INTERVIEW WITH SHEPHERD IVERSON

Let’s start with an introduction of yourself and your work on North Korea and Korean reunification. What is your approach to North Korea and why did you decide to write this book?

Iverson: I’ve lived in Korea for more than eight years. I’m a family man, a husband and father. My wife is also a PhD—a Polish theoretical physicist—and our adolescent son’s first language is Korean—of three languages he speaks fluently. We’ve gone native in Korea… in this safe and friendly culture. We have some dear friends.
Professionally… I’m a gadfly – I question authority, the status quo. After analyzing the reasons for a history of status quo policy failures it becomes possible to learn from mistakes and seek more productive alternatives. My approach to denuclearizing North Korea and ending this humanitarian tragedy is based on a strategy that has never been tried before—and that’s good.

My interest in the Korean problem came to me rather suddenly once I realized political control could be bought in North Korea and this whole damn problem could end without military conflict. I became convinced that Korea could be reunited and Kim’s nuclear threat could be over within a few short months if either statesmen or successful businessmen would lead the way. I have spent six years designing a pragmatic and plausible unification model. Now it is up to others to take it over and get this done.

I’m tired of hearing our status quo experts say there are no good options in Korea. They just haven’t explored all the options. If policymaking and diplomacy were run like a business the people who have been working on North Korea policy would have been fired long ago. Attempts at coercion, containment, isolation, accommodation, and partial engagement have all led to frustration. Yet every current strategic suggestion for dealing with the Kim regime proposes a reincarnation of one of these failed policies. This qualifies as the definition of institutional insanity: proposing the same policies over and over again expecting different results.

In the grand scheme of things there are only punishments and rewards, but as every parent or superior knows, it’s their particular form and application that bestows legitimate authority and credible power. A strong military response to eliminate a threat to US security might seem reasonable at this point, but there are alternatives that can be less dangerous and more effective. I think personalized incentives might be the answer.

What are the incentives you refer to?

Iverson: After president Obama’s Leap Year Deal failed in 2012 the US demanded North Korea make legitimate concessions to denuclearize before talks could begin, but the Kim regime made it clear it will never do that, and so we shrugged our shoulders, continued with our war games off its coast, and that was the end of it… stalemate. Strategic patience merely kicked the can down the road, allowing Pyongyang to reach the brink of possessing a nuclear-tipped ICBM capable of killing hundreds-of-thousands of American citizens. The recent ICBM test should surprise no one. What were we thinking?

This is where we are today, and why the USS Carl Vinson and the USS Ronald Reagan Carrier Strike Groups were dispatched to Korean waters and the South Korea navy has deployed ship-to-surface missiles. Eventually this strategic saber rattling and bellicose brinkmanship may lead to real consequences.

This increasingly negative and aggressive trajectory of relations can only turn positive and constructive through some form of engagement and the application of tangible incentives. Unfortunately for the Kim regime, the incentives I have in mind will force them from power, reunify Korea, denuclearize the region, and bring ubiquitous economic and security benefits to concerned nations. If the incentives I have prescribed were applied, the Kim regime would have no choice but to acquiesce… but with dignity and sufficient personal and financial security. For those who have not read my new book, Stop North Korea!, I have described in detail how an incentive-based culture and economic approach could be the answer to the North Korea problem. I hope people who can make a difference will read it, talk about it, and act on it.

In the book you ask readers to think of North Korea as a company with great potential, which has been under-performing, but its board of directors stubbornly refuse to leave and make room for someone who might run the company more successfully. To overcome this problem of leadership transition you propose that North Korea can be bought, that external investors should buy this “company” and give its “board of directors” (North Korean elites) a substantial severance so a new board can step in, bring new capital, and restart the engines. Could you expand on this notion? How can anyone bring this option to the table in 2017, under a Trump presidency and with mounting tensions in US foreign policy, and who could negotiate a deal of this magnitude?

Iverson: Now that’s a big compound question. I’ll answer the second part first. My mother made sure I had a liberal education. During the 2016 presidential campaign I mostly opposed Trump on domestic matters, but soon had to admit that he was taking a practical approach to international affairs, and connecting them to local sentiments. I predicted the electorate would respond to this and more than nine months before he was elected I told an audience of self-satisfied liberal political scientists in Seoul to prepare for the unexpected.
Not only was I convinced Trump would win, but I also concluded during the writing of this book that he would be more likely than Hillary to think outside the box and to implement the proposals I laid out. Irrespective of his scruples, Trump is a high-flying businessman who understands how to negotiate big deals with hard power using capital incentives and coercive strength. The art of the deal is really mostly the science of leverage.
But in the end it might not matter who was elected president in the US or South Korea. With the progressive nuclear threat, the moment of truth was going to come before 2020 anyway, and under extreme pressure my buyout idea would sound more plausible and appealing to any leader seeking an alternative to military action.

Say more about your notion of buying out North Korea.

Iverson: Well, the idea rests on a similar premise to the $50 billion Mofaz Fund proposed by a former Israeli general and statesman to buy out Palestine and empower moderate Arabs. Preposterous? I think not. Historically geopolitics plays out more zero-sum, while economics is usually more positive-sum. If anything it is absurd to think we can solve modern political disputes better with force than with capital investment. Ambassador Blackwill and Jennifer Harris argue this point in their brilliant new book, War By Other Means.

Over the course of the twenty-first century the modernization of foreign policy will involve a greater emphasis on geoeconomic statecraft and smart power economic solutions. There will simply be no other reasonable choice than this natural evolution… as conventional and asymmetric weapons become more lethal and ubiquitous. Most policymakers still think sanctions and punishment first, and have yet to enter into this new positive paradigm.

It took a long time to convince parents to refrain from spanking their children except under exceptional conditions. But such parental restraint seems to have become standard family policy today in progressive households. However, the threat of North Korea’s nuclear-tipped ICBM’s may be one such exceptional condition.
But force usually results in temporary compliance and creates unresolved anger; this resentment may resurface in destructive ways. Some haunting cultural memories linger for generations, like the brutality of indiscriminate carpet-bombing of North Korean cities by the US in the 1950s. North Korean leaders play up the fact that the US dropped more bombs in Korea than during the entire War in the Pacific, and killed nearly to a quarter of the civilian population. These were not smart bombs.

And now with the US rehearsing an invasion just off its coast… it is no wonder the Kim regime is seeking a nuclear deterrent. The trajectory of this dispute is leading to military action. But I think there is a way out… a way to create peace, and this is why I wrote Stop North Korea! I have a new policy idea.

My insight is that in order to denuclearize North Korea we must create insurmountable culture-wide economic incentives for reunification. This would peacefully remove the Kim regime from power. And the only way to do this is through the institution of a Reunification Investment Fund. After an original story about my idea was published in NK News the global media picked up this proposal, but falsely reported that it would take a $175 billion investment to denuclearize Korea. CNBC even reported my plan would replace Kim with other North Korean elites.

If one were to read my plan carefully one would see that it would probably take $4 billion of private investment per year—promised over seven years—to payoff North Korean military and political elites… and another $15 billion—again, over seven years—to personally incentivize the government bureaucracy and the impoverished population in Pyongyang to take action. I think a $30 billion fund, sitting idle in escrow, but ready to payout, might be enough to unify and denuclearize North Korea in a matter of months. Word of mouth spreads quickly. It wouldn’t take long for everyone inside North Korea to hear about this offer. And soon everyone will be talking about how to depose the Kim regime and join with the South.

