Deadly Game

Donald Trump and Kim Jong Un Risk Nuclear War

By Mathieu von Rohr, Christoph Scheuermann, Wieland Wagner and Bernhard Zand
 
  With his missile tests and threats in recent months, North Korean dictator...


With prospects growing that North Korean dictator Kim Jong Un could soon have long-range nuclear missiles at his disposal, Donald Trump is threatening a military response.

Suddenly nuclear war seems possible, but how great is the threat of escalation?

Rehearsals for the apocalypse have long been underway. Every two months, always in the early afternoon, the sirens begin wailing in Seoul. Cars and buses come to a halt, civil defense officials take up their positions at busy intersections and volunteers wearing yellow armbands guide pedestrians into the nearest shelter, of which there are hundreds in the South Korean capital.

The army, too, is prepared. Highways between Seoul and the border at the 38th parallel are lined with watchtowers and every few kilometers, heavy, concrete barriers hang above the road. Should war break out, explosive charges would drop the barriers onto the roadway, blocking the way to attackers. Beaches on the coast are likewise outfitted with tank traps and barbed wire -- all in an effort to protect the southern half of the Korean Peninsula from the poor yet heavily armed north.

The facilities are defensive in nature, but the South Korean military also has an attack plan, abbreviated as KMPR, which stands for Korea Massive Punishment and Retaliation. The details are secret, but the first scenes of a new Korean war would look more or less as follows: Before North Korea could attack, the South would seek to eliminate its opponent's missile launch sites with cruise missiles of its own while anti-aircraft defenses would shoot down those rockets that evaded the initial strikes. Before North Korea could set its infantry in march, the plan calls for South Korean special forces to infiltrate Pyongyang and liquidate dictator Kim Jong Un.

When South Korea's defense minister spoke publicly for the first time about these plans last September, it was primarily of interest to Asian military experts. Now, though, the scenarios described seem disturbingly realistic. The Korean Peninsula hasn't been this close to military conflict since 2006, the pro-Chinese government newspaper Global Times recently wrote in Beijing.

From a global perspective, the situation could hardly be more sensitive. In Pyongyang, Kim Jong Un is a dictator who appears prepared to wage war to ensure his regime's survival, one which could result in hundreds of thousands, or even millions, of casualties. On the other side of the world, in Washington, D.C., sits Donald Trump, a democratically elected president who knows little about the world but who, in addition to the nuclear codes, also possesses a Twitter account that he tends to use imprudently. He has also shown, in both Syria and Afghanistan, that he isn't shy about deploying cruise missiles and massive bombs.

Fraying Nerves

As such, North Korean ruler Kim Jong Un isn't the only destabilizing factor in this conflict. And the other is sitting in the White House. Combined, the two are fraying nerves across the globe.

On New Year's Day, three weeks before Trump's inauguration, Kim announced that his country would soon be testing an intercontinental ballistic missile. Such a rocket would have sufficient range to reach the North American continent and Kim's disclosure was the most concrete and credible threat of a direct attack on the U.S. that his regime had yet issued.

"It won't happen," Trump answered in a tweet, essentially laying down a red line that his predecessor Barack Obama never drew with respect to North Korea.

Trump sees Pyongyang's nuclear arsenal as the greatest danger facing U.S. national security, but he isn't just inexperienced when it comes to foreign policy -- he often veers into downright clumsiness. A recent example came two weeks ago, when he announced that he had directed a U.S. aircraft carrier to head toward North Korea as a warning -- even though the vessel was actually heading in the opposite direction to take part in a maneuver near Australia. Whether it was a bluff or whether Trump had misunderstood something remains unclear -- even as the vessel, the USS Carl Vinson, is now steaming toward Korean waters -- but it does show the degree to which things can go wrong under this commander-in-chief.

Following the numerous failures and defeats he has suffered early on in his presidency, Trump badly needs successes to present to his supporters as he passes the symbolically important 100-day threshold. An aggressive stance toward North Korea at least gives him the appearance of resolve and Trump hopes to demonstrate that he is able to stand up to the Pyongyang dictator.

When he launched 59 missiles at Syria earlier this month, he received praise even from commentators who don't normally have a kind word to say about this president. Because of Trump's apparent addiction to public acclaim, it isn't difficult to imagine the conclusions he drew.

The Trump presidency combined with the recent headway made by North Korea's missile and nuclear program under Kim's leadership mean that the confrontation between Washington and Pyongyang has entered a new and unpredictable phase. Rarely in the past has an escalation of this conflict been so imminent. Worse yet, a war on the Korean Peninsula might quickly turn into a nuclear conflict and, beyond that, could also involve several major regional powers and ultimately produce more refuges than the war in Syria.

Grave Concern

More indications of the rising tensions have cropped up this week. On Tuesday, the USS Michigan, a nuclear submarine armed with over 150 Tomahawk missiles, docked in South Korea. Officials say it is just a routine deployment, but coming as it does on April 25, the anniversary of the founding of the North Korean military, it seems likely that Pyongyang will have a different interpretation. Consistent with that anniversary, North Korea also held an immense live-fire artillery drill on Tuesday. In an unusual move, Trump has invited the entire Senate to the White House on Wednesday for an update on the situation with North Korea.

Some 75 million people live on the Korean Peninsula, with 25 million of them in North Korea and roughly the same number in Seoul and its immediate surroundings. Furthermore, the three largest economies in the world -- the U.S., China and Japan -- are involved in the conflict, meaning that a war wouldn't just have catastrophic humanitarian consequences, but also significant economic repercussions. Even the Russian Foreign Ministry recently expressed grave concern over the situation.

