scientists in keeping their rockets in the air much less in a pre-calculated trajectory. It's good that the US government has not said anything about intercepting or striking the rocket while still on the launch pad.

The approach that appears most amenable is reengagement using assistance and economic development as carrots. Professor Michael Mazzar suggests

[A] new strategy using the twin forces — markets and information — to alter the system. The fundamental U.S. goals would be peace, stability and a gradual process of reform and evolution in the North that could eventually change the character of the regime. Unlike traditional proposals for engagement, this approach would not try to use trade and economic benefits to change the North's behavior. Instead, it would use targeted direct foreign investment, people-to-people contacts, training programs for North Korean technocrats and more to accelerate the rise of alternative power centers in the North. 

This is the safest plan for moving forward. I asserted before that leaving the North Korean masses to starve will negatively impact the long-term interests of the US. Other analysts also support the idea of proactively supporting the North Korean people to better prepare the US for North Korea's collapse. Some even consider aid to be a step towards taking down the regime. Gordon Chang believes that

Food aid, if properly monitored, can further erode regime controls on information. Foreign food monitors, present in the country to ensure no diversion of aid, give the North Korean people an opportunity to meet outsiders and thereby learn the truth about their own society and the outside world. Moreover, the presence of the monitors tests the limits of the state’s ability. There are simply not enough local minders to watch over foreign workers, doctors, and monitors. In fact, there has been unsupervised contact between foreign food monitors and North Koreans. 

There is clearly a compelling argument for continuing engagement with the North Koreans through humanitarian assistance. For its part, Pyongyang is willing to continue negotiations and have not rescinded its invitation of IAEA inspectors in the face of Washington halting the delivery aid.

The point is that there are plenty of reasons why North Korea remains antagonistic; one cannot expect two nations to build trust without first establishing diplomatic relations nor negotiate over demilitarization without a peace treaty. It's time that Washington stops allowing Pyongyang to surprise it and instead surprise the North Koreans. America needs a peace offensive.

Why we must go on... even with Pyongyang

The hard-won deal with North Korea is already in peril - Pyongyang has announced its intentions to launch a satellite to commemorate Kim Il Sung's centennial and the US sees this as a violation of the moratorium on missile testing. Nonetheless, the negotiations must go on because the opportunity is ripe to set Northeast Asia on a course for greater stability.

Evaluating the merit of the recent food-for-nukes deal has divided analysts.

In a Washington Post op-ed on March 8, Andrew Natsios censured the "Leap-day Deal" for sending a message that encourages Pyongyang to build more nukes and divert aid with impunity. Chris Nelson criticized Natsios' positions but failed to produce a defense for the deal itself.

I am in favor of the deal and here are reasons why:

The moratorium on activities at the Yongbyon nuclear facility is a great start and if the US stays in the agreement, there will be follow-up negotiations. Some analysts were critical of the fact that the deal narrowly specified the Yongbyon facility when there are probably other underground nuclear facilities. But we cannot monitor facilities that we do not know about, thus a more expansive agreement would have simply acted as a harbinger for future conflict.

Based on accounts of high-profile defectors from North Korea, it is likely that Pyongyang is actually concerned for the wellbeing of the North Korean people (in so far as not wanting them to all die) - this will bring North Korea back to the negotiating table because Washington's nutritional assistance package of 240,000 tons will not be sufficient to ensure food security through the lean months between harvests. When negotiations restart, there is room to expand upon the standing agreement.

Monitoring, which State Department officials and many analysts mention on a regular basis as a key obstacle to providing food aid, has never been a big problem - not because Pyongyang doesn't siphon off the aid that comes in the country, but because having surplus food in the market will have a positive outcome. As Chris Green assessed in his recent article on Sino-NK:

This is one oft-unspoken fact that muddies the waters of the 'aid transparency debate'; namely, that giving grain to the North Korean state ends up diluting prices in the [markets], something that is good for ordinary consumers

More importantly, it is in the moral and strategic interests of the United States to help build a North Korea that is not suffering from chronic malnutrition. The long term social consequences of exposure to starvation will prevent the North Korean people from engaging in activities that contribute to social change or effectively participate in reconstruction if the country opens up to the world. If this occurs, then the cost of reconstruction falls on South Korea and invariably the United States. Therefore, Washington should begin investing in the future that it wants to see today.

