South Korea, U.S. Seek China’s Help Punishing North (Update1) - BusinessWeek
May 24 (Bloomberg) -- South Korea and the U.S. urged China to cooperate in international efforts to punish North Korea over the sinking of a warship in March that the U.S. said has raised tension in the region to its highest in decades.
“We have always tolerated North Korea’s brutality, time and again,” South Korean President Lee Myung Bak said today in Seoul, setting out the response to the March 26 torpedo attack in which 46 sailors died. “We did so because we have always had a genuine longing for peace. Now, things are different.”
South Korea will take the case to the United Nations Security Council, halt most trade with its neighbor, ban North Korean ships from its waters and restart propaganda broadcasts suspended in 2004. Secretary of State Hillary Clinton, in Beijing for the U.S.-China Strategic and Economic Dialogue, expressed support for the South and pressed China, the North’s main ally, to “work together again to address this challenge.”
Kim Jong Il’s regime, struggling at home as shortages of food and goods undermine the ruling party’s control, last week threatened “all-out war” against any punitive measures. UN sanctions imposed on North Korea after its second nuclear test in May 2009 caused international commerce to shrink 9.7 percent last year, according to a Seoul-based trade agency.
“South Korea has laid out virtually all the measures it can employ,” said Kim Yong Hyun, professor of North Korean studies at Seoul-based Dongguk University. Still, China isn’t likely to join the push for more sanctions “as it wouldn’t want North Korea collapsing on its border.”
China has called for “calm and restraint” and says it is making its own assessment of the ship sinking.
China Trade
China accounted for 78.5 percent of North Korea’s international trade, excluding that with South Korea, the Korea Trade-Investment Promotion Agency said in a report today. North Korea, whose leader Kim visited China earlier this month, doesn’t release official trade data.
In addition to being North Korea’s main ally, China is also host of multilateral talks on North Korea’s nuclear weapons program. The forum also includes Japan, Russia, South Korea and the U.S. North Korea reiterated its right to develop nuclear weapons to protect it from U.S. aggression, the state-owned Korea Central News Agency reported today.
Clinton today praised China for supporting tougher UN sanctions against Iran, and said the same cooperation was needed following the report of a multilateral panel last week that concluded a North Korean submarine sank the 1,200-ton Cheonan.
Talks With China
“No responsible country in the international community will be able to deny the fact that the Cheonan was sunk by North Korea,” Lee said today, without naming China. South Korea is in close talks with China and Russia on forging a response against North Korea, Foreign Minister Yu Myung Hwan said today in Seoul.
The attack has overshadowed the agenda for the high-level talks in Beijing, where Treasury Secretary Timothy F. Geithner and Chinese Vice Premier Wang Qishan are among senior officials debating the level of the yuan and trade issues.
President Barack Obama offered “unequivocal” support for South Korea’s defense, in a statement released by White House Press Secretary Robert Gibbs. He directed his government to review all polices regarding Kim’s regime.
The U.S. and its allies haven’t faced such a serious regional incident in decades, a U.S. official traveling with the China party said yesterday, speaking on condition of anonymity.
The cost of insuring South Korean government debt from default rose to a nine-month high. Credit-default swaps on South Korea jumped to 147.2 basis points as of 11:34 a.m. in Seoul, according to CMA DataVision, heading for the highest price since Aug. 19. The won touched its weakest point since Sept. 15 of 1,220.75, according to Seoul Money Brokerage Services Ltd.
Geopolitical Risk
Increased “geopolitical risk is absolutely one of the last things that foreign investors would welcome,” said Oh Suk Tae, an economist at SC First Bank Korea Ltd. in Seoul.
The March attack was the deadliest blamed on Kim’s regime since 115 people were killed in the 1987 explosion of a South Korean airliner. Other provocations include attempts in 1968 and 1983 to assassinate South Korean presidents.
Kim’s regime, which has been relying on handouts since the mid-1990s, is suffering from worsening shortages of goods after its botched currency revaluation late last year. Academics including Rudiger Frank, professor of East Asian Economy and Society at the University of Vienna, said that was aimed at rolling back an experiment with free markets that had loosened the state’s control over jobs, food and patronage.
Food Aid
The UN World Food Program said this month its food aid to North Korea will run out by the end of next month.
South Korea accounted for a third of North Korea’s international commerce last year, according to the Unification Ministry. Inter-Korean trade dropped 7.8 percent to $1.7 billion in 2009, 56 percent of which came from their joint industrial complex in the border city of Gaeseong, ministry data show.
South Korea will keep the complex operating, while banning any new investment and citizens’ visits to North Korea, Unification Minister Hyun In Taek told reporters in Seoul today.
South Korea also plans to hold joint anti-submarine exercises with the U.S., Defense Minister Kim Tae Young said.
Comment - I think we can all make up our minds in the years to come on how responsible is China as an emerging power.