North Korea is a problem for China – if only the US would realise

North Korea

North Korea now has nuclear warheads that it can attach to missiles, that can travel great distances – to Guam, almost certainly, the nearest offshore US territory, and, with a bit of practice perhaps heavily populated parts of the US mainland. It sounds scary, but then Russia, China and others have had this capability for decades and we’re all still here.

The West has yet to accept this new reality or to accept that there is nothing that can be done to change the new reality.

North Korea’s President Kim has been acting logically. He wants to stay in power and not end up like Saddam Hussein or Colonel Gaddafi. If anyone does threaten him or his regime, they may succeed but at least he will go out in a blaze of glory, as he now has the ability to inflict catastrophic damage on any aggressor. In that sense he has already “won” and the West has already “lost”, it’s just that we won’t or can’t admit it.

Put yourself in Kim’s shoes. Having got to this position, is there anything that the West could offer that would make you give up those nuclear weapons and missiles? No. Nothing.

So the question then becomes “What does Kim do with these weapons?” Well, he has them but can’t use them, because if he does he gets destroyed. He can only threaten to use them. His fate is that of the honey bee: you sting, you die. China has also made it very clear to North Korea that if it starts a war, China will NOT come to its aid. However if North Korea were attacked by the US, then China would intervene. It’s possible that North Korea is trying to goad the US into an attack, so that China can be brought back to its side.

If Kim can’t use his new toys, they could still be useful if he could sell them for hard cash. He would have to find a way to deliver them to his “customers”, which is not easy if you are completely isolated. China and Russia are important in this regard, as the only way out of North Korea by land is through their territory. Proliferation is a very real threat and that is the threat that the West should be working to contain now.

What is not widely reported is Kim’s anger and frustration with China. North Korea has been used to having carte blanche from China to do pretty much whatever it likes. Recently China has been putting the squeeze on North Korea both with its votes in the UN and its actions. Why is China so upset?

Balance of power

China is upset with Kim because North Korea’s recent testing of warheads and missiles have upset a balance of power in north Asia that had been swinging steadily in China’s favour. The US has for some time been perceived as reducing its commitment to the region. Few people bought Obama’s ‘pivot to Asia’, for example.

US retrenchment was likely to accelerate under his successor who famously said on the campaign trail that if “Japan and South Korea want nuclear weapons they can buy them themselves”. One of President Donald Trump’s first actions in office was to pull out of the Trans-Pacific Partnership – a regional trade deal that excluded China.

From a Chinese point of view these developments were perfect. They were an open invitation to China to expand both militarily and economically.

China has brazenly ignored international opinion, building runways on atolls whose ownership is disputed across the South China Sea. At the same time it has dangled development cash to its Asian neighbours via its Asian Infrastructure Development Bank. Earlier this year Beijing invited 50 nations to hear about its extravagant but vague project, ‘One Belt, One Road’.

Give Beijing an inch and it takes a mile.

The Chinese have spent a lot of time trying to kick the US out of Asia and now Pyongyang has invited them back!

But now because of North Korea’s re-militarisation under Kim, the US, much to China’s ire, has reversed course. Because of the threat from North Korea to allies South Korea and Japan, the US has sent the THAAD missile defence system to both countries. This upsets China because THAAD could also be used against the Chinese. The Chinese have spent a lot of time trying to kick the US out of Asia and now Pyongyang has invited them back!

China will take it out on Kim one day but for now it’s not in their interest to do so. While China detests Kim, it does not want regime change or the country to implode. North Korea has a vital role to play in China’s security because it acts as a buffer against South Korea, which is host to 30,000 US troops. The last thing that China wants is to have those troops on its border. Nor does it want millions of starving refugees flooding across –there are 25m people in North Korea. Kim knows all this only too well.

So while the Western press presents North Korea as a problem for the US and its allies, from an Asian perspective North Korea feels much more like a problem for China.

Courses of action

If the West were to think of North Korea as a Chinese problem and wanted to influence Chinese behaviour, then several courses of action come to mind. Rather than pounding the table at the UN and demanding more sanctions, the US could ramp up its military presence in the region and explain to the world that this is the result of North Korea’s behaviour. It could also re-start the TPP negotiations, as Japan has been arguing for.

That might force China to think more creatively about a solution for North Korea. One person Beijing might turn to is Kim Han-Sol. The 22-year-old nephew of President Kim may not be ready to take the reins of power. Yet he would seem to have ample motive. His father is thought to have been assassinated on Kim’s orders. Alas, China’s influence probably does not run this far.

Still, the diplomatic option of leaving China to sort matters out while quietly building up its military and economic clout would be a pragmatic one for the US. No one in their right mind sees an attack on North Korea as an option, short of mass slaughter (on both sides – Seoul, a city of 10m, is only 60km from the border).

The difficulty here is Trump. The president is under considerable pressure domestically and he still has much to learn about international relations. Couple that with a compulsive need to appear a ‘winner’, a short attention span and a fondness for speaking his mind via Twitter and you have a formulation for unease. Ironically, he may be the biggest risk facing Asia at the moment.

How are financial markets making sense of all this? This would be less of an afterthought if markets had reacted at all this week. Apart from the dollar, which was wobbly anyway, they have been muted. That probably says a couple of things: when it comes to geo-politics markets aren’t much of a guide; besides, this is just the latest iteration of the last Cold War, something that has been playing out for the best part of 65 years.

All the same, depressingly North Korea has the making of a true black swan event – one by definition that is almost unthinkable, impactful but easily rationalised in hindsight.


The article above was previously published on Aberdeen Asset Management’s ‘Thinking Aloud’ blog on 13th September 2017