Could we summarize your plan for somebody who has little knowledge of the situation on the Korean Peninsula, somebody who is not familiar with its intricacies? What would the benefits be for each part of the North Korea population?

Iverson: Sure. This is a gigantic bribe: if elites force Kim to acquiesce, we give them money. The average annual income in North Korea is about $1,000; it is over $30,000 in the democratic South. Enough said… it is this relative poverty that gives my reunification plan a chance. Even elites are impoverished by international standards. There are 200,000 millionaires in South Korea, but only a few hundred in the North. My plan would create 11,000 instant millionaires, and begin a long process of peace and reconciliation.

This reunification fund promises North Korean elites enough incentive money to compel them to make Kim Jong-un an offer he cannot refuse. This may result in a Palace Revolution led by ultra-elites—who would receive $20-30 million each if Kim acquiesced—or a coup d’état sponsored by well-compensated military elites—all generals are promised at least a million dollars. Or it could lead to mass insurrection or peaceful acquiesce. Each of these scenarios is of course preferred over military confrontation.

We have an international humanitarian responsibility to end Kim’s reign. Besides the nuclear threat, the UN estimates two million children are chronically malnourished and the regime holds more than 80,000 political prisoners in a Stalin-like gulag system.

The reason this Reunification Investment Fund was quoted at $175 billion is because I direct $125 billion—more than 2/3’s of the money—go directly to the impoverished masses over seven years, more than doubling average household incomes per year. This capital would come from public sources and is money that must be spent on development anyway… and it is best it enter the economy through individuals—motivating both reunification and bankrolling economic demand at the grassroots.

And for the masses, promises of stable food prices, modern medical and dental care for their children, job freedom, reliable water and electricity, improved infrastructure, and thousands of dollars in a personal bank account, will create a new world of optimism. If Kim does not acquiesce willingly, we may anticipate mass disappointment will lead to collective action.

This economic model uses the power of incentivizing an entire culture to produce elite political transformation to reunite Korea. It is based on sound principles of social science and would succeed if funded.

So where will the money for Kim Jong-un and his family come from? If not individual governments, who has that kind of wealth?

Iverson: Kim Jong-un and his family will receive no money. But I recommend Kim be allowed to keep a portion of the money he is reported to have squirreled away. I think even now Kim Jong-un might reasonably be recast as a young figurehead leader, not directly responsible for the purges ordered by the old hierarchy of the entrenched Party bureaucracy. This gives Kim a plausible free pass and safe exit from power, without international retribution.

The $4 billion per year for seven years that is necessary to payoff North Korean elites must come from private sources. I would expect a consortium of Korean chaebols, international corporations, and private individuals can raise this kind of capital. This might be all the money needed to spark reunification. But you can read about the details of a larger payout in the book.

Now, considering that the numbers in your plan seem to make sense, who in your opinion would be the best negotiator to strike a deal on these terms with the North Korean government? Who do you see, today, as willing and able to take this plan to the North Koreans?

Iverson: Good question. If not Donald Trump, then Bill Clinton with Jimmy Carter, if he is still alive. Of course, with South Korean president Moon Jae-in, and perhaps a chaebol boss. In traditional societies women made the peace—perhaps Michelle Obama, or a combination of enlightened billionaires and the media. I don’t know who might surface to champion this cause, but once the money is on the table, this peace plan can be signed and sealed quickly.

Coming to South Korea’s role in all this, we have seen the recent victory of Moon Jae-in, who is a left-leaning politician who could possibly support more dialogue with the North. What do you think would be the implications for the participation of South Korea into this plan? Does it matter what South Korea thinks?

Iverson: A wise and cooperative South Korean president could be a big help. This is Moon Jae-in’s chance to win a Nobel Peace Prize. But he needs the courage to really lead his people out of the darkness.

This brings us to a section of the book that is particularly fascinating. You explore the relationship between China and North Korea and the concept of ‘hostile surrogates’. In your view, China is propping up countries like North Korea to keep the US busy with a different range of problems, and to divert the eyes of the US from what is really going on in Asia. This is in contrast with a depiction of North Korea in the media, as a crazy place, run by an infantile dictator, which constantly tests the patience of its Chinese Patron. What’s your take on that?

Iverson: Yes, there is this standard ‘infantilization’ of Kim Jong-un in the media. He’s depicted as a screaming toddler, rattling a nuclear missile to protest unfair treatment or just to get his way… and to me, this is a dangerous underestimation of Kim. But the real danger is in taking president Xi and China at its word. The media has completely missed the real story.

China’s economic support for North Korea has increased four-fold since 2006, after North Korea exploded its first nuke. Beijing now purchases 90 percent of North Korea’s commercial exports, provides over a billion dollars in aid, 80 percent of its consumer goods, 90 percent of its energy, $100 million in UN banned luxury items, and enough food to feed over a million people each year. Profits from trade and aid with China directly and indirectly fund more than three-quarters of North Korea’s $6 billion military budget. So essentially, despite what Xi says, Beijing is paying for Kim’s nuclear program. I don’t understand how the media has missed this.
China
supports North Korea for security reasons. After establishing Pakistan as a nuclear power on one flank, China prefers a surrogate ally with nuclear muscle on its other flank. This relationship would dissolve if the Kim regime’s nuclear threat to the United States were unacceptable to China’s larger geostrategic objectives. This logic has escaped analysts who fail to identify the silent surrogate role Pyongyang plays in promoting Communist China’s historical anti-imperialist anti-Western foreign policy through the indirect transfer of technical knowledge and advanced weaponry to the Greater Middle East—especially to Iran and Syria.

There is abundant evidence for all of this. That is why I somewhat cynically argue that Beijing would surely withhold support if Pyongyang started selling weapons to Xinjiang rebels or to the Dali Lama. However, if Washington awakens from its strategic slumber and challenges China, Beijing may soon see no alternative and reluctantly back away from North Korea. How Beijing can do this while saving face is explained in my book.

And this is why sanctions have not worked so far and are unlikely to work in the future?

Iverson: Exactly. Justin Hastings new book, A Most Enterprising Country, documents this very well.

What’s the UN’s role?

Iverson: The UN may help ameliorate some pain and suffering, but it does not keep the country alive; China does… and will continue to until it is forced to pay a price.

Now, if things change with China and its relationship to North Korea…. what would happen in case of a sudden regime collapse and in the absence of a reunification plan?

Iverson: There is a map in my book showing how Beijing could claim a large portion of what is now North Korean territory, say, drawing a line from Anju in the west to Hamhung in the east. They might initially claim this resource rich territory as a buffer zone, and then, in time, annex it. China can do this because it has the strongest army in Asia and the US will never again fight China on the ground. Indeed, China might even sequester this land after a US surgical strike if it thought it could control regime replacement in Pyongyang and sooth international public opinion.

Let’s get now to some of the points in your book that may raise more than a few eyebrows. The moral substantiation of your plan may seem weak to those who believe that North Korea is the ultimate incarnation of an evil polity, much akin to Nazi Germany. How would you morally justify making a deal with North Korea?

