South Korea and the G7 – some tricky issues

Jun 12, 2020

Recent months have seen little sign of any development in the US: DPRK relations but a lot has been happening in the peninsular – through piecing the jigsaw together continues to be challenging.

Foremost has been the impact of Covid19: especially in the South, where the ROK government’s management of the pandemic and its assistance to many other countries have been widely lauded; but not so in the North which unconvincingly has denied its very existence. Meanwhile, internal machinations in the North’s leadership structure were at least partially exposed by the extensive rumour campaign in Western media about Kim Jong-un’s health and the increasing signs that his younger sister is being positioned to carry on the family line as his likely successor.

President Trump’s invitation to President Moon to attend the G7 in the later in the year while confirming the ROK’s global ranking as a “middle power” also presents some major hurdles for the ROK in balancing its national interests between China and the US – even more so than for Australia.

That there has been no sign of progress on the fundamental issue in the US: DPRK negotiations is not surprising given the history of the two Summits. Whatever a recent exchange of letters between Kim and Trump might have contained, it is patently obvious that Kim has been closely observing Trump’s anxiety about the November elections so predictably rise. He claims that the earlier moves he made should have been met with a conciliatory response from President Trump – as he had been led to believe by his advisers from their discussions with US counterparts.

Trump would dearly love to notch up some sign of real progress in the negotiations with the DPRK to bolster his list of pre-election achievements as the list is likely to have some significant gaps which Covid19 has definitely exacerbated. The temptation of a third Summit remains though this time it would need a positive outcome. Incidentally, spare a thought of what a Summit might look like if Kim has been replaced by his 31-year-old sister! Whether any change in this strategic patience would be required, if it begins to look likely that Trump might lose, remains to be seen. So far, Biden seems to have steered clear of any major comments on Korea

Kim’s fence-sitting has also been reinforced by his assessment the North’s economy could continue to survive the UN and additional US sanctions regime with the leakages through, especially China and – to a lesser extent – Russia. There have been some recent reports that Kim has put food supply high on the priority list for internal political discussion and, despite denials of Covid19 inside the North, medical supplies to cope with the virus.

The DPRK has repeatedly declined assistance in both from the South estimates are that the ROK government has been the biggest supplier of food aid (routed through international organisations)  which has been matched by significant amounts of medical supplies and equipment from Korean NGO’s. Nonetheless, it would appear that some Western reports of the North being crippled by the international sanctions are exaggerated.

On 28 May, the US Department of Justice announced indictments against 28 North Korean and 5 Chinese citizens alleging they had used “ a web of more than 250 shell companies to launder over $2.5 billion in assets through the international banking system”. It was claimed that by this action the US had “signalled its commitment to hampering North Korea’s ability to illegally access the US financial system “and fund its weapons programs. But there are serious doubts about its effectiveness – particularly how much pressure the US can bring to bear on the major Chinese banks involved without provoking damaging retaliatory measures. One informed American commentator has claimed that this amounted to “policy atrophy” which has allowed the North to gain sanctions relief “for free”.

On a more public level, China and the DPRK opened a big new border point at Manpo roughly midway along their frontier. There was no attempt to play down the new opening – to the contrary, the Chinese Global Times reported it in considerable detail! Its report acknowledged that sanctions applied to cross border trade – especially in minerals and coal which “will be limited”! It noted that in 2018 China: DPRK two way trade had been reduced by 52% year on year.

The new facility was “expected” to process 500,000 tons of goods and 200,000 entry and exit visits a year. Given the sanctions, the trade would largely be in agricultural and other food items. Chinese tourists had been visiting in increasingly large numbers. But no mention was made of whether the North had reopened the border, which they claim to have closed very early to prevent Covid19 spreading in from China.

Rumours of Kim’s ill health – even at one stage his demise – several weeks ago continue largely to have been unexplained. The speed of denials from Trump and Moon and the usually very active Korean intelligence community raised some questions in themselves and added to the longer discussion about succession in the North. After Kim’s return to the public arena in April after a lengthy absence, he disappeared again only to resurface a few days ago to chairing a politburo meeting. There seems to be some credible evidence that he has been living in his palatial new resort in Wonsan on the East Coast.

The spectacular rise of his sister (Kim Yo-jong)  in the political hierarchy naturally has encouraged a spate of conspiracy theories usually with her as her brother’s successor. Her several important public pronouncements, at a time when her brother seems to have eschewed the limelight, has given her a key public persona which has been strengthened by her being handed responsibility for managing the DPRK’s relations with the ROK.

She has enjoyed a favourable public interest in the South from the way she performed when she came to Seoul for the Winter Olympics in 2018. She attended the same boarding school in Switzerland as her brother and has a degree in computer science from Kim Il Sung University. She is married and reportedly has one child.

In the past few weeks, Kim Yo-jong has made several scathing attacks on Moon and his government. They were linked first with Moon’s failure to stop old fashioned cold war style propaganda balloon attacks from groups in the South. In the event, Moon has had to prohibit the balloon launches even though that will have cost him some domestic political capital. It may be a sign of KimYo-jong’s hand that the North Korean media has devoted so much publicity to the balloon drops as a hitherto public reference to them has been prohibited in the North.

She has since continued her diatribe against the South and called for the cessation of all contact between North and South. Whether all this represents her attempt to stamp her own imprint on a major policy or it presages some new strategic approach to the whole Korean issue remains to be seen. Though there is some speculation among DPRK watchers in the South than what she has been trying to do is to provide some openings for renewing contact ( in response to the ROK responses to her demands)!

Not surprisingly, Trump’s invitation to the ROK ( along with Australia and India)to the already twice delayed G7 meeting in Washington in September was quickly accepted by Moon. It was welcomed by many in the Korean media as recognition that the ROK could now be ranked as a genuine middle power – and some respite from the highly sensitive ongoing saga of Trump’s demands on the ROK to accept huge increases in their funding of the US military presence in the ROK. Some even going as far as suggesting that the inclusion of these three would lead to an “expanded” G10 – while the reality is that each host of the G7 is entitled to invite other countries to attend that meeting rather than formally join the G7.

After an initial flurry, the major media have acknowledged, probably briefed by the government, that the emphasis which Trump and his spokesmen have since placed on making China the focus for the meeting poses a major cause for concern for Moon. Like Australia, the ROK faces serious difficulties in balancing its relations with China and the US – probably even more critical than in Australia’s case.

China is its largest trading partner and recognised as the key country for the ROK in any eventual solution of the North Korean nuclear dilemma while the US is the second-largest trading partner and the military ally fundamental for the ROK’s security. It also knows from the bitter experience of the reaction to the US basing of the THAAD missile in the ROK just how vulnerable its economy is to Chinese retaliation. This forced the large Korean corporates to make considerable effort to move their supply chains from China to Vietnam and elsewhere in SE Asia. Korean investment in China was reduced by almost 50% in 2017 as a result of the THAAD crisis.

Moon will be placed in a very precarious position internationally and domestically if he gets wedged by Trump into ganging up by the G7 on China the eve of the US elections – as looks very likely Trump has in mind. There is little doubt that China will hit back hard at the ROK economy. This could well be a topic which Prime Minister Morrison might find useful to discuss with Moon prior to the G7 – if it still goes ahead. As also could be discussions about how much our still very substantial trade with the ROK might be affected by the extraordinary pressure to ‘buy more American’ that Trump continues to exert on the ROK  – as he has been doing with China and Japan.

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