Negotiations must not only go on, but pick up the pace. As North Korea's economic and political ties with China and the Russian Federation deepen, Washington's economic importance to Pyongyang will diminish. More importantly, should Washington leave North Korea without means to better secure and distribute food, the consequences will yield an immense human cost that will continue to undermine the region's stability long into the future.

Read my full article on Asia Times

A New Hope?

As the follow-up negotiations to finalize the nutritional assistance to North Korea is taking place, several analysts have weighed in their opinions on the "Leap-day deal." Most people have taken a negative position, citing the agreement's narrow focus on the Yongbyon facility and the questionable act of using humanitarian assistance for leverage.

However, it is important to point out that the recent negotiations have produced opportunities for long-term engagement and a chance to reduce tensions in the region.

At the least, the infamous Yongbyon facility will be closed. Many point out that North Korea probably has many other underground facilities that support the nuclear weapons program, but Yongbyon is probably Pyongyang's largest and most productive enrichment site. With enough output to produce a nuclear weapon on an annual basis, closing down the facility will be a huge step forward. 

Furthermore, now that the food crisis and the nuclear issue are linked, Pyongyang will be pressed hard to make further concessions in their nuclear program in order to gain more food. Although some experts, like Marcus Noland, do not believe that Pyongyang accepted the US deal out of concern for its people, considering the socio-economic conditions, it is likely that North Korea's sudden change in position is tied to its desperation for assistance. 240,000 tons of nutritional assistance will only last so long. When the North Koreans come back for more food, more concessions may be negotiated.

These are issues that both North Koreans and Americans can potentially work together to resolve - Washington wants Pyongyang to give up its nuclear weapons and Pyongyang wants Washington to help it recover from the food crisis. Andrei Lankov is adamant that North Korea will never give up nuclear weapons, but as long as talks move in a direction that would reduce tensions and establish a firmer line of communication between Pyongyang and Washington, the current negotiations are well worth the moral and strategic risks.

Of course Washington is on a limited time frame. As North Korea's ties with Russia and China deepen, the US economic leverage over the isolated and hungry state will decrease. More importantly, the US should not delay the delivery of humanitarian assistance as to prevent further trauma on the North Korean people. Much is at stake.

US-DPRK leap?

On February 29, 2012, the DPRK and the United States simultaneously announced the results of their third exploratory talks. Both sides chose to focus on different aspects of the negotiations in their announcement, but in general, Pyongyang and Washington appear to have landed on the same page.

The agreements were surprisingly extensive, covering a moratorium on long-range missile launches, cessation of nuclear weapons tests and nuclear activities at Yongbyon and permission for IAEA inspectors to return to North Korea.

In return, the United States promised to finalize negotiations on 240,000 metric tons of nutritional aid. The addition of "nutritional assistance" in the meeting is somewhat surprising because Washington has always maintained rhetorical distance between the nuclear issue and humanitarian assistance - as many analysts suspected, the deal appears to have been reached mainly via US using humanitarian assistance as leverage.

The agreement to provide 240,000 metric tons of nutritional aid is significant because it means that the North Korean leadership was willing to concede on the issue of being given the remaining 330,000 tons of grain from the 2005 agreement. According to Marcus Noland, this concession suggests that there is an individual or group making decisive political decisions in Pyongyang, which in of itself was not a certainty after the death of Kim Jong-il.

While US negotiators were wary of making assertive comments on recommencing the Six-party Talks, the North Korean statement chose to underscore the possibility of restarting the talks, lifting sanctions and acquiring a light water reactor - clearly looking for a deal similar to the 1994 Agreed Framework.

The key area of concern here is the linkage between food aid and the nuclear issue. If this becomes the established precedence, then humanitarian assistance will be shamelessly flaunted as a political tool - and the North Koreans will have a positive incentive to engage in provocative behavior to induce food aid.

