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Geopolitical risk on the Korean peninsula

Author: Editorial Board, East Asia Forum

With North Korea as a neighbour, geopolitical risk is a fact of life for South Korea. North and South Korea are still technically in a state of war: the armistice that ended the Korean War in 1953 left the two countries in a perpetual state of ceasefire — with both still claiming to be the sole legitimate government of the entire peninsula — and a peace treaty has never been negotiated.

After the devastation of the Korean War, few would have bet on South Korea’s economic miracle. In fact, in the 1950s North Korea was considered to have better economic prospects given its clustering of heavy industry and superior untapped natural resources, and per capita incomes were higher there than in the South. Remarkably, despite its challenging circumstances, South Korea has transformed itself over the last six decades from an impoverished war-torn dictatorship to an industrialised high-income democracy and has acquired membership of the OECD in 1996 and the G20 at its establishment.

The escalation of the North Korean missile and nuclear crisis and the war of words between US President Donald Trump and North Korean leader Kim Jong-un is a serious hazard to South Korean prosperity as well as global peace. North Korea’s most recent missile test on 29 November brings the total to 23 missiles launched over 16 tests since February, including three tests of ICBMs (the long-range missiles primarily designed for delivering nuclear weapons).

Trump’s reaction to North Korea — including an ever growing list of childish insults deriding Kim as ‘rocket man’, a ‘madman’ and ‘short and fat’ as well as Trump’s threats to unleash ‘fire and fury’ and to ‘totally destroy’ North Korea — unhelpfully distorts the line between US deterrence measures and the possibility of US pre-emptive attacks. Deterrence measures are designed to discourage North Korea from initiating attacks, but talk of a US pre-emptive attack risks encouraging North Korea to initiate its own pre-emptive strike. The blurring of these two separate concepts on the use of military power in Trump’s rhetoric heightens the risk of accidental conflict.

North Korean media responses have condemned Trump as a ‘barking dog’ and a ‘hideous criminal sentenced to death by the Korean people’ are par for the course under its propaganda regime. But in a sign of how far the war of words has escalated, North Korean media also released a statement by Kim Jong-un in response to Trump’s UN speech in which he vowed to ‘tame the mentally deranged US dotard [Trump] with fire’ — the first ever statement directly issued to the world under a North Korean leader’s name.

The consequences of a conflict between the United States and North Korea would be devastating. With the North amassing its heavy artillery along the Demilitarised Zone that divides the two Koreas, the 25 million inhabitants of the greater Seoul area are at immediate risk. In some scenarios casualties in Seoul would reach the millions. Japan would also be at risk. In the case of a military conflict, North Korea may decide to target the Japan Self-Defense Forces and US bases in Japan to cut off rear-area support to the US military. Some in Japan also worry that North Korea would target its nuclear power plants. For its part, China is keen to avoid an influx of North Korean refugees (especially into its Yanbian Korean Autonomous Prefecture) as well as the further complications that would arise in US–China relations.

The risk of these consequences should be enough to convince hawks of the folly of military options vis-a-vis North Korea. In addition to the immediate military consequences, the economic damage to the regional and global economy would be severe.

Peter Drysdale and Adam Triggs explain in our feature article this week that ‘the intensification of tensions between the Trump administration and North Korea’s Kim Jong-un in recent months’ has heightened ‘the geopolitical risks surrounding South Korea’.

While South Korean equity and currency markets have proved relatively resilient to the evolving crisis, they have not been unaffected: ‘South Korean credit default swaps — a measure of risk — have almost doubled in 12 months’.

In the case of a military conflict, the economic fallout for South Korea would have regional and global implications. Drysdale and Triggs suggest that South Korea is at the heart of Australia’s Northeast Asian economic interests. Other small- and middle-sized economies that rely on open trade and the rules-based international economic order would be similarly affected. This is because of ‘South Korea’s role in East Asian economic integration, through the participation of its major corporations in global value chains and the increasingly important role of its economy in services and financial markets. These industrial linkages are the backbone of the whole East Asian economy’.

The spillover effects of economic disaster for South Korea would impact the whole of East Asia, the most dynamic region in the global economy contributing more than any other region to global GDP growth. The shock to the global economy, already facing unprecedented challenges from protectionist and anti-globalisation forces including Trump and Brexit, would be consequential.

As politically unpalatable as it may be, the only pathway to avoid regional geopolitical catastrophe is to negotiate denuclearisation through a comprehensive resolution that has buy-in from all the major stakeholders. The contours for this have already been set out in the Six-Party Talks September 2005 agreement (denuclearisation in exchange for a permanent peace treaty, international economic cooperation and normalising North Korea’s diplomatic relations with the United States and Japan). But realising a deal will require the building of trust and iron-clad guarantees both from North Korea about nuclearisation and to North Korea that its existence will not be threatened if it gives up its nuclear ambitions.

With the success of its economic transformation over the past six decades, South Korea is understandably resolute in its resolve to protect its prosperity and security. The world is now in the unenviable position of relying on the US military top brass to restrain a US President who seems to lack a fundamental understanding of where the geopolitics might lead next. South Korea and other US allies and partners (including Australia and Japan) must clearly and actively communicate to the their US interlocutors (including Mr Trump) the risks of walking into accidental conflict with North Korea and what the elements of a durable peace on the Korean peninsula will need to comprehend.

The EAF Editorial Board is comprised of Peter Drysdale, Shiro Armstrong, Ben Ascione, Amy King, Liam Gammon, Jillian Mowbray-Tsutsumi and Ben Hillman, and is located in the Crawford School of Public Policy in the ANU College of Asia and the Pacific.

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