Courcy's Intelligence Brief - 3 April 2013

Items

• The North Korean mystery

  LatinNews 03 April 2013 Hits: 646

  Since we sent out our Special Alert on North Korea on 30 March, following Pyongyang’s declaration that a ‘state of war’ existed with the South, North Korea has moved to reactivate operations at a nuclear reactor in Yongbyon, which was put out of commission following an agreement with the international community in 2007, and to prevent the entry of South Korean workers and cargo to the jointly run Kaesong Industrial complex.  Despite this continued escalation, our sources remain relatively calm about Pyongyang’s intentions while remaining somewhat perturbed about what all this says about Beijing’s judgement.

  We have consulted a wide range of sources – a recently returned Western traveller to the North; Russian military and diplomatic observers; South Korean officials; and Western diplomats – and the consensus remains that North Korea does not want war and that there will not be war.  One diplomatic source, in particular, even suggests that the move to reactivate the nuclear plant at Yongbyon is positive.  His argument is that clearly something was coming, given the escalating rhetoric, and if this is that “something” then there is relatively little to worry about (at least for now).

  There are reasonable grounds for believing that Kim Jong-un’s belligerence, so early in his leadership, is aimed at bolstering his internal ascendancy ahead of possible economic reforms.  Throughout the past year we have picked up a number of signals hinting of economic reform to come.  These have included the unusual level of coverage, during last summer, of economic news by the ruling party’s official paper, Rodong Sinmun.  There was a similar level of emphasis on economic issues over political in Kim’s New Year address to the nation.

  In his New Year’s address, Kim stressed that “building an economic giant” was the most important task, and he emphasized that “all economic undertakings this year should be geared to effecting a radical increase in production and stabilizing and improving the people’s living standards”.  He mentioned “economy” 24 times, significantly more than his references to founder Kim Il-sung (11) or to his father Kim Jong-il (14).  Socialism was mentioned 18 times, self-reliance (juche) 13 times, and the military-first doctrine (songun) six times.  It is conceivable that the recent warlike rhetoric has been a response to push back from the military over the downgrading of songun.

  At least some well-placed observers are interpreting this week’s cabinet reshuffle as a further indication that the North under Kim Jong-un is contemplating a push for economic reform.  According to an announcement made by Korean Central Television on 2 April, Kim has replaced, amongst others, vice-premier Ri Seung-ho and the ministers in charge of agriculture, natural resources development, land and environmental preservation, and the chemical and oil industries - all relevant to economic performance. 

  Industrial technocrat and economic specialist Pak Pong-ju has been appointed prime minister.  Previously prime minister from 2003-07, Pak is remembered for his visit to Seoul in 2002 as part of an economic delegation and for his part in the 2002 “July 1 Decree” that called for reforms on wages and more freedom for the business sector. 

  It is thought that former leader Kim Jong-il appointed Pak after being shocked at the economic dynamism of China during visits in 2000 and 2001.  In the end, however, Pak was removed under pressure from hardliners who were frightened that economic reforms were going too far.  He was despatched to run a textile factory in South Pyongan Province but eventually returned as vice-minister for light industry in 2010, shortly before Kim Jong-un’s rise to the status of heir apparent.

  It is considered unusual for a North Korean figure, with no family ties to the ruling family, to make a comeback like this.

  But even if all this is true, there remain enormous worries about the crisis on the Korean Peninsula.  The first, of course, is that it could spiral out of control, a possibility that was reinforced by the South Korean announcement on 1 April that it was implementing a new contingency plan of “active deterrence” that would allow the military to launch a pre-emptive strike against North Korea if the North were to show signs of launching an imminent nuclear or missile attack on the South.

  South Korea’s Defence Minister Kim Kwan-jin announced that the military is devising “an active deterrence and will build an attack system to swiftly neutralize North Korea’s nuclear and missile threats, while significantly improving our military’s capability of surveillance and reconnaissance”.

  The deployment of South Korea’s new system for detecting, targeting, and destroying North Korean nuclear and missile targets will not be immediate (it was planned for 2015 but will now be brought forward), but the move towards a more sensitive response to North Korean actions is clear, as is the potential for miscalculation.

  The other major worry remains China.  There are really just two possibilities, neither of which is good, to explain China’s approach to North Korea.  The first is that Beijing has little or no control over Pyongyang.  The second is the opposite proposition that China could be allowing, or even encouraging, Pyongyang to behave in the way that it is for calculated advantage. 