Moreover, the linkage between food and the nuclear program will create an incentive for Washington to continue the supply of aid even if the North Koreans are abusing the distribution, as long as the negotiations on the nuclear program makes progress - humanitarian assistance will be taken hostage by North Korea's willingness to talk.

The agreement specified that North Korea will halt nuclear activities at the Yongbyon nuclear facility, which leaves nuclear facilities that the US and the IAEA do not know about (if they exist) free to continue uranium enrichment. In 2010 Siegfried Hecker was shown the uranium enrichment program at Yongbyon and he was shocked to find that the facility was capable of producing a weapon's worth of highly enriched uranium every year. While this infamous facility will halt operations, just as Hecker was not expecting a massive enrichment program in 2010, we may stumble upon an underground nuclear facility in the near future. Furthermore, Pyongyang probably retains enough plutonium right now for four to twelve atomic bombs.

While the recent agreement could definitely open way for a considerable breakthrough, bringing the regional players back to Six-party Talks and forestall mass starvation in North Korea, as with all agreements with Pyongyang, this one stands on thin ice. As the moratorium does not include a specific timetable, Pyongyang may well be stalling for time and aid.

The dependency illusion

Through trial and extreme error, communism has been thoroughly discredited in the last century; however, the theory of dialectical materialism survives into the new millennium. Marx suggested that the construction of new means of production inevitably leads to internal contradictions and new epochs are created through the process of synthesizing all the existing material realities. Today, we simply replaced the idea of an inevitable communist takeover with the presumption that every country will one day adopt the liberal democratic system.

This was Francis Fukuyama's famous thesis in "The End of History?" However, the revolt against this new world order began soon after the end of the Second World War, right alongside the Cold War. This was the struggle fought via economic nationalism and competing theories of modernization, taking shape in various ideologies and political systems. Latin American economists first led the charge in the 1940s and 50s with their "Dependency Theory." The core idea forwarded the view that poor and less powerful states will be subject to the political, economic, social and cultural domination of wealthier states. Adherents of this theory chose to disengage from the dominant economic systems of their world in favor of sovereignty.

There were varying degrees (everything from import substitution to self-sufficiency), but the most radical and extensive pursuit of this stance can be seen in North Korea. North Korea rejected the idea of being subject to either American or Soviet political and economic influences. Manifestations of this appeared in Pyongyang's refusal to join COMECON and its constant pursuit of heavy industry.

However, many analysts have pushed aside indigenous North Korean desire to be independent and instead analyzed Pyongyang's policies as an attempt to maximize political capital by playing the Soviet Union against the PRC during the Sino-Soviet Split. Naturally, in the post-Soviet era, the US foreign policy makers look to China as North Korea's patron and sole hegemon. As negotiations in Beijing carry on to denuclearize North Korea, this mistaken perception of Sino-DPRK relations will prove most ineffective for the US side.

North Korea appears to be increasingly dependent on Chinese economic aid and slowly making reforms to harbor cross-border trade. Some have argued that such reforms indicate North Korea's irreversible ties to China and a physical representation of Beijing's influence over Pyongyang, almost like the economic and political relationship that the US had with Latin America. However, to characterize the Sino-DPRK relationship as a traditional core-periphery model is short sighted.

The basic assumption that North Korea's economic dependence translates to political subjugation lacks substantial warrants. Yafeng Xia, a historian specializing in the history Sino-DPRK relations, portrayed China as less of a lever and more of a hammer, meaning that Beijing can strangle/starve Pyongyang to death but lacks the tools to apply less extreme changes or bring it to submission.

On top of not wishing to upset the balance of powers,North Korea serves as an important source of raw materials for development in China's northeastern provinces.

Furthermore, with everyone expecting millions of refugees to flood across the Yalu when the state collapses, it is hard to distinguish who has leverage over whom in the current state of affairs.

There is a predominant mood of inevitability when people discuss issues related to North Korea - that it will one day collapse or that it will inevitable bow to the economic realities and give themselves to the Chinese model. However, such thoughts are presumptuous and oversimplifies how different people view themselves and the world.