Iverson: This isn’t Let’s Make a Deal, it’s let’s peacefully remove the Kim regime using cultural and economic incentives. To some this payment plan may seem unethical or even immoral, but most of the elites who will benefit are merely innocent inheritors of their fathers’ ill-begotten estate. They were not complicit in its original acquisition or in the malevolence that followed. We don’t punish the descendants of slaveholders or the children of thieves and murderers. This payment would largely amount to a bailout for the misdeeds of their ancestors—without moral hazard. The new North Korean elite is composed of good and bad people, like the elite in all nations.

Young South Koreans seem more detached from reunification issues than their parents. What is your take on this?

Iverson: I dealt with this question in my previous book. South Koreans are demotivated when it comes to unification because politicians, public intellectuals, and the media have not presented the entire picture. North Korea has enormously valuable natural resources—valued at $6-10 trillion US dollars—and according to a Goldman Sachs study there are intrinsic development synergies that would propel the GNP of a united Korea past France, Germany, and Japan in just one generation. Korean scholars and the media have not popularized all the facts. A unified Korea will be much richer.

Well, I hope this happens. I’d like to thank you for your time and for your efforts to resolve this Korean crisis. Thank You. Thank you very much.

Iverson: No, thank you for your intelligent questions and sincere concerns. I appreciate that you have read my book and can envision along with me the possibilities for a peaceful solution. Thank You.

North Korea and the World

Book Review

North Korea and the World: Human Rights, Arms Control, and Strategies for Negotiation by Walter C. Clemens, Jr. (Lexington, KT: University Press of Kentucky, 2016)

Reviewed by Shepherd Iverson

Walter Clemens is an exceptionally literate Columbia-Harvard educated octogenarian scholar, who offers an experienced purview of the past leading to the present, and sound advice for how to conduct North Korea policy in the future. As one might expect from its title, whether one prefers Virgil, Machiavelli, or Goethe, the cheerful adagio and leisurely allegro of a Bach concerto or the sharp point counterpoint and complex syncopation of Beethoven, this book has something for everyone.

Did you know Koreans printed books using metal type 200 years before Gutenberg; claims one-forth of all Catholic martyrs, and that no US President spoke the word “Korea” in public from 1911 to 1942? This book contains intriguing and meaningful anecdotes and details that embellish a refreshingly sophisticated analysis. Clemens thorough scholarship also provides updated empirical estimates of things such as how many children are malnourished, citizens imprisoned, number of people who died in the famine, and other figures. This historically grounded treatise will satisfy those who seek a deeper understanding of North Korea today and the perplexing dilemmas and geopolitical challenges associated with its nuclear proliferation.

Beginning with Kim Il Sung’s interest in nuclear weapons in the mid-1950s, Clemens chronicles the phases of North Korea’s nuclear program and the impetus given it when India tested its first nuclear bomb in 1974, proving that even a poor nation can obtain a nuclear threat. This would eventually lead to nuclear cooperation with Pakistan.

Although almost 450 pages—60 pages of notes—this book is so well researched and written that it reads like a Tom Clancy novel. Separated into four sections and twenty chapters, Clemens discusses the historical roots of the North Korea problem, policy dilemmas, recent opportunities aborted, and future policy options. Interspersed throughout are thought provoking questions that could only have been asked by a scholar of significant field experience and indisputable wisdom.

Clemens asks if America should be seen as a beneficent gendarme or a brazen bully, and provides evidence for both. In his chapter, Facing Up to Evil, he quotes Reinhold Niebuhr and posits a universal moral argument that “suffering anywhere diminishes everyone,” and cites the 2006 United Nations Security Council resolution 1674 affirming the “Responsibility to Protect,” which justifies the international community’s moral obligation to intervene economically and militarily if necessary when states violate the basic human rights of their citizens.

The third section of the book is devoted to opportunities aborted as Clemens discusses failed US policy beginning with the Agreed Framework—the least bad option to create security on the cheap—followed by “Bush’s blend of bombast and malign neglect,” frustration at the cessation of six-party talks, concluding with the abandonment of the Leap Year accord and strategic patience.

One criticism of this book might also contain its deliverance: throughout there is an almost ecumenical passion reminding readers that international relations is more than abstract concepts and impersonal theories. Clemens claims “determined individuals have sometimes overcome the thrust of material forces and neutered the vagaries of time and chance.” Indeed, after introducing Machiavelli’s mysterious concept of fortuna, Clemens discusses Australian black swans, cultural intangibles, determinism, free will, and provides ample exculpatory evidence for readers to agree with his exonerating thesis that humanity may indeed overcome the push and pull of structural constraints and political dilemmas to evolve toward the light—as Steven Pinker argues in The Better Angels of Our Nature.

Clemens asks if Korea will “become a crossroads for commerce or a cauldron for war,” and argues that we have a choice, that cooperation is vital to the fitness of our species, and to thrive in an interdependent world of growing complexity we must foster enlightened self-interest to accomplish mutual gain and accommodate peace.
In his final chapter Clemens discusses the limits of rational policymaking, the possibility of parallel truths, imponderables and uncertainty, before introducing ten alternative approaches to denuclearizing North Korea. He favors strategies of engagement and negotiation, and devising “outcomes beneficial to key stakeholders” through incentives, and proposes GRIT (graduated reciprocity in tension-reduction) to achieve these results.

North Korea and the World makes an important and timely contribution to resolving one of the greatest security dangers to the United States since the Cuban missile crisis. This book is a must read for policymakers and Americans concerned about a belligerent nation with a per capita GDP of Afghanistan and a cultural propensity for honorable suicide that is developing weapons of mass destruction capable of annihilating a major American city in less than an hour from across the ocean at the push of a button.

Disarming North Korea

Disarming North Korea

Abstract: This essay seeks to cast doubt on conventional assumptions about China’s coercive ability and intent concerning North Korea, and proposes an unconventional geoeconomic solution to the growing nuclear threat that upholds Chinese security and saves face for Beijing. With incentives for private underwriting, a Reunification Investment Fund is introduced as a platform to create US-China cooperation and elite North Korean support in reuniting Korea.

Foreign Policy editor and Beltway insider David Rothkopf complains about “dumb-downed smart people” in Washington, and claims there is an “institutionalized aversion to creativity.” Indeed, conventional US North Korea policy remains stuck in the muck and mire of Cold War causation, without nuance, imagination, or reasonably substantiated expectations of positive-sum outcomes. The fatalistic diplomatic doctrine is: “There are no good options.” This can and must change.

After North Korea’s quadruple missile launch in March, nonproliferation analyst Jeffrey Lewis has convincingly argued that Pyongyang is “preparing for a nuclear first strike” on US and allied military installations in the Asia-Pacific. Experts predict that sometime during the Trump presidency North Korea will be able to deliver a nuclear-tipped ICBM to the United States homeland. Past US presidents have drawn a red line, claiming they would not allow a nuclear North Korea; however none has been successful in undermining this danger or in dissuading China from supporting the Kim regime. After eight years of strategic patience there is a growing consensus that something must be done in a hurry and that China must be compelled to cooperate.

