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.

By Robert R. King

In the last few days the United States and Iran faced off in their most recent and one of their most dangerous confrontations.  North Korea’s leader Kim Jong-un was no doubt watching more intently and more anxiously than most other world leaders.  It is hard to believe that Chairman Kim has not been thinking in very personal terms about the situation involving Iranian General Qasem Soleimani and Iran’s Supreme Leader Ali Khamenei.

A clear indication of Pyongyang’s intense interest in the U.S.-Iran confrontation is the fact that North Korea’s tightly-controlled news media has been unusually quiet on the topic.  The media avoided comment or even giving coverage to the actions taking place between Washington and Tehran.  North Korean media cited the public Chinese and Russian criticism of the U.S. drone strike in Baghdad, and reported that Soleimani had been killed.  The North Korean story did not mention Soleimani’s high position in the Iranian military hierarchy nor give an indication of his importance in Iran.  Kim Jong-un’s visit to a fertilizer factory at the time of these events was given considerably more media coverage in Pyongyang.

North Korea, Iran and the “Axis of Evil”

North Korea has been consistently placed in the same category as Iran by U.S. presidents over the last two decades.  Additions and deletions have been made to U.S. listing of rogue regimes, but the only two countries consistently on the list are Iran and North Korea.  Nearly 20 years ago shortly after the 9/11 destruction of the World Trade Center in New York City,  President George W. Bush linked North Korea and Iran when he included both countries plus Iraq, which was invaded shortly afterward, in the memorable phrase “Axis of Evil.”  During the Bush Administration, John Bolton added Cuba, Venezuela, and Libya to the Axis of Evil.  The revolutionary overthrow and execution of Muammar Qadaffi a few years later resulted in the removal of Libya from the list.

In his first State of the Union Address in January 2018, Donald Trump singled out four “communist and socialist dictatorships” for his own list of rogue regimes threatening world peace.  Trump’s list was Iran, North Korea, Cuba and Venezuela.  The fact that Iran and North Korea are consistently on the naughty list must make Kim Jong-un very attentive to how the U.S. president is dealing with Iran.

On January 8, just a few days after the death of Iranian General Soleimani in the U.S. drone strike in Baghdad and the day after Iranian missiles were fired in retaliation against U.S. military bases in Iraq, President Trump delivered a closely watched White House speech on Iran.  Officials in Pyongyang were probably paying very careful attention to Trump’s speech.

Pyongyang is also very likely watching closely the popular upheaval and protests in Iran that followed just a few days later when the Iranian government belatedly admitted that one of its missiles had mistakenly shot down a Ukrainian commercial aircraft killing 176 mostly ethnic Iranian passengers.  In light of North Korean and Iranian cooperation on nuclear and missile issues, as well as both countries’ hostility to the United States, Pyongyang is probably paying very close attention to what has transpired between Tehran and Washington.

North Korea’s Ties with Iran on Nuclear and Missile Development 

The two countries have cooperated in the development of missile delivery systems.  North Korea provided scud missiles to Iran in the 1990s and probably earlier during the Iran-Iraq war, but Iran has continued to develop its own missile capabilities.  Iranian missiles appear to have more accurate targeting capability than we have seen thus far from North Korean launches in the last few months.

Public information about nuclear cooperation between Tehran and Pyongyang is limited, but in the past North Korea shared nuclear technology with countries hostile to the United States in the Middle East.  A North Korean-built nuclear reactor in Syria was destroyed by the Israeli military before it was completed.  The International Atomic Energy Agency confirmed that the destroyed facility had the capability to produce nuclear weapons-grade materials.  No similar nuclear smoking gun has been identified in the case of Iran, but there are convincing indications that North Korea and Iran have aided each other in their missile and nuclear quest.

President Trump’s efforts to work with Kim Jong-un to reduce tensions on the Korean peninsula have largely foundered over North Korea’s nuclear aspirations.  A path forward on the nuclear issue was not identified in working-level discussions prior to the Hanoi Summit between President Trump and Kim Jong-un, and that was the reason the summit failed.  The first sentence in President Trump’s January 8 speech on the current crisis with Iran—even before the President said “Good morning” to the assembled journalists and dignitaries—was this statement: “As long as I’m president of the United States, Iran will never be allowed to have a nuclear weapon.” That first statement was only then followed by a “Good morning” and the information that no Americans were harmed in the Iranian missile strikes on U.S. bases in Iraq just a few hours earlier.

The unequivocal reaffirmation of opposition to nuclear weapons for Iran was likely interpreted in Pyongyang by Kim Jong-un as a very negative signal with regard to the possibility of some accommodation with the United States.  Kim has been adamant in insisting that he intends to maintain and enhance North Korea’s nuclear and missile capability.

Trump’s Whims, Not National Consensus is the Basis of U.S. Policy

A red flag warning to Kim Jong-un from President Trump’s action against Iran is that U.S. policy is not based on a broad national consensus.  Policy changes take place at the whim of the person who happens to be in the White House.  Trump made that point clear in his January 8^th White House speech on the Iranian missile attacks on U.S. military facilities in Iraq.  He harshly criticized by name his predecessor, former President Barack Obama.

Trump also blamed the multinational agreement to limit Iran’s ability to develop nuclear weapons, known as the JPCOA (Joint Comprehensive Plan of Action).  This agreement was negotiated with the participation and support not only of the United Sates but also the other members of the UN Security Council (China, France, Russia and the United Kingdom) as well as Germany and the European Union.  The bottom line message from the President’s speech and U.S. military actions is that policy changes with a change in leadership.  Policy changes at the whim of the person who happens to be in the Oval Office at the time.