  One possibility that has been suggested by Russian sources is that China wishes to test US responses and its commitment to allies.  At the same time, China could see this outbreak of seemingly irrational belligerence from Pyongyang as a way of reminding the US that it could activate a highly dangerous but deniable response to any US actions in East Asia (or even in the Middle East) to which China objects. 

  If this latter explanation is the correct one, it becomes doubly worrying when put alongside China’s continuing bellicosity in the East and South China seas, not least because such a calculation by China (if that is, indeed, what China has calculated) would surely prove to be misplaced.  There is no evidence that the combination of instability on the Korean Peninsula with Chinese bellicosity over territorial disputes is doing anything other than to reinforce the commitment of the US to its allies in East Asia, and to reinforce the welcome that this enhanced commitment receives.  JdeC.

  NOTE: On 28 March the official Chinese news agency Xinhua reported a spokesman for China’s Ministry of National Defence as saying that “any plot to occupy Chinese territory by drawing support from external forces is doomed to fail”.  The statement was made in response to media reports about the US and Japan drawing up joint plans for the defence of the disputed Senkaku/Diaoyu Islands.

• The EU continues to distance itself from US in Asia

  LatinNews 03 April 2013 Hits: 600

  Three times in the past year we have looked at the European Union’s policy towards China and what appears to be a clear effort to distance itself from the United States.  This week provides a further illustration of this trend.

  In March 2012 we highlighted a report from the EU-funded Europe-China Research and Advice Network (Ecran) which argued that the EU should take advantage of the US’s difficulties with China by highlighting the EU’s disinterest in regional disputes.  Noting that the “China-threat discourse” emanates largely from the US, the Ecran report argued: “We should bear in mind too that China poses no military threat to Europe.  Nor is it an exporter of international terrorism.  Its sphere of influence is primarily East and Southeast Asia...where it seeks to protect its borders and to safeguard oil exploration projects in the South China Sea.  It also aspires to develop a second line of defence through a naval presence in the Indian Ocean and potentially the Pacific.  But in neither case are European interests directly involved – something that promises to benefit the EU in its engagement with China.”

  Particularly surprisingly, given the EU’s ostensible commitment to universal human rights, the Ecran report argued that even though it did not expect any improvement in Chinese human rights in the next five years, change should be left to come from within.  In other words, the EU’s commercial and economic interests (including continuing Chinese support of the euro) were seen to outrank both trans-Atlantic solidarity and support for human rights.

  Providing evidence that this was not a one-off maverick report from an EU-linked institution, but rather part of a clear trend in EU strategic thinking, in December 2012 the EU-funded European Institute for Security Studies (EUISS) published a report in which it concluded that China “presents a strategic opportunity to enhance Europe’s role in world affairs and gain autonomy from the US”. 

  Then, in our 13 March 2013 briefing, we highlighted another EUISS report on EU-China relations: “Brussels-Beijing: Changing the Game?” which, inter alia, warned the EU against “becoming directly involved in Washington’s current build-up of military and diplomatic pressure on China”.  This report also said that “those countries in the region disputing territories with China…cannot expect much from the EU in terms of robust support in the continuation of aggressive Chinese policies” relating to these disputes. 

  Our briefing on this report concluded that the EU remains determined to maintain the best possible relations with China, even if this clashes with the interests of the United States, Japan, and the smaller countries of Southeast Asia.

  Now an Alert published during the past week by the EUISS returns to the subject of the EU in Asia, arguing that – like the United States – the European Union has also made a ‘pivot’, albeit a smaller one, towards Asia.  And, as with the previous reports highlighted above, it appears to see Europe as being in competition with the US in Asia, and the solution to winning this competition to be to differentiate the EU from the US by being less confrontational with China.

  The 26 March EUISS Alert argues: “The European ‘pivot’ provides a broadly complementary - rather than alternative – political presence to that of the US, in particular in promoting sets of multilateral-based rules and standards.  Yet there is a major difference between the two: Washington’s rebalancing towards Asia seems primarily aimed at keeping China in check.  By focusing on strengthening its security alliances in the area, the US pivot risks (if not properly managed) causing increased polarisation and the emergence of zero-sum ‘great games’.  The European pivot, by contrast, is untrammelled by binding military alliances and is not aimed at/against any particular country in the region.  It is no coincidence that it is in places like Beijing, Seoul, Delhi and the ASEAN Secretariat that the European pivot has found some of its strongest supporters.”

