Tag Archive | "iran"

America’s Adversaries and Sanctions Dead-ends

By Andray Abrahamian

Earlier this month, President Donald Trump warned Iraq’s government against expelling U.S. forces from the country. “If they do ask us to leave,” he said, “if we don’t do it in a very friendly basis, we will charge them sanctions like they’ve never seen before ever. It’ll make Iranian sanctions look somewhat tame.” While this was an idiosyncratic statement to say the least, it does highlight the United States’ over-reliance on sanctions as a foreign policy tool. When we don’t know what to do: sanctions.

With Iraq, this threat might have an impact: the Iraqi political-economy is enmeshed with the United States. Mr. Trump seeks to alter the calculation of a single debated policy issue in Baghdad, albeit a significant one. The goal is discreet, which is when sanctions have the best chance of success.

When it comes to adversaries who tend to view relations with the United States as a zero-sum conflict, it becomes trickier, especially when the United States is asking for a fundamental change in national defense and foreign policy. This brings us to both North Korea and Iran. These two countries were adversaries of the United States long before Mr. Trump was a reality TV star, much less the U.S. President. He inherited and inflamed both relationships, before creating divergent paths: dialogue (with North Korea) and pressure (with Iran). Sadly, both approaches seem to leading to dead ends. Yet sanctions targeting both Iran and the DPRK will remain.

The dead end is this: when targeted states believe that they must not – nay, cannot – yield to their more powerful enemy, even under damaging sanctions, they find coping mechanisms. North Korea and Iran both have become adept at smuggling their main exports. U.S. unilateral sanctions ban the sale of Iranian oil and threaten importers elsewhere with penalties if they don’t comply. UN sanctions on North Korea block the exportation of coal, seafood and other goods. Both states therefore hide their shipments, reflagging and changing the identification codes of their ships and turning off the transponders that all merchant vessels are supposed to use to allow tracking. Both countries have learned to conduct ship-to-ship transfers at sea to move products onto non-sanctioned vessels.

Iran and North Korea are both forbidden by the UN from exporting weaponry, but continue to do so. It turns out the global arms trade is a shadowy world, full of brokers willing to bend and break the rules. Both states have come to rely on a network of individual actors abroad, motivated by high profit margins for high risks, and countries whose interests are not aligned with the United States, to survive.

It’s not that sanctions don’t have costs. Smuggling is no substitution for normal exports and state coffers in both Tehran and Pyongyang are emptier than they would be without sanctions. But as resources dwindle, the core institutions of the state tend to get a bigger share of a shrinking pie as their governments double down on hardline positions. In both countries this means the military and security services. The further away you are from the heart of the system, the less there is for you.

In both Iran and North Korea, there is anecdotal evidence of medical supplies being limited and NGO relief work being hampered by sanctions. In Iran, food prices have soared under sanctions, causing hardship. In North Korea, which is a far more opaque country, it is less clear how nutrition is being impacted, but it seems likely that the most vulnerable are being harmed.

Ordinary citizens also find coping mechanisms through smuggling and informal money transfers. Money transfers in Iran, using what is called a hawala system, work like this: let’s say you wanted to buy a $5,000 Persian carpet. You’d wire the money to an “exchanger” – a hawaladar – in, say, Dubai. He’d call his counterpart in Tehran and say, “I’ve got the dollars here. You can put the equivalent into the rug merchant’s local account and tell him to send the rug.” So trade with Iran isn’t completely stopped, but ordinary businesses pay a premium: the carpet merchant has to pay for the exchanger’s services, often 3 to 5 percent in the case of Dubai. The carpet may also be sent to a third country to hide its origin.

The commissions taken by Chinese financiers for facilitating North Korea’s transactions are higher. Estimates range from 5 to 20 percent, but can increase depending on risk perception. This is, of course, for customers who show up at all, given the hassle and possibility of risking the ire of the United States. Certainly, major companies will steer clear.

What is most likely with both Iran and North Korea in 2020 is period of increased tensions and provocations. This will lead to additional sanctions by Washington, but with no clear solutions for resolving its tensions with either Iran or North Korea. Neither regime will disappear, nor relax its control over its citizens. Great Powers whose interests are not aligned with the United States will throw lifelines to these beleaguered economies and ordinary citizens will find ways to suffer through reduced economic opportunities. Continued economic pressure will further marginalize whatever voices for compromise and dialogue exist in both Tehran and Pyongyang as policymakers fall in line with hardline approaches to the United States.  The leadership in Tehran will increase support for proxy forces around the Middle East and gain influence in Iraq while leaders in Pyongyang will continue to place their limited resources into furthering their nuclear and missile programs.

In this context, continuing to “charge them sanctions” unless the target states offer concessions beyond what they can tolerate harms American interests. And of course it harms ordinary citizens whose only crime is being born in either the Islamic Republic of Iran or the Democratic People’s Republic of North Korea.

Andray Abrahamian is a Non-Resident Fellow at the Korea Economic Institute and Visiting Scholar at George Mason University Korea and Senior Adjunct Fellow at Pacific Forum. The views expressed here are the author’s alone.

Photo from Gage Skidmore’s photostream on flickr Creative Commons.

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Can the U.S. Fill South Korea’s Oil Gap?

By Kyle Ferrier

Following President Trump’s decision to re-impose sanctions on Iran last May, the White House announced last week it will not be extending waivers on sanctions to countries importing Iranian oil. South Korea is one of only eight countries to be have been granted a waiver, which took effect as U.S. secondary sanctions went into force in early November and are now set to expire on May 2. Faced with this inevitability – though it may have come sooner than anticipated – Seoul’s efforts to diversify oil imports so far already suggest U.S. oil producers will play a key role in making up for the blockage of Iranian imports.

Demand for oil in South Korea has been growing in recent years, all of which must be met with imports. Total crude oil imports grew over from $44.3 billion in 2016 to $80.3 billion in 2018, making South Korea the fifth largest oil importing country last year. This demand has continued into 2019 – the volume of oil imports for the first three months this year is higher than it was during the same period last year.