Chinese President and communist Party general secretary Xi Jinping must feel uneasy about an unconventional US president with a conservative populist mandate, as Donald Trump has already made China’s trade surplus a political issue, and as Beijing quietly continues to prop up a regime in North Korea that is developing nuclear weapons it threatens to use against the United States. With several million manufacturing jobs lost to alleged unfair trade with China, and North Korea in the final stages of developing a nuclear-tipped ICBM, Washington may seek a grand bargain with Beijing to rebalance US-China trade and denuclearize North Korea. As the preponderant economic and military power in the world today, the United States has considerable ability to achieve both objectives. However, avoiding conflict may require unconventional means of deploying US power over China and North Korea.

In a book Henry Kissinger hopes will convince policymakers to reassess geoeconomic tools, in War by Other Means Ambassador Robert Blackwell and Jennifer Harris critique conventional US foreign policy and present a prescient prescription for what must change. Blackwell and Harris contend the Vietnam War pushed geoeconomics off the policy stage, and then as now, the US too often reaches for the gun instead of the purse. Citing ideas introduced by the influential Johns Hopkins foreign policy professor Michael Mandelbaum, Blackwell and Harris assert, “Understanding geoeconomics requires appreciating deeply embedded differences in the operating assumptions of geopolitics and economics. The logic of geopolitics is traditionally zero-sum, while the logic of economics is traditionally positive-sum.” They conclude that US policy should de-emphasize zero-sum conventional power politics in favor of positive-sum geoeconomic statecraft.

To achieve this objective, I have designed a model to peacefully denuclearize North Korea while creating economic and security benefits for concerned stakeholders—including China. In this essay I will introduce a pragmatic platform for positive-sum private and multilateral cooperation that expands the set of options at a time when it is painfully obvious conventional strategies derived from institutional think tanks and policy professionals are not working, and sentiment is growing for more drastic actions.

However, before introducing this proactive geoeconomic approach, let us review evidence that supports the prevailing opinion that China could do more to stop North Korea, and possible reasons for its reluctance.

China’s Reluctance to Stop North Korea
Conventional wisdom is that China prefers a divided peninsula in order to preserve a fraternally allied communist authoritarian state as a buffer between itself and the US allied (and occupied) democratic South Korea. While perhaps a valid concern for a more insecure generation, there is little rationale for this today. In addition to the borderless diffusion of news and information via digital communications and the Internet, with over two million men in boots and 2,000 fighter aircraft, no modern army would dare push toward Beijing over land through Korea, and after unification, the presence of anti-ballistic missile systems (THADD) and the US military are unnecessary. Let me suggest another reason that has largely escaped critical analysis.

Since the chorus of disapproval in China following North Korea’s February 2013 nuclear test, the prevailing consensus is that Beijing has distanced itself from Pyongyang. It is cited that Chinese President Xi has yet to meet with Kim Jong-un and has warned the Kim regime to stop provocations. Although there is circumstantial evidence for estrangement this does not discredit an alternative hypothesis that China is feigning displeasure to disguise its real intent. Analysts who presume acrimony fail to identify the silent surrogate role North Korea plays in promoting Communist China’s historical anti-imperialist anti-Western foreign policy through the transfer of technical knowledge and advanced weaponry. An incomplete flow chart of the chain of interlinking proxy relationships (including Russia’s role) and weapon transfers between anti-Western authoritarian states and non-state terrorist/resistance groups is represented in the figure below:

Anti-Western International Weapons Supply Chain

This chain of strategic relationships destabilizes the Middle East and challenges US interests in the Persian Gulf. A history of Chinese weapon exports to the greater Middle East and current North Korean weapon exports through Chinese ports to Syria and Iran (arming Hezbollah and Hamas) suggests collusion. China policy expert Denny Roy points out that an increasingly dangerous “anti-U.S. Iran diverts U.S. resources away from East Asia and attention away from China.” According to newly released records obtained under the Freedom of Information Act, China exported nuclear materials to the Middle East in the early 1980s. Declassified CIA reports reveal that Chinese entities have been key suppliers of nuclear and missile-related technology to Pakistan and missile-related technology to Iran.

In 2011 a U.N. Panel of Experts report was blocked by Beijing in the Security Council because it contained incriminating details that Iran and North Korea exchanged missile technology using Air Koryo and Iran Air, involving transshipment through China. Before the JCPOA agreement was finalized, Beijing repeatedly opposed UN sanctions against Tehran, vetoed sanctions against the Bashar al-Assad regime, and stymied possible P5+1 action in Syria. Beginning in 2009 the Obama Administration imposed sanctions 16 different times on Chinese entities for weapons proliferation, including after 445 North Korean-made graphite cylinders used in ballistic missiles were seized in 2012 from a Chinese cargo ship bound for Syria.

In February 2014 the US Defense Intelligence Agency Director testified before the Senate Armed Services Committee that Syria’s liquid-propellant missile program depends on equipment and assistance primarily from North Korea.
These intelligence discoveries, plus Beijing’s lackluster response to Pyongyang’s nuclear and ballistic missile tests and its failure eliminate munitions transshipments and enforce UN sanctions, suggest that China’s support for North Korea may not be a benign legacy of the Cold War, but part of a larger geopolitical strategy. After establishing Pakistan as a nuclear power on one flank, China may prefer a surrogate ally with nuclear muscle on its other flank.
While China may currently lack resolve to stop North Korea, evidence it could prevent its nuclear proliferation would create a strategic opening for geoeconomic diplomacy.

Can China Stop North Korea?
Taking the CCP at its word that it disapproves of North Korea’s nuclear missile program, most institutional analysts also presume Beijing cannot stop it. However, evidence of substantial economic leverage suggests otherwise. According to a US Congressional research report, in addition to over one billion dollars in direct aid, Beijing purchases 90 percent of North Korea’s commercial exports, provides 80 percent of its consumer goods, 90 percent of its energy, over $100 million in UN banned luxury goods, and enough food to feed over a million people per year. However, the most profit is derived from the trade itself, which despite Beijing’s alleged discomfort with Pyongyang’s provocations, has quietly increased four fold since North Korea’s first nuclear test in 2006, as shown in the graph below.

China-North Korea Trade 2006-2015

Source: Korea Trade-Investment Promotion Agency (KOTRA)

Although there are indications of a recent reversal, this dramatic increase in trade since 2006 is undeniable evidence of China’s growing support for North Korea and at least tacit approval of its nuclear weapons program. As Beijing props up the Kim regime without bringing attention to itself—or anyone losing face—it may undervalue exports by at least one-third—a strategic discount—while the bulk of North Korea’s exports of mineral products and textiles—utilizing work camp labor—may return a 90 percent profit. The structural trade deficit (highlighted above) with China is effectively foreign aid since it is inconceivable it will ever be paid back, as with the $10 billion Russian debt that was forgiven in 2012 after decades in arrears. Given these assumptions, from available data Chinese trade and aid is responsible for direct and in kind fungible profits that paid for more than three-quarters of North Korea’s $6 billion 2015 military budget.

Despite benign policy pronouncements, this suggests China is underwriting the stability of the Kim regime and paying for a portion of its nuclear weapons program. Indeed, if China were to abide by UN sanctions and suspend support—even if food aid was maintained at humanitarian levels—without luxury goods for elites, oil for the military, and essential commodities for its people, it is improbable the Kim regime would last long. American Enterprise Institute economist Nicholas Eberstadt describes North Korea as more dependent on aid than the poorest countries in Africa. According to the highest ranking émigré and a senior member of the Korean Workers Party: “Without Chinese capital goods, it would be impossible for the North Korean government to operate, and ordinary people would not be able to carry on with their daily lives.”