In light of U.S. actions involving Iran over the last few weeks, the aggressive U.S. action against one of North Korea’s few friends, as well as the idiosyncratic personal role played by President Trump are likely to make the North even more cautious about making any serious long-term changes in its relationship with the United States.  Suspicion and caution about United States intentions raised by the Iranian actions will likely make further progress on U.S.-North Korean relations even more difficult and unlikely.

Robert R. King is a Non-Resident Fellow at the Korea Economic Institute of America. He is former U.S. Special Envoy for North Korea Human Rights.  The views expressed here are his own.  

Photo from Peyman Abkhezr’s photostream on flickr Creative Commons.

By Stephan Haggard

In lieu of a New Year’s speech, Kim Jong -un convened an unusual plenum of the Central Committee in December, issuing a widely-distributed Report on the meeting in its stead. What was said—and what it augurs for 2020—are considered in two parts: the bargaining with the United States, which has gotten most attention, and the economic messages—taken up tomorrow–which are equally if not more important.

The Plenums of the last two years—which appear to be augmented with personnel well beyond the Central Committee narrowly conceived–have been consequential. The April 2018 party plenary came at the beginning of the summit era, and carried a message—however equivocal—of a willingness to talk. The April 2019 plenum, by contrast, followed on the failure in Hanoi and was decidedly darker in tone. It set in train the sustained limbo—broken briefly by the handshake at the border and the Stockholm meetings–that characterized U.S.-DPRK relations for most of 2019.

Plenums are designed to outline broad policy lines that pertain to both external and internal affairs. There can be little doubt, however—given the year-end deadline given by Kim Jong-un for progress on negotiations with the U.S.—that this one was sending a foreign policy message. See it as the “Christmas gift” that Vice Minister of Foreign Affairs Ri Tae Song promised in early December.

Coming early in the work report is a long passage on the technological advances made in the country’s weapons programs, an admission—were one needed—that the regime has not been standing still. In addition to the 19 short-range missile tests, tests the Trump administration has largely shrugged off, other development activities have clearly not abated. The core message: time is not in fact on the side of the United States.

What capabilities, exactly? Two are of most central strategic significance. The first is reflected in the highly public engine test at the Sohae Satellite Launching Ground, a facility that Trump personally claimed Kim Jong-un had promised to destroy. The test is a reminder that the regime has multiple programs aimed at a credible inter-continental capability, and these have continued despite the self-declared moratorium on long-range missile tests.

The second message is that the regime remains set on securing a second-strike capability, and thus a more assured deterrent against any possible U.S. military action (however low a probability it may seem to us). The report makes mention of the fact that the U.S. maintains a preventive option, claiming disingenuously that the U.S. sees North Korea as a “target of its preemptive nuclear strike.”  This capability has been signaled through tests showing more competence with solid fuel rocketry, a long-standing objective. Solid-fuel shortens launch times, and thus increases mobility. A submarine-launched capability serves the same purpose; tests related to such a capability were undertaken just in advance of Stockholm. Even if it would seem that an SLBM capability was pretty far off, we have made that miscalculation about North Korean engineering capabilities before.

The report’s analysis of the current state of diplomatic play is virtually a mirror image of the analysis of North Korean behavior in the U.S.: that North Korean dickering is simply a pretext for developing capabilities that will get harder and harder to shut down. The North Korean interpretation, by contrast, is that the U.S. is playing the same game, “wasting time away under the signboard of dialogue and negotiations,” while at the same time keeping the sanctions regime in place.

The United States has downsized, downplayed and even canceled exercises. This has not been enough for Pyongyang, which continues to treat any drills and the shipment of “ultra-modern warfare equipment” as signs of bad faith. Yet it is also noteworthy that the report makes particular mention of the “more than ten independent sanctions measures” the U.S. has undertaken outside of the UNSC framework, a reference to secondary sanctions Treasury has imposed to reduce leakage.

The report boasts that “the world will witness a new strategic weapon to be possessed by the DPRK in the near future”; I leave speculation on what that might be to others, but given the multiple missile programs the regime is juggling simultaneously, Pyongyang’s options are surprisingly wide. The result is that bargaining is about to shift from the conference table (such as it was) to an end to the moratorium, a resumption of testing and whatever conciliatory or escalatory measures the Trump administration chooses to make.

Despite these threats, the report also leaves open a diplomatic crack. While the regime will “reliably put on constant alert the powerful nuclear deterrent capable of containing the nuclear threats from the U.S.,” it also notes that “the scope and depth of bolstering our deterrent will be properly coordinated depending on the U.S. future attitude to the DPRK.” Military threats are never distinct from diplomatic objectives; they are a complement to them. The objective: to force concessions from the United States as a precondition for a resumption of talks at any level.

To assess North Korea’s bargaining position, however, we need to consider the economic landscape. That landscape necessarily takes us into where China stands on the current state-of-play; I address that issue tomorrow.

Stephan Haggard is the Lawrence and Sallye Krause Professor of Korea-Pacific Studies, Director of the Korea-Pacific Program and distinguished professor of political science at the University of California – San Diego.  The views expressed here are the author’s alone.

Photo from the Kremlin’s website.

By Mark Tokola

The Trump Administration’s precipitous decision to remove American troops from Northeast Syria, where they had been allied with Kurdish forces in opposing ISIS, and had been deterring Turkish forces from attacking the Kurds, raises questions regarding the wisdom of relying on the United States.  Of course, the U.S. commitment to have forces in the region had not been open-ended.  They would have had to leave at some point.  The shock came from the withdrawal coming without warning and apparently without a plan regarding what would happen next.  The move seems to have taken everyone by surprise: the Kurds, U.S. allies, and even the U.S. government outside of President Trump’s innermost circle—if he had told anyone at all ahead of his announcement.