Before the U.S. withdrawal from the Joint Comprehensive Plan of Action last spring, Iran was South Korea’s third largest source of oil. In 2017, Iran’s $7.5 billion in crude oil exports to South Korea were only behind Saudi Arabia’s $17 billion and Kuwait’s $8.3 billion. However, from September to December, 2018, Seoul cut off oil from Iran in response to Trump’s decision to reintroduce sanctions on Tehran. As a result, Iranian exports to South Korea last year only totaled $3.9 billion, dropping it down to the eighth largest provider of oil to South Korea.

Seoul has reopened the spigot since January, but the flow of Iranian oil has been relatively modest. From January to March, South Korea imported $1.2 billion in oil from Iran. The April imports will likely provide the final figure for the year, but, even with numbers suggesting a last big push before the May deadline, it seems unlikely to come close to last year’s total.

During the period of Iran’s diminishing exports, no other county among the largest exporters of oil to South Korea gained as much as the United States. The $4.5 billion in U.S. oil exports to South Korea last year was a 520% jump from 2017. The numbers for 2019 continue to be promising as the $1.8 billion in U.S. oil exports through March already represents an over 360% increase from the same period last year.

U.S. Secretary of State Mike Pompeo’s remarks that the U.S., Saudi Arabia, and the U.A.E will help to offset the losses from Iranian trade further provides reason to be bullish on U.S. oil exports to South Korea, but there also limitations.

Iranian and American crude oil are not perfect substitutes. There are some American sources that produce oil similar to that from Iran, but at a much lower rate. These may also be needed for more domestic consumption in the U.S. in the face of limited oil supply from Mexico and Canada and the now completely cut off supply from Venezuela after new sanctions enacted in in January. That many South Korean refineries are set up to specifically process Iranian oil will also add to the cost of the adjustment.

Still, the growing demand for oil in South Korea and the removal of a major competitor from the field – irrespective of the politics behind the decision – bodes well for American producers, now churning out more oil than any country thanks to the Shale Revolution.

Kyle Ferrier is the Director of Academic Affairs and Research at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Enrico Strocchi’s photostream on flickr Creative Commons.

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The Lessons North Korea Will Likely Take from the U.S. Withdrawal from the Iran Nuclear Deal

By Troy Stangarone

As President Donald Trump announced that he was withdrawing the United States from the Iran nuclear deal and reimposing sanctions on Iran, in perhaps surreal fashion he also announced that U.S. Secretary of State Mike Pompeo would be landing in North Korea in about an hour to discuss the final details for the summit meeting with North Korean leader Kim Jong-un on North Korean denuclearization. Even if unintentionally, President Trump’s comments had the result of linking the two agreements and how the issue of the withdrawal from the Iran nuclear agreement may impact the prospects for reaching an agreement with North Korea on denuclearization.

Shortly afterwards, National Security Advisor John Bolton tried to draw these connections. He said that the withdrawal from the Iran deal was also designed to send a signal to North Korea that the United States wants a real deal on denuclearization, he added that “Another aspect of the withdrawal that was announced today (Tuesday), is to establish positions of strength for the United States.. (with) implications not simply for Iran but for the forthcoming meeting with Kim Jong Un of North Korea; it sends a very clear signal that the United States will not accept an inadequate deal.” Of course, reaching a real deal goes two ways and North Korea will likely take lessons from the U.S. decision to withdraw from the Iran deal.

North Korea studies the United States intensely and will likely want to avoid the challenges the Iran deal faced, as well as the shortcomings of its own prior experiences with the United States. While there are significant reasons that withdrawing from the Iran agreement could make reaching a deal with North Korea more difficult rather than provide the United States with leverage, there are also distinct lessons that North Korea may take from the U.S. withdrawal from the Iran nuclear deal beyond whether an agreement with the United States can be depended on.

When the Iran deal was completed there were bi-partisan concerns over whether the agreement sufficiently addressed Iran’s nuclear program and other issues. Democratic Vice Presidential nominee Tim Kaine was a co-author of the bi-partisan Iran Nuclear Agreement Review Act and pushed to extend sanctions on Iran. North Korea may find the process put forward in the Iran Nuclear Review Act as a stumbling block that it will want to avoid. The Act required the president to certify every 90 days that Iran was incompliance with the Joint Comprehensive Plan of Action (JCPOA). Avoiding a similar North Korea Nuclear Review Act and the potential for a continuous need to have the agreement certified will likely be a North Korean objective in light of the certification processing having served as a means for critics of the agreement to bring it to an end.

However, that does not necessarily mean that North Korea will not want Congressional involvement. Another failing of the Iran nuclear deal was that there was no real Congressional buy-in. As Assistant Secretary of Legislative Affairs at the Department of State wrote to then Congressman Mike Pompeo in 2015, the JCPOA is “not a or an executive agreement, and is not a signed document.” There is also the lesson from the Agreed Framework in the 1990s when North Korea became frustrated over delays in promised heavy fuel oil shipments and Congress’ reluctance to provide funding for the construction of light water reactors.  We should expect North Korea to want more Congressional buy-in to avoid difficulties with U.S. follow through and for any agreement to be more difficult to discard, perhaps as formal treaty to prevent a future president from withdrawing from the deal.

While the JCPOA was not designed to address Iran’s actions in the Middle East or its ballistic missile tests, the narrower scope of the agreement should also demonstrate the need for North Korea to reach a more comprehensive agreement with the United States so disputes on issues other than its nuclear weapons and ballistic missile programs do not undermine support for the core agreement. We are already seeing this in commentary to address North Korea’s chemical and biological weapons, but there will be some issues, such U.S. sanctions on human rights, which the talks may be unlikely to address.