Under such conditions, leaders of surrogate states need not like their overseers in order to do as expected when money—or its equivalent—is on the table, especially if they have no one else to turn to and when these activities are consistent with their geopolitical designs. The degree of animus or friendship between Beijing and the Kim regime is immaterial to this client-proxy relationship, which would dissolve if North Korea’s nuclear missile program, and missile exports and nuclear technology transfers to the Middle East were unacceptable to China’s larger strategic objectives. Indeed, Beijing would surely withhold support if Pyongyang started selling weapons to Xinjiang rebels or to the Dali Lama.

Breaking With the Past
As shown, China has more leverage over North Korea than most analysts presume. However, enlisting China’s cooperation may not be as prohibitive as observers might think. Dartmouth political scientist Jennifer Lind points out that when China and North Korea originally formed an alliance both countries were weak, resentful, isolated, and the target of Cold War containment by the US and its allies. China has since moved beyond this state of affairs, has joined multilateral institutions, and now depends on the international system as the world’s largest trader. Although its North Korea policy remains anchored to the past, influential factions in the PLA and the CCP regard the Kim regime as a threat to regional stability.

In a September 2014 article, published in the China state journal, World Knowledge, Renmin university international relations expert Li Wei describes North Korea as inappropriate as a “strategic ally” because it does not conform to the general criteria of a “strategic hub country” that supports Chinese political, diplomatic and security goals. Party elites are uneasy about an unruly state on their border that may provoke a US military response or prompt regional nuclear proliferation. Indeed, Richard Haass at the Council on Foreign Relations notes: “China needs years and more likely decades of relative stability in the region so that it can continue to address its many domestic challenges. North Korea is a threat to such stability.”

Although hardliner traditionalists still prevail over a new generation of policy pragmatists, their authority is not unlimited, and Beijing is not immune to its own populist pressures. China may not renew this relationship indefinitely, as it is forced to accept more important concerns that loom on the horizon. Since the Mao era, Chinese leaders have exhibited an admirable faculty for reform in response to changing real-world circumstances. As relations between the US and North Korea deteriorate and the geopolitical calculus changes, the geoeconomic model outlined below may be China’s golden opportunity to resolve this eroding security dilemma before it loses control over the situation. Sixty-five years ago when its frontline value was beyond reproach, North Korea was a protected pawn in the chess match of great power rivalry. However, now that it has invited danger into the region for China, it may be sacrificed for a larger strategic vision.

In a world of massive capital flows, unequal abundance, structural stagnation, and global satellite communication, where expanding trade and creating jobs is as important to political survival as free access to well endowed consumer markets, it is likely that over the course of the twenty-first century a more pragmatic modernization of foreign policy will involve a greater emphasis on geoeconomic statecraft to solve political disputes and promote and defend national interests. The following plan to disarm North Korea was designed as a bridge to this future.

Creating Geoeconomic Incentives
What if there was a way to reunify Korea and stop nuclear proliferation without inciting fear or administering punishment, but instead, by promising personal rewards? Novel approaches often seem untenable until they are fully understood. Therefore, I ask readers to be open-minded and suspend judgment until they comprehend the interacting details of this model.

To begin, imagine you control a multi-billion dollar capital fund and North Korea is a poorly run underperforming corporation that is controlled by an incompetent board of directors—the Kim family and a small number of ultra-elites—who will not negotiate a deal. In this regressive situation it is logical to offer shareholders—political and military elites, government managers and bureaucrats, and the general population—a higher price for their shares to convince them to overrule their board of directors. This is the plan in a nutshell.

After a quarter century of failed conventional policies, a geoeconomic strategy that injects the persuasive power of personalized money into the diplomatic process may be necessary in order to overcome institutional inertia and path dependencies that too often terminate in conflict. My assumption is that in social settings, where almost everything is for sale, there must be some level of security assurance and personal financial incentive that will impose insurmountable domestic pressure on the Kim regime to acquiesce to South Korean political control.

To achieve this result I have designed a plan for the institution of a seven year $52.5 billion Reunification Investment Fund—with private underwriting—that would offer personal financial incentives for North Koreans to unify with their wealthy relatives to the South. As in the final days of the Soviet Union, the efficacy of this model is enhanced by the word-of-mouth rumor currently spreading across North Korean social networks that the outside world is a better place to live. People are ready for change; this fund is a platform to unleash and manage it. The bold arrows below represent the essential elements of this Reunification Investment Fund:

Reunification Investment Fund Financial Flow Chart

* The Bank of Korea may act as the lender of last resort

In this scenario, the South Korean government would offer resources awards and private sector contracts for infrastructural improvements and portions of future markets, industries, and business enterprises worth trillions of dollars in profitable assets, including open markets in telecommunications, transportation, building materials, and automotive products, ownership or licensing agreements for control over mines, seaports, and tourist attractions, and exclusive construction contracts for a gas pipeline, railroads, tar roads, energy generation, and a multitude of necessary projects.

In exchange for these resource awards and government assurances, business investors would be required to endow this fund to pay an annual $4.2 billion golden parachute for seven-years to North Korea political and military elites, to compensate for their loss of power and position. Since it is impractical to expect democratically elected officials to agree to pay large amounts of public money to North Korean elites, these payments must come from private sources, for whom the prospect of enormous business profits make this a wise investment.

Lucrative business opportunities abound in the hermit kingdom. North Korea ranks 10th among all nations in mineral reserves; valued at $6-10 trillion. A multi-billion dollar pipeline must be built from Russia to supply the industrial and population centers of Korea with an estimated $3 billion in natural gas per year. Railroads must be rebuilt for rapid commodity transport to Europe and China. Unification would stimulate exports through the northernmost ice-free Pacific port in Rason, just a few miles from landlocked China and bordering the resource rich Russian Far East. Roads must be tarred, cars imported; only 3 percent of the roads are paved and the North has only 50 thousand private cars compared to 18 million in the South. Cheap labor will be available for at least a generation, as internal markets spring up. Tourism is another unexploited multi-billion dollar industry, where control over specific attractions may be turned over to private enterprise in return for contributions to the fund.

After decades of globalization profits and unprecedented QE, the world is awash in money. Business tycoons, transnational corporations, and institutional investors have surplus capital and are looking for opportunities. International business, banking, and multilateral underwriting, with G-20 leadership, will impart confidence by indemnifying this fund with broad assurances from the global community. In today’s multilayered global balance of power, private interests often serve as a unifying force in the competitive nation-state system of world governance. This plan is based on the assumption that geopolitics may sometimes be more effectively managed through positive-sum geoeconomic incentives acting on the personal and cultural level.

Culture Unifying Incentives
Almost everyone in North Korea has abandoned Leninist ideology and is aware of and envious of South Korea’s remarkable prosperity. The steady diffusion of news and information across the semi-permeable Chinese border has changed the cognitive landscape, as a market-motivated underground word-of-mouth information highway challenges the state’s meta-narrative and monopoly on information. Rumors of the inordinately better life in the South have saturated cultural impressions and created a new social context for political change that has not existed before.