Is the concern justified? Is the world now on the brink of atomic war for the first time since the Cuban Missile Crisis? Is military conflict now unavoidable after many years of unsuccessful diplomatic efforts to stop North Korea's nuclear weapons program?

Robert Litwak, a nuclear proliferation expert at the Woodrow Wilson International Center in Washington, D.C., says that North Korea is on the verge of a nuclear breakthrough. The regime, he says, is feverishly seeking to develop up to 100 nuclear warheads in the next two to three years that can be delivered via intercontinental ballistic missiles. "If they are successful, the playing field will fundamentally change," Litwak says. He too speaks of a "slow-motion Cuba crisis" and is reminded of the fateful year 1962 -- with the difference being that North Korea is a nuclear-armed "failed state" that is ruled by a family clan.

In this year alone, Kim Jong Un has carried out four missile tests, each of them accompanied by shrill rhetoric. If the United States continues threatening world peace and insisting on its "gangster logic," which holds that it is justified to invade sovereign states, then "a nuclear war could break out at any moment," the deputy North Korean ambassador to the United Nations threatened a week ago Monday in New York. They are grotesque words, but do they need to be taken seriously?

A Security Risk

North Korea has often issued aggressive threats in the past. But Kim, with his eagerness to arm his country, his paranoia and his proclivity for taking risks, is at least predictable. Trump, however, is not. The decisive question is how he will react. Each sentence he utters can have relevance when it comes to war and peace, each unguarded word. And that is the greatest risk posed by Trump, with his lack of experience, his narcissism and his fondness for instant provocation on Twitter. A president who cannot control himself is a security risk.

During the campaign, Donald Trump repeatedly insisted he would put America first and that he had no interest in disseminating American values in the world. But Trump is far from an isolationist. He has frequently spoken of reestablishing American strength in the world, and the strength he refers to is military in nature. "We have to start winning wars again," he said in a late-February speech.

Consistent with that message, Trump has also announced a $54 billion increase to the defense budget and has also given the military a freer hand in the fight against militant Islamism -- which has since resulted in an uptick in civilian deaths in U.S. airstrikes.

Regarding North Korea, U.S. Secretary of State Rex Tillerson said during a trip to Asia five weeks ago that the U.S. policy of "strategic patience" was over. Last Monday, Vice President Mike Pence likewise traveled to South Korea, making an appearance in a bomber jacket at a look-out in the demilitarized zone. He spoke of Trump's readiness to respond to provocations with strength. "North Korea would do well not to test his resolve," Pence intoned.

"It is easy to determine what Kim Jong Un wants," says South Korean parliamentarian Kim Jong Dae, one of the country's most experienced security policy officials. "But Trump is unpredictable."

On the one hand, he says, the U.S. announces it is sending an aircraft carrier and speaks openly of military plans while on the other, it is sending signals that it is prepared to negotiate. Mike Pence also spoke of the possibility of talks.

Seoul is particularly worried about American plans for a commando operation targeting the North Korean dictator, says Kim Jong Dae. He says that the Navy Seals team that killed Osama bin Laden in Pakistan was involved in the Foal Eagle joint military exercise with South Korea in March. "We are most concerned that the U.S. will attack North Korea without asking South Korea for approval," the lawmaker says.

Uneven Distribution

Trump's predecessors in recent decades have all shied away from using military force against North Korea, but it isn't difficult to imagine Kim Jong Un provoking him into an impetuous act. Victor Cha, the director of Asian affairs on George W. Bush's National Security Council and now Senior Advisor and Korea Chair at the Center for Strategic and International Studies (CSIS) in Washington D.C., expects that such a provocation will come in the coming days, ahead of the South Korean presidential election on May 9.

"We analyzed data from several decades and found that North Korea has regularly provoked militarily before or after elections in South Korea," Cha said in an interview conducted prior to Tuesday's North Korean artillery exercise. "I expect them to continue to provoke this time as well -- at least through the presidential elections, plus/minus two weeks. The critical period could start around April 25, Military Foundation Day."

The risk, says Cha, is that the strength of the north's military is unevenly distributed. "North Korea has a large, partly outdated artillery, and it has weapons of mass destruction. Unlike other militaries it doesn't have much in between. This could shorten the ladder of escalation."

Were Trump to seriously consider a military option, he would, broadly speaking, have three options at his disposal. First, the U.S. could carry out a preventative strike in an effort to prevent North Korea from launching a nuclear-armed missile. To do so, however, it would have to identify the launch site, though it is likely that many are capable of being launched from mobile platforms. Destroying all of them would be almost impossible.

Second, Trump could launch a preventative strike on all of North Korea's nuclear facilities, including research centers and production sites. That, though, would be challenging inasmuch as they would have to be struck at roughly the exact same time. Should that not be successful, there would be significant risk of a nuclear counterstrike from North Korea. Furthermore, Pyongyang could respond to such an attack with a conventional military offensive against South Korea.

The Risk of Military Escalation

The third theoretical option, that of a U.S.-led military invasion from South Korea, is essentially impractical due to the risk that North Korea would respond with nuclear or chemical weapons.

Even threatening North Korea militarily is extremely risky given the threat of a powerful reaction should the country's leadership become convinced that an attack was imminent.

Pyongyang, after all, could hardly win a war with the U.S., making it all the more important that it strike quickly and unexpectedly. And in contrast to the U.S., Japan and South Korea, Kim Jong Un is prepared to accept extreme risks and a huge number of victims in his own country.