Lastly, both the Agreed Framework and the JCPOA were reached with Democratic administrations and ultimately overturned by Republican administrations. With a general post-Cold War trend of Democrats preferring multilateral solutions and a Republican preference for bilateral agreements, any agreement reached with a Republican president is more likely to remain in place should there be a future Democratic president, additionally incentivizing North Korea to reach a deal with the current Trump administration.

As Americans go into talks with North Korea, they should be prepared for the North Koreans to seek stronger assurances for the longevity of any agreement than existed with the Iran agreement. If that is the case, North Korea could push U.S. negotiators in three areas: (1) to eliminate the prospect of the relatively frequent reviews that Iran faced; (2) that there be Congressional buy-in to sustain any agreement; and (3) that any agreement should be as comprehensive as possible. Without addressing these areas, it may be more difficult to reach a lasting deal.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the author’s alone.

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Negotiating a Nuclear Deal with North Korea Just Got a Whole Lot Harder

By Troy Stangarone

If negotiating a nuclear deal with North Korea was already a fraught proposition, President Donald Trump’s decision to no longer certify the Iran nuclear deal despite Iran’s compliance with the Joint Comprehensive Plan of Action (JCPOA) just made that prospect all the more difficult.

For decades one of the main obstacles to resolving the North Korean nuclear issue has been a lack of trust in North Korea’s ability to live up to an agreement. In the late 1990s the United States and North Korea negotiated the Agreed Framework to halt North Korea’s first push to develop a nuclear weapon and then under the Obama Administration the two sides negotiated the Leap Day Agreement to freeze North Korea’s ballistic missile tests. In both cases the agreements fell apart due to actions by North Korea.  Now the United States is taking actions in relation to the Iran nuclear agreement that raise questions about the United States willingness to live up to a negotiated agreement.

In the case of Iran, there is general agreement that it is in compliance with JCPOA. However, the Iran Nuclear Agreement Review Act (INARA) requires the president to certify not just that Iran is in technical compliance with the JCPOA, but also that the suspension of sanctions is “appropriate and proportionate” as well as in the U.S. national interests. It is on the basis that the current sanctions relief is not “appropriate and proportionate” to the steps that Iran has taken under JCPOA that President Trump decided to end certification, not on the basis of Iran’s compliance.

President Trump took this step over concerns centered on issues that the agreement was never intended to address such as Iran’s support for non-state actors such as Hezbollah and Hamas, as well as the regime’s continued ballistic missile tests. In doing so, he has moved to increase pressure on Iran over its broader behavior, but he has also raised questions about U.S. credibility in any efforts to negotiate a nuclear deal with North Korea.

The president’s decision does not mean that the United States has withdrawn from JCPOA. Instead, by refusing to certify Iran President Trump has thrown the issue back to Congress, which now has 90 days to decide whether to re-impose sanctions. The expectation is that Congress will not immediately impose sanctions, but rather work to make changes to INARA. However, should the Congress re-impose sanctions on Iran for its nuclear program the United States would be in violation of JCPOA.

With the agreement back in Congress’ hands, Senate Foreign Relations Committee Chairman Bob Corker has put forward a proposal with the Trump Administration and Senator Tom Cotton to amend INARA. Under the proposal, U.S. sanctions on Iran would snap back into place if the intelligence community determined that Iran had taken steps to enhance its nuclear program that moved it under the one year breakout period for developing a nuclear weapon. It would also use the threat of re-imposing sanctions to remove the sunset clauses in JCPOA, strengthen verification, and limit Iran’s development of advanced centrifuges.

While all are worthy goals, in pursing changes through an amendment of U.S. law rather than new negotiations with Iran the Trump Admiration and Congress would in essence be seeking to unilateral rewrite the agreement. In fact, President Trump stated as much when he said that he would like to “make all restrictions on Iran’s nuclear activity permanent under U.S. law.” If the United States can simply redo significant provisions of an international agreement through its own domestic law, there is little incentive for North Korea to negotiate a deal with a country that will try to use its own laws to unilaterally rewrite an agreement even if North Korea lives up to its end of the bargain?

Beyond undermining U.S. credibility in talks with North Korea, refusing to certify Iran as part of an effort to negotiate better terms also signals to North Korea that any deal might be less advantageous than Pyongyang would be willing to accept. While pressure may bring North Korea back to the negotiating table, reaching an agreement with North Korea will require a tradeoff of benefits and risks on both sides. If the United States now wants better terms from Iran on the nuclear deal, a type of deal which North Korea has already indicated is unacceptable, decertifying Iran only moves the two sides potential negotiating positons further apart should talks become possible.

The decision on Iran also makes maintaining a unified international front with North Korea more difficult. U.S. credibility isn’t merely about North Korea’s willingness to trust the United States in any negotiations, but also that of our partners that the United States is working in good faith and that any agreement reached will be upheld as long as North Korea maintains the terms. If the United States cannot be trusted to keep its word should the political situation change, there is less incentive for countries such as China to bear the burden of sanctions to bring North Korea to the table.

At a time when the United States already faced a difficult nuclear crisis with North Korea, moving to unilaterally alter the Iran deal only complicates matters. The United States could now find itself dealing with two nuclear crises, more reluctance among allies and partners to help the United States, and a North Korea that has an additional reason to be skeptical of negotiating a deal with the United States, none of which are in the United States’ national interest.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Jen Morgan’s photostream on flickr Creative Commons.

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Contradictions in Trump’s UN Speech and Implications for North Korea Policy

By Troy Stangarone

As President Donald Trump addressed the United Nations General Assembly for the first time he asserted the need for a strong role for national sovereignty in international relations, but also called on the United Nations to resolve the now imminent threat from North Korea. While the ideas of sovereignty and international cooperation need not be in contradiction with each other, the potential tension between the two raises questions about the future approach to resolving the crisis with North Korea, as does President Trump’s suggestion that he might walk away from the nuclear deal with Iran.

