North Korea: Jaw-jaw…for now, at least

China’s engagement in the Kim Jong-un/Donald Trump summit changes the calculus; but risks remain non-negligible.

It is not simply because I was in Tokyo and Seoul this past week that I have been giving a good deal more thought to prospects for the proposed Kim Jong-un/Donald Trump summit. In truth, there is so much uncertainty still surrounding this issue — which again this week demonstrated its capacity to surprise when Kim Jong-un popped up in Beijing (although, in retrospect, this should not have been so surprising) — that it really does demand continued careful consideration.

As a result I have come up with four possible summit-related scenarios, all of which I consider to be perfectly plausible and which I hope offer at least some additional clarity, if not certainty.

Scenario 1: The summit doesn’t happen

The question which follows in the event of a pre-summit collapse of the process is: who loses face?

As things stand, Kim Jong-un does not. The North Koreans have still said nothing about the summit in public. For sure there are attributed ‘boiler-plate’ statements in the Chinese press. But these don’t really count, in my view. All they tell us is that Kim Jong-un is willing in principle to meet Mr Trump (well, he would be, wouldn’t he!); and that North Korea’s stance on denuclearisation remains much as it has been since at least 2004.

So, if the wheels were to come off the wagon now-ish, Kim Jong-un could reasonably claim that he personally had simply responded positively to a proposal put forward by the South Koreans and was in no way responsible for their failure to deliver Mr Trump to the table. No loss of face there.

Similarly, President Xi Jinping does not stand to lose face since he came to the game well after it had kicked off and can reasonably claim that China and North Korea have mended their fences at this time in significant part to support South Korea’s efforts to bring the relevant parties to the negotiating table.

President Moon Jae-in is, however, much more exposed. He has clearly been the driving force behind this initiative, which is not entirely supported by many of the younger South Koreans who voted for him in large numbers last year. He is, therefore, very vulnerable politically even though he deserves considerable credit for going against the views of his core support — which is called ‘political leadership’, in case you happen to live in a Western democracy where we can barely remember what it looks like!

As for Mr Trump, I doubt that this issue matters so much to his base that it will make much difference one way or the other to his all-important personal approval ratings. But he is still likely to feel personally affronted and, as we know, does not generally react well in such circumstances. Especially with John Bolton and Mike Pompeo whispering in his ear, we do have to weigh carefully the possible consequences.

All this being said, whereas at the start of last week the probability of the summit actually happening was still no better than 50:50 to my mind, Kim Jong-un’s visit to Beijing suggests to me that it probably will. Not for sure because there is almost certainly still a great deal to be agreed before the two leaders can come together — and, therefore, much which could still go wrong. Agreeing a venue for starters (although I am inclining towards China hosting as an emerging favourite). So, for now, let’s award a 25% probability to the summit not happening.

Scenario 2A: The summit takes place and it is agreed to launch a negotiating process

The (I think) four parties — ie Kim Jong-un and Mr Trump plus Moon Jae-in and Xi Jinping — come together. There is no big agreement but no big bust-up either. Rather, they agree to set up detailed negotiations (at officials’ level) with the aim of agreeing a peace treaty.

There is, of course, a possibility that such a process could end up with a deal. Or, alternatively, the process could drag on so long that Mr Trump has left office to be replaced by the US President who is resigned to living with a nuclear-capable North Korea and relying on containment. However, Mr Trump is famously addicted to quick (if superficial and/or unsustainable) ‘wins’ and I really struggle to see him tolerating a lengthy process — and especially one where Messrs Bolton and Pompeo would undoubtedly be telling him (quite probably justifiably) that Kim Jong-un was taking advantage to build up his nuclear stockpile.

In consequence, of my four scenarios, this is not so much the best as the least bad. So, perhaps more in the hope rather expectation, I give it a 30% probability.

Scenario 2B: The summit takes place but the US immediately totally rejects Kim Jong-un’s conditions for denuclearisation

With the notable exception of South Africa, no country with a fully developed nuclear capability has ever surrendered it. And the end of the apartheid era was a truly exceptional circumstance for which there is no equivalent which I can see in the case of North Korea. So, I think we can take it as a given that North Korea will demand a very high price in return for surrendering its nukes.

The general consensus is that this would include complete withdrawal of US forces from the Korean peninsula and the scrapping of all the US’s security guarantees to South Korea including the nuclear umbrella. And, in my opinion (echoed by The Economist Espresso last week), Kim Jong-un may throw in similar conditions relative to Japan, if only as a bargaining chip.

Consistent with the US’s clearly established policy that North Korea must give up its nukes unconditionally, Mr Trump immediately and categorically rejects these demands and, in return, insists on total capitulation. Kim Jong-un gets up and walks out, claiming when he gets back to Pyongyang that he was prepared to negotiate but the US was not.

At minimum, I would expect the US to react by imposing even harsher sanctions on North Korea. But of my four scenarios this is also the one which takes us closest to the possibility of an early military strike of some sort. This would still be a tail risk, in my view, but a non-negligible one for all that. After all, if we look to trade for lessons on what “America First’ means in practice, it is clear that the prevailing policy in Washington is now to demand total acceptance of America’s terms or face punishment of some sort. And I do think we can reasonably read across from economic nationalism to national security.

A variation on this theme is that, rather than looking to bargain away his nukes, Kim Jong-un demands recognition of North Korea as a legitimate nuclear power in return for permitting UN inspections etc and, possibly, returning North Korea to the 1968 Nuclear Non-Proliferation Treaty, from which it withdrew in 2003.

