Does Kim Jong-Un’s Strategy Make Sense?

Authored by Federico Pieraccini via The Strategic Culture Foundation,

"Looking at the recent North Korean testing of two intercontinental missiles, it may seem that Pyongyang wishes to increase tensions in the region. A more careful analysis, however, shows how the DPRK is implementing a strategy that will likely succeed in averting a disastrous war on the peninsula."

In the last four weeks, North Korea seems to have implemented the second phase of its strategy against South Korea, China and the United States. The North Korean nuclear program seems to have reached an important juncture, with two tests carried out at the beginning and end of July. Both missiles seem capable of hitting the American mainland, although doubts still remain over Pyongyang's ability to miniaturize a nuclear warhead to mount it on an intercontinental ballistic missile (ICBM). However, the direction in which North Korea’s nuclear program is headed ensures an important regional deterrent against Japan and South Korea, and in some respects against the United States, which is the main reason for North Korea’s development of ICBMs. Recent history has repeatedly demonstrated the folly of trusting the West (the fate of Gaddafi remains fresh in our minds) and suggests instead the building up of an arsenal that poses a serious deterrence to US bellicosity.

It is not a mystery that from 2009 to date, North Korea's nuclear capacity has increased in direct proportion to the level of distrust visited on Pyongyang by the West. Since 2009, the six-party talks concluded, Kim Jong-un has come to realize that the continuing threats, practices, and arms sales of the United States to Japan and South Korea needed to be thwarted in some way in the interests of defending the sovereignty of the DPRK. Faced with infinitely lower spending capacity than the three nations mentioned, Pyongyang chose a twofold strategy: to pursue nuclear weapons as an explicit deterrence measure; and to strengthen its conventional forces, keeping in mind that Seoul is only a stone’s throw away from North Korean artillery.

This twofold strategy has, in little more than eight years, greatly strengthened the ability of the DPRK to resist infringement of its sovereignty. In contrast to the idea commonly promoted in the Western media, Pyongyang has promised not to use nuclear weapons first, reserving their use only in response to aggression against itself. In the same way, a pre-emptive attack on Seoul using traditional artillery would be seen as intolerable aggression, dragging Pyongyang into a devastating war. Kim Jong-un’s determination in developing conventional and nuclear deterrence has succeeded in establishing a balance of power that helps avoid a regional war and, in so doing, contributes to the strengthening of overall security in the region, contrary to what many believe.

The reason the United States continues to raise tensions with Pyongyang and threaten a conflict is not out of a concern for the protection of her Japanese or South Korean allies, as one may initially be led to think. The United States in the region has a central objective that does not concern Kim Jong-un or his nuclear weapons. Rather, it is driven by the perennial necessity to increase forces in the region for the purposes of maintaining a balance of military force (Asian Pivot) and ultimately trying to contain the rise of the People's Republic of China (PRC). One might even argue that this strategy poses dangers not only to the entire region but, in the case of a confrontation between Washington and Beijing, the entire planet, given the nuclear arsenal possessed by the United States and the People's Republic of China.

In this respect, the triangular relationship between China, North Korea and South Korea takes on another aspect. As always, every action is accompanied with a reaction. The statement that Beijing would prefer to get rid of the DPRK leadership is without foundation. Central in the minds of Chinese policy makers is the threat of a US containment that could undermine the country's economic growth. This strategic planning is well known in Pyongyang, and explains in part why the DPRK leadership still proceeds with actions that are not viewed well by Beijing. From the North Korean point of view, Beijing derives an advantage from sharing a border with the DPRK, which offers a friendly leadership not hostile to Beijing. Pyongyang is aware of the economic, political, and military burden of this situation, but tolerates it, receiving the necessary resources from Beijing to survive and develop the country.