In his remarks to the UN General Assembly, President Trump laid out a potentially interesting definition of sovereignty, but one that the administration likely needs to flesh out and clarify. In Trump’s view sovereign nations have “two core sovereign duties: to respect the interests of their own people and the rights of every other sovereign nation.” This definition is in tension with the more established definition of sovereignty from the Treaty of Westphalia that defined sovereignty as the right of states to rule over their territory without interference from other states. There is no expectation for the state to act in the interest of its own people.

In essence, President Trump has augmented the idea of non-interference in the affairs of other states with the idea of the state having a duty to look after the interests of its people and takes a more limited view of modern day multilateralism. In his remarks, President Trump makes clear that the United States does not seek to impose its form of government on others, so the obligations of the state to its people are not tied to a form of government, but rather whether that government is working in the interests of its people.

However, President Trump also seems to suggest that if a state is not meeting its obligations to its population it does not maintain the second aspect of sovereignty – the obligation of other states not to interfere in its internal affairs. In the modern era, the idea of a more malleable version of sovereignty is not uncommon. The European Union functions on the concept of pooling sovereignty to collectively achieve a higher purpose and, hence, accepts a degree of interference in the authority of the state. Or, perhaps more in the context of the United Nations there is the concept of the Responsibility to Protect, where UN member states take on a responsibility to intervene in the affairs of other states to preclude genocide, ethnic cleansing, and other war crimes. It seems unlikely that President Trump wanted to lay out such an expansive concept of the ability of states to intervene in the affairs other states, but in assigning the interests of citizens as one of the duties of states President Trump does seem to be laying out groundwork for when states have failed in their duties and lost their sovereignty.

While President Trump’s remark that the United States was prepared to “totally destroy North Korea” if the United States has to defend itself or its allies, less attention has been given to his remark that this is exactly the type of problem that the United Nations was designed to resolve.  However, his approach to sovereignty seems to make a stronger case for the United Nations to take action on the issue of North Korea due to the regime in Pyongyang’s failure to look after the interests of its citizens rather than the dangers of its nuclear program. While there is clear international consensus that North Korea’s weapons programs are a danger to international peace and security, the emphasis on citizens interests and lack of clarity on where the rights of nations ends potentially complicates dealing with North Korea as it raises questions about whether resolving the nuclear issue is sufficient.

If President Trump’s use of sovereignty potentially complicates collective action on North Korea, his suggestion that the United States might not remain in the nuclear deal with Iran does as well. The Iran deal has been suggested as a potential framework for a deal with North Korea. While Pyongyang has rejected such an arrangement, it does likely represent the starting point for both sides to think about a potential solution. Pyongyang will likely seek a more generous arrangement than what Iran received, while the concerns expressed by the Trump Administration suggest that it would seek an agreement that addressed more issues than merely North Korea’s weapons programs.

However, getting to that point requires finding the political space to negotiate an agreement that would stop North Korea’s weapons development and roll back its capabilities, which has long been the goal of increased UN sanctions. To work, the United States needs to have credibility as a negotiating partner to achieve a negotiated outcome. Leaving the deal with Iran would raise questions about the credibility of the United States in any negotiations with North Korea, but would also reinforce the idea that any deal reached with the United States could simply be changed by any future U.S. administration.

It would also potentially complicate cooperation with states in the region. Any successful agreement requires the continued cooperation of China and Russia to maintain pressure on North Korea. If the United States is not viewed as a credible partner by Beijing in reigning in North Korea’s behavior, it lessens the incentives for China to maintain pressure on North Korea to enter into talks and for all sides to abide by any agreements reached.

In many ways, President Trump’s speech at the United Nations was not a provocative as many have suggested. While President Trump is known for using stronger language than prior U.S. presidents, his suggestion that the United States would forcefully retaliate against North Korean aggression is not inconsistent with prior U.S. administrations and his call for the UN to resolve the crisis have been underplayed. However, his own remarks also raise questions about achieving those ends. Does his vision of sovereignty and a state’s obligations to its citizens suggest greater change in North Korea than many other states may be looking for? Will the administration’s actions towards the Iran nuclear deal undermine efforts to reach a deal with North Korea? These are two key questions which the administration needs to flesh out to avoid creating contradictions in its own policies.

Troy Stangarone is the Senior Director for Congressional Affairs at the Korea Economic Institute of America. A version of this article in Chinese also appeared in Dunjiaodu.com. The views expressed here are the author’s alone.

Photo from United Nations Photo’s photostream on flickr Creative Commons.

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As Chinese Tourists Continue to Drop, Korea Turns to the Middle East

By Jenna Gibson

As several KEI analyses have shown, South Korea’s tourism industry  has been one of the main casualties of China’s economic retaliation over deployment of the THAAD missile defense system. New estimates from the Korea Tourism Organization show that China’s retaliation could cost Korea up to 5 million tourists this year, five times as many as when the MERS outbreak significantly dampened tourism in early 2015.

In June 2017, Korea saw a 36 percent drop in tourist entries, due in large part to a 66.4 percent decrease in Chinese visitors compared to June 2016. At that time, Chinese tourists made up 48.8 percent of all entries into Korea – a figure that’s now down to 25.7 percent.

But the numbers also reveal some good news that illuminate an important avenue for future growth in Korea’s tourism industry. While Chinese visitors continued to drop, the number of tourists from the Middle East have jumped significantly, recording a 71 percent increase from June 2016 to June 2017.

And, perhaps more importantly, tourists from the Middle East spend significantly more during their time in Korea than those from other areas, according to a study by the Korea Culture and Tourism Institute. Their recent survey of tourists in Korea showed that Middle Eastern visitors spent an average of $2,593 each during their trip, followed by Chinese tourists at $2,059 each. The average for all visitors to Korea is significantly lower, at $1,625.

In order to cash in on this growing market, the Korean government and the tourism industry are focusing on providing more services for Middle Eastern tourists, including a push to increase the number of halal certified restaurants around the country. Just this month, 117 more restaurants received their halal certification, bringing the total to 252. In addition, many popular tourist attractions have added prayer rooms for their Muslim visitors, including Nami Island, Lotte World, and Coex Mall, as well as Incheon International Airport and Busan’s Gimhae International Airport.