Imposition of dogmatism and a self-assuredness in one's own vision of history are not new things, but we ought to have learned our lesson and become more flexible.

Read my article in the context of the US-DPRK negotiations on Asia Times

A short chronology of DPRK-US nuclear weapons negotiations 2010-12

February 2010

• U.N. political chief B. Lynn Pascoe meets with North Korea's president and foreign minister and "argue[s] strongly that the six-party talks should be resumed without preconditions or further delay."
• On February 13, North Korea's chief nuclear negotiator Kim Kye Gwan arrives in Beijing and strongly pushes for a trip to the United States in March, but the U.S. does not authorized a visa for him.
• February 15 North Korea’s nominal head of state, Kim Yong Nam, states that North Korea will end hostile relation with U.S. through dialogue and negotiations.

March 2010

• 26 March 2010, ROK Corvette Cheonan is scuttled

May 2010

• Kim Jong-Il publicly supports cooperation “towards moving for a resumption of the Six-Party process.” Meanwhile, Clinton tours Asia.

June 2010

• United States extends economic sanctions against North Korea under the UN Security Council Resolution 1874

August 2010

• Kim Jong-il expresses hopes for early resumption of six-party nuclear talks during his trip to China

November 2010

• Special Representative Stephen Bosworth travels to Beijing to discuss the DPRK’s clandestine uranium enrichment program.
• Yeonpyeong Island is shelled.

January 2011

• North Korea invites South Korea to begin negotiations on inter-Korean trade; however, Seoul makes a counteroffer to discuss the sinking of the Cheonan and the shelling of Yeonpyeongdo. Pyongyang agrees to meet in February.

February 2011

• US NGOs observe signs of a severe food crisis in parts of North Korea
• The first Inter-Korean military negotiation sine the 2010 sinking of the Cheonan starts and promptly collapses as the North Korean delegation storms out

March 2011

• The US demands a show of seriousness by the North Koreans as a prerequisite for the resumption of negotiations.

May 2011

• Special Envoy for North Korea Human Rights Ambassador Robert King and the USAID Deputy Assistant Administrator for the Office of Foreign Disaster Assistance Jon Brause travel to the Democratic People’s Republic of Korea from May 24th to 28th to explore the possibility of extending food aid.

July 2011

• Kim Kye-gwan arrives in New York on July 27, 2011 for negotiations “designed to explore the willingness of North Korea to take concrete and irreversible steps toward denuclearization.” Talks conclude without any substantive changes, but characterized as exploratory and constructive. Bosworth states that “before deciding our next steps to resume the process, the United States will consult closely with the Republic of Korea and our other partners in the six-party talks”
• South and North Korean representatives meet in Indonesia to discuss prospects for restarting the 6 party talks

August 2011

• US and the DPRK agree to discuss the search and repatriation of remains of US troops killed in North Korean territory during the Korean War
• During his meeting with President Medvedev in Ulan Ude on August 24, Kim Jong Il promised to work on introducing a moratorium on testing and spent nuclear fuel processing. Senior Washington official states that the offer was “welcome but ... insufficient” to return to the negotiating tables.

September 2011

• Top nuclear negotiators from North and South Korea meet in Beijing to discuss terms of restarting the 6 Party talks
• On September 23, North Korea expresses interest in continuing negotiations with the US in October

October 2011

• October 24, Bosworth meets with DPRK vice foreign minister Kim Kye-gwan in Geneva “to determine if North Korea is prepared to implement its obligations under UN Security Council Resolutions 1718 and 1874 and its commitments under the 2005 Joint Statement of the Six-Party Talks
• No significant breakthroughs in denuclearization negotiations. Bosworth states he is “neither optimistic nor pessimistic”
• October 26, the US government is reportedly preparing to resume food aid to North Korea, but will stagger the aid in a series of deliveries. A source close to the North tells Yonhap News that Washington plans to restart the humanitarian assistance that stalled in 2008.
• Mounting criticism that the US is coupling food aid with successful negotiations with the DPRK.