This complex relationship leads the DPRK to carry out missile tests in the hope of gaining many benefits. First of all, it hopes to gain a regional, and possibly a global, deterrence against any surprise attacks. Secondly, it forces South Korea to have a symmetrical response to DPRK missile tests, and this strategy, coming from North Korea diplomacy, is far from improvised or incongruous. In recent years, South Korea’s response has come in the form of the Terminal High Altitude Area Defense (THAAD) system, designed to intercept missiles. As repeatedly explained, it is useless against North Korean rockets, but poses a serious threat to the Chinese nuclear arsenal, as its powerful radars are able to scout much of China's territory, also being ideally positioned to intercept (at least in theory) a responsive nuclear strike from China. In a nutshell, THAAD is a deadly threat to China's strategic nuclear parity.

From the point of view of the four nations involved in the region, each has different aims.

For the United States, there are many advantages in deploying the THAAD: in increases pressure on China, as well as concludes an arms sale that is always welcomed by the military-industrial complex; it also gives the impression of addressing the DPRK nuclear problem adequately.

 

South Korea, however, finds itself in a special situation, with the former president now under arrest for corruption. The new president, Moon Jae-in, would prefer dialogue rather than the deployment of new THAAD batteries. In any case, after the latest ICBM test, Moon required an additional THAAD system in the Republic of Korea, in addition to the launchers already there. With no particular options available to conduct a diplomatic negotiation, Seoul is following Washington in a spiral of escalation that certainly does not benefit the peninsula's economic growth.

 

Ultimately, the PRC sees an increase in the number of THAAD carriers close to the country, and the DPRK is growing in its determination to pursue a nuclear deterrent.

 

Indeed, the strategy of the Pyongyang is working: on the one hand, they are developing a nuclear weapon to deter external enemies; on the other, they are obligating the PRC to adopt a particularly hostile attitude towards South Korea’s deployment of THAAD. In this sense, the numerous economic actions of Beijing towards Seoul can be explained as a response to the deployment of the THAAD batteries. China is the main economic partner of South Korea, and this trade and tourism limitation is quite damaging to South Korea’s economy.

This tactic has been used by North Korea for the last several years, and the results, in addition to the recent economic crunch between the PRC and South Korea have indirectly led to the end of the reign of the corrupt leader Park Geun-hye, an ever-present puppet in American hands. The pressure that the DPRK applies to bilateral relations between China and South Korea increases with each launch of an ICBM carrier, which is the logic behind these missile tests. Pyongyang feels justified in urging its main ally, China, to step up actions against Seoul to force it to compromise in a diplomatic negotiation with Pyongyang without the overbearing presence of its American ally pushing for war.

The main problem in the relations between South Korea, China and North Korea is represented by American influence and the need to prevent a rapprochement between these parties. As already stated, the United States needs the DPRK to justify its presence in the region, aiming in reality at Chinese containment. Pyongyang has been isolated and sanctioned for almost 50 years, yet serves to secure China’s southern border in the form of a protected friend rather than an enemy. This situation, more than any United Nations sanction to which the PRC adheres, guarantees a lasting relationship between the countries. Beijing is well aware of the weight of isolationism and economic burden on North Korea, which is why Beijing is symmetrically increasing pressure on South Korea to negotiate.

In this situation, the United States tries to remain relevant in the regional dispute, while not having the capacity to influence the Chinese decisions that clearly rely on other tactics, specifically putting pressure on South Korea. In military terms, as explained above, Washington can not start any military confrontation against the DPRK. The consequences, in addition to millions of deaths, would lead Seoul to break relations with Washington and seek an immediate armistice, cutting off the United States from negotiations and likely expelling US troops from its territory. Ultimately, there is no South Korean ability to influence the political process in the North while they continue to be flanked by the United States in terms of warfare (very aggressive joint exercises). The influence Washington can exert on Pyongyang is zero, having fired all cartridges with over half a century of sanctions.

Conclusion

The bottom line is that the United States cannot afford to attack the DPRK. Pyongyang will continue to develop its own nuclear arsenal, with Beijing's covert blessing in spite of its officially continuing to condemn these developments. At the same time, South Korea is likely to persevere with a hostile attitude, especially in regard to the deployment of new THAAD batteries. Sooner or later, Seoul will come to a breaking point as a result of further restrictions on trade between China and South Korea. As long as Seoul is able to absorb Chinese sanctions, little will change.