MENA tourism graphic-01

Part of the drive for more tourists from the Middle East choosing to visit Korea is the explosive popularity of Hallyu across the region. Take Iran, for example. There, fascination with Korean culture started back in the mid-2000s, when the historical drama ‘Dae Jang Geum’ was broadcast on state TV and garnered 86 percent ratings nationwide. In a 2017 report of the most popular shows on Netflix around the world, Iran was only one of two non-Asian countries to put a Korean drama (2012’s Love Rain) on the top of their queues.

In June, CJ E&M, Korea’s largest media company, said it will be opening a Turkish unit to increase its presence in Turkey, where locals can’t seem to get enough Korean cultural content. Considering that the filming sites of many popular Korean dramas have become popular tourist destinations, this increase in the popularity of Korean TV shows could lead to overseas fans travelling to Korea to see the spot where their favorite drama couple fell in love.

With the Korean tourism industry continuing to focus on enticing Middle Eastern visitors as well as tourists from all parts of the world, there is certainly an opening to offset some of the losses from the drop in Chinese tourism over the last year or so. But there is still a long way to go – even with the huge increase in visitors, Middle Eastern tourists still only make up around 1 percent of entries into Korea.

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone. 

Image from yadem.hayseed’s photostream on flickr Creative Commons.

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Hallyu Sets its Sights on the Middle East

By Jenna Gibson

At the end of May, Korea’s largest media company announced it would be opening a Turkish unit to help create and promote local content for the Turkish market. They already have plans to film Turkish versions of popular Korean movies, and hope to move forward with more Korean-Turkish co-productions in the future.

CJ E&M is a Hallyu powerhouse, owning the music-oriented TV channel Mnet as well as popular cable channel tvN, responsible for several smash-hit dramas including 2016’s “Goblin.” With this move to increase its presence in Turkey, CJ is hoping to make new inroads for the Korean Wave in the Middle East.

Although the main markets for Korean pop culture abroad are still in East and Southeast Asia, the phenomenon has put down roots around the world, including in the Middle East. In Iran, for example, fascination with Korean culture started back in the mid-2000s, when the historical drama “Dae Jang Geum” was broadcast on state TV and garnered 86 percent ratings nationwide. In fact, in a 2017 report of the most popular shows on Netflix around the world, Iran was only one of two non-Asian countries to put a Korean drama (2012’s Love Rain) on the top of their queues.

Meanwhile, last year the United Arab Emirates became the first non-Asian country to host a KCON event after the United States. KCON, a music festival/cultural experience featuring some of the biggest k-pop stars as well as demonstrations of Korean food, beauty products, and more, drew more than 8,000 fans to its Abu Dhabi stop.

Scholars have speculated that one of the reasons Hallyu is so popular in the Middle East is because although some of the specifics are different, Korean dramas tend to focus on values that conservative audiences in the Middle East find relatable. According to one study of female fans of Korean pop culture in Iran, “Reflecting traditional family values, Korean culture is deemed ‘a filter for Western values’ in Iran.” The study dug further into online fan communities across the Middle East, showing that love of Korean pop culture allowed women to share a sense of community with fellow Hallyu fans. “The uni-culture cyberspace community of fandom has given Middle Eastern women confidence and a strong sense of group identity, sometimes for the first time.”

But the Hallyu movement is not just about giving fans a place to enjoy catchy dances or dramatic love stories. For the Korean companies that create Hallyu content and sponsor overseas events like KCON, it’s about getting fans to buy Korean.

“We see that there are a lot of business potential in many areas that are influenced by Korean culture, such as the beauty, IT and SOC markets,” Sul-joon Ahn, President of Music Division at CJ E&M, told Dubai News after the KCON event.

In fact, South Korea has been trying to create a “Second Middle East Boom,” focused on boosting industries like construction, infrastructure and energy. By capitalizing on the popularity of Hallyu, this push for increased Korean presence in the region can expand to include consumer goods and creative content.

CJ E&M’s expansion into the Turkish market could signal a new era of Hallyu, one that focuses on localization and domestic buy-in to boost the continued success of Korean pop culture around the world.

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone. 

Image from Republic of Korea’s photostream on flickr Creative Commons.

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Unfriending North Korea…With South Korea’s Help

By Jenna Gibson

On June 16, Uganda officially kicked North Korea to the curb, asking approximately 60 DPRK troops and state security officials to leave the country. Uganda was playing host to the North Koreans as part of a military exchange program – the UN recently reported that the North Koreans were providing police training to their Ugandan counterparts, including lessons on the use of AK-47s and pistols.

Why kick them all out now? It may be yet another sign that South Korean President Park Geun-Hye’s so-called Summit Diplomacy is working.

According to 38 North, South Korea described President Park’s recent international trips as “part of diplomatic efforts to enlist the international community to the effort to bring about change in North Korea on all fronts.”

Uganda is a perfect example of the strategy’s success. Ugandan President Yoweri Museveni first promised to cut military ties with the DPRK after his summit meeting with President Park. During her visit to Uganda, which was the first visit by a South Korean president to the African nation since 1963, President Park also signed 10 agreements to cooperate on defense, health, rural development and communications technology.

While South Korea has long invested in development aid in sub-Saharan Africa, the timing of this visit and Uganda’s subsequent split with Pyongyang is noteworthy, in part because it is hardly the first country that has recently given preference to Seoul after a visit from the Korean president.

In fact, Park’s 2016 itinerary almost reads like the most recent UN General Assembly vote on North Korean human rights. Uganda – abstain. Ethiopia – abstain. Kenya – abstain. Iran – no. It seems clear that President Park’s administration is focusing on those who still support North Korea, whether actively or by staying silent.

Take Iran, for example. In one of the most high-profile diplomatic moves of her administration, Park recently travelled to Tehran for the first bilateral summit between South Korea and Iran since the two countries established diplomatic relations in 1962.

