North Korea?s intentional defiance of the international community has permanently altered the geo-strategic balance in northeast Asia. We believe China, the United States, Japan, and South Korea will push for robust economic sanctions. Sanctions have worked to moderate North Korean behavior. A three-day shutdown by China of humanitarian aid in 2003 forced North Korea back to the bargaining table.
A nuclear North Korea is likely to increase pressure on Japan and South Korea to develop a nuclear deterrent, potentially stoking a regional arms race. China is the key to North Korea and has the power to: 1) moderate North Korean behavior, 2) topple Kim Jong Il, and 3) blunt the effects of U.S. and multilateral sanctions.
In the next 12 months, we will see one of two likely outcomes:
Nothing Changes – North Korea may moderate its behavior and offer new negotiations designed to discuss strategic deterrence and the ultimate surrender of its nuclear weapons capability. The U.S. and Japan will impose severe sanctions, but South Korea and China?fearing the state?s collapse–will not. This split will permit North Korea to persist under extreme but survivable conditions. Desperate to preserve revenue flows to support his regime, Kim could step up sales of nuclear and missile engineering expertise and materiel to other rogue regimes, such as Iran, and potentially terrorists. We judge this scenario most likely.
Sanctions and Slow Decline – The U.S., China, Japan, and to a lesser degree South Korea impose effective sanctions. North Korea experiences a humanitarian crisis that erodes central power and gives rise to regional warlords/administrators. Northern administrators begin unilateral bargaining with South Korea. The Army splits with pocket of civil war emerging. Kim Jong Il enables a humanitarian crisis as people starve and freeze during winter in North Korea. Sanctions hold firm until a portion of southern North Korea strikes a deal with China and South Korea and proclaims independence. Kim is ultimately assassinated by a North Korean army officer. We judge this scenario somewhat likely.
Wildcard
The one wildcard to consider: Did the North Koreans actually detonate a nuke, and if they did, did it fail?
1. On October 9 morning, Russia said the seismic activity led them to believe the yield was between 5 and 15 KT.
2. Data indicates North Korea was predicting about a 4 KT yield.
3. Rumors in the US community, now leaking into mainstream media, indicate the yield may have been less than 1 KT, a detonation producible by conventional explosives.
TRC?s Stance on a Nuclear North Korea
The following developments lead us to believe we will not see fundamental geo-strategic changes soon.
1. On October 10, Japan advised they will not be fundamentally altering their security posture, meaning they claim won?t build nukes.
2. China has claimed the test altered its fundamental relationship with North Korea, but we do not see an emerging hard-line Chinese response.
3. The US has been the most blunt in terms of its criticism and saber rattling, but administration statements on October 9 and 10 have also contained some ?go-slow? themes.