In light of that risk, Barack Obama warned his successor in November that North Korea would be the most pressing national security risk facing the Trump administration -- just as the country's nuclear program has long been one of the thorniest foreign policy issues U.S. presidents have had to deal with. In his infamous State of the Union address in 2002, George W. Bush didn't just include Iran and Iraq in his Axis of Evil, but also North Korea. One year later, the U.S. marched into Iraq and deposed Saddam Hussein -- vividly illustrating the worst-case scenario for the regime in Pyongyang.

But like his predecessors, Bush chose diplomacy in his dealings with the North Koreans. In 2003, the six-party talks began in Beijing, which included China, Japan, Russia and the U.S. in addition to North and South Korea. Even as Bush's ensuing attempts to pacify Iraq were characterized by bumbling and dilettantism, his diplomats were patient and competent in their talks with North Korea.

In the fifth of a total of six negotiating rounds, the idea was born to provide North Korea with generous humanitarian aid, fuel deliveries and the normalization of relations with Japan and the U.S. in exchange for putting a halt to the country's nuclear program.

Pyongyang initially approved the plan's essential elements. But a first nuclear test in 2006, the diplomatic tensions that resulted and, in 2009, the launch of a North Korean satellite, led to the abandonment of the talks. Pyongyang subsequently declared that it would "never again" take part in such negotiations.

Bush's successor Barack Obama focused primarily on sanctions and sought to apply pressure on China to play a more active role in tempering its protégé. The strategy, however, was unsuccessful, with North Korea carrying out more than 50 missile tests during Obama's presidency along with four of the five nuclear tests it has conducted to date.

'My Military'

In response, Obama ordered the military three years ago to prepare cyberattacks against North Korea.

Since then, as the New York Times recently reported, the number of failed missile tests in the country have multiplied. Last fall, Kim Jong Un even ordered an investigation to determine the extent to which his country's archenemy might be behind the setbacks. But technical problems could also be to blame for the failed tests. Plus, in contrast to Iran, where the U.S. was able to deploy malware to sabotage the country's uranium enrichment program, North Korea is not well networked, making it difficult to infiltrate the country's infrastructure.

Which brings us to Trump, a man for whom good foreign policy apparently consists primarily of having a powerful army to order around. He has been open about his fondness for the military, even going so far as to call it "my military" on occasion.

The good news, though, is that the generals he has placed in important positions are far from interested in starting a war. Trump's national security advisor, Herbert Raymond McMaster, for example, is considered an excellent and discriminating strategist. In a book he wrote about the Vietnam War, he concluded that high-ranking military officers were also to be blamed for the escalation and ensuing disaster for lacking the courage to clearly tell politicians that their plans were not working. McMaster now finds himself the role of constantly telling the president what he thinks -- and Trump thus far appears to be listening to him.

In fact, since he began his term, Trump seems to have realized that foreign policy is more complicated than he thought. "The world is a mess," he said following the chemical attack allegedly carried out by the Syrian regime almost three weeks ago.

He appears to have had similar such epiphanies more recently. In the transcript of an interview with the Associated Press released on Monday, Trump said that his infamous quote about NATO being "obsolete" was made at a time when he didn't know much about NATO. "Now, I know a lot about NATO."

Another realization came during his recent meeting with Chinese President Xi Jinping, who held a 10-minute lecture for the president on why China's influence over North Korea is limited. "I realized it's not so easy," Trump said with disarming honesty in a subsequent interview. (He also asserted that Korea "used to be a part of China," which the Koreans vehemently reject.)

More Pugnacity

Since his meeting with the Chinese leader, Trump has softened his approach to Beijing, apparently in the realization that he is going to need their help. Even his campaign accusation that China manipulates its currency is one that he no longer repeats. He explained why on Twitter: "Why would I call China a currency manipulator when they are working with us on the North Korean problem?"

Chinese sources say that Xi warned Trump against an escalation and told the president that Kim can only be reached through diplomacy. Trump's team, however, countered that Beijing hasn't accomplished much in North Korea with diplomacy in the past several decades. It is time, they said, for a different approach -- and more pugnacity.

Thus far, there are no indications that Kim has been cowed by Trump. In mid-April, he made a celebrated appearance before the Supreme People's Assembly, the country's token parliament which gathers every year in April to rubber-stamp the budget and other measures implemented by the country's leadership. As usual, the state-run newspaper Rodong Sinmun used the occasion to issue a few threats to the U.S. and its allies. This time, it wrote: "Our strong, revolutionary army watches our enemy's every step and the gaze of our nuclear powers is fixed on the invasion bases of the U.S., not just in South Korea and the Pacific, but also on the American mainland."

At a military parade just a few days later, on April 15, the regime put on display the weapons with which it might realize the threat. For the first time, Pyongyang showed off transportation and launch canisters for two missile systems that appear to be for intercontinental missiles with the capability of perhaps even reaching the East Coast of the United States. The goal of the regime is that of building nuclear warheads that are small enough to mount on these missiles.

The calculation, it appears, is that nobody will want to attack such a heavily armed country, thus making Kim Jong Un's leadership secure.

Whether Kim's engineers are already sufficiently technologically advanced to make such a warhead is unclear. Most experts believe that Pyongyang possesses up to 20 nuclear warheads and could be ready to mount them on its missiles in about two years.

But the missile systems are far from bug-free. As recently as Sunday, April 16, a missile exploded shortly after launch in an embarrassing setback for Kim Jong Un. Since then, experts have been wondering if the explosion may have been caused by U.S. sabotage.

'The Military First'

The occasion for the April 15 military parade was the 105th birthday of Kim's grandfather Kim Il Sung, who founded North Korea and died in 1994. It was also Kim Il Sung who sent the first experts to the Soviet Union following the end of the Korean War in 1953 and entrusted them with the development of missile and nuclear programs.