Iran has long been seen as a friend to North Korea, purchasing arms and backing the Kim regime in the international sphere. In 2002, U.S. President George W. Bush famously linked the two as part of the “axis of evil,” along with Iraq. To see Iranian President Hassan Rouhani stand next to a South Korean President and declare his opposition to nuclear development on the Korean peninsula is no less than a sea change.

 In a recent KEI podcast that examined the historic trip, Iran expert Alex Vatanka clearly saw an opportunity for South Korea to make inroads with Iran.

“Much of what Iran has done in recent years in terms of outreach to certain countries around the world was driven by an almost ideological desire to as they would put it, challenge the global system,” Vatanka said. “Rouhani is very different. This Iranian president’s view, and why he was elected in 2013, is those countries are great, but they actually have nothing to offer us. They can’t contribute to the most important thing we are trying to fix, which is the Iranian economy.”

South Korea, in contrast, has much to offer Iran economically. In fact, Park Geun-hye left Tehran with promises to triple trade between the two countries from $6 billion to $18 billion annually. Using this leverage to her advantage, Park has been able to turn a former DPRK ally away from Pyongyang.

Across the world, the pattern may be repeating itself again in Cuba. Earlier this month, Foreign Minister Yun Byung-se visited Havana, despite a lack of formal ties between the two countries. Cuba has long supported its fellow communist country, making this visit particularly key for Seoul. “For an exceptionally long 75 minutes, our talks were very friendly, serious and candid,” Yun told South Korean reporters after the meeting. “We had a broad exchange of views on bilateral, regional and global issues.”

This strategy is hardly limited to high-level visits, though. Seoul has announced they will provide $1.5 billion in development assistance to Vietnam from 2016-2020, for example. And the South Korean administration has been working to turn Myanmar away from the North with infrastructure projects and trade deals since the country began opening to the international community in 2011.

These moves have not gone unnoticed in Pyongyang. In response to Park’s recent trip, the DPRK sent Kim Yong Nam, the country’s nominal head of state, to Africa as well. There, he met with leaders from nine countries, including Chad, Gabon, Congo, Burundi and Mali. Another high-level official visited Vietnam and Laos in June.

“Pyongyang tries to maintain positive relations where it can, with countries less closely tied with its rivals,” John Grisafi, NK News director of intelligence, said in a recent NK News article. If South Korea can continue to narrow the list of countries willing to side with Pyongyang, they may be able to successfully remove what remains of North Korea’s room to maneuver in the international sphere.

And it seems like that’s exactly what Seoul is doing. It’s too soon to tell how widespread and long-lasting these shifts will be. But for now, it seems North Korea’s isolation may finally be cemented, allowing sanctions to take their full effect.

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Korea.net’s photostream on flickr Creative Commons.

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Six Implications from the Mid-Term Elections for U.S Policy Towards East Asia

By Troy Stangarone

The 2014 mid-term elections will likely mark an important turning point in U.S. foreign policy and the Obama Administration. While presidential elections can bring in entirely new administrations, mid-term elections, especially those in the second administration of a presidency, can also serve as decisive moment. As administrations look to cement their legacy and power begins to wane as lame duck status sets in, administrations have often looked to foreign policy where they are less encumbered by Congress and have more freedom of action to build a legacy.

With Republicans winning a majority in the Senate for the first time in eight years, President Obama will face a Republican Congress for his final two years in office. The shift in power raises six issues for foreign policy in general and East Asia more specifically for the last two years of the Obama Administration.

Is Obama Already a Lame Duck?

Generally presidents look to foreign policy for achievements in their final two years in office and we should expect President Obama to do so as well. With a series of international issues to address such as a resurgent Russia and the crisis in the Ukraine, dealing with the Islamic State and the Assad regime in Syria, the nuclear negotiations with Iran, and North Korea, as well as economic issues such as trade policy, there should be a host of issues for the Congress to work on with the President.

Ronald Reagan and Harry Truman successfully worked across the aisle to advance important foreign policy objectives after mid-term losses with Reagan pushing arms control deals with the Soviet Union through Congress and Truman working with Republicans to lay the foundations of U.S. foreign policy after World War II with the passage the Marshall Plan and aid for Turkey and Greece.

However, as President Obama prepares to head off a series of summit meetings in Asia, the circumstances facing President Obama may be different than those Truman and Reagan faced. In exit polling from the elections, six out of ten voters said that they had negative feelings about the administration and for every two who voted to support it three voted to express opposition. This reservoir of concerns about the Administration’s policies could spill over into foreign leader’s perceptions of the Administration, as there are already suggestions may be the case in Europe and China. The international climate is different as well. China is seen by many as a rising power and the United States as one that is waning.  If President Obama is seen by foreign leaders as someone who is losing influence in the United States, coupled with concerns about the United States’ influence to play a role abroad, they pay less heed to him, making it difficult for President Obama to have similar foreign policy successes in his last two years in office.

The President’s upcoming trips to the annual APEC summit in Beijing, the East Asia Summit in Myanmar, and the G-20 summit in Australia may give us some initial insight into how President Obama’s new status is perceived abroad.

Governing the Senate Might Not Be So Easy

In initial comments after their victory Republicans touched on many of the right notes by expressing a desire to move past the “gridlock and dysfunction” of recent years and to be seen as a party that can govern, while the President identified trade, tax reform, and infrastructure spending as areas where he is willing to compromise with Republicans.

If Senator McConnell and Speaker John Boehner are able to work with Obama on an agenda that ends the gridlock, it could help to enhance the President’s position abroad by countering the narrative that his lame duck period has set in. With eyes soon set to turn to the 2016 elections, there is also an incentive for Republicans to demonstrate that they can do more than oppose Obama to enhance their chances of retaining the Senate and creating a favorable political environment for the Republican presidential nominee. However, governing the Senate might not be easy.