What will lead to a major change in the region will be the economic effect of these restrictions that will eventually oblige Seoul to consider its role in the region and its future. Seoul's leadership is aware of three situations that will hardly change, namely: Pyongyang will never attack first; Beijing will continue to support North Korea rather than accept the United States on its border; and Washington is not able to bring solutions but only greater chaos and a worsening global economic situation to the region. In the light of this scenario, time is all on the side of Beijing and Pyongyang. Eventually the economic situation for Seoul will become unbearable, bringing it to the negotiating table with a weakened and certainly precarious position. Beijing and Pyongyang have a long-term common goal, which is to break the bond of submission between South Korea and the United States, freeing Seoul from Washington's neo-conservative programs to contain China (on a Russia containment model).

Indirectly coordinated work between Beijing and Pyongyang is hardly understandable to Western analysts, but examining every aspect, especially with regard to cause-and-effect relationships, these decisions are not so incomprehensible and even more rational in a broader viewing of the region and its balance of power. On the one hand, Seoul sees the DPRK offering peace, stability and prosperity based on a framework agreement between Seoul, Pyongyang and Beijing. This would also particularly benefit South Korean trade with China, eventually returning to normal relationships between countries, with important economic benefits.

The alternative is an alliance with Washington that would completely eliminate the economic benefits of a healthy relationship with Beijing. This could even potentially lead to a war involving millions of deaths, fought on South Korean soil and not in the United States. The United States does not offer any solutions to South Korea, either in the short or long term. The only thing Washington is offering is a fixed presence in the country, together with a stubborn anti-Chinese policy that would have serious economic consequences for Seoul.

As paradoxical as it may seem, Kim Jong-un's rockets are much less of a threat than is Seoul’s partnership with Washington in the region, and in fact seem to offer Seoul the ultimate solution to the crisis in the peninsula.

Look Out Manhattan – Chinese Foreign Real-Estate Spending Plunges 82%

Earlier this month, Morgan Stanley warned that commercial real estate prices in New York City, Sydney and London would likely take a hit over the next two years as Chinese investors pull out of foreign property markets.

The pullback, they said, would be driven by China’s latest crackdown on capital outflows and corporate leverage, which they argued would lead to an 84% drop in overseas property investment by Chinese corporations during 2017, and another 18% in 2018.

Sure enough, official data released by China’s Ministry of Commerce have proven the first part of Morgan Stanley’s thesis correct. Data showed that outbound investment in real estate was particularly hard hit during the first half of the year, plunging 82%.

“According to official data, outbound investment by China’s real estate sector fell 82% year-on-year in the first half, to comprise just 2% of all outbound investment for the period.”

Overall, outbound direct investment to 145 countries declined to $48.19 billion, an annualized drop of 45.8%, according to China Banking News.

The decline is a result of a crackdown by Chinese authorities after corporations went on a foreign-acquisition spree that saw them spend nearly $300 billion buying foreign companies and assets, with China’s four most acquisitive firms accounting for $55 billion, or 18%, of the country’s total. The acquisitions aggravated capital outflows, creating a mountain of debt and making regulators uneasy. Late last month, Chinese authorities ordered Anbang Insurance Group to liquidate its overseas holdings. In June, authorities asked local banks to evaluate whether Anbang and three of its peers posed a “systemic risk” to the country’s financial system. As Morgan Stanley noted, these firms were responsible for billions of dollars of commercial real-estate investments in the US, UK, Australia and Hong Kong.

The pullback will likely be equally as devastating for residential home prices. Average sales prices for Manhattan residential real estate has continued to climb, but cracks are starting to appear. As we pointed out two days ago, 25% of homes sold in 2Q still experienced a price cut, with that number rising to 40-60% in trendy neighborhoods like the Upper East Side.

While falling real-estate prices would be an inconvenience for corrupt Chinese officials and other shady investors trying to stash their money as far away as possible from their homeland, they’d be a welcome relief for renters and young couples or individuals looking to buy their first home.

Across the US, asking rents hit all-time highs earlier this year.