Courcy's Intelligence Brief - 14 November 2012

Items

• North Korea doing things differently

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  Back in June, and again in July, we suggested that “something may be afoot in North Korea”.  As respected and informed an observer as the International Crisis Group (ICG) issued a report on 25 July saying that there were no indications that North Korea’s new leader Kim Jong-un intended to pursue economic reforms, but our own sources were continuing to pick up indications of change.  As ever with North Korea, it is impossible to be certain about anything, but once again there is a sense that something may be changing, albeit slowly and inconsistently.

  One pointer we emphasized in our July analysis was the unusual level of economic news being published by Rodong Sinmun, the organ of the ruling Workers’ Party of Korea.  In the first three months of 2012, the number of economic stories covered by the paper went up from 132 in January to 141 in February and then to 233 in March.  Increased visits to industrial sites by Premier Choe Yong-rim were also thought by our sources to be pointing in the same direction.

  Now the Choson Sinbo, widely seen as the North Korean regime’s mouthpiece in Japan, has reported on a potentially significant re-ordering of the country’s decision-making process, which hitherto has been dominated by the country’s leader.  The paper has reported the establishment of a new “cabinet government system” for the discussion of “economy-related matters”.  The paper added that “the order is being established and appropriate measures are being taken in order to maximize the potential of the national economy”.

  The paper also highlighted the point we made in June, namely the continuing frequency of Choe Yong-rim’s visits to economic establishments.  The paper said: “Efforts to invigorate the economy are being stressed at a different level that is unprecedented.”

  Only a day before this report, on 8 November, the same newspaper was predicting that relations with South Korea could thaw if a new South Korean president were to be elected in December.

  It said North Korean economic officials are predicting that “South-North economic cooperation projects” could “take off at a high speed” if “objective” conditions are met.  It did not elaborate on what was meant by “objective”, but the comment was interesting nonetheless.

  Another interesting development were photographs released by the North’s Korea Central News Agency (KCNA) of a special gathering in Pyongyang on 29 October to mark the 60th anniversary of the founding of the Kim Il sung Military University.

  The interesting point was that the photographs of the event showed 30 foreign guests, mostly diplomats, seated around Kim Jong-un.  Such a happening would have been unthinkable during Kim Jong-il’s rule when only Russian and Chinese ambassadors were allowed to meet with the leader in person.

  North Korea watchers in Seoul say this is another example of Kim Jong-un indicating that North Korea is no longer completely cut-off from the rest of the world.

  On the other hand, on 12 November researchers at the US-Korea Institute at Johns Hopkins University reported on evidence that North Korea is continuing actively to develop its long-range missiles.  The institute said that North Korea “has conducted at least two, possibly more, tests of large rocket motors at its Sohae Satellite Launching Station, the most recent in mid-September 2012”.

  It added that these tests are critical for the development of new rockets, and it said that construction activity at the Sohae site suggested that the infrastructure for future launches of long-range rockets “much larger than either the Unha-3 or the KN-08” was being built.

  Finally, and ominously, the report suggested that “in the aftermath of the US and South Korean presidential elections, Pyongyang may embark on a new round of activities in the first half of 2013, including rocket and nuclear tests, that will contribute to further development of its nuclear deterrent”.

  This report suggests that caution remains the order of the day when dealing with North Korea, but the circumstantial evidence for some change on the economic front, at least, is building and warrants close watching.  JdeC.

• Inequalities behind continuing Mideast turmoil

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  The International Monetary Fund (IMF) has just released its Regional Economic Outlook for the Middle East and Central Asia.  At a time when the Middle East continues to be wracked by violence and strategic instability, the section covering the Middle East and North Africa (Mena) provides little comfort to those concerned about Mideast stability.  The political and strategic tensions that we highlight on a week-by-week basis are unlikely to find their solution in rapid economic progress or in diminishing inequality.

  The most important structural point about the Middle East is that of the 617.3m population living in the arc stretching from Mauritania to Pakistan, nearly three-quarters (73.3%) live in the 12 countries with per capita incomes of below $5,000 per annum.

  A further 19.7% live in the four countries with per capita incomes of between $5,000 and $10,000.  Then, at the top of the pyramid, there is the 7% of the region’s population which lives in six countries with a per capita income of over $20,000.

