With the Korean peninsula on the edge of a possible multiple missile test, US Secretary of State John Kerry is scheduled to land onshore in South Korea today.
The purpose of Secretary Kerry’s visit is to listen to the situation from an on-the-ground perspective and calibrate such views with those in Washington.
Most likely, North Korea’s actions of belligerent and bellicose rhetoric is another attempt to put fear into the international community as a strategy to bring South Korea, the US, and other states to the bargaining table, as it has done with success in the past. South Korea has indirectly hinted yesterday that it is willing to seek dialogue with North Korea. So it seems that North Korea’s negotiation strategy of bipolar brinksmanship (good DPRK, bad DPRK), is a moderately effective one.
We believe, despite the odds against it, that a possible “black swan” event exists in which a low probability event can occur that results in high levels of potential damage. Neither side of the DMZ wants a war. But the risk is of possible miscalculation by either or both sides. From North Korea’s perspective, artillery shelling of an island or warship killing military personnel and civilians did not lead to a military response from South Korea (e.g., the attack on South Korea’s Cheonan warship and Yeongpyeong Island, both in 2010). Similarly, two missile launch attempts last year in 2011 and nuclear weapons tests in 2006 and 2009 also yielded no military retaliation, only diplomatic consternation. Thus, its assumption (which may no longer be valid) is that a similar, or even slightly amped down action, will likely lead to the same type of direct military non-response from South Korea and/or the U.S. According to the DPRK’s possible war game calculus, at most, only more mere sanctions may be imposed upon it. This would sway most states, but not so much with the DPRK, an already super-sanctioned state.
In theory, economic sanctions should deter a “rational” state. But North Korea is not a fully rational state–rather, the DPRK is an emotional, Stalinist state. Thus, economic sanctions–counter to its intended purposes–has made North Korea more belligerent. Further, indirect recent criticism of North Korea from China’s new president, Xi Jinping, may add to North Korea’s paranoia that the international community is against it. If the DPRK feels like it is being backed into a corner, rational behavior can be trumped by fear, which then leads to action that is viewed as “reasonable” and “defensive” from its perspective, but “unreasonable” and “provocative” from an outside perspective.
It’s been said that North Korea’s post Gen-X dictator, Kim Jong-Un, does not want to commit suicide by attacking South Korea, the U.S., or their allies. But what about the possibility of an “accidental provocation” that was neither intended or foreseen?
If a single bullet triggered conflict in Europe and World War 1, could not a small yet unlikely “black swan” miscalculation–defined to include such iterated or non-iterated acts as artillery shelling, transboundary incursions, military technology testing, cyberattacks as well as traditional military provocations–occur and lead to another conflict in South Korea in the future?
Hopefully not. But just like we have life insurance for remote, statistically unlikely possible events, we should also consider the insurance (foreign/military) policy in the event of such unlikely yet possible future black swan events as it affects geopolitics and our highly interconnected global capital markets.
Some may argue this is overly contrarian and alarmist. But such views were also heralded prior to the subprime crisis. As a geopolitical risk management solution, however unlikely or not, contingency and exit plans in the short-run carry little downside, while buying opportunities may exist soon thereafter as the markets become overly discounted due to such inter-Korean tensions.
See below media clips on this issue:
– WSJ: Korean War 2? Tiger Tails and Black Swans – by Jasper Kim
– Austria Broadcasting Corp (FM4): South Koreans “on edge”
Australia Network News (ABC), Newsline with Jim Middleton interview segment
CNN TV interview – with Jasper Kim (Power of the Kim dynasty):
– CNBC TV interview – with Jasper Kim (Worldwide Exchange):