December 2011

• Kim Jong-Il dies, but Pyongyang approves the continuation of negotiations. New York channel used to continue negotiations.

February 2012

• North Korea makes a list of demands that South Korea must fulfill before resuming negotiations including the cancellation of joint American-South Korean military exercises. South Korea does not budge and the exercises are conducted on schedule
• Vice-Minister of Foreign Affairs Kim Kye Gwan leaves Pyongyang on February 21 for the 3rd round of talks with U.S. officials in Beijing.

The Russian Winter Offensive

It has been a while since I wrote an article about Russia, but with Foreign Minister Sergei Lavrov’s recent visit to Damascus and Russia’s veto at the UN Security Council to block a resolution on Syria, the Eurasian giant deserves our attention.

Many analysts question why Moscow is acting so strongly against the United States when the Obama Administration appears to have done so much to achieve a "Reset" with the Kremlin. Most prominently, Daniel Drezner compares Russia and China in his Foreign Policy article and points out how Beijing's rhetoric towards Washington is more reserved than Moscow's despite China facing more direct challenges from the United States.

But objectively speaking, the baseline presumption that there actually had been a "Reset" between the United States and the Russian Federation may be a fallacy. With Putin at the helm, the Kremlin has seen the foreign policies of the Clinton, Bush and Obama administrations, which invariably produces a long term perspective on US behavior towards Russia and actions in Russia's key areas of interest. Taking this view into account helps better explain why Moscow may not feel that Obama is all that different from Bush.

What the Russian leadership expected the “Reset” was for the United States to break from the policy of unilateralism and show “commitment to the notion that Russia can be a viable and trustworthy partner to the United States regardless of the state of Russia’s domestic affairs.” The Libya issue provides a good example of where the "Reset" failed to manifest - Russia abstained from the UN Security Council Resolution 1973 without totally rejecting it in deference to US leadership. Despite the silent understanding that the resolution should not be viewed as a green light for military intervention, NATO began air strikes on Libya. Therefore, in debating the crisis in Syria, it is only natural for Lavrov to give a firm warning to the "West" and use Russia's veto power to reject the resolution against the Assad regime. Furthermore, the criticism against Russian elections by the US State Department was not well received by the Kremlin, especially during a sensitive time for semi-democratic/semi-authoritarian regimes around the world.

What is more, Washington has nothing to bargain for. It has opted out of being an assertive negotiator or a stabilizer on the Korean Peninsula where Russia seeks stability in order to begin constructing new gas pipelines that will open way for the development of the Russian Far East. The US has not and cannot fulfill Japan's security needs, which is forcing Tokyo to reorient its military position from north against Russia to south against China (exchanging land based forces in Hokkaido for air and naval forces in the South China Sea) and leaving Russia in good position to conclude a favorable resolution on its island dispute with Japan.

Before, Russia saw the United States as a vital partner in engaging Asian countries - but with Washington forcing South Korea and Japan to reconsider their dependency on oil imports from the Middle East, Russians  can expect the East Asian economic powers to come to the Kremlin. In fact, South Korean entities have been in negotiation since 2003 to develop means to deliver gas to South Korea through North Korea - now Pyongyang has given a nod of approval and things will move along, with or without Washington.

The US-Russian friction is a reflection of Washington's massive loss of leverage over a country that had at one point desperately desired closer relations. Internal weaknesses of the Russian Federation may play a peripheral role, but obsessing over Putin's authority over the country misses the wider implications of current events.

Russia is a big country. It spans over vast territories and borders several regions where major world players have staked out their interests - Kremlin is challenged to produce a cohesive and coherent foreign policy to maximize Russia's gains. Naturally, the resulting policies are both reactive and pragmatic.

Looking at Eurasia from the perspective of those who rule over a significant portion of it seems like a good place to start for Washington if it seeks to better assert its leadership role there.

Read my full article on Asia Times.