After decades of silent transformation the mere existence of this fund sitting in escrow ready to pay out vast sums may catalyze overwhelming support for reunification at all levels of North Korean society. The promise of $29.4 billion to elites—$4.2 billion times 7 years—can win a lot of hearts and minds. The top ten power elite families would receive $30 million each, while the top thousand would get more than $5 million; 11,000 upper elites—including all generals—will be offered at least $1 million; more than 50,000 mid-level political elites and military officers will receive $100,000 to $500,000, while the incomes of 300,000 families in Pyongyang will increase many fold if Korea were to unify.

This provision of money is compensation for loss of status and income. On the surface, these payments may seem unethical, possibly even immoral, but most of the elites who will benefit are merely innocent inheritors of their fathers’ ill-begotten estate (position and power) and were not complicit in its original acquisition or in the malevolence that followed. We do not punish the descendants of slaveholders or the children of thieves and murderers. Their only guilt is the origin of their birth. Indeed, this payment would amount to a bailout for the misdeeds of their ancestors—without moral hazard.

As designated by the thin arrows in the financial flow chart shown above, the masses outside Pyongyang should also be awarded financial benefits. This will help jump-start the new economy and ensure social stability. Non-taxpayer derived investment capital may come from South Korea’s half-trillion dollar sovereign wealth and foreign reserve assets, QE, helicopter money, or from the presumptive peace dividend. Post-unification investments in infrastructure from Korean government bonds ($300 billion has been proposed), international banks (IMF, ADB, and AIIB), and the B-20 (the investment arm of the G-20) may amount to more than a trillion dollars over the next decade, creating millions of productive jobs and securing the democratic transition.

Little is known about the sentiments of the Pyongyang poor, who comprise about two million people living in close quarters, just a stone’s throw from the guarded compounds of the power elite. Few have refrigerators and even fewer own washing machines; electricity and water are intermittent. They live along dirt roads in brick-and-clay huts without toilets, heat their homes with charcoal, and bathe infrequently in public cold-water showers—even in the bitter cold of winter. Promises of food security, modern health and dental care for their children, property ownership, a regularly functioning water and energy infrastructure, high-speed international communication links, and thousands of dollars deposited into their personal bank accounts each year for seven years may spread unification fever and many may take to the streets.

Safe from international retribution, the Kim regime may acquiesce long before the social situation devolves into a state of general chaos and insurrection. Although Kim Jong-un receives no money, that personal safety is more precious than power would give him little choice but to accept this offer. He may be granted immunity from criminal prosecution, allowed to keep a portion of his fortune, and promised freedom to live and travel anywhere in the world. Nothing is gained by his vilification or punishment, while promising safety and security to Kim and his family may prevent bloodshed.

Or if Kim is unwilling to acquiesce, motivated by the $20-30 million promised to the 200 most prominent families, elites may take matters into their own hands. Or a coup d’état may be sponsored by well-compensated political and military elites. In either event, violent overthrow or peaceful acquiescence—and with or without Chinese assistance—the transfer of power to South Korea would disarm a nuclear threat and end more than half a century of abject tyranny.

Conclusion
The Trump administration has made it clear that America’s patience has run out and that it will not allow the Kim regime time to develop the ability to nuke the United States. With the horror of 9/11 indelibly etched into American minds, many believe a surgical military strike now may have significantly lower risks than a nuclear-ICBM endangered future. All options are on the table; the US is prepared to act unilaterally and unpredictably—as in the April 7 cruise missile strike on a Syrian airfield. Since conventional geopolitics has failed to stop North Korea from developing weapons of mass destruction, this geoeconomic approach should be considered in lieu of another missile strike. Indeed, the extraordinary plan proposed here might be the only realistically achievable path to denuclearize Korea at this late stage without resorting to a kinetic solution.

Mutual US-China security concerns may compel reciprocal compromise and cooperation. China may facilitate reunification by suspending all support for Pyongyang while the US would agree to withdraw its military from mainland Korea pending unification and the removal of nuclear weapons. Both nations may diplomatically promote and financially support this fund. Indeed, ubiquitous benefits from reunification should help promote this peace initiative.

If popularized in the media, business leaders and heads of state may see this is a workable plan that would benefit everyone with something at stake in the region. The US would get the dissolution of a grave nuclear threat, an end to the possible transfer of nuclear materials and technology to terrorists or rogue states, and a chance to reassess its geopolitical interests in a less threatening Asia-Pacific; Japan gets safety from missile attack and weapons of mass destruction, along with large new labor, export, and investment markets; Russia gets secure rail and energy profits, and year-round passage to Pacific shipping; China gets a reprieve from the possibility of regional nuclear proliferation, free-market access to Korean minerals and ports, cooperation in developing its northeast provinces, the removal of US troops from mainland Korea and an easing of great power rivalry; and South Korea gets permanent peace, trillions of dollars in mineral resources, energy security and diversification, several valuable Pacific ports, rail connection to China and continental Europe, 50 percent more people, 120 percent more territory, and according to a Goldman Sachs study, development synergies that may propel its GNP past France, Germany, and Japan in just one generation.

Although nuclear proliferation and the trajectory of geopolitics seem unstoppable, we need not continue down this road leading into the abyss. Instead we may think outside the box and create novel solutions to unique contemporary geopolitical problems. Realizing the potential of this fund will require the inspired vision of business and political leaders who can bring out the best in all of us; those who perceive the big picture and understand that the ideas that move humanity forward are often initially considered crazy, disruptive, or impossible; leaders who can show us what we should want, while employing positive-sum geoeconomic incentives to get us there.

To get from here to there we must transcend zero-sum geopolitics with a strategic plan that at least has some chance of positive-sum success. This Reunification Investment Fund is such a plan. As Ambassador Blackwell and Jennifer Harris astutely assert: “U.S. foreign policy must be reshaped to address a world in which economic concerns often outweigh traditional military imperatives and where geoeconomic approaches are often the surest means of advancing American national interests.”

correction

Correction

Somehow I messed up the 2015 North Korea-China trade amount. It did not increase but declined from 2014.

From Korea Trade-Investment Promotion Agency data, I now estimate Chinese trade and aid is responsible for direct and in kind fungible profits that fund more than 80 percent of North Korea’s $6 billion military budget. [not 90 percent]

The corrected ten year graph is below.

           North Korea Trade Volume (billions)

 

The US-Korea Alliance and the World According to Trump

The US-Korea Alliance and the World According to Trump                  

Living in South Korea with my family for the past eight years has afforded me a grassroots perspective on Korean politics and the future of the US-Korea alliance. As populism changes the political landscape in the West, many wonder if similar effects will be felt in the East. The public process of dethroning President Park suggests it may. With populist hysteria associated with the transgressions of President Park and her cronies, there has been a rise of left-wing political opposition that is less sympathetic to US interests. Washington is concerned about a possible postponement (or even cancellation) of the planned 2017 deployment of the Terminal High Altitude Area Defense (THAAD) system.