When the collapse of the Soviet Union in 1991, Pyongyang lost its most important ally and the regime responded with the "Songun" doctrine, which literally means "the military first." Kim Il Sung's son, Kim Jong Il, pursued this course so radically that he triggered a vast famine, all in the name of strengthening his family's hold on power. Up to 3 million people are thought to have starved to death.

The Kims' weapons program quickly advanced and in 2006 the regime carried out its first successful nuclear test. The year 2011 saw the death of Kim Jong Il, a frail, eccentric man who was fond of Hollywood and basketball but who tended to avoid the public eye. As his successor, he chose his third son, Kim Jong Un, who was likely born in 1984.

As has become increasingly clear throughout his rule, however, this third Kim orients his leadership less on his diminutive father and more on his stately grandfather. His hairstyle and dress are reminiscent of Kim Il Sung, and he also wears similar eyeglasses and imitates his body language. In a March 2016 propaganda photo, which shows him in front of a group of nuclear experts, Kim is even wearing a military greatcoat and fur hat that resembled those worn by his grandfather.

In the photo, the group is standing in front of a metal sphere that the state news agency KCNA claimed was a nuclear warhead. It measured around 60 centimeters in diameter and would thus be small enough to mount on a carrier rocket.

Just how far Kim is prepared to go to secure his rule became apparent in December 2013, with the execution of his uncle, Chang Song Taek, who was the second-most powerful official in the regime. It was a gruesome killing, even for North Korean standards: The 67-year-old was pulled out of a politburo meeting on live camera, convicted as a "traitor to the party" and then, rumors hold, shot with an anti-aircraft gun.

Sidelined

Just over three years later, on February 13 of this year, another close relative of Kim's fell victim to a no less spectacular assassination. His older half-brother Jong Nam was attacked at the Kuala Lumpur airport by two women who pressed a towel to his face that was saturated with the nerve agent VX. He died a short time later -- and another potential rival had been sidelined.

The older Kim had originally been foreseen as Kim Jong Il's successor, but he fell out of favor with his father because of his lifestyle. Since 2003, he had been living in Beijing and in the gambling city Macau. Rumors that China's leadership had been keeping him in reserve as a potential alternative to Kim Jong Un may have been one of the reasons behind the successful plot to assassinate him.

Despite his brutality, his vulgar behavior and his martial tone, most close observers of North Korea nevertheless believe he is a rational thinker. One Chinese expert, who asked not to be quoted by name, says that Kim is primarily interested in preserving the regime's power. The expert says that progress in the nuclear program and the most recent threats emanating from North Korea must be viewed through that lens. He argues that Kim's threats of nuclear war are strategic in nature and not made out of some kind of death wish.

Cautious Steps Internally

Domestically, Kim is taking cautious steps to open the country economically. Compared to the 1990s, Pyongyang and other North Korean cities are booming. Skyscrapers have been built and leisure facilities like the riding club in Pyongyang or the ski area near Wonsan create the appearance of prosperity. There are now even traffic jams on once-empty streets.

The capital city in particularly -- as the regime's showcase -- is being dressed up on the model of modern Chinese cities. Kenji Fujimoto, the Japanese chef who used to cook for the Kim family, apparently returned to the city recently to open a sushi restaurant. Fresh fish for the elite is flown in from Japan through third states.

"Shopping centers have been built in every district of Pyongyang," reports North Korea expert Choi Jin Wook in Seoul. "They all look similar: There's a restaurant on the ground floor, on the second floor there's a sauna or spa and a shop on the third floor."

Along with the boom in construction, there has also been a surge in corruption, a product of investors needing the approval of state organs like the military or the secret police for each business they open.

"The elite are constantly fighting for political power because power secures economic interests," says Choi.

The new prosperity has only reached a fraction of the population. Nonetheless, people living in the larger cities are now able to stock up on groceries and clothing at privately owned markets. Most North Koreans have a side job to make ends meet and payments often take place in euros or the Chinese yuan instead of the national currency, the won, even at supermarkets or in taxis.

For several years now, the country has also operated a mobile phone network built by Egyptian entrepreneur Naguib Sawaris. Three million North Koreans are now purported to own mobile phones. But the network is closed and heavily shielded from the outside world, with those living near the border often doing what they can to get their hands on smuggled Chinese SIM cards.

A Bleak Situation in the Provinces

The northeastern Chinese city Tumen is located directly on the river for which it is named, just across from North Korea. The afternoon sun beams through the cloudy skies bathing Namyang Workers' District, the North Korean town on the other side of the river, in a warm spring light.

People can be seen leaving their homes, children play soccer, a bulldozer is at work on the bank and an army truck rumbles down the road.

For two hours, not a single private car can be seen. Looking through binoculars, it is possible to see that none of the roads in Namyang have been paved and most window frames are filled only with plastic sheeting. When neon ads light up on the Chinese side at dusk, North Korea remains dark. The lights only go on in three, maybe four apartments, and the light hum of a generator can be heard. In contrast to the cities, the situation remains as bleak as ever in provinces. The majority of North Koreans live in abject poverty.

The few North Koreans the regime allows to travel into China -- truck drivers, laborers and security workers -- are immediately recognizable by their simple clothing. They wave you away just as soon as you try to speak to them.

In restaurants and karaoke bars with names like "A Thousand Years of White Snow," North Korean women serve and sing. They make three appearances a night, singing the same Korean songs each time. But even with these women, it is difficult to have a conversation. They all say they are in China for three years, claim to have attended the same university in Pyongyang and complain of homesickness for North Korea, which they say is much nicer than China. But please, no names or details or "anything that could create problems for us."

There are dozens of restaurants like this in China, and the women work for a network of North Korean companies that have close ties with the regime. Their profits are funneled to Pyongyang, creating an important source of revenue for the regime.