While Senator McConnell will likely have a 53 or 54 seat majority in the Senate, passing most legislation requires 60 votes to end debate. This means that Republicans will have to convince Democrats to cross the aisle to work with them to pass legislation. While some moderate Democrats such as Senator Joe Manchin could be expected to work with Republicans, the traditional pool of Senators expected to face tough elections in the next cycle may not be very promising for Republicans.  With 26 Republicans, as opposed to just 10 Democrats, up for reelection in 2016, there is a strong incentive for Democrats to block legislation not to their liking in an effort to win back the Senate in the next cycle. While retirements and other factors could change this, perhaps only two or three of the 10 Democrats up in 2016 will face tough reelection battles. In contrast, six Republican Senators are from states that President Obama won twice. In fact, two GOP Senators up for reelection in 2016 represent states that have consistently voted for the Democratic presidential nominee since 2000. Additionally, if Republicans are unable to develop a working agenda with President Obama and he moves into a lame duck period, Democrats will increasingly become less beholden to the White House and more focused on their own interests and the next election.

Beyond the challenges Senator McConnell may face from Democrats, he will have to deal with obstacles in his own party. Senator Ted Cruz can be expected to continue to push maximalist positions which would make compromise with Democrats more difficult and potentially divide more moderate and conservative members of the party. There will also be the desire of potential presidential candidate such as Senator Cruz, Senator Marco Rubio, and Senator Rand Paul to make their mark.

Republicans Might Be More Helpful on Trade, But It’s Still a Difficult Road Getting There

The prevailing logic is that Republicans are more supportive of free trade than Democrats, so a Republican Senate means that the President is more likely to receive the new grant of Trade Promotion Authority (TPA) that is needed to push key trade deals such as the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP) across the finish line. However, the likely path for TPP, let alone the conclusion of TPP and TTIP is likely to be more complex.

Given time constraints for the rest of the year, the current draft TPA legislation seems unlikely to pass in the lame duck session. If it does not, there are a series of factors that could impact the timing and passage of TPA. First, the current draft of the legislation was negotiated by House Ways and Means Committee Chairman David Camp, Senate Finance Committee Chairman Max Baucus, and Senate Finance Committee Ranking Member Orrin Hatch. Two of the three will be gone in the next Congress. Chairman Camp is set to retire and be replaced by either Representatives Paul Ryan or Kevin Brady. Senator Baucus is now Ambassador to China, having been succeeded by Senator Ron Wyden as Chairman earlier this year. Much as Senator Wyden has sought changes in the current draft, either Congressmen Ryan or Brady could seek modifications as well, if only to address concerns within their own caucus as many of the new members are expected to be more conservative than the ones they are replacing. Regardless, both Representatives Ryan and Brady co-signed a letter to USTR urging passage of TPA before the conclusion of the TPP talks, even if it is an agreement in principle.

Another factor could be immigration policy. Republicans will be watching the President to see if he follows through on promises to issue an executive order on immigration. Given the mistrust of President Obama that already exists among Republicans, especially in the House, any executive order could undermine support for granting President Obama TPA.

There is also the question of whether Republicans are willing to grant President Obama a trade victory. If he were to conclude the TPP and TTIP, those would be victories for the President, and significant ones at that. If the new Congress does not start off on good terms with the President, there could be increasing reluctance to grant him significant victories if other Republican priorities are not being addressed.

Given the potential political need to possibly update the draft TPA legislation, TPA may not pass Congress until the middle of 2015. If that is the case, the conclusion and passage of TPP and TTIP will move increasingly close to the beginning of the 2016 presidential cycle, potentially pushing their passage to the next administration.

More Defense Funding, for the Pivot to Europe?

One of the Obama Administration’s signature policies has been the pivot, or rebalance, to Asia. However, while initially well received by Democrats and Republicans alike for its increasing emphasis on Asia, the policy has come under criticism for being too heavy on defense. There are also concerns that the cuts from sequestration have gone beyond what is needed to adequately fund the pivot.  At the same time, the key economic component of the pivot, the Trans-Pacific Partnership talks, has moved more slowly than hoped, undermining the larger drive for increased economic engagement with the region.

There have also been concerns about the U.S. commitment to the pivot in Asia, where China seems to be the only country that believes it is taking place. With the U.S. being drawn back into the Middle East to deal with the troubles in Iraq and Syria and the deterioration of relations with Russia, questions have been raised regarding whether the U.S. has the resources to become more deeply involved in Asia.

With Republicans now in full control of Congress, efforts could be made to finally address the cuts to defense under sequestration, but some of those increases could go towards strengthening the U.S. commitment to Europe because of Russia’s increasingly aggressive approach with its annexation of Crimea and the increasing frequency of military flights into and around European airspace. While increased defense spending should lead to additional resources for the Asia-Pacific region, the push for the U.S. to deploy more resources to Europe and Middle East will likely continue to raise concerns about the U.S. commitment to Asia.

Strategic Patience May Be Increasingly Challenged

President Obama came to office with a willingness to abandon adversarial relations with states such as North Korea if they would unclench their fists. Early in his term, North Korea rejected efforts at dialogue, though the Administration later tried to engage in dialogue with the Kim Jong-un regime when he came to power. However, despite this willingness to reach out to states such as North Korea, the Administration’s policy towards North Korea has largely consisted of what is often referred to as strategic patience.

Strategic patience is premised on the idea that the cycle of provocations followed by negotiations and rewards for North Korea to not engage in bad behavior needed to be broken.
Additionally, the United States could afford to wait out North Korea while its actions isolated it from its neighbors. However, as North Korea advanced its nuclear program through continued nuclear and missile tests, the policy has come under increasing scrutiny.

Without a Democratic majority in the Senate to defer to the administration’s policy preferences, North Korea policy could increasingly come under greater pressure from Congress. A Republican Senate is more likely to bring up legislation such as the North Korea Sanctions Enforcement Act of 2014, which passed the House earlier this year. Should North Korea engage in further missile or nuclear tests, Republicans would likely place increasing pressure on the Administration to move away from strategic patience towards a stronger sanctions regime.