As a predominant economic and military power, the United States can make policy mistakes and recover relatively unaffected. But as a resource-poor middle-power, never far from the precipice, South Korea does not have the resilience to deny reality and make mistakes. Unfortunately, facts and logic do not seem highly valued in Korean policy circles. A collective state of denial of the North Korea proliferation problem has defied reason. Like status quo parties in Europe and the United States, traditional sources of political power in Korea are ill prepared to reverse patterns of perceived incompetence and trends of disaffection.

Months ago, shortly after Donald Trump made disparaging campaign remarks about the cost of the US-Korea alliance, I warned those present at a political science seminar in Seoul not to underestimate the possibility of a Trump presidency. My Korean colleagues thought I was out of touch; this could never happen. That inconvenient truths or the logical trajectory of geostrategic facts might intervene to dissuade future events seemed not to effect the normal wishful thinking of status quo political analysts in South Korea (and in the US), as they misapprehended modern vectors of change. However, mistakes in judgment have larger consequences for Korea.

Few South Korean analysts have been critical of America’s wait-and-see policy of strategic patience, as if assuming the North Korea nuclear missile threat will disappear without incident. Status quo thinkers have been unmoved by innovative ideas that might impact policy, allowing only small iterations of their own unimaginative conventional approaches. Myopic self-satisfied political leaders from both the right and left seem so wrapped in the rhetoric of there historical views and positions on North Korea that neither see the ground moving out from beneath their feet. At a time when Korea needed a strong and sophisticated leader it elected a president who consults with spirits through Shamans.

Exit Obama-Park; enter Trump. The Donald might not be well liked by half the American public, but as a spoiled self-centered billionaire who will do almost anything to win and get his way, he simply doesn’t give a damn about how things have been done in the past or what the established order thinks. In the spirit of Teddy Roosevelt, Ronald Reagan, and the gunslingers of the Wild West, many Americans like such rough and ready tell-it-like-it-is leaders. Opponents may refer to his personal style of deal making as abrasive, even dangerous, but everyone will agree he is a man of action who commands attention; while some fear and others rejoice that he might actually get things done. Trump may have a thin understanding of how geopolitics has been conducted in East Asia, but after years of making deals, he has a thick understanding of how to employ power to get his way.

While experts predict North Korea will be able to deliver a nuclear-tipped ICBM to the US mainland at some point during the Trump presidency, many now ask how the World According to Trump will affect Koreans and the US-Korea alliance. Unlike sidestepping politicians, I will be blunt and straight to the point about an issue that really matters. While President Obama asserted the US would not consider a unilateral strike on North Korean nuclear missile sites because of the danger of a knee-jerk retaliation against Seoul, all bets are off with Trump. To protect American lives, that tens of thousands of Koreans might perish is unavoidable collateral damage. Trump does not have a liberal conscience; he is an American exceptionalist on steroids. When he says America First he means it.

Even the suggestion of unilateral action makes my Korean colleagues cringe. They will not discuss this possibility openly; it is more comforting to put ones head in the sand and to deny danger. During Obama’s tenure, few took my forewarnings seriously, even as the logical progression of this possible outcome was becoming more apparent. Indeed, Trump may not let a belligerent Kim regime obtain political leverage concordant with an ability to vaporize millions of Americans at the push of a button. And with the horror of 9/11 indelibly etched into the American psyche, why should he when a surgical military strike now may have significantly lower risks to American lives than a nuclear-ICBM endangered future?

It should be remembered that 10 years ago two former US Secretary’s of Defense advocated just such a preemptive strike, and public opinion polls suggest that even a portion of those who did not vote for Trump might approve of this action. Former Secretary of Defense Colin Powell has also reiterated this scenario, and it is doubtful incoming Secretary of Defense James “Mad Dog” Mattis—whom GOP hawks tried to convince to run for president—will be less proactive.

Another pending concern that may affect the US-Korea alliance, about which the conventional South Korean political establishment is in a state of denial, has to do with China. The liberal East Asian Foundation and other progressive groups have applauded China’s One Belt One Road and Maritime Silk Road initiatives (with the dubious assumption Korea will accrue some benefit), but without a realistic assessment of its economic viability. It is ironic that while Korean economists expertly manage the Korean economy, economic realities seem of little consequence to Korean political experts while stroking the China Dream.

It is presumed China’s rise and the US fall are real and permanent and that South Korea must decide which ship to board. But political dreamers are merely intoxicated with a grand idea. Most sober geoeconomic analysts predict this will be the American Century and that communist China may soon crumble under the weight and fiscal mismanagement of its corrupt authoritarian leaders. Perhaps this sanguine credulity and irrational exuberance among Korean political experts exists because crony capitalism and kleptocracy with Chinese characteristics strikes close to home—among the last six South Korean Presidents, two were impeached, two went to jail, and one committed suicide. Even before the prospects of a Trump geoeconomic rebalance, the view among many macroeconomics is that China is a sinking ship, overleveraged in every aspect of its economy, and faces if not a hard landing, a very long one—the middle income trap.

In the World According to Trump, like European free riders, Korea is expected to pay more and do more to protect its freedom and prosperity, and China is considered the ultimate freeloader; but not for much longer. Trump will likely push for trade reform, as is evident in his “get tough on China” appointments of Robert Lighthizer for US Trade Representative, Wilber Ross as Commerce Secretary, and professor Peter Navarro—a reputable anti-China agitator who wrote “Death By China”—to run the new National Trade Council. Indeed, the impact of Obama’s geopolitical rebalance may be mild compared to Trump’s geoeconomic rebalance. Jobs are the issue.

Trump promised to give Americans their jobs back; rekindling the American Dream for a millennial generation. Indeed, Trump was elected in no small measure because people think conventional political leaders have failed them; that out-of-touch Cold War curmudgeons and corporatists have misappropriated their trust and beguiled the public good will. Citizens feel lied to about matters of great importance (with conventional media complicity) and express their anger through social networks and sometimes out on the streets.

These sentiments are going global and status quo candidates from the right and the left will increasingly be surprised and confounded by new populist political personalities who appeal more directly to plebeian concerns. As the masses unite, the US-Korea alliance may become as fraught with contradictions and as complicated as the US-Philippine alliance. These inertial populist forces are larger than any one political leader, and have roots in the democratic leveling effects of the Internet and the rise of a new global conversation.

Trump merely marshaled democratic forces already in motion that made the perceived negative effects of globalization and an unfair trade relationship with China a central populist issue. The US had lost 5 million manufacturing jobs since the year 2000. As Beijing refused to open its markets to US business without onerous requirements, the US trade deficit with China ballooned to over $350 billion. Americans are realizing that importing/buying Chinese products is paying for their unemployment while bankrolling the modernization of a Chinese military that may one day kill their sons and daughters.

Answering Taiwan President Tsai Ing-wen’s phone call reflects an incipient geostrategic willingness by the Trump Administration to apply leverage against China for a number of perceived abuses, including unfair currency and trade practices, its aggressive behavior in the South China Sea, and a reluctance to enforce sanctions against the Kim regime.

As the North Korean threat grows more menacing, Americans increasingly wonder how a country with a GDP equal to the poorest nations in Africa can afford a nuclear missile program? Who better to officially direct this question to Chinese leaders than Secretary of State Rex Tillerson, a pragmatic corporate dealmaker who sees national security through an economic lens.