Dents in the 'Unbreakable Friendship'?

China continues to allow their presence, but that could end. Even after just the first phone conversation between Xi Jinping and Donald Trump in February, Beijing promised to more strictly implement UN sanctions against North Korea than it has in the past. In early April, following the meeting between the two presidents in Florida, China's custom's authority got tougher and sent back several coal freighters for the first time.

Slowly, Chinese leaders are drifting from the official line of an "unbreakable friendship" with their communist neighbor and are adopting a more critical view. Some in China, like historian Shen Zhihua of East China Normal University, have begun publicly stating that China's Korea policies have failed. At a recent public event, he said that South Korea, and not North Korea, is China's natural ally on the peninsula. So far, the transcript of his presentation on the internet still hasn't been censored -- a sign that influential figures within the apparatus share his opinion.

Beijing is facing a dilemma. It doesn't want to see further missile and nuclear tests because a North Korea with a highly developed nuclear arsenal would run counter to China's own interests. But it also doesn't want to lose the communist buffer state on its eastern flank.

In private discussions and on the internet, the Chinese have long been poking fun at Kim Jong Un. Recently, the official press in China has likewise been unusually clear it its rejection of Pyongyang. If Kim disturbs the efforts at rapprochement between Beijing and the new U.S. government through a nuclear test, there will be a price to pay, the wrote the Global Times. Although China continues to oppose any kind of military intervention, there is a "chance that Beijing could also say 'yes' to a potential US imposed financial blockade against North Korea," the paper wrote.

It's a fundamentally new tone that hints at the possibility that Beijing and Washington could work more closely together on the issue of North Korea. So far, the regime in Pyongyang has profited from distrust between the two superpowers. It created the space necessary for North Korea to build up its arsenal to its current size and allowed an unimportant small country with a knack for high drama to become a serious international threat.

But is there now a possibility that the U.S. and China might join forces to find a peaceful settlement of the Korea question, through, for example, tougher sanctions?

Top Chinese official Yang Xiyu, who once participated in the six party talks, notes that in the 1990s "the leadership was never in danger, even during the famine crisis." That's why he believes that sanctions are the wrong way to go. He argues that a regime as tough as the one in Pyongyang can hardly be brought to its knees economically.

But if neither diplomatic nor economic pressure can do anything, will China, the U.S. and the rest of the world have to get used to the fact that North Korea is getting closer to becoming a nuclear power?

For proliferation reasons alone, that is hard to imagine, says U.S. expert Victor Cha, the George W. Bush official who took part in the six party talks on behalf of Washington. "North Korea doesn't just arm itself," he says, "it sells weapons to other countries. Preventing this and getting them to sign a (non-proliferation) treaty is a must."

It's not only the Chinese experts who question whether Kim would react to economic pressure. In South Korea, many are now also questioning whether a tightening of economic sanctions would make any sense. They consider the hardline approach taken by former President Park Geun Hye, who was impeached in March over allegations of abuse of power and corruption, to be a failure.

On May 9, South Koreans will go to the polls to elect a new president. The two candidates with the greatest prospects for succeeding Park -- the centrist, reform-minded Ahn Cheol Soo and the left-wing liberal Moon Jae In, are both advocating increasing contacts with the North. "If we only isolate Kim, then we have no longer have any influence over him," says Lim Eul Chul of the Center for International Cooperation for North Korean Development.

Lim's name is being circulated as a possible unification minister in a Moon cabinet and he has called for a reopening of the special economic zone at Kaesong. Until it's closure in February 2016 by President Park, North Korean laborers had produced inexpensive goods for South Korean companies at the enclave, located at the 38th parallel. Even among members of the conservative government that will continue to manage the country until the election, differences are already emerging with allies in Washington over the North Korea issue.

Political Maneuvering in Japan

But the situation is altogether different in Japan, where an escalation of the Korea crisis could play into the hands of nationalist Prime Minister Shinzo Abe, who has already visited Trump twice since the new U.S. president took office. For some time now, the prime minister has been seeking to amend the pacifist constitution that was essentially dictated to Japan by its American occupiers after World War II.

Kim's provocations have established the political maneuvering room for Abe that have enabled him to increase the budget of the Japan Self-Defense Forces to about 44 billion euros, the highest it has been since the end of the war. Recently, Japanese television has given wide coverage to North Korean missile tests, and only a short time ago, several of those missiles went down around 300 kilometers off the coast of Japan. In March, the first evacuation drill in response to an attack was conducted since the end of World War II in the Akita prefecture.

Given that Japan's air defenses would be insufficient for protecting the country from several missile strikes at the same time, some high-ranking members of Abe's party are already calling for a review of possible "counterstrikes against targets abroad" -- meaning North Korea. Such deployments are currently prohibited under the Japanese Constitution, but the country now has the military means to do so after taking delivery of 42 American-made F-35 stealth fighters.

Still, with no guarantee that Kim can be disarmed militarily in a single strike, the international community appears to have other option than returning to the negotiating table.

A military strike may have been possible over 20 years ago, when North Korea's nuclear program was still in its infancy. In 1994, during the first major nuclear crisis, the Pentagon and South Korean armed forces ran a simulation of a detailed war scenario. It predicted a devastating outcome for the first three months after the outbreak of fighting: 490,000 deaths on the South Korean side and 52,000 dead or wounded on the American side. The plan was shelved and former U.S. President Jimmy Carter was sent to Pyongyang as a negotiator instead.

