Nuclear neighbor

North Korea | Kim's antics may worry China and South Korea, but a collapsing Pyongyang would terrify them

Issue: "Demsnami," Nov. 4, 2006

Residents of Dandong, China, a city that faces North Korea across the Yalu River, had a running joke about their neighbor's decrepit technology last summer. If North Korea aimed an intercontinental missile at the United States, they said, it would probably hit downtown Beijing.

They were right about the failure: When Kim Jong Il did test his long-range Taepodong 2 in July, it plunged into the Sea of Japan. The North Korean leader has been far more effective in rattling Dandong-and the region-with his claim of an underground nuclear test.

A diplomatic frenzy has followed in the weeks after North Korea's Oct. 9 explosion. The United Nations slapped new sanctions on the nation, banning luxury goods and military equipment going there. Secretary of State Condoleezza Rice also did a quick spin of capitals, visiting South Korea, China, Japan, and Russia to whip up enthusiasm for sanctions and six-party talks.

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Only two of those nations, however, hold serious sway over Kim's regime: China and South Korea. Aid and trade from the two bordering neighbors help prop up Pyongyang. Already, China has shown a shift in policy by openly signaling its anger with the North.

But only time will tell how far Beijing and Seoul will pressure Kim to disarm. Neither wants a nuclear Korean peninsula, but nor do they want to destabilize the North so far it collapses and sends a flood of refugees and economic woes across their borders.

In Dandong, the nuclear test brought some quick changes, according to Roy Browning, the city's sole American businessman. More People's Liberation Army soldiers are patrolling the area, and authorities have begun inspecting cargo, in line with new sanctions.

Chinese businesses are now wary of North Korea, slowing their cross-river dealings since the summer. "Before there was pretty much a steady stream," Browning said, "but now it's down to one once in a while."

Dandong's corridor accounts for 80 percent of China's trade with North Korea, which reaches $1.5 billion a year. Traders in the rapidly growing city may hardly blink if their business with North Koreans dwindles, but the Pyongyang regime will feel the squeeze. Trade with China amounts to half of North Korea's total.

With that kind of impact in mind, Beijing authorities in late October told China's four main banks to halt transactions with the North, sealing off its main conduit to the international financial system. Though the exact volume of transactions is unclear, analysts say it is substantial, and this action will hurt Pyongyang.

The move is similar to a damaging one the United States took last year, when it warned U.S. financial institutions against doing business with a Macau bank that held poorly monitored North Korean accounts. The warning scared banks around the world from dealing with Pyongyang, leaving Kim infuriated and with narrow access to funds.

Nonetheless, these early Chinese moves may not signal a full shift against North Korea. Marcus Noland, a senior fellow at the Institute for International Economics, said China often follows dual action: Officials water down multilateral efforts-including the sanctions in UN Security Council Resolution 1718-while quietly pursuing their own bilateral policy.

The banking decision is one example, but China has so far said it will not cut off food aid or its crucial oil shipments. Losing the oil, which accounts for 90 percent of North Korea's supply, would trigger a swift economic collapse. "The Chinese in their public statements have been far more critical than they have been in the past," Noland said. "[But] it's hard to sort out the real Chinese policy."

China also enjoys having North Korea as a buffer state, and would rather not have on its doorstep the U.S.-friendly nation that Korean reunification might bring. Nor does Beijing want Pyongyang to overstep and cause a repeat of 1998, when North Korean missile tests spurred South Korea and Japan to cooperate strongly, Noland said: "When the proxy starts doing things against their long-term interest, it's time to rein them in."

While China is calibrating its reaction, South Korea has been discombobulated. On Oct. 23, the nation's defense minister offered his resignation over the test, followed two days later by that of the reunification minister's. Seoul months ago halted 500,000 tons of food aid to the North, but restored it partially after North Korean floods.

Despite Rice's urging, President Roh Moo Hyun's administration is shying away from tough sanctions. Officials have balked at actively participating in the Proliferation Security Initiative, a Washington-led effort that interdicts ships suspected of carrying WMD-related material.


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