The Intractable Issue of Energy

As South Korea and Japan haggle over the most appropriate method of castigating Tehran for its nuclear program while also ensuring continued supply of petroleum from Iran, I think it's useful to recollect the insights of the late Japanese economist Wakimura Yoshitaro (1900-96). A member of the leftist economic circle, the Ouchi group, Wakimura warned that the transport of Middle Eastern oil was a potential flashpoint for global conflict. Having lost faith in the West's ability to negotiate without coercing oil producing countries, members of the Ouchi group concluded that continued dependence on oil and Japan's alliance with the United States would invariably pull them into an unwanted conflict surrounding the black gold. Their solution was for Japan to go nuclear.

Today both Seoul and Tokyo are struggling to balance their economic needs and their political allegiance to the United States. I argued in my most recent article on Asia Times Online that Washington's aggressive policies in the Middle East threatens East Asia's economic security and thus damages America's ties with its allies in the region.

Middle Eastern oil is indispensable to the global economy, but in particular to countries that rely heavily on shipping and heavy industry. South Korea and Japan both fall into this category - even though Japan developed nuclear energy after the post-war reconstruction, there are certain sectors where petroleum is irreplaceable. Part of South Korea's remarkable economic growth was based on its development of petrochemical industries, obviously an enterprise where oil is a prerequisite. Mind you, both nations are practically island nations that depend heavily on shipping for import-export. Nuclear powered container ships are still in their experimental stage.

Therefore, Washington's request to significantly reduce or ban import of oil from Iran comes as a serious blow to both Seoul and Tokyo.

Some experts in Israel have waived off concerns over loss of industrial output by suggesting that South Korea simply increase imports from other Gulf emirates. Besides, they said, diffusing Iran will help the denuclearization process in North Korea.

What's absurd about all this is how little regard these "professionals" have for the intricacies of trade and commerce. Yes, some Gulf states that have historically been terrified of Iran have offered to increase exports to South Korea. But oil from Saudi Arabia does not magically appear in your local gas station the next day - this requires more ships, rerouting of ships and funds, negotiating new deals (nearly three quarters of South Korea's imports from Iran are negotiated on a long term basis and only a quarter is bought on spot price) and dozens of other infrastructural and financial consideration have to be made.

In addition, South Korea's fiscal regime keeps the Won from being overvalued - this safety mechanism, while keeping exports relatively affordable, raises the cost of imports. Escalation of tensions in the Straits of Hormuz and the expansion of sanctions against Iran will invariably affect the market. At the end of the day, South Korean industries will be still be heavily burdened even if they are supplied from different sources.

It's contemptuous to color this as a simple process, especially when one country is bending over backwards to satisfy another's irrational fears.

Furthermore, what happens in Iran will not affect North Korea. Commercial links between the two states have already ebbed long time ago due to increased policing and oversight by the international community. North Korean missiles are no longer entering Iran, but nuclear proliferation expert Joshua Pollack noted that technology transfers have continued unabated. And why point to North Korea? It's the single greatest example of how punitive sanctions don't always work.

Meanwhile, Washington has long recognized its diminishing power in the Asia-Pacific. Obama's "pivot" seeks to reassert the importance of the United States in the region - And let's be fair, no one has forgotten about the US. After all, US security guarantees to South Korea and the Seventh Fleet stationed in Japan are considered essential facets of the two countries' defenses. At the same time, US cannot revert the confluence of time. China's industrial prowess is going to inevitably make it economically influential in the region.

The Free Trade Agreement with South Korea and the Trans Pacific Partnership with Japan are two great ways for the United States to build on existing (and still massive) trade links with its allies in East Asia. Indeed, nothing solidifies a relationship between two countries more than the transfer of goods and peoples. Add ideals and sense of familiarity - the United States is still indispensable in every way imaginable.

How do you mess this up? Force your allies to swallow bitter medicine for a sickness they don't have.

Chinese premier Wen Jiaobao stepped in with good timing and suggested taking the Iranian issue to the UN. He opposed Iran's nuclear program, but he also noted the incredible hardship that will be wrought on the world if the sanctions expanded. It's a bad day when Beijing appears like the more rational actor. Make no mistake, Seoul and Tokyo are in part holding out for China to forestall the current crisis.