The role and mission of U.S. troops deployed abroad is always open to discussion and policies can change.  Even surprise is not necessarily a bad thing.  Tactically, there are advantages to surprising adversaries.  It is hard to ever imagine a circumstance, however, when one should surprise an ally, particularly in the battlefield.  And if the surprise consists of suddenly leaving an ally to face an enemy alone, it will be hard to justify for any reason.

South Korea is among the countries most dependent on the United States for its security.  It faces an overtly hostile North Korea and a China that often applies pressure on South Korea, for example in its opposition to South Korea deploying a defensive anti-missile system, THAAD.  South Korea has integrated its armed forces with those of the U.S. in a Combined Forces Command (CFC) and has forgone developing its own long-range missiles, and perhaps even a nuclear weapons program, because of its trust in U.S. extended deterrence and U.S. commitment to the defense of the Republic of Korea.  How will South Korea view the U.S. abandonment of the Kurds?

First, the plight of the Kurds is not an abstract and distant concept for South Koreans.  During the Iraq War, South Korean provincial reconstruction teams (PRTs) operated in the Kurdish areas of Northern Iraq.  I visited a South Korean PRT is Irbil, Iraq in 2007 and saw first-hand the warm relationship between the South Korean teams and Kurds they were helping train in practical, civilian skills.  The South Koreans also saw firsthand the personal relationships between the Americans operating in the area and the Kurds.  I have to wonder what they are thinking today.

There are differences between what had been considered the U.S. commitment to protect the Kurds in Northeast Syria and the wartime and treaty alliance with South Korea.  The former was a mutually expedient alliance, put together to serve specific and temporary purposes in the complicated and unpredictable context of the Middle East.  It was not an alliance between countries.  It was not a mutual defense pact.  Perhaps this should be enough to reassure South Korea that its case is different and it need not worry about its reliance on the U.S. for its security.

And yet, South Koreans are concerned about U.S. reliability.  They have found themselves on unsteady ground with the United States, whether going from the U.S.-Korean Free Trade Agreement being called a “gold standard” to “the worst agreement ever” in the course of a year, to burden sharing demands from the United States that have quintupled from a level which the U.S. had found satisfactory, to a unilateral suspension of joint military exercises that South Korea had agreed were essential to force readiness as the result of the first Trump-Kim summit in Singapore.  Any of these might have been the result of an adjustment in U.S. foreign policy.  Taken together, they look less like “America First,” and more like, “Unreliable America.”

The quotation about countries having “no permanent friends, only permanent interests,” has been attributed to Henry Kissinger, Lord Palmerston, and Charles de Gaulle, among others.  Maybe they all said it.  The reason it appears so often is that it introduces a dose of realism when politicians get too carried away in romanticizing relations between countries.  There is not much point to an alliance that doesn’t serve the allies’ long-term interests.  The key phrase, however, is “long-term.”  The United States has benefited enormously for over seventy years from having long-term allies, even when their relationship has gone through inconvenient or aggravating periods.  Russia and China envy the global U.S. alliance system and are attempting to emulate it—whether through Russian permanent bases abroad or through the Chinese Belt and Road Initiative—even as they watch the U.S. weakening its ties to allies.

An alliance is valuable almost only in so far as it is reliable.  The United States has every right to expect allies to proportionately bear the burden and expense of their alliance.  Allies in turn have a right to expect the United States to act reliably.  The U.S. withdraw of troops from Syria, on top of the U.S. withdrawal from the Paris climate agreement, intermediate nuclear forces (INF) agreement with Russia, the Trans-Pacific Partnership (TPP), and other commitments—you can make your own list—puts U.S. reliability in question.  That is tough on alliances, even one so apparently firmly established the one between the United States and South Korea.

Mark Tokola is the Vice President of the Korea Economic Institute of America. The views expressed here are his own.

Photo from Morning Calm Weekly Newspaper Installation Management Command, U.S. Army’s photo stream on flickr Creative Commons.

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

• The Ministry of National Defense announced plans to loosen physical standards for eligible conscripts. This aims to help the military meet its manpower needs.
• Simultaneously, the Ministry of Patriots and Veterans Affairs recognized Ha Jae-heon, a former Army soldier who lost his legs to a North Korean landmine, as having been “wounded in combat.”
• Observers see the elevation of Ha’s designation from “wounded while in public service” as part of an effort to publicly underscore the government’s appreciation of servicemen.

Implications: The South Korean government’s effort to prevent rapid aging from affecting its military readiness may incur backlash from young men who already feel disenfranchised. While ongoing reforms hedge against the inevitable reduction in military personnel, the government appears to also place emphasis on public outreach to encourage military service. This is evident in improvements in military welfare and the government’s efforts to promote positive images of military service. In particular, men wounded in uniform are now receiving higher compensation to ameliorate negative perceptions.

The government also decided to increase manpower by loosening physical standards for eligible conscripts. This decision has already sparked a backlash among many young men who see the male-only draft as a hindrance to their job prospects and welfare. This cohort of conscription-eligible young men already displays dissatisfaction with the incumbent administration. According to a Gallup Korea poll in September, only 31% of men in their 20s have a favorable view of the government. Only men in their 60s have responded with a lower favorability towards the incumbent administration.

Context: The number of conscripts fell from 291,000 in 2009 to 253,000 in 2018. This corresponds with the shrinking population in the past decade. The number of men eligible for conscription is expected to fall below 250,000 after 2022. As a result, even if 90 percent of young men serve in the armed forces as a volunteer or conscript, South Korea will have to ensure future preparedness with a drastically smaller military.