  The six countries with per capita incomes above $20,000, with a combined population of 43.3m (7.0%), are:

  - Qatar - $98,144 (1.8m)

  - UAE - $63,626 (5.4m)

  - Kuwait - $43,723 (3.7m)

  - Oman - $23,572 (3.1m)

  - Bahrain - $22,918 (1.1m)

  - Saudi Arabia - $21,196 (28.2m).

  The four countries with per capita incomes of $5,000-$10,000, with a combined population of 121.7m (19.7%), are:

  - Lebanon - $9,862 (4.0m)

  - Iran - $6,420 (75.2m)

  - Libya - $5,510 (6.5m)

  - Algeria - $5,503 (36.0m).

  The remaining 12 countries, all with per capita incomes below $5,000, and with a combined population of 452.3m (73.3%), are:

  - Jordan - $4,618 (6.3m)

  - Tunisia - $4,317 (10.7m)

  - Iraq - $3,478 (32.8m)

  - Morocco - $3,084 (32.2m)

  - Egypt - $2,932 (80.4m)

  - Syria - $2,803 (21.4m)

  - Sudan - $1,959 (32.7m)

  - Djibouti - $1,467 (0.8m)

  - Yemen - $1,343 (25.1m)

  - Pakistan - $1,199 (175.3m)

  - Mauritania - $1,185 (3.5m)

  - Afghanistan - $589 (31.1m).

  These inequalities are set to worsen.  Growth for the oil-exporting countries is expected to be 6.5% for 2012, with their combined current-account surplus set to remain near the historic high of $400bn recorded in 2012.  The oil-importing countries, on the other hand, are expected to record growth of just 2% in 2012.  Even with a recovery to 3.25% in 2013, the IMF notes that this is “a rate far below what is required to address chronic and growing unemployment”.

  The social pressures in these countries have led to an increase in spending on fuel and food subsidies, and so fiscal balances have deteriorated and “fiscal vulnerabilities remain high”, with average public debt at over 70%.  At the same time, notes the IMF, “external current account deficits have widened from already high levels.  Together with weak capital inflows, these have resulted in a sharp decline in official international reserves, raising concerns about reserve adequacy and leaving diminished buffers and limited policy space for addressing a downturn.”

  The IMF has also done some interesting work on countries that have gone through the sort of intense political instability (PI) now being experienced in much of the Middle East.  The research shows that in 11 comparable events in low- and middle-income countries unemployment rates rose by about 1–1½ percentage points on average during the first two years after the start of PI, and then took between four and five years to recover.  Public and private investment declined by about 20% on average during the event year, and remained low in subsequent years.  And, of course, fiscal positions worsened sharply during PI, continued to worsen for two years, and only recovered slowly.

  The research also found that episodes of PI and conflict often recur, as countries with a past history of domestic conflict have a high risk of subsequent conflict.

• China's blogosphere not fooled

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  It has been interesting to note how quickly China sought to capitalize on the BBC’s recent difficulties, and even more so how this has backfired with popular opinion.

  The state-run China Central Television (CCTV) has led the Chinese charge against the BBC, reporting at length that the BBC is “deeply mired in a credibility crisis”.  A joint despatch from the official news agency Xinhua and China National Radio accused the BBC of “covering up mistakes to hide shame” and said that this could only lead the outside world to “question its credibility”.

  The Communist Party-run Guangming Ribao talked about “the dirt hidden under the halo of the BBC’s corporate culture”.  The party-run Shanghai newspaper Liberation Daily added: “After one scandal after another, the halo on the head of the Western media represented by the BBC is fading gradually”.  The Hong Kong tabloid The Sun said that the BBC’s credibility “is on the brink of bankruptcy”.

  By contrast, China’s social media and blogosphere was quick to point out the irony in the officially-sanctioned criticism of the BBC.  One post on Sina Weibo, China’s equivalent of Twitter, summed up the general feeling, saying: “It is really admirable that one piece of unverifiable false news can lead to the resignation of BBC chief Entwhistle [the director-general].”  Another commenting on Entwhistle’s resignation said: “His behaviour makes me feel that this is a responsible media organization.”  Another wrote: “I heard the BBC chief resigned over a wrong report.  Shouldn’t the head of CCTV have resigned a thousand times.”