If the Nuclear Talks with Iran Fail, There Might Not Be Enough Political Capitol to Negotiate With North Korea

While the Six Party Talks have not met to discuss North Korea’s nuclear issue since the Bush Administration was still in office, the Obama Administration has pursued a diplomatic path to try and rein in Iran’s nuclear ambitions. Those talks are not directly related to the North Korean nuclear issue, but they could have an impact on the ability of the administration to pursue talks on North Korea’s nuclear program.

If the talks, which are in the final months of an initial negotiation period, are successful they could serve as a demonstration to North Korea of the advantages if it engages in meaningful denuclearization talks with the United States and its partners in the Six Party Talks. However, should the talks with Iran fail or if Congress rejects any agreement reached in the talks, it is unlikely that that the Administration would have the political capital needed to try and advance talks with North Korea. Republicans are skeptical of the talks with Iran, and remain so in regards to North Korea. If the Obama Administration is unable to successfully conclude a deal with Iran, it is unlikely that the United States will be able to engage in meaningful denuclearization talks with North Korea prior to the next administration taking office in 2017.

Concluding Thoughts

As a result of the mid-term elections, the next two years should be a period of both opportunities and challenges for the Administration and Republicans in Congress that will help to lay the groundwork for the foreign policy debate for the next presidential election.  However, for policy towards East Asia there should still be a degree of continuity as, while Republicans and Democrats may have differing perspectives on some issues, they are largely on the same page when it comes to matters relating to East Asia.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the authors alone.

Photo from The White House’s photostream on flickr Creative Commons.


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Korea to Halt Imports of Iranian Oil

By Troy Stangarone

With sanctions by the United States and the European Union continuing to tighten on Iran, Korea has announced that it will halt imports of Iranian oil as of July 1. Korea’s decision makes it the first of Iran’s major export markets, and a key Asian consumer of Iranian oil, to fully cut off its supply of Iranian crude. Korea’s move contrasts with Iran’s other key export markets and could pay dividends to Korea in the future, but does not come without costs.

While the United States recently granted Korea a 180 day waiver from U.S. financial sanctions, the European Union has refused to grant a waiver from its ban on the sale of protection and indemnity insurance (P&I) for shipments of Iranian oil. The EU’s sanctions have proven effective because 90 percent of P&I is handled through European insurers, including 100 percent of Iranian shipments. Without the ability to purchase insurance for their shipments, Hyundai Oilbank and SK Energy would have been unable to insure a tanker’s cargo, its liability after a collision, environmental pollution and the risk of war – a real potential given Iran’s prior threats to seal off the Strait of Hormuz and Israel’s unease with Iran’s nuclear program.

Asian countries are the biggest purchasers of Iranian oil, accounting for 60 percent of Iran’s oil exports. However, in contrast with Korea, the 4th largest purchaser of Iran’s crude oil, Japan, India, and China have all sought ways to get around the EU ban. Japan recently passed a law to provide its importers with sovereign, state based, insurance for their imports,  an option Korea choose not to take. India and China have reached varying deals for Iran to provide insurance and ship the oil.

While Korea imports almost 10 percent of its oil from Iran, it has been preparing for this eventuality. Had it not received a waiver from U.S. sanctions, it would have likely had to take similar steps. Knowing that, Korea has essentially taken three measures to address the crisis. First, it sought to build up its oil reserves.  It stockpiled Iranian oil, increasing imports by 57 percent in April, before declining by 40 percent in May as it worked to secure a waiver from the United States. At the same time, Korea sought out alternatives to Iranian oil during President Lee Myung-bak’s trip to the Middle East in February. The deals struck on that trip have allowed Korea to replace its imports of Iranian crude with other suppliers in the Middle East. According to Reuters:

Shipments from Kuwait in the first five months rose 23.3 percent to 348,493 bpd, while those from Saudi Arabia rose 7.9 percent to 838,678 bpd. Imports from the UAE increased 8.6 percent to 258,263 bpd, the KNOC data showed.

January-May imports from Qatar rose 14.3 percent to 280,829 bpd.

In the short term, Korea has addressed its energy needs in a manner that reduces its risks from the uncertainty surrounding Iran’s nuclear program. It will also have distinguished itself from its competitors in the region by not skirting the sanctions. This will likely not go unnoticed by the United States, the European Union, and numerous Middle Eastern states that have concerns about Iran’s nuclear program. This could benefit Korea through deeper ties with other states in a key region for meeting Korea’s energy needs.

However, there are potential costs. Iran has not yet made a statement on Korea’s decision, but Korea does have broader interests in Iran that its decision to halt imports could affect. First, Korea has developed a significant commercial relationship with Iran and it has been becoming an increasingly important market for Korean exports. Over the last decade, Korea has seen its exports to Iran increase from $1.2 billion to $6.0 billion last year. Iran could seek to limit the access of Korean exports to its markets in retaliation. Additionally, should a solution be found to the Iranian nuclear crisis, Korea could find itself less welcome in Iran than Japan, India, and China, all of whom will continue to import Iranian oil.

While the potential for costs exists, Korea has deftly handled a difficult situation. As an energy importer, it has managed to replace most of the oil that it would have lost and ensure that its broader economy will not be impacted by either U.S. or European sanctions on Iran. It also avoided having the state take on additional liabilities by not choosing to supply insurance for Iranian shipments. At the same time, the steps it has taken should also help Korea to deepen its ties with more stable energy suppliers in a volatile region.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute. The views expressed here are his own.

Photo from Daniel Ramirez’s photo stream on flickr Creative Commons.

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About The Peninsula

The Peninsula blog is a project of the Korea Economic Institute. It is designed to provide a wide ranging forum for discussion of the foreign policy, economic, and social issues that impact the Korean peninsula. The views expressed on The Peninsula are those of the authors alone, and should not be taken to represent the views of either the editors or the Korea Economic Institute. For questions, comments, or to submit a post to The Peninsula, please contact us at ts@keia.org.