Korea View was edited by Yong Kwon with the help of Soojin Hwang, Hyoshin Kim, and Rachel Kirsch.

Picture from the U.S. Department of Defense website

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

• South Korea looks to assume wartime operational control (OPCON) from the United States by 2022.
• A survey conducted by the ASAN Institute in February revealed that 40% of South Koreans supported the planned transfer, while 32% advocated postponement and 11 called for the plan to be eliminated altogether.
• A group of retired deputy commanders from the Combined Forces Command (CFC) urged the Moon administration to postpone these changes until after North Korea’s denuclearization.

Implications: A long-established progressive-conservative flashpoint, South Korea’s assumption of OPCON continues to divide people along partisan lines despite growing criticism of U.S. government’s North Korea policy by people on all political spectrums. The conservatives’ strong support for the status quo is partly rooted in the fear that the U.S.-Korea military alliance may begin to unravel if Seoul regains OPCON. This aversion to potential abandonment outweighs conservatives’ growing dissatisfaction with Trump’s policies towards the Korean Peninsula, particularly his amicable posture towards Kim Jong-un. This also overcomes bipartisan misgivings around the Trump administration’s demand for more money to host U.S. troops in South Korea. The opinion of CFC deputy commanders will further embolden conservative opposition to President Moon’s current push to accelerate OPCON transfer.

Context: Domestic politics aside, South Korea still faces several barriers before it can secure OPCON. First, the South Korean military must pass a test to validate its capabilities. Second, the two countries must conclude negotiations on the role of the United Nations Command post-OPCON transfer. In recent months, these talks have reached a significant impasse. As such, the timeline of OPCON transfer may be delayed despite the Moon administration’s plans.

Korea View was edited by Yong Kwon with the help of Soojin Hwang, Hyoshin Kim, and Rachel Kirsch.

Picture from UNC – CFC – USFK flickr account

By Mark Tokola

On Thursday, July 25, North Korea launched two, (reportedly) short-range, missiles into the sea west of Japanese waters. News reports say that they traveled to distances of 430 and 690 kilometers, and flew low, no higher than 50 kilometers in altitude. Some analysts believe that the projectiles were part of North Korea’s newly-developed KN-23 arsenal, a short-range ballistic missile that resembles Russian-designed Iskander system. The weapon was also tested in May ahead of President Trump and Kim Jong-un’s meeting at the Demilitarized Zone on June 30.

Although these missiles do not have the same range as the ICBMs that North Korea tested in 2017, the KN-23 is sophisticated. The KN-23 reportedly can change direction and its low trajectory can help evade missile defense systems.  It apparently is designed to strike with accuracy. They may not threaten the U.S. homeland, but they certainly threaten South Korea and Japan.

What is North Korea signaling with this test, if anything?* In retrospect, North Korean missile testing in 2017 seemed to have adhered more to a weapons development and engineering timetable than to any diplomatic maneuvering or special anniversaries. They tested when they were ready to test. North Korea’s stepped-up testing schedule enabled Kim Jong-un to announce in his 2018 New Year’s speech that the program had been completed.

However, diplomacy has come to the fore in 2018 and 2019 and it seems more probable that North Korea’s May 9 and July 25 missile tests were intended to message something to someone. It also may not be coincidental that these missile test came just days after photographs were released of Kim Jong-un standing next to a new North Korean submarine under construction. It is just not clear what the message is, or to whom it is directed.

American commentators tend to assume that the North Korean missile tests were a message to the United States, perhaps to urge a resumption of negotiations or to increase North Korean leverage for the talks to come. Conversely, it could be argued that the missile tests are intended to message the opposite, that North Korea does not mind if its behavior leads to a delayed resumption of talks. They may want to show that sanctions are not having that much effect and time is on their side.

There are several possible interpretations of the message. Might it be directed towards South Korea rather than towards the United States? “The U.S. dismisses short-range missiles as unimportant but they can hit you. You should deal with us.” Or the message may be meant for Japan. “Our missiles tests are aimed in your direction for a reason. Ease up on your hardline policies towards us, or else.” Or maybe China? “You want stability in Northeast Asia? Then get the U.S. to make a serious offer to ease sanctions.” Kim Jong-un’s missile test messaging might even be directed towards his hardline domestic constituency. “You can stop worrying about diplomacy leading to North Korean weakness.  Support me.  We’re developing new and deadly North Korean weapons.” Or it could be some combination of the above.

There is no way to be sure what North Korea is signaling. Pyongyang may be frustrated that we are not interpreting their signals correctly and are not responding to them as they would wish. What the United States can do is to interpret the possible signals in ways that advance U.S. and South Korean interests.  If we want talks to resume, we should not interpret the missile tests in ways that would derail them. Whatever the intended message is, U.S. and South Korea policymakers should see the short-range missile tests and think: “Note to self: North Korean nuclear weapons and long-range missiles are not the only threats North Korea poses.”

What does North Korea mean by the tests?  When movie mogul Samuel Goldwyn was asked about messages conveyed in movies, he reportedly said: “If you want to send a message, use Western Union.”  It would be helpful if North Korea would be more explicit about its wants and what it is offering.

*The day after this was posted, Kim Jong-un made a public statement that the missile test was meant as a warning to South Korea to stop joint military exercises with the U.S. and to stop modernizing its military forces.

Mark Tokola is the Vice President of the Korea Economic Institute of America. The views expressed here are his own.

Picture from Korea Central News Agency

By Troy Stangarone

Last week two oil tankers were attacked in the Gulf of Oman. The attack comes after four tankers were attacked in the Persian Gulf in May. While the United States has argued that Iran is behind the most recent attacks, the growing confrontation between the United States and Iran has deeper implications for South Korea.