A Balance of Deterrence in the Far East

North Korea now has up to 20 nuclear warheads at its disposal, and the risk of a military attack has increased significantly. At the same time, the probability of defanging the country's nuclear program in the longer term has also diminished. Even if the new U.S. president isn't prepared to admit it yet, the military option is actually no longer an option. A balance of deterrence is already in place in the Far East.

As such, Trump's only realistic alternative is to conduct negotiations. He already stated once during the election campaign that, if need be, he'd meet with Kim Jong Un for a hamburger and to discuss the problems. Trump's view of successful foreign policy has always tended to resemble the real estate business: Two men meet and close a deal. After all, Trump views himself as being one of the greatest dealmakers of all time.

He could also do something unusual like sending his son-in-law Jared Kushner to North Korea -- an idea that has been suggested by Mark Fitzpatrick, a nonproliferation expert at the International Institute for Strategic Studies in Washington. He argues it would send the message to Pyongyang that it is being taken seriously. Kushner is Trump's point person for difficult cases. He helped to prepare for Xi Jinping's visit to Florida and Fitzpatrick believes that Kushner could help to deescalate the North Korea conflict by pushing the dictator into talks.

Robert Litwak, the North Korea expert in Washington, also believes it is in Kim Jong Un's interest to negotiate. He proposes a freezing of the North Korean nuclear program through negotiations between China and North Korea. The result could be that Kim stays in power, with a limited number of nuclear weapons.

The greatest threat these days, in fact, may not be that one side intentionally triggers a war. Rather that both sides may stumble into a spiral of escalation that they are unable to stop.

But if a military confrontation can be prevented, if Trump and Kim don't overreact and if negotiations are the ultimate outcome, then it is possible that Trump wouldn't be in a bad spot.

The fact that he is erratic, impulsive and unpredictable is certainly a worry to politicians around the world, but that could work to his advantage during negotiations. That, in fact, might be why Trump recently said: "This country has to be less predictable."


By Mathieu von Rohr, Christoph Scheuermann, Wieland Wagner and Bernhard Zand


A World Turned Inside Out

Stephen S. Roach
. Chinese Economy

NEW HAVEN – Slowly but surely, a bruised and battered global economy now appears to be shaking off its deep post-crisis malaise. If the International Monetary Fund’s latest forecasts are borne out – an iffy proposition, to be sure – the nearly 3.6% average annual growth in world GDP expected over the 2017-2018 period would represent a modest uptick from the 3.2% pace of the past two years. Fully a decade after the Great Financial Crisis, global growth is finally returning to its 3.5% post-1980 trend.
 
But this round trip hardly signals that the world is back to normal. On the contrary, the overhyped idea of a “new normal” for the world economy overlooks an extraordinary transformation in the global growth dynamic over the past nine years.
 
At the margin, the recent improvement has been concentrated in the advanced economies, where GDP growth is now expected to average 2% over 2017-2018 – a meaningful pick-up from the unprecedentedly anemic 1.1% average growth of the preceding nine years. Relative strength in the United States (2.4%) is expected to be offset by weakness in both Europe (1.7%) and of course Japan (0.9%). However, annual growth in the advanced economies is expected to remain considerably below the longer-term trend of 2.9% recorded during the 1980-2007 period.
 
By contrast, the developing world keeps chugging along at a much faster pace. Although the average growth rate expected for these economies over 2017-2018, at 4.6%, is about half a percentage point lower than during the preceding nine years, they would still be expanding at more than twice the pace of the developed world. Unsurprisingly (at least to those of us who never bought into the Chinese hard-landing scenario), strength in the developing world is expected to be concentrated in China (6.4%) and India (7.5%), with growth lagging in Latin America (1.5%) and Russia (1.4%).
 
This persistent divergence between developed and developing economies has now reached a critical point. From 1980 to 2007, the advanced economies accounted for an average of 59% of world GDP (measured in terms of purchasing power parity), whereas the combined share of developing and emerging economies was 41%. That was then. According to the IMF’s latest forecast, those shares will completely reverse by 2018: 41% for the advanced economies and 59% for the developing world.
 
The pendulum of world economic growth has swung dramatically from the so-called advanced countries to the emerging and developing economies. New? Absolutely. Normal? Not even close.

It is a stunning development, one that raises at least three fundamental questions about our understanding of macroeconomics:
 
First, isn’t it time to rethink the role of monetary policy?
 
The anemic recovery in the developed world has occurred against the backdrop of the most dramatic monetary easing in history – eight years of policy interest rates near the zero bound and enormous liquidity injections from vastly expanded central-bank balance sheets.
 
Yet these unconventional policies have had only a limited impact on real economic activity, middle-class jobs, and wages. Instead, the excess liquidity spilled over into financial markets, sustaining upward pressure on asset prices and producing outsize returns for wealthy investors.

Like it or not, monetary policy has become an instrument of mounting inequality.
 
Second, has the developing world finally broken free of its long-standing dependence on the developed world?
 
I have long argued that claims of such a “decoupling” were spurious, given the persistence of export-led growth in poorer countries, which tethers their economies to external demand in richer countries. But the facts now speak otherwise. Growth in global trade slowed to a 3% average pace over the 2008-2016 post-crisis period – half the 6% norm from 1980 to 2016. Yet, over the same period, GDP growth in the developing economies barely skipped a beat. This attests to a developing world that is now far less dependent on the global trade cycle and more reliant on internal demand.
 
Finally, has China played a disproportionate role in reshaping the world economy?
 
Chinese rebalancing suggests that this may well be the case. Historically, China’s hugely successful export-led growth strategy, together with the rapid growth of China-centric global supply chains, was the major reason why I never bought the decoupling story. Yet the export share of Chinese GDP tumbled from 35% in 2007 to 20% in 2015, while its share of global output surged from 11% to 17% during this period. China, the world’s largest exporter, may well be in the vanguard of global decoupling.
 
