FYI | May 26 2010
By Greg Peel
North Korea's “Dear Leader” Kim Jong-il is assumed to be terminally ill, but outside observers suggest he has been tardy in preparing his son for succession, perhaps in denial of his own mortality. This has provided an uneasy feeling of uncertainty as to what the mad dictator might deign to do before his demise.
While Kim has enjoyed deity-like support from his ignorant people just as his father had before him, he has recently gone a long way to losing that support. Earlier this year Kim decided to redenominate the North Korean won, basically knocking two zeroes off every banknote. While this is not a historically unusual move across the globe, what was unusual is that Kim limited the amount of currency North Koreans could receive in exchanging their old banknotes for new. In short, Kim stole nearly all of his people's savings.
At the same time, Kim has been unsuccessful in preventing access to the internet it totality, and South Korean websites have been accessed which paint a very different picture of the “evil” West and its lifestyle compared to the abject poverty North Koreans have been brainwashed into assuming is utopia. The tide is turning.
This presents South Korea with a problem. Before 9/11, Kim had begun to allow a program of family reunification across the DMZ, bringing together displaced relatives who had not seen each other since the War. It seemed at the time that the North might almost be ready to open up slightly. South Korea would like to re-embrace the North, but only by peaceful and gradual reunification.
But George W. Bush put paid to any thawing of tensions when he blithely added North Korea into his “Axis of Evil”.
While a now a major global economic powerhouse, South Korea could not afford a sudden influx of millions of starving, unskilled North Koreans escaping en masse across the border.
And does North Korea's ally China desire such a burden. China may retain a vague “communist” alliance with North Korea, but the reality is China has moved on. Realistically, China does not want the US armed presence which has been stationed on the Korean Border since 1953 to shift up right to the Chinese border, were the Koreas to be reunited. But nor would it advocate a renewal of the War, which in theory never actually ended, and an influx of Northern refugees.
Danske Bank analysts do not believe any military aggression from the North towards the South would have the backing of China, and suspects Beijing is annoyed by the North's sinking of a Southern warship which has precipitated the renewed tensions.
North Korea relies entirely on China for food and energy supplies and military backing. China knows a war would be suicidal for the North and Beijing is hardly likely to wish to derail its advance into a capitalist powerhouse by re-establishing the US as an enemy.
In the meantime, South Korea also provides “aid” to the North by buying Northern produce. But in response to the torpedo, the South has ceased all trade as a means of non-military retaliation. It has also closed its waters to North Korean vessels, cutting off supplies from elsewhere. South Korea is also looking for UN support for further sanctions (beyond those already in place) but clearly is attempting to starve Kim into submission. North Korea also relies heavily on the foreign currency acquired through trade with the South, while for the South such trade has little impact.
It is still unclear as to why North Korea fired on a South Korean ship, and whether or not the order came from the top. One theory is that a admiral on the outer unilaterally decided to regain status by impressing his leader. What is clear however, as yesterday he issued a call to arms to his people, is that Kim is becoming increasingly desperate and erratic.
Danske bank believes a new war on the peninsula is only a remote possibility. What is more probable in the longer term is that a “regime change” is on the cards. The analysts suggest even China may now be looking to a regime change as necessary for stability in Asia.
They believe the most likely scenario is that the threat of war will gradually fade. It may nevertheless give China more power to reject US calls for currency revaluation given the US will be pleading with China not to provide support to the North (Hillary Clinton is presently in Beijing by default).
It is not surprising the South Korean stock market took a 2.5% dive yesterday, and that unwitting neighbour Japan's index fell 3%, helping to spark the 3% fall in Australia. As I write, the Nikkei has only recovered a timid 0.3% which is likely one reason why Australia's morning rebound has lost some steam.