As a country without substantial domestic energy resources, South Korea is highly dependent upon foreign imports for its energy supplies whether it be oil and natural gas, coal, or the nuclear fuel to run its nuclear power plants.

South Korea uses petroleum and other liquid based fuels for 44 percent of its energy consumption, including for fuel for transportation, power generation, and its petrochemical sector. Liquefied Natural Gas (LNG) accounts for another 14 percent of South Korea’s energy consumption and is used in power generation, transportation, and other sectors.

South Korea’s dependence on imports for energy is also a dependence on the Middle East for imports of petroleum. In 2018, 72.9 percent of South Korea’s crude petroleum imports by value came from inside the Strait of Hormuz. South Korea’s purchases of LNG tend to be more diversified, about 45 percent are also from the Middle East.

With imports from Iran in 2018 beginning to decline from the resumption of U.S. sanctions, to increasing imports from the United States, Russia, and few others outside of the Middle East, South Korea’s imports from the region 2018 were down from 82 percent in 2017.

The significance of the Strait of Hormuz, and South Korea’s dependence on suppliers inside it, is that it is the narrow passage way which divides the Persian Gulf and the Gulf of Oman. This is a critical transit point for global energy exports as 30 percent of the world’s oil exports come from the Middle East. It also boarders Iran, which has threatened to close if the U.S. tries to block Iran’s access to the strait. Iran has also threatened to close the strait in the past.

If Iran attempted to close the Strait of Hormuz, it would have significant implications for South Korea.

South Korea’s dependence on the region for such a significant amount of its energy consumption makes it susceptible to the current tensions in the Middle East in terms of price and supply. After an initial spike in the price of Dubai crude, the benchmark for South Korean oil imports from the Middle East, after the most recent attack on oil tankers markets seem to have calmed. However, some analysts have suggested that prices of Brent crude, the benchmark for the United States, could rise to $100 a barrel from its current price of around $62 today[1].

The prospect for the current tensions between the United States and Iran to grow into a wider conflict will only be one factor on global energy prices. With the current U.S.-China trade tensions dampening global growth, demand for petroleum could decline and act as a counter weight on prices to U.S.-Iran tensions.

If current tensions between the United States and Iran were to escalate to a wider conflict, the supply of oil on global markets would play an important role in maintaining prices, but with the U.S. also trying to cut off Venezuelan oil exports global oil markets could be tighter than expected.

The ability of the United States to build a coalition to protect ships transiting near Iranian territory would also play a factor in the availability of supply and the stability of price. If the United States was unable to build a coalition to defend oil and LNG shipments from the Middle East, South Korea could find itself facing both rising energy prices and an energy shortage if supplies from the Middle East were disrupted.

In the short-term there is little that South Korea can do to insulate itself from instability in the region, but that also means it has a significant interest in the United States and Iran avoiding a wider conflict in the dispute over Iran’s nuclear program. Over time continuing to diversify its supply and moving more towards renewable energy would help to reduce South Korea’s susceptibility to the unpredictability of the Middle East.

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.

Graphics by Juni Kim, Program Officer at the Korea Economic Institute of America.

Photo from the Official U.S. Navy Page’s photostream on flickr Creative Commons.

[1] Dubai crude tends to be more expensive than Brent crude, but most of the analysis is done in Brent crude prices.

By Phil Eskeland

Yesterday, the U.S. Senate voted by a wide bipartisan margin for an amendment expressing opposition to a precipitous withdrawal of U.S. forces from Syria and Afghanistan.  Nearly every Republican Senator and more than half of the Senate Democratic Conference supported this amendment.  This vote comes after confusing pronouncements from the Trump Administration that U.S. troops would soon be leaving Syria and Afghanistan.  It also comes just one week after another legislative effort, offered by Senate Minority Leader Charles Schumer (D-NY), to oppose the lifting of sanctions against a Russian oligarch close to Russian President Vladimir Putin, which garnered the support of not just every Senate Democrat, but also 11 Senate Republicans.  What was notable about yesterday’s vote was the author of the amendment:  Senate Majority Leader Mitch McConnell (R-KY), who sets the legislative agenda for Senate Republicans and, by practical effect, for President Donald Trump.

Last year, there were a few examples of the Republican-led Congress blazing its own trail in setting some aspects of U.S. foreign policy apart from the Trump Administration such as a rare prohibition on the ability of the President to waive sanctions against Russia.  However, with the departure of some key national security advisers and Cabinet officials during the past year who were thought to be the “adults” in the room to manage President Trump divergence from traditional Republican orthodoxy on foreign policy and with the gains Democrats made in the 2018 elections, many Republican national security “hawks” are coming to the conclusion that they need to differentiate themselves from President Trump on several fronts.

This may have implications for U.S. policy towards North Korea.  Last December, the President signed into law the Asia Reassurance Initiative Act (P.L. 115-409), which makes clear that the policy of the United States with regard to North Korea’s nuclear and ballistic missile programs is the “complete, verifiable, and irreversible dismantlement of such programs.”  The new law also states that “it is the policy of the United States to continue to impose sanctions” on North Korea until it “is no longer engaged in the illicit activities described” in various U.S. Executive Orders and United National Security Council resolutions.

In addition, earlier this week, Representative Mike Gallagher (WI-8^th) introduced bipartisan legislation (H.R.889) with three other Republicans and four other Democrats to renew the restrictions on the ability for the President to reduce the number of U.S. troops on the Korean peninsula below 22,000 personnel.