If the United States truly feels as though there is a need for a strategic refocusing in the Asia-Pacific, then Washington must take into greater consideration the interests and concerns of South Korea and Japan.

In fact, an American president must learn to better empathize with countries around the world in general. Wakimura Yoshitaro believed that powerful Western nations will never negotiate with, but merely dictate to Middle Eastern countries, creating conditions for simmering anger to one day boil over and scald the rest of the world. Time for the United States to step up and prove itself to be a better country than those from another era.

Read my less rambunctious article here

Why not rice?

With the food-for-nukes talks underway between the North Koreans and the US, the negotiations appear to be bogged down on the details of the food aid package. The North Korean delegation has agreed to discuss ending the uranium enrichment program if the US shows "willingness to establish confidence."

So far, Washington remains quite unwilling to build the kind of "confidence" the North Koreans are talking about - mainly providing the remaining 300,000 tons of food aid that was promised to Pyongyang in 2008. The US is offering nutritional assistance (specifically protein-high supplements targeting younger children suffering malnutrition) instead because it fears that a substantial food aid package will be diverted to the military instead of going to the people in need.

This is a reasonable concern to have considering the number of times that Pyongyang had retracted its promises to Washington and the international community. However, if the US is willing to go as far as provide nutritional assistance, then it should consider and study the effects of providing North Korea with actual food aid, including rice and other grains.

Injecting the food deficient market with valuable rice could potentially play a crucial role in redistributing the food stuffs in the country. If the food aid actually reaches those in need, then the people can either consume it or sell the valuable grains for more quantities of less valuable grains, increasing their food reserve. And so far, based on reports from South Korean, US and UN aid groups, the North Korean government has shown capable of honestly distributing food aid to its people in the past year.

However, even if the grains are siphoned off by the party and military elites, the decrease in the demand for grains by the elites may help control the food prices that are growing out of control. Specifically, the sudden availability of rice will decrease the demand and price of cheaper grains such as corn and increase their accessibility to more impoverished North Koreans who have long relied on cheaper non-rice alternatives in times of hardship. Therefore, providing real food aid should be seriously considered as a means of significantly influencing the DPRK domestic food market.

All of this is purely guesswork and could very well make no sense whatsoever in the trained eyes of an economist or those with more up-to-date information about the economic conditions in North Korea. But I hope someone somewhere in the state department (or the White House) went through at least brain storming this before quietly excluding it from US foreign policy.

There are obvious political consideration involved, but again, the cost of a broken society will only be a future burden for the international community when North Korea finally collapses (whenever that may be...)

More dangerous than drugs

According to sources from within the DPRK, Pyongyang has issued an order to block the use of foreign currencies and to severely punish violators. This order specifically targets the demands for US dollar and Chinese renminbi, two most popular foreign currencies used for purchases in North Korea. Sure to be catastrophic and impossible to fully implement, the government rationale has been that it was the will of its late leader Kim Jong-il.

I noted in my last article that Pyongyang's primary objective for its year of "power and prosperity" will be geared towards curbing rampant food prices and bringing inflation under control. The most recent measure to insulate the nascent domestic consumer market from foreign currencies appears consistent with the desire to fulfill the above mentioned goals.

Pyongyang is still reeling from the devastating currency reform in 2009 which nearly wiped out the savings of everyday North Koreans. In order to revitalize the people's trust in the central bank, interest rates were raised and access to savings was eased. However, the sudden influx of cash into the capital-starved system seems to have led to inflation and people are once again abandoning the North Korean won for more reliable currencies such as the USD or RMB. At the rate that the North Korean won is devaluing, the most reasonable thing an individual can do is to convert cash holdings to stable foreign currencies.

The state is clearly worried about its increasing inability to manage the domestic market. After all, the issuing of money constitutes an enormously powerful mechanism of control. Accordingly, the recent order apparently noted that the punishment for illegal use of foreign currency should be more severe than the repercussions for drug smuggling.