  Meanwhile, the blogosphere has also been very critical of the performance of China’s leaders at the 18th Party Congress, particularly of the sycophantic speeches.  As an example of the sycophancy, Beijing delegate Ju Xiaolin composed a poem called “Getting New Hope” in praise of President Hu Jintao, which he proceeded to read out in between emotional sobs.  He ended by saying he had finally found new hope in Hu’s 64-page report.

  Another delegate, Li Jian from Ningxia, claimed to have cried five times during Hu’s speech.  The blogosphere reacted with derision to this performance, with one microblog post saying that Li was clearly trying to further her career “one tear at a time”.

• Albania's premier calls for unification of ethnic Albanians

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  In a speech to a meeting in Kamez, reported on 9 November, Albania’s Prime Minister Sali Berisha talked about the “ideal of national unification” being “the most precious ideal of the Albanians”.  There are some 6m Albanians in the Balkans, but only 3m live in the territory of Albania.  A further 2.2m Albanians live in the former Yugoslavia, of which 2m are in Kosovo.

  Berisha said: “I would like to recall that 100 years ago those who strove for ethnic Albania, for Albania with territories in which the Albanians were an ethnic majority and which represented a geographical continuity, those who laid down their lives for the ideal of this Albania, had no state of their own, no institutions of their own...It is decisive that the energies of the nation should go into building its future in freedom.  Therefore, on this 100th anniversary, the greatest tribute we can pay to hundreds and thousands of people who laid down their lives from the outset of the last century to 1999 and 2001, in Kosova [Kosovo] and Macedonia, is to do everything to unite with one another, to do everything to unite with Europe.”

  The reference to “Europe”, by which Berisha meant the European Union, was presumably intended to take the irredentist sting out of his comments without diminishing his appeal to nationalist sentiments ahead of next year’s general election.

  But the ideal of a Greater Albania does not appeal to all Albanians.  The country is split between Ghegs, in the north and Kosovo, and Tosks.  Tosks would not necessarily welcome an increase in Gheg influence in Albania.  The following Internet discussion post is not untypical: “All proud Tosks hate Sali Berisha who has kicked many Tosks from key state positions...This filthy Gheg changed the entire state machine in favour of the Ghegs, even the Kosovar Ghegs.”

• Risk pointers

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  *** Support for German far right continuing to increase.  Germany’s Friedrich Ebert Foundation has been tracking anti-democratic attitudes in Germany since 2006 in its bi-annual surveys.  Since its last survey in 2010, support for right-wing extremist attitudes has grown from 8.2% to 9% according to its summer 2012 survey.  Xenophobic attitudes, however, are now admitted to by 25.1% of the population.

  Far-right attitudes are most prevalent in the former East Germany, where support for such views has risen from 10.5% of the population to 15.8%.  Xenophobia is also most prevalent in the east, where 39% of the population hold such views.

  According to the authors of the survey: “While in the past young people were considered to be less susceptible to these ideas, now it is exactly this group that stands out.”

  *** Little let up in Japan-China dispute.  As of 13 November, Chinese maritime surveillance vessels had approached the Japanese-controlled Senkaku Islands (called Diaoyu by China) on 25 consecutive days.  On the 13th, four Chinese surveillance vessels were warned away by the Japanese coastguard.  One of the Chinese vessels responded by radio saying that the Senkaku/Diaoyu were Chinese territory.

  A day earlier, China’s foreign ministry issued a fierce statement condemning the Dalai Lama for referring to the disputed islands by their Japanese name during a visit to the Japanese city of Yokohama.

  The foreign ministry statement said: “The Dalai Lama...once again shows his true colours of betraying his motherland and engaging in activities to split China under the guise of religion...In order to achieve his goal of splitting China, the Dalai Lama would rather collude with Japanese right-wing forces.  His behaviours are despised by the Chinese people.”

  *** Iran’s nuclear progress.  According to The Jerusalem Post, a new International Atomic Energy Agency (IAEA) report, to be published on Friday (16 November), will reveal that Iran has completed the installation of 2,700 centrifuges at its underground Fordow plant, thus enabling it to speed up production of uranium enriched to 20%.

  In August the IAEA reported that approximately 700 of 2,000 centrifuges were in operation.