These legislative efforts may complicate negotiations with North Korea, particularly if the upcoming summit meeting between President Trump and North Korean leader Kim Jong-un leads to a relaxation of sanctions without a clear path towards dismantling the existing stockpile.  If defense “hawks” in the U.S. conclude that North Korea continues to engage in various illicit activities, then implementing any agreement would be very problematic.  Recall that the Agreed Framework of 1994 did not succeed, in part, because of Congressional reluctance and resistance to fulfilling the American side of the bargain by slow-walking the provision to provide aid to North Korea.  This did not allow the completion of the light-water reactor and delayed the delivery of heavy fuel oil on several occasions.  From 1995 until 2006 (excepting 18 months from 2001 until 2002, Democrats controlled the Senate), Republicans controlled Congress.  Thus, it is of the utmost importance for the Trump Administration to continuously brief and inform Members of Congress regarding U.S. policy towards North Korea to garner their support and to avoid a repetition of previous failed diplomatic efforts to end weapons of mass destruction threat from the DPRK.

Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own.

Picture taken by Lance Corporal Zachery Laning, U.S. Marine Corps via Wikimedia Commons

By Mark Tokola, Phil Eskeland, Troy Stangarone, Kyle Ferrier, Juni Kim, Yong Kwon, and Sang Kim

2018 was a year of dramatic change on the Korean Peninsula. The prospect of war that seemed to growth with each North Korean nuclear or missile test receded as North Korea, the United States, and South Korea moved towards diplomacy which culminated in the historic summit meeting between U.S. President Donald Trump and North Korean Chairman Kim Jong-un in Singapore.

While the move towards diplomacy with North Korea was the top story of 2018, the year also saw South Korea successfully host the 2018 Winter Olympics, South Korean President Moon Jae-in move more directly towards implementing his income lead growth strategy, and K-pop take another significant step towards breaking out in the United States.

As we move into 2019, some of the big questions facing the Korean Peninsula will center around whether real progress can be made with North Korea now that we are beyond the initial stages of diplomacy and what that means for inter-Korean relations. Other key issues for 2019 will be how the U.S.-China trade war plays out and the implications for South Korea, as well as whether income lead growth will be able to overcome some of the initial implementation challenges it has faced.

With that in mind, here are 10 issues related to North Korea, South Korean politics, and U.S.-Korea relations to follow that will have an impact on the Korean peninsula in the year ahead:

Whether a Peace Process Can Develop

It is generally believed that the denuclearization of North Korea will be accompanied by a “peace process” (or peace regime, or peace declaration, or end-of-war declaration – there are many terms being tossed around) but what this would actually mean or whether it would come before or after an agreement on denuclearization is unclear.  The “peace process” may come in pieces.  There is nothing to prevent North and South Korea from declaring on their own that peace has come to the peninsula.  Similarly, the United States and North Korea could issue a joint statement saying that have no hostile intent towards one another.  If such statements can promote denuclearization or decrease tensions, well and good.  The devilish details would be in what concrete steps if any would accompany a declaration of peace.

2019 may well see announcements of peace on the Korean Peninsula.  It would seem like an irresistible flourish to mark Kim Jong-un’s visit to Seoul, or to give an appearance of progress for a second Trump-Kim Summit.  But, watch for the details.  Would a declaration of peace be accompanied by a road map towards denuclearization? A normalization of relations with liaison offices being established in Washington and Pyongyang?  A more wide-ranging commitment by North Korea to restrain its belligerent behavior beyond denuclearization, such as in cyber or other weapons systems?  Would there be a move towards formally ending the Korean War by winding up the armistice? Thinking through what a peace process would mean reveals that there are big issues beyond denuclearization.

Will the United States Lift Sanctions on North Korea?

In his New Year’s Day address, Kim Jong-un called for the United States to lift sanctions if it wants the process of dismantling North Korea’s nuclear weapons to go forward. In the past, the Trump administration has said that North Korea would have to dismantle or substantially dismantle its weapons programs before sanctions relief would be possible. With progress with North Korea stalled, one of the key questions for the Trump administration will be whether it sticks to its stance or accommodates North Korea’s push for sanctions relief.

If the Trump administration decided to move forward on sanctions relief there are four general ways it could look to pursue to move the talks forward and demonstrate good faith. The first area would be to support inter-Korean engagement. Here the administration could support further sanctions waivers to allow inter-Korean economic projects to advance. At the United Nations, the administration could support removing one or more specific sanctions that have been placed on North Korea. Another, more likely option at the UN, would be for the administration to pursue time-limited waivers of sanctions that are contingent on progress by North Korea in dismantling its nuclear programs. The final option would be for the administration to waive one or more specific U.S. sanctions where it has the authority to provide a national interest waiver.

Burden Sharing and the U.S.-Korea Military Relationship

As part of his professed “America First” values, U.S. President Donald Trump has repeatedly criticized South Korea, and other U.S. allies, for what he views as an unfair defense burden to America for stationing U.S. troops. The U.S. has maintained a military presence in South Korea since the Korean War in the 1950s and South Korea currently hosts 28,500 American troops, the third largest number of troops stationed in a foreign country after Japan and Germany. Ten rounds of negotiations occurred throughout 2018 between U.S. and South Korean officials to renew the Special Measures Agreement, a 2014 burden sharing deal that is set to expire at the end of 2018. The latest round failed to reach a deal over demands from the U.S. for South Korea to greatly increase its contribution and has prompted fresh concerns over the U.S.’s commitment to the alliance. Without a new deal in place, Korean workers at U.S. military bases in South Korea are in danger of being put on leave in the New Year. If left unresolved, the ongoing debate over cost-sharing could greatly hinder future U.S.-ROK relations.

