Xi visit may revive North Korea nuclear diplomacy

Subject North Korea's foreign relations. Significance China’s President Xi Jinping visited Pyongyang on June 20-21, ahead of the G20 summit in Osaka where he will meet his US counterpart Donald Trump. Trump is then due in Seoul on June 29-30 to meet President Moon Jae-in. Reports that Trump may visit Panmunjom in the inter-Korean Demilitarised Zone (DMZ) have sparked speculation of steps to revive nuclear diplomacy, possibly even including an unannounced third summit with Kim. Impacts North Korea will be Trump’s main agenda item in Seoul, so some initiative seems likely. South Korea risks being sidelined if nuclear diplomacy resumes, with China perhaps taking the intermediary role. If Trump and Kim meet at Panmunjom, that would boost Moon’s position; the more so if he joins them.

Subject Politics in South Korea. Significance President Moon Jae-in has hailed the second summit between North Korean leader Kim Jong-un and US President Donald Trump due to be held in Hanoi on February 27-28 as a “remarkable breakthrough” for peace on the Korean peninsula. Moon hopes the meeting will lead to an easing of sanctions on Pyongyang, enabling inter-Korean cooperation such as the relinking of roads and railways to progress, and that this will boost his waning popularity. Impacts US pressure on Seoul to pay more for US troops in South Korea may stoke anti-US sentiment. Rising tensions with Japan will ultimately cause problems for both countries, and their currently indifferent US ally. Pinning hopes on the unpredictable Kim and Trump is risky; failure with North Korea would galvanise the conservatives.


Subject The outlook for North Korea-US denuclearisation talks. Significance On June 30, President Donald Trump used a long-planned trip to South Korea after the G20 summit in Osaka to visit the Demilitarised Zone (DMZ), for his third meeting in barely a year with North Korean leader Kim Jong-un. Impacts Working talks will resume, but progress may depend on Pyongyang gaining partial sanctions relief. Inter-Korean relations will likely remain stalled unless sanctions are eased. The peninsula has not become risk-free; Kim may miscalculate or hardliners could push for policies even Trump cannot accept. Japan’s Prime Minister Shinzo Abe seeks his own summit with Kim; Kim has scant incentive to grant one.


Subject The first summit between Chinese President Xi Jinping and North Korean supreme leader Kim Jong-un. Significance On March 26-27 Kim Jong-un, North Korea's supreme leader, paid an unexpected two-day visit to Beijing for a summit with Chinese President Xi Jinping. The visit's goal was to secure Chinese support for the coming summits with the presidents of South Korea and the United States and to soften up the hard-line stance China has taken towards North Korea over the past year. Impacts Pyongyang will pay lip service to eventual denuclearisation, but keep at least some of its arsenal under any conditions. Pyongyang's rejection of US demands for immediate and complete denuclearisation could lead to a new, more dangerous, nuclear crisis. Trade-related tensions between Washington and Beijing work in Pyongyang's favour.


Subject North Korea's politics and foreign relations. Significance North Korea on May 9 announced its first ever test of a submarine-launched ballistic missile (SLBM). Separately, Pyongyang has yet to comment on allegations by South Korea's National Intelligence Service (NIS) on May 13 that the North's defence minister, Hyon Yong-chol, was publicly executed using anti-aircraft guns around April 30, apparently for disrespect and disobedience to Kim. Impacts Delivering on pledges of economic improvement would buy Kim loyalty, but there are reasons for pessimism. The new missile threat will raise North Korea's place on the list of US priorities. Decisions on missile defence in South Korea will become more urgent.


Significance North Korean leader Kim Jong-un visited China during January 7-10. He spent his 35th birthday in Beijing and met Chinese President Xi Jinping for the fourth time in ten months. Meanwhile, Pompeo implied on January 11 that sanctions on North Korea could be eased, with a focus on removing its intercontinental ballistic missile (ICBM) threat to the United States rather than full denuclearisation. Impacts Xi might make an overdue return visit to Pyongyang in April, perhaps before Kim’s promised first visit to Seoul. Other Asian leaders may visit Pyongyang too, conferring legitimacy on Kim. South Korea may once again challenge China for influence in North Korea.


Subject South Korea's international relationships. Significance South Korea’s government is celebrating the success of its response to COVID-19, but the country’s four key foreign relationships all face difficulties -- those with the United States, China, Japan and North Korea. No other countries or regions are vital to Seoul, despite vaunted ‘Southern’ and ‘Northern’ initiatives. Impacts A prolonged deadlock on funding the US military presence in South Korea could push Seoul closer to Beijing. If President Xi Jinping visits South Korea later this year, Washington could easily misread this. Substantial fence-mending with Japan may have to await new leaderships in both countries. South Korean President Moon Jae-in may have tacitly given up on North Korea, which has visibly given up on him.


Significance It also benefits from policies that heavily favour the domestic arms industry. This has resulted in a well-equipped modern military and a high degree of self-reliance in equipping it. However, this model may be unsustainable. Impacts Seoul will likely attempt to expand armaments collaboration with other countries to gain additional resources, technologies and markets. China’s military modernisation is an increasing concern, including in the context of potential war with China’s ally, North Korea. Threats from North Korea make air and missile defence the top procurement priorities.


Significance President Donald Trump said he dismissed Tillerson as he wants his cabinet to be more in line with his thinking; Trump and Tillerson had clashed over policies and priorities. CIA Director Mike Pompeo will be nominated to succeed Tillerson. The nominee to replace Pompeo at the CIA will be current CIA Deputy Director Gina Haspel. Impacts A better-coordinated foreign policy team could help Trump prepare for his new push on North Korea-US ties. Pompeo may find as secretary of state that he disagrees more openly with Trump; the CIA director is not public-facing. Conceivably, the 2018 midterm elections could further delay Trump nominees, but secretaries could work in an acting capacity.


Significance South Korea’s unification minister (MOU) warned on April 10 that any US strike on North Korea would put “the safety of the public” at risk. A day later, Seoul’s defence (MND) and foreign (MFA) ministries dismissed rumours on local social media of an imminent war crisis as “overblown” and “groundless”, respectively. Moon Jae-in, the liberal opposition candidate whom most polls predict will win the May 9 snap presidential election, said he does not expect a US pre-emptive strike on the North. However, Moon also warned Washington that South Korea is “the concerned party” which “owns” peninsula-related matters, including the nuclear issue. Impacts Experienced military professionals in Trump’s cabinet and National Security Council are a restraining influence. South Korea and Japan, being in the front line, will counsel their US protector against any action that might imperil their security. If Moon Jae-in is elected, his desire to re-engage the North will clash with Trump’s hard-line attitude and narrow nuclear focus. After his smooth -- if insubstantial -- summit with Xi, Trump’s threatened unilateralism on North Korea is likely to stop at sanctions.


Subject China's options for retaliating against US firms during trade tensions. Significance US President Donald Trump tweeted yesterday that he is working with China's President Xi Jinping to get China's telecoms giant, ZTE, "back in business, fast" -- even though it was penal US sanctions that forced the company to announce last week that it was stopping operations. The Trump administration is divided on whether its objective in threatening imports tariffs on Chinese goods worth 50 billion dollars, effective May 22, is to strike a deal to cut China's trade surplus with the United States or to change China's industrial practices. Impacts Compliance costs will rise even if trade tensions subside. Investors in industries that China sees as strategic (eg, semiconductors and integrated circuits) may face unwritten screening rules. Investors in automobile, aircraft and shipping manufacturing and finance may find new opportunities to enter the market.


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