This hints at an even more powerful trend: the rapid transformation of China’s industrial structure.
 
China’s tertiary sector (services) has gone from 43% of GDP in 2007 to 52% in 2016, whereas the share of the secondary sector (manufacturing and construction) has fallen from 47% to 40% over the same period. While the private consumption share of aggregate demand increased more slowly, largely owing to high precautionary saving (which reflects gaps in the social safety net), there are grounds for optimism on this front as well.
 
Indeed, the explosive growth of Chinese e-commerce points to a shortcut toward a newly vibrant consumer culture that was unavailable to today’s advanced economies at a similar stage of development. In the annals of structural change, where shifts tend to be glacial, China’s evolution is a sprint.
 
All of this speaks to a radically different world than that which prevailed prior to the Great Financial Crisis – a world that raises profound questions about the efficacy of monetary policy, development strategies, and the role of China. While some healing of an $80 trillion global economy is now evident, progress needs to be seen through a different lens than used in past cycles. A world turned inside out, with new dynamism in the developing world far eclipsing lingering malaise in the advanced economies, is new – but hardly normal.
 
 


An American Recession and the World

By George Friedman


A recession in the United States is likely to come in the next two years. It is difficult to determine when a recession will occur based solely on economic activity. Economists argue about the precursors to a recession as a matter of course. I am not making the case that one will happen because I believe I am competent to enter that debate. Rather, I am making the case that one is increasingly likely simply by looking at the frequency with which they occur.

The last recession started in 2007 and ended in 2009. The one before that started and ended in 2001. The two previous recessions ran from 1990 to 1991 and from 1981 to 1982. In these cases, the time between the end of one recession and the start of another was about eight years on average. Between 1945 and 1981, recessions were much more frequent, but obviously something has happened to extend the time between them.


Newspapers are seen for sale at a newsstand Sept. 16, 2008 in New York City. The previous day, the Dow Jones Industrial Average plunged 4.4 percent or 504 points, the worst single-day loss since the terrorist attacks of Sept. 11, 2001. Mario Tama/Getty Images


Eight years have now passed since the last recession, and the U.S. is in the zone for one based on its experience since 1980. A recession is likely sometime between now and 2019. It is always possible that we will set a new post-war record for expansion, but that is unlikely simply because periodic recessions are necessary. During expansions, economies tend to accumulate inefficiencies. Low interest rates allow businesses to survive despite their inefficiency, and this will continue if a recession does not occur. In the current expansion, we have had extraordinarily low interest rates, so even with relatively low growth rates, pruning is needed.

Recessions are unpleasant and hurt some people disproportionately. However, the U.S. recession will likely hurt other countries more than the United States. When combined with other global economic problems, the recession will likely weaken Europe’s anemic recovery and strike another blow at the Chinese. It will also put further downward pressure on commodity prices, considering that the United States is the world’s largest importer and has been, to some extent, the engine stabilizing the international system.

The 2007-09 recession hurt the Chinese tremendously because their biggest export customers were the United States and Europe. In due course, the Chinese slowdown cut China’s consumption of industrial commodities, including oil, hitting countries like Russia and Saudi Arabia. This is part of the global exporters’ crisis I have written about previously. The United States avoided the worst of this because, while it is the second-largest exporter in the world, exports account for only about 12.6 percent of its GDP (the U.S. ranks only 161st in the world in terms of exports as a percent of GDP, according to the World Bank). In part, this lack of dependence on exports helped U.S. GDP grow on its internal engine. More important is that the U.S. is less vulnerable to global downturns than other countries.

The decline in the U.S. economy will inevitably involve a drop in U.S. imports. Under normal circumstances, this slump would not destabilize the system. But we have not been living under normal circumstances since 2008. More precisely, we are now living in a new normal. In the new normal, countries that were driven by exports are now using diminished export demand to simply maintain their economies in the hopes of generating enough domestic demand to replace lost markets.

In most cases, they have achieved a fairly precarious balance at this point that is much more subject to destabilization than in previous cycles. A relatively small drop in global demand can have a substantial impact. Thus, a routine U.S. recession will lead to a small global decline, reversing gains in stabilization made in recent years.

The downturn in export demand will have a ripple effect because exporting countries are also importing countries. As American demand contracts, exporters’ economies will be affected and their need for imports will contract as well. This domino effect is normal. The problem is that the international system’s vulnerability has grown dramatically because many countries have become excessively reliant on exports, and this has been accompanied by a general weakness in their domestic economies. Therefore, the ripple effect, while not a tidal wave, will be more substantial than would have been the case before 2008.

The most significant vulnerable countries will be the exporters of manufactured products and industrial commodities, particularly oil. The Chinese and the Germans are the most important examples, given that they are the world’s second- and fourth-largest economies. The Chinese have reduced their reliance on exports as a percent of GDP to some extent, but they remain heavily dependent. They have decreased their dependence by increasing domestic consumption, but this has also led to a decline in their growth rate target to what China claims is a sustainable 6.5 percent a year. A drop in exports would make even this target harder to hit and would limit China’s ability to build domestic demand by contracting exports too quickly.

However, Germany’s export dependence has always troubled us the most. With 46.8 percent of its GDP derived from exports and its banking system in an extraordinarily weak position, Germany needs a stable export base. With the Middle East in chaos and suffering from low oil prices, as are the Russians, Germany’s export purchasers are the Europeans, the Chinese and the Americans. If the appetite for German exports in the U.S. and China declines, it will also affect Germany’s European partners. Thus, the Germans would have trouble maintaining their export rates in the face of a U.S. recession.