The Future of THAAD in South Korea

China’s protest of the deployment of Terminal High Altitude Area Defense (THAAD) batteries, which were provided by the U.S. military, in South Korea in 2017 led to a political and economic row between the two countries. A resulting Chinese ban on tourism to South Korea and South Korean goods eventually gave way to an agreement late last year to normalize trade relations. Although trade and tourism numbers have started to rebound in 2018 after dramatic decreases in 2017, negative repercussions still remain, though the exact cost of the sanctions are hard to definitively quantify South Korea has likely lost more than $13 billion from the decline in tourism alone. In particular, the Korean conglomerate Lotte, which provided the land for THAAD deployment, has suffered from the after-effects of China’s sanctions with its stores in China shuttering due to lost business.

For 2019, it will be worth watching if the numbers continue to recover and how South Korean businesses adapt to the potential risks of dealing with a volatile Chinese market. For Lotte’s part, the company has actively courted Southeast Asian markets to make up for Chinese losses. It will also be worth watching if THAAD becomes part of talks with North Korea or the expected results of a South Korean environmental impact study affect its deployment.

U.S.-Korea Trade Relations – Section 232 Investigation

The past year has seen great progress in ameliorating initial uncertainties:  exports of U.S. goods and services to Korea increased 10 percent; the bilateral trade deficit declined by 43 percent; and agreements were reached and ratified to modify the Korea-U.S. Free Trade Agreement (KORUS FTA) and to limit Korean steel exports to the United States.

Nonetheless, there is still one looming threat – the possible imposition of U.S. tariffs as high as 25 percent on imported motor vehicles and parts from South Korea.  The Commerce Department has until February 17, 2019, to release the results of its Section 232 investigation into the national security implications of imported autos and parts.  If the report concludes that these products are a threat to U.S. national security, the President has until May 17, 2019, to make a final decision on tariffs.  However, because Korea and the U.S. concluded their negotiations on KORUS and steel two months before the Commerce Department launched this investigation, other major auto producers – Canada, Mexico, Japan, and the European Union – received reprieves or waivers on higher tariffs during their trade talks with the United States.  No decision has yet been made to exempt South Korea from higher tariffs even though Korea imposes zero tariffs on motor vehicles imported from the United States; the revisions to KORUS made several changes benefiting U.S. automakers, including a 20-year extension of the 25 percent U.S. tariff on imported pick-up trucks; and the value of U.S. imports of motor vehicles and parts from Korea has steadily declined since 2015.  Imposing a 25 percent tariff on imported cars and parts would also add approximately 10 percent to the production cost of Korean name-plated cars assembled in Georgia and Alabama, making their vehicles less affordable to the American public, resulting in a significant reduction in employment at both their manufacturing facilities and their dealerships.

Compounding the issue is the frustration that President Trump expressed on November 28^th regarding the recent announcement of the closure of four GM plants in the U.S. that make auto parts and smaller vehicles.  The President tweeted, “the countries that send us cars have taken advantage of the U.S. for decades,” reflecting a fundamental worldview that he has believed for over 30 years.  Trump added, “if we [imposed a 25 percent tariff on] cars coming in, many more cars would be built here.”  Because Korea still exports some cars to the U.S. that compete against GM, the threat of a higher tariff could be used to pressure Korean car manufacturers to move even more production to the United States.  President Trump also desires that Korea pay much more to continue stationing U.S. troops on the Korean peninsula.  He could use the threat of higher car tariffs as another pressure point on South Korea.  Unless Korea is granted an exemption on the auto tariffs, much of the goodwill in the bilateral trade relationship that has been generated over the past year will quickly dissipate because it will be perceived as bad faith in terms of moving the goalposts in bilateral trade negotiations.

The U.S.-China Trade Conflict

On the surface, tension in U.S.-China trade relations does not appear to affect South Korea too much because South Korea’s economy is more aligned with the United States.  However, because China is now Korea’s largest trading partner, South Korea could be caught in the undertow of the churn in U.S.-China friction.  Some Korean brand consumer electronic products are assembled in China and subsequently exported to the United States, which now has to be re-thought in light of the threat of U.S. tariffs as high as 25 percent on Chinese exports.  Other products assembled in China also contain significant Korean content.  For example, the screen on the new Apple iPhone XS is made by either Samsung or LG.  The Korean stock market frequently gyrates at any movement in U.S.-China trade talks – up when negotiations progress and down when discussions stall.  The two sides have given themselves until March 1, 2019, to conclude a successful agreement.

However, many of the irritants in the U.S.-China trade relationship are deep and foundational problems to the Chinese economy and most likely cannot be cured in less than three months.  If an agreement is reached that just makes marginal changes on the edges, such as a commitment by China to purchase more U.S. products or lowering the tariff on imported autos, then the U.S., and by extension, Korea, will continue to face long-term economic challenges from China.  If the U.S. acts in concert with other nations that have similar concerns about unfair and trade-illegal Chinese practices, then multilateral action can spark necessary reform to China’s economy.  However, if the talks break down and the U.S. continues to act alone by imposing more and more tariffs irrespective of how it affects constituencies in the U.S. or other nations like Korea, China will ironically gain the moral high ground as the defender of free trade and unnecessarily delay the market-oriented changes the free world needs to see take place in China.

U.S.-Korea Cooperation in the Indo-Pacific

The “Free and Open Indo-Pacific Strategy,” first introduced over a year ago, now underlies Washington’s approach to the region. South Korea has yet to officially join the strategy nor is it likely to in 2019 due to concerns in Seoul that it could be interpreted as “containing” China or even forcing its hand to choose between Beijing and Washington. However, the overlapping goals between the Indo-Pacific Strategy and the Moon administration’s “New Southern Policy” provide new opportunities for both the U.S. and South Korea to work together beyond the Peninsula.