  There must be some doubt as to exactly how enthusiastic “Seoul, Delhi, and the Asean secretariat” really are about a European Union policy the main pillar of which would seem to be avoiding any confrontation with China that might undermine EU economic interests, but that such a policy is enthusiastically received in Beijing cannot be doubted.  Washington might also be wondering exactly how “complementary” the EU’s policy towards China is to the US’s.

• Greek solidarity with Cyprus

  LatinNews 03 April 2013 Hits: 734

  In our briefing last week on the Cyprus crisis (Premature Turkish triumphalism), we pointed out that a number of scenarios for Europe that only five years ago would have been considered beyond the realms of contemplation were now at least within the bounds of the possible, albeit at the extreme edges.  One of the scenarios we mentioned, and the reason why we suggested Turkish triumphalism was premature, was the possibility that a simultaneous exit from the euro of both Cyprus and Greece could reinvigorate Greek nationalist yearnings for enosis, that is union between Greece and Cyprus – the very issue over which Turkey invaded Cyprus in 1972.  We are, of course, still some way from a Greek-Cyprus euro exit, and even further from a serious revival of enosis.  Nevertheless, it was interesting to see the interaction this week between the speaker of the Cypriot parliament, Giannakis Omirou, and the leader of the right-wing Independent Greeks party, Panos Kamenos.

  Before the election in May 2012, the Independent Greeks party had 11 MPs made up of 10 defectors from mainstream New Democracy party and one from PASOK.  The party won 33 seats (out of 300) in the parliamentary election in May 2012, but this dropped to 20 in the follow-up election of June 2012.

  In response to the Cyprus crisis, on 24 March the Independent Greeks party joined with the leftist Syriza to form a “great nationalist and social democratic front” for solidarity with Cyprus.  Kamenos said: “We want to send a message together in support of the Cypriot Greeks...Greek Cypriots should know that they are not alone, we are all together, we are all of the Greek people.”

  At his meeting with Kamenos, the speaker of the Cypriot parliament said that the support of Kamenos and others in Greece “gives us hope and courage to endure this ordeal” and to escape “colonial bondage”.  Kamenos replied: "The effort of our European partners with their public statements to wear down and humiliate the Greeks continues in Cyprus too." 

  This is, we suspect, only the beginning.

  NOTE:  Out of Greece’s listed companies, only 72 reported profits in 2012, with 161 recording losses of 6.6bn euros.  If a number of companies that have failed to report their 2012 results were included, total losses could be over 10bn euros.

• Risk pointers

  LatinNews 03 April 2013 Hits: 362

  *** 35th intrusion by Chinese vessels.  On Monday (1 April) three Chinese maritime surveillance vessels crossed into Japan’s territorial waters around the disputed Senkaku/Diaoyu Islands for about five hours.  This was the first such intrusion since 18 March, but the 35th since September, when Tokyo purchased a large part of the disputed islands from a private owner.

  On the same day, the director of China’s State Oceanic Administration (SOA), Liu Cigui, said: “China will maintain regular patrols in the Yellow Sea, the East China Sea, and the South China Sea.”

  *** Russia’s ageing Pacific Fleet.  On 28 March, a spokesman for Russia’s Far Eastern Shipbuilding and Ship Repair Centre (DTsSS) was quoted as saying: "Currently, of about 80 ships and submarines in active service in the Pacific Fleet, about two-thirds are being used past their service life, some ships and submarines are not past their designated service life but past their inter-repair service life." 

  The spokesman said that the fleet’s support ships are in a similar condition, with “more than two-thirds” being past their service life.  He added that the number of ships in Russia’s Pacific Fleet has decreased by more than 50% since 1991.

  *** Japan’s PM not to visit war shrine.  It was announced on 29 March that Japan’s Prime Minister Shinzo Abe will not visit the Yasukuni war shrine during the three-day spring festival that starts on 21 April. 

  The reason given was to ensure that there is no further deterioration in relations with China.  However, a Chinese foreign ministry spokesman seemed unimpressed.  When asked to comment, Hong Lei responded by saying: “Only when Japan faces up to the past can it embrace the future.”

  It is not yet known whether Abe will visit Yasukuni on 15 August, the anniversary of Japan’s surrender to Allied forces in 1945.  Abe refrained from visiting the shrine after he became prime minister for the first time in September 2006, unlike his predecessor Junichiro Koizumi, who infuriated China with his repeated visits. 

  However, Abe did visit the shrine as leader of the opposition during last year’s autumn festival.  He has also said that it was “extremely regrettable” that he could not visit the shrine during his previous term as premier.