Abductions China & Korea Diplomacy Russia & Korea

Continental drift: U.S. alliances erode despite “pivot” to Asia

Xi Jingping has departed from Seoul, where he couldn’t quite bring himself to agreeing to a joint statement with Park Geun Hye calling for North Korea to give up its nuclear weapons.

But the statement stopped short of directly urging North Korea to give up its nuclear program, only vaguely calling for all members of the six-party nuclear talks to resolve the issue through dialogue and abide by their 2005 denuclearization-for-aid deal. [Yonhap]

Some of the dire declarations I’ve seen that Xi’s visit successfully finlandized South Korea seem premature, but Xi did take one very big step in that direction when he coaxed South Korea into agreeing to set up a bank in Seoul to clear bilateral business transactions in Chinese yuan. China’s clear intention here is to undermine the global supremacy of the dollar, circumvent the power of U.S. financial sanctions, draw South Korea into China’s economic orbit, and perhaps even shield North Korea’s international transactions from the Treasury Department. More here and here.

How this new arrangement will mesh with the artificially depressed value of the yuan will be an interesting question, but China has already made similar arrangements France, the U.K., and Germany, so we can assume that (1) the problem isn’t insurmountable, and (2) the yuan is nowhere near replacing the dollar as a reserve currency in the short term. Given the extent of public corruption in China, uncertainties in China’s economy, and the broader non-convertibility of the yuan, the yuan isn’t going to be as safe a medium of exchange as the dollar anytime soon. In the longer term, however, the threat is significant. The power of the dollar may be as important to our national power as our Navy.

In the case of South Korea, there could also be shorter-term policy implications, if yuan-clearing banks begin clearing transactions for North Korea. The effect of this would be to enlist a new group of financial profiteers in Seoul to oppose financial sanctions against the North and spread China’s risk from financial sanctions to South Korea. If the U.S. wants to retain its last best non-violent option against North Korea, it will send a very clear signal to President Park and to South Korean banks opposing this idea.

One wonders if U.S. influence is so diminished that that signal would work. The presence of 25,000 U.S. troops in South Korea ought to mean something. If South Korea isn’t really interested in disarming North Korea, one wonders why they remain there. There are moments when I think the U.S. has a greater interest in neutralizing North Korea as a proliferation threat than in having South Korea as an ally. That’s especially so when one considers the financial cost of that alliance to U.S. taxpayers.

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Meanwhile, North Korea’s ransom diplomacy with Japan is succeeding. It has given Japan a list of ten names of Japanese nationals, including abductees, who are still alive in North Korea. None of the abductees has met with a Japanese official or returned home, but the Japanese government has already made moves toward relaxing its sanctions against North Korea. The effect of this will be to blunt the economic pressure intended to disarm the North. The AP provides an excellent summary of Japan’s actions:

— North Korean nationals are now allowed to enter Japan, but will be screened case-by-case if a request is filed. A ban on individuals subject to the U.N sanctions remains.

— Officials of Chongryong (the General Association of Korean Residents in Japan), which serves as a de-facto North Korean embassy here, can obtain re-entry permits after traveling to North Korea.

— An advisory discouraging Japanese nationals from traveling to North Korea is no longer in place.

PORT CALLS

— North Korean-registered vessels are able to enter Japanese ports but only for humanitarian purposes.

— A ban on a North Korean passenger ferry, the Mangyongbong-92, that was the only regular direct connection to Japan, stays in place.

— Port calls are limited to pickups of food, medicine and clothing and other articles for personal use only, and shipment of large quantities is not permitted. North Korean crewmembers will not be permitted ashore without prior approval.

MONEY TRANSFERS

— Remittances to groups and companies based in North Korea do not have to be reported to the government if not exceeding 30 million yen ($300,000), the same as to other countries. Under the sanctions, reporting any remittance exceeding 3 million yen ($30,000) was compulsory.

— Those visiting North Korea can now carry cash up to 1 million yen ($10,000) without having to report it to the government, up from 100,000 yen ($1,000).

EXPORTS

— Japan’s overall trade ban on North Korea remains in place.

— Freezing of assets on individuals and entities involved in missile programs, under U.N. Security Council resolutions, stay in place.

One potential source of dispute will be whether North Korea has given Japan a complete listing of surviving abductees. Some Japanese government publications I’ve read list dozens of potential abductees, and the Japanese public is unlikely to take Pyongyang’s “re-investigation” at its word. Another potential source of conflict is the pending tax sale of Chongryon’s headquarters in Japan. Finally, a nuke test could always upset things.

Japan’s sudden defection from the anti-North Korea alliance isn’t wholly the Obama Administration’s fault. The Bush Administration was the first to sideline Japan’s interest in getting its citizens back, but the Obama Administration squandered the last five years by failing to correct it and rebuild that alliance.

Japanese Prime Minister Shinzo Abe also bears a large share of the blame, with his revisionist dis-apology for Japan’s World War II-era atrocities — something that has proven useful to Xi Jinping in his efforts to isolate Japan and break up the U.S.-led Pacific coalition. If you want to read more on the spurious historical merits of Japan’s revisionism, Dennis Halpin has been doing some excellent writing on the subject.

If you think things couldn’t have declined much more over the last year, don’t forget Russia’s surge of investment in North Korea.

Taken together, these developments mean that U.S. leverage over North Korea and China has faded significantly over the last six months. That isn’t a very impressive set of accomplishments for an administration that allowed the Middle East to fall to the most brutal gang of terrorists since the Khmer Rouge, while ostensibly making Asia the focus of its full diplomatic attention.

2 Comments

  1. Your view of the necessary supremacy of the dollar is wrong. The dollar as a reserve currency has allowed China to manipulate its exchange rate, which has damaged every other nation in the world. The use of the dollar as the only world reserve currency inhibits our own ability to engage in national economic self-defense. The sooner China is forced to trade with real yuen the better, if only bi-laterally.




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  2. David, I think you’re confusing the value of the dollar with the stability, security, efficiency, and supremacy of the dollar system.




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