A U.S. recession would also put heavy pressure on oil prices. The Saudi-Russian attempt to raise oil prices has pretty much failed. The price of oil is now subject to market forces rather than any concerted action by oil exporters. Historically, as oil prices fell, industrial production increased. That is no longer the case because the problem now is finding customers at any price, not keeping production costs low. Lower oil prices might solve a few problems for exporters of manufactured goods, but they create massive problems for oil exporters.

The most important consequence of this contraction will be on internal social and political forces. A European recession over the next couple of years would increase the pain in southern Europe and likely spread it north. This would strengthen those challenging the European political elites and increase the demand for protectionism. It would present a challenge to the EU and bolster the idea that the flow of goods without any national controls exposes all countries to the consequences of systemic failure. The argument will be that, if the system is failing, remaining part of the system makes little sense.

In China, where political stabilization has been imposed by a dictatorship, the dictator’s credibility will be questioned if Chinese growth rates continue to fall. President Xi Jinping has promised the Chinese a graceful transition from an export-focused economy to one driven by internal demand. To do this, he must control social and political challenges, and maintain a careful and shifting balance between exports and domestic growth. A sudden buckling of exports would make this difficult.

As for Russia and Saudi Arabia, should oil prices be stuck below $50 a barrel, the pressure on these countries’ economies will increase. Both will try to manage their regional interests in the face of deepening internal challenges. The credibility of these regimes depends on their ability to maintain a degree of well-being appropriate to their historical patterns. Those patterns will be difficult to preserve.

The United States will suffer in this situation, but it will not face fundamental crises. However, a recession in the next two years would happen during Donald Trump’s presidency. The American public tends to hold presidents responsible for the economy, even though they have no control over what happens. Therefore, a recession would place Trump in a difficult political position moving toward the 2020 election. The United States would not be as exposed as export-dependent nations, but the political repercussions would require Trump to have established a solid and stable political base by the recession’s onset.

I have no econometric model predicting a recession, although I am not sure that these models have been consistently effective predictors. Rather, I am noting that we are eight years from the last recession, and 10 years has been the longest period between recessions. The precursors to a depression – such as irrational exuberance of asset classes, rising interest rates, a negative yield curve and proclamations that “this time, it’s different” – have at most been modestly appearing. But the clock is ticking. We may set new records on this expansion, but I find it much more likely that a necessary cyclical recession will take place within the next two years.

And I am arguing that this time it will be different, in the sense that even a relatively mild U.S. recession will have global implications.


The long arm of the policía

The arrest of two fugitive Mexican governors

Their flight was embarrassing. Their capture is a good sign
.

ONE of the odder pieces of evidence turned up by investigations of Javier Duarte, a former governor of the state of Veracruz, was an exercise book with his wife’s scrawl. “Sí merezco abundancia” (“Yes I deserve wealth”), she had written, over and over. During six years in charge of the state on the Gulf of Mexico, Mr Duarte allegedly did his best to acquire it. He was arrested at a resort in Guatemala on April 15th, after six months on the run. Five days earlier Tomás Yarrington, an ex-governor of the northern state of Tamaulipas, was nabbed in Florence, Italy. He had been eluding justice for five years.

The two fugitive governors are both former members of the Institutional Revolutionary Party (PRI), to which Mexico’s president, Enrique Peña Nieto, belongs. The attorney-general has investigated at least 11 state governors since 2010, nine of them from the PRI. Mr Peña once praised Mr Duarte and two other tainted governors as exemplars of the PRI’s “new generation”. This does its image no good ahead of an election in June in the State of Mexico, Mr Peña’s political home. The outcome will be a harbinger of next year’s presidential election (in which Mr Peña cannot run again). The governors’ arrest is a sign that the country is cracking down on corruption, though not yet hard enough.

Veracruz under Mr Duarte became “a state of terror”, according to the International Crisis Group, an NGO. At least 17 journalists were killed during his administration, from 2010 to 2016. He is being investigated on suspicion of having moved 233m pesos ($12m) of public money into ghost companies. Mr Duarte’s successor alleges that state hospitals administered fake cancer drugs to children during his rule. In 2016 the PRI lost control of the state for the first time in more than 80 years. Mr Duarte resigned in October, two months before the end of his term, and disappeared by the time an arrest warrant was issued a few days later.

Mr Yarrington, who governed Tamaulipas from 1999 to 2005, has been charged with collaborating with the Gulf Cartel, a drug gang. According to the Wall Street Journal, the state’s government provided bodyguards for him even as he was on the run from federal charges.

Such crookedness is an old problem. “Corruption is not a disagreeable characteristic of the Mexican political system: it is the system,” wrote Gabriel Zaid, an essayist, 30 years ago. At state level it may have got worse. When Mr Zaid was writing Mexican presidents (all of them priistas) removed governors almost at will. With the arrival of democracy in the 1990s power was dispersed and the president’s influence waned. In 2000 Vicente Fox of the National Action Party became the first non-PRI president in seven decades, but faced governors who were mostly from the former ruling party. To win their co-operation he sent more money and gave them licence to behave more or less as they wished. His successors have continued that practice.

The arrests of Messrs Duarte and Yarrington suggest that tolerance is waning. A freedom-of-information law (in force since 2003), social media and more assertiveness by the press and civil society have made it harder for politicians to get away with wrongdoing. The federal government faces the most scrutiny, but the demand for accountability is spreading to the states. A new “anti-corruption system” is supposed to police all levels of government, by co-ordinating corruption-fighting agencies and strengthening the federal auditor, among other things. It has yet to make a difference. Mr Peña no doubt hopes that voters will remember his party for chasing wrongdoers rather than advancing their careers.