More importantly, how the government resolves this crisis will dictate whether North Koreans will have something on the dinner table tomorrow. The price of rice and corn has increased dramatically in the last few months and many North Koreans are unable to afford their already meager meals. Stopping the use of foreign currencies may be intended to increase the value of the North Korean won and make goods more affordable - it could also turn out to be another major blow to consumers and merchants alike.

More on this to come...

A legacy of death and inflation

Rather than the prosperous state Pyongyang promised for Kim Il-sung's centennial celebrations in 2012, Kim Jong-il's shortsighted economic policies leave his son in a position in which Jong-il found himself in 1994 - inheriting a nation facing famine. The capital's relative luxury has indirectly caused soaring food prices and the young Kim Jung-eun is faced with the insurmountable challenge of controlling inflation.

In addition, with winter setting in, North Koreans may also have to make the difficult choice between fuel and food. If the inflationary pressures remain, vast portions of the population will starve or freeze to death by the end of the winter.

The danger lurking around the corner is the possibility of North Korea falling back on anti-Americanism to channel the public's distress away from the falling living standards. It will not be a particularly difficult task as the state propaganda apparatus has already pointed to US-led sanctions as the key source of the country's hardships.

According to some sources, Kim Il-sung engaged in provocative actions in 1968 precisely because of this: to convince the people that sacrifice was necessary for national security.

You can read my full article here

Obituary: Man of steel, Park Tae-joon

Park Tae-joon defied critics by developing South Korea's steel industry from zero into a world-beating colossus in a matter of a few years, and so embodied his country's rapid political and economic transformation in the 20th century. One of Asia's legendary industrialists, his legacy of achievement built on military discipline and brute determination will tower over generations to come.

You can read the full obituary here

Claims and assertions... now with empirical data to boot!

Back in October, I suggested that the food crisis in North Korea is very real, not because of a definitive deficit of total food stuffs, but because of price increases in basic goods. I made the claim by piecing together ground observations and Andrei Lankov's analysis of the public distribution system, but had no empirical data to prove that the price of food was indeed increasing to unaffordable levels for everyday North Koreans.

Recently, two scholars with the Peterson Institute of International Economics have been posting articles about food and price inflation in North Korea on their blog. Marcus Noland and Stephen Haggard (the writing seems to be mostly done by Marcus Noland) collected data on rice and corn prices in the DPRK since Pyongyang's sudden currency reforms last winter. Much of their conclusions support what NGOs and UN agencies have already observed, but the empirical data that Haggard and Noland used to validate their analyses provide a definitive economic survey of the food crisis.

In the post "Inflation in North Korea," Noland observes:

A simple regression of the prices (technically their logarithmic values) against time suggests that since the beginning of 2010, inflation on an annualized basis has averaged 131 percent for rice and 138 percent for corn... Most worrisome, however are recent post-harvest observations. Unlike 2010 when, as would be expected, the price of rice fell after the harvest, the rice price has been rising continuously since the harvest. Corn prices, which tend to fall even more dramatically after the harvest, for example by nearly 50% in the three months following the harvest in 2010, have actually risen since the harvest.

further explicating what their findings actually mean, Noland continues in the post "The food situation in North Korea"

Abundant evidence suggests that the distribution of income in North Korea is becoming less equal. The upshot, as the WFP report makes clear, is that some swath of the non-elite population is being squeezed, with a reported 50-100% increase in hospital admissions of malnourished children and rising numbers of low birth-weight babies.

So, with all this analysis available and understanding the social and political hazards of allowing the starvation to continue, it's mind boggling how Washington can maintain its rhetoric on the need to "identify and complete an assessment of whether food aid assistance can effectively be provided in a manner that is transparent and targeted and reaches intended beneficiaries and avoids the risk of graft and misappropriation” in the face of such a catastrophe.

Yes, there are obviously considerations in regard to "rewarding bad behavior" and whatnots. And the systemic reforms to food production and distribution in the DPRK are long ways away from being implemented, if they have even been planned. Regardless, if the first world nations do not come to the aid of North Korea now, we will be condemning millions to unfathomable suffering and death.

There are certainly more eloquent ways to say this, but: think of the children.