Fortunately, I think that, thanks in no small part to Xi Jinping’s involvement, both these are relatively low — albeit high risk — probabilities of, maybe, 15% in total.

Scenario 2C: The summit takes place and agreement is reached after Mr Trump accepts the majority of Kim Jong-un’s conditions for denuclearisation

I am really surprised that — outside Japan at least — this scenario seems to be being given very little consideration at present. Although there is some acknowledgement that Mr Trump, in contrast to past presidents, could conceivably agree to complete withdrawal of US forces from the Korean peninsula etc, it is appears to be being treated as a very slim tail risk.

My personal view is that at least some commentators are forgetting a potentially key point here, ie Mr Trump’s personal approval rating. As I have explained in past articles, in general this goes up when he delivers on his pre-election promises and down when he fails in this respect. Not only did he claim during his campaign that he would sit down with Kim Jong-un “over a burger” and do a deal; on several times he committed to withdraw all US forces from South Korea (and Japan) unless the full costs of the US security guarantees was met. I can’t help but think that Mr Trump could see it as a (quick) win-win if he were to return to Washington having concluded “the deal of the century” with North Korea AND fulfilled his pre-election pledge vis à vis South Korea.

The damage which this would do to America’s standing across much of Asia (and perhaps particularly in Japan) — far worse than withdrawal from the Trans-Pacific Partnership — would likely be lost on him. And he would, in my view, be unlikely to be too concerned about ‘technicalities’ such as verifying that Kim Jong-un was sticking to his side of the bargain.

Given that this is the self-acclaimed ‘world’s greatest dealmaker’ we are talking about, I have to give this scenario a relatively high 30% probability.

But what does this all mean for war risk?

I should recall at this stage that probabilities I assign to various scenarios are not based on quantitive modelling but on my best subjective assessment. As such they are essentially indicative. As such, they are intended primarily to give readers a useful idea of whether I believe risk is rising or falling over time.

IF Scenario 2C comes to pass, it follows that my previous probability of us continuing on the established trajectory through to 2019 has turned out to be wrong — even though any sort of deal struck at the summit would inevitably be followed by further detailed negotiations (and the risk of a breakdown in the process).

On the other hand — and with all due respect to Lexington writing in The Economist this week (subscriber access only), who presents a well argued case to the effect that Mr Trump “is unlikely to start a catastrophic conflict” — I stand by my view that the risk of conflict on the Korean peninsula this year has gone up since 1 January. I would currently put it at around 15%, ie still slightly up from the 10% I had at the start of the year but down on where I was a fortnight or so ago (ie 25%) thanks to the engagement of Xi Jinping in the summit process.

This leaves us with a 55% probability of the current trajectory prevailing through until early next year at least.

Furthermore, and looking further ahead, on careful reflection I am also going to lower the probability I am assigning overall to war risk, ie from 35% to 25%. This may seem somewhat contrarian as Mr Trump surrounds himself with notable hawks (and I may have cause to go into reverse in due course!). But for now I think that a perceived increase in the threat of a US-launched strike of some sort plus (again) the engagement of Xi Jinping should help to keep us, if not in ‘jaw-jaw’ mode, a step or two back from the Churchillian alternative of ‘war-war’.

Footnote: 'Why now?' redux

The commentariat has had a good deal to say since Mr Trump agreed to meet Kim Jong-un about why North Korea’s leader was prepared to come to the table now. Personally, I doubt that there is any single reason; rather, the reality is that a number of factors have come together to push him in this direction. A very good article (subscriber access only) in the 31 March edition of the Financial Times by Bryan Harris spells out several — all of which I believe to be relevant — as follows.

  • Even though he assumed the role of paramount leader in 2011, it seems likely that it is only recently that Kim Jong-un has felt confident that his grip on power is firm enough for him to risk travelling outside his country. During this period, he has not only purged many of the individuals who led key positions under his father, he has also boosted his standing with ‘the people’ through a combination of boosting the economy through modest but important reform (the first of two strands of his byeongjin philosophy) and a highly effective domestic propaganda campaign (orchestrated primarily by his sister, Kim Yo-jong).
  • His claim in November that he had completed the building of the “state nuclear force” may have been somewhat hyperbolic. But Kim Jong-un clearly feels that his nuclear and missile programmes (the second byeongjin strand) are sufficiently advanced for him to have a genuine and powerful bargaining chip not only to put on the table but also to deter a possible US military strike.
  • Boosted sanctions are clearly causing some considerable discomfort. Most interestingly, although Washington is trying to claim all the credit for this, data published this month reveal that China has been turning the screw a great deal tighter than required by UN sanctions, including cutting oil supplies. [Note: It may be no coincidence that China has released these data at a time when it is trying to soften proposed US actions against it on trade.]

To these I would add ‘window of opportunity’. Moon Jae-in opened the door a little when he was first sworn in as President, musing that he would welcome North Korean participation in the Winter Olympics. I frankly doubt that we would be where we are today had the hawkish Park Geun-hye still been President in Seoul. Add to that the fact that no predecessor of Mr Trump would have agreed to a summit with the North Korean leader. So, credit also goes to Kim Jong-un for seeing the opportunity and seizing it — whatever his objectives in coming to the table may turn out to be.

Alastair Newton (writing from Seoul)

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