Both visions focus on increasing engagement with South and Southeast Asia on many of the same key issues based on the same core values, albeit in different ways. The clearest means to bridge the two is through infrastructure projects. The U.S. is looking to mobilize large, high-standard loans and the quality and cooperative nature of South Korean loans, Seoul’s efforts to direct more development assistance to ASEAN countries and India, and the competitiveness of Korean firms in building modern infrastructure make South Korea an ideal partner in achieving this goal. In 2019, look for Seoul and Washington to cooperate on infrastructure projects in the region as well as highlight their joint efforts.

Improving the Environment in South Korea

Although air pollution arose as an issue during the 2017 presidential election, leading candidates at the time focused largely on expanding dialogue with China and remained quiet on domestic sources of this public health threat. The issue returned with a vengeance this past November when extreme levels of ultrafine dust forced Seoul to restrict the number of vehicles on the road and construction. This comes at a particularly awkward time for the Moon administration, which responded to public concerns following the 2011 Fukushima Daiichi disaster by promising to phase out nuclear power in Korea.

Absent nuclear power, cleaner energy could be drawn from natural gas, which South Korea has been importing in increasing amount – particularly from the United States. However, this exposes Korea to geopolitical issues and market volatility. The Moon government is also making a big push to increase renewable energy capacity.

At this juncture, South Korea may consider looking to Taiwan – voters there rejected the phase-out policy in a referendum this year. With nuclear energy satisfying both clean air and energy security, this issue is poised to be revisited by both the government and the public in 2019.

South Korea’s Income Lead Growth/Job Creation

The state of the economy remains the biggest source of concern for South Koreans. After taking several months to get up and running, the first full year of the Moon administration’s income-led growth agenda has fallen short of its ambitious goals. Responding to his falling approval rating in light of underwhelming initial results that have increasingly become a major issue of public debate, President Moon has devoted more government resources to his economic agenda this year. However, the key question for 2019 is will this be enough to win back public support and reinvigorate the economy?

Moon’s income-led growth strategy is a novel approach to resolving the stubborn structural issues in the economy, but this also means it is largely unproven. The IMF and OECD support the agenda’s increased social spending, particularly given the government’s fiscal space, but these policies must also start creating jobs and bolstering growth to be sustainable. Even if the agenda is on the right path, the window to push it through may be closing. More interest rate hikes by the Federal Reserve and the prospect of worsening trade tensions between China and the U.S., both of which have already impacted the economy, could make it harder for Moon’s agenda to find more success this year.

The #MeToo Movement and Women’s Right 

Heightened advocacy for women’s rights was a global trend in 2018. In South Korea, the #MeToo movement gained momentum with women stepping forward with allegations of sexual harassment and violence against high-profile figures, including presidential-hopeful Ahn Hee-jung, poet Ko Un, and award-winning movie director Kim Ki-duk. However, advocates faced obstacles ranging from a relatively lenient legal code to deeply-entrenched social attitudes. Providing further proof of the current society’s antipathy to women’s concerns, the brave actions of women who came out publicly with testimonies of abuse – despite receiving international attention – resulted in very few prosecutions.

Korean women last year also confronted a proliferation of hidden cameras, which prompted protests demanding stronger punishment for trafficking of digital material that was filmed without consent. In response, the government has so-far announced tougher punishments for trafficking of these materials and announced plans to better police online sex crimes and remove illegal footage from the internet more swiftly. These will go hand-in-hand with broader protections such as extensions to the statute of limitations in sexual abuse cases and measures that would allow victims of harassment and abuse to report these crimes anonymously.

Notwithstanding, many advocates recognize that strengthening the legal system is a necessary but insufficient means to achieve true social change. With many women’s rights organizations now mobilized in the wake of the scandals in 2018, open debates about how cultural attitudes will be reformed will likely intensify in 2019.

Bonus Issue: Will Kim Jong-un Go to Seoul?

At their summit meeting in Pyongyang, Kim Jong-un agreed to Moon Jae-in’s proposal that he visit Seoul before 2018 ended. Kim never took that trip, but in his recent letter to Moon he expressed a desire to meet with Moon frequently in 2019 and “a strong determination to visit Seoul while watching future situation.” Whether Kim makes that trip will be one issue that many will be watching in 2019.

It is not surprising that Kim did not meet with Moon in Seoul in 2018. With progress in talks with the United States stalled and his meeting with Trump postponed until early 2019, there would have been little that Kim could have achieved in Seoul. Any trip to Seoul in 2019 will likely be dependent on how Kim’s next meeting with Trump goes and whether there is any historical progress Kim can make in Seoul. He will likely want to achieve more that than act of a North Korean leader visiting Seoul for the trip to go forward.

Beyond whether Kim will visit Seoul will be the question of how his visit is received. At the moment, Kim’s image has improved in South Korea with the current diplomacy and 60 percent of South Koreans would have supported the trip if he had taken it in December. One issue to watch from any visit will be whether it builds support for inter-Korean ties among South Koreans or causes them to reassess the current opening with North Korea?

Mark Tokola is the Vice President of the Korea Economic Institute of America, Phil Eskeland is the Executive Director of Operations and Policy, Troy Stangarone is the Senior Director for Congressional Affairs and Trade, Yong Kwon is the Director of Communications, Kyle Ferrier is the Director of Academic Affairs and Research, Sang Kim is the Director of Public Affairs and Intern Coordinator, and Juni Kim is the Program Manager and Executive Assistant. The views expressed here are the authors’ alone.

Image created by Juni Kim.