Despite denial and deception, it is obvious China supports North Korea for geopolitical reasons, while having yet to suffer geoeconomic consequences for this preference. After establishing Pakistan as a nuclear power on one flank, China prefers a surrogate ally with nuclear muscle on its other flank. This relationship would dissolve if the Kim regime’s nuclear threat to the US and its well-documented missile exports and nuclear technology transfers to the Middle East were unacceptable to China’s larger strategic objectives. Indeed, Beijing would surely withhold support if Pyongyang started selling weapons to Xinjiang rebels or to the Dali Lama.

This analysis is based on actions, not words. Realism and Trump’s campaign promises put China’s trade and aid policies in double jeopardy. Many believe an unencumbered trade policy has not made Americans richer or safer, but harms workers while directly (China) and indirectly (North Korea) underwriting the financial and military capabilities of those who treat the United States as their enemy. It has become clear to even less educated citizens that the greatest paradox of our time is that Americans have been funding their own geopolitical and geoeconomic demise. Indeed, Trump was elected because he agrees with this populist diagnosis.

Although pending dangers remain unspoken, and no promises can be made, logical trajectories suggest Seoul must fully cooperate with Washington to pressure Beijing to stop Pyongyang, or else face the possible consequences of a US military strike against North Korean nuclear missile facilities. Unfortunately, because of inertial tendencies in international relations, it may already be too late. Perhaps the last and only possibility now to avoid military action is the fast-track solution—to bribe North Korean elites to reunify—outlined in my new book, Stop North Korea: A Radical New Approach to the North Korean Standoff.

With a populist Make America Great Again mandate, President Trump will be compelled to modernize US policy and force China to comply with fair trade policies and denuclearization in North Korea. The art of this deal is in the degree to which economic pressure must be applied to convince China to stop North Korea’s nuclear threat. For Seoul, liberal economic reengagement is no longer an option since Pyongyang is nearly ready to field a nuclear-tipped ICBM that will endanger American lives.

The US-Korea alliance is fragile at both ends. In a prolonged state of denial, South Korea has not done enough. Seoul must quickly adjust to an increasingly dangerous and complex situation, and do what it can to unify Korea now, because without forewarning, as the preponderant economic and military power in the world today, the United States has considerable leverage to achieve any security objective it deems necessary.

SHEPHERD IVERSON is a former foreign professor in the Institute for Korean Studies at Inha University. A portion of this essay was adapted from his new book, Stop North Korea! A Radical New Approach to Solving the North Korean Standoff (Tuttle 2017).

The Corporate Buyout of North Koreans

The Corporate Buyout of North Koreans

4

I am not a veteran political scientist, who after 25 years of diplomatic frustration and failure, is smothered in nostalgia for the Accords and still longing for renewed Six Party Talks. I am a cultural anthropologist who started work on denuclearizing North Korea only after I moved to South Korea to teach eight years ago. Although I am now quite familiar with the political theory and the ways and means of diplomatic gamesmanship, I am not overly impressed with either. Something more genuine and reasonable has been left out of their elitist equations…the common everyday people. Cultural concerns are naught. And while humanitarian concerns are voiced, there is much less attention paid to the economic survival of individuals in North Korea. Proposals for how to end the Korean civil war and reunify the country are therefore biased by both the bloodless and the bleeding hearts, with little common sense in between.

Considering the great danger of an unstable autocratic regime in control of nuclear-tipped ICBM’s it is amazing to me how few books have been published that might provide a solution. There have been five. I have written two.

happy new year

  •                                     HAPPY NEW YEAR
    Ì

Wouldn’t it be grand if we could release 120,000 North Korean citizens presently interned in prison camps, feed two million children who struggle to survive on an inadequate diet, and eliminate nuclear weapons from the Korean peninsula.

Maybe this year.

If this Reunification Investment Fund is capitalized, this might be the year.

Kim’s Nukes and Trading with China

Kim’s Nukes and Trading with China                                             

During President Obama’s second term North Korea conducted three nuclear tests, launched two satellites into low-earth orbit, and successfully flight-tested road-mobile and submarine-launched intermediate-range ballistic missiles. Experts estimate North Korea may have twenty or more operational nuclear-armed medium-range ballistic missiles and be the able to deliver a nuclear-tipped ICBM to the US mainland at some point during the Trump presidency. US presidents have claimed they would not allow this, however none has succeeded at undermining this threat or in eliminating China’s support for the Kim regime. After years of strategic patience something must be done in a hurry.

President Xi and Kim Jong-un must feel uneasy about a conservative populist Trump presidency. A more transactional Make America Great Again policy may insist on a grand bargain to rebalance US-China trade and denuclearize North Korea. As the preponderant economic and military power in the world today, the United States has considerable leverage to achieve both objectives.

Since North Korea has a GDP similar to the poorest countries in Africa, Americans ask how it can afford its nuclear missile program? According to a Congressional research report, while purchasing 90 percent of its commercial exports, Beijing provides 80 percent of North Korea’s consumer goods, 90 percent of its’ energy, $100 million in UN banned luxury items, and enough food to feed over a million people per year. From available trade data I calculated that in addition to $1.2 billion in direct aid, North Korea received a $1.1 billion strategic discount on imports and profited $3 billion on exports to China in 2015; $7.8 billion total trade and aid resulted in a $5.3 billion fungible profit that may have paid for 90% of North Korea’s $6 billion military budget, including two nuclear tests and almost two dozen ballistic missile launches in 2016.

Despite denial and deception, it is obvious China supports North Korea for security reasons. After establishing Pakistan as a nuclear power on one flank, China prefers a surrogate ally with nuclear muscle on its other flank. Indeed, this relationship would dissolve if the Kim regime’s nuclear threat to the United States were unacceptable to China’s geostrategic objectives. Beijing would surely withhold support if Pyongyang started selling weapons to Xinjiang rebels or to the Dali Lama.

When America welcomed China into the WTO in 2001 it did not imagine Beijing would use its favorable trade status as a weapon to oppose US interests. Beijing’s monetary and protectionist trade policies have hurt American workers, brought national deficits, and underwritten North Korea’s nuclear-missile threat to our homeland. Americans are realizing that importing/buying Chinese products is paying for their unemployment while bankrolling the modernization of a Chinese military that may one day kill their sons and daughters.

Unencumbered trade policy has not made Americans richer or safer. The greatest paradox of our time is that Americans have funded their own geopolitical and geoeconomic decline. With a populist mandate President Trump may be compelled to modernize US policy and force China to comply with fair trade and denuclearize North Korea, and help Make America Great Again.

 

SHEPHERD IVERSON is a foreign professor in the Institute for Korean Studies at Inha University in South Korea.

A Peaceful Geoeconomic Approach

A Peaceful Geoeconomic Approach

Shepherd Iverson

In a book Henry Kissinger hopes will remind policymakers of the importance of geoeconomic tools, and retired General David Patraeus asserts “should be require reading for all presidential candidates and their foreign policy advisors,” former Ambassador Robert Blackwell and Jennifer Harris’s War by Other Means: Geoeconomics and Statecraft (2016) is both a strong indictment of current US foreign policy and a prescient recommendation of what must change. Blackwell and Harris contend the Vietnam War pushed geoeconomics off the policy stage, and then as now, the US too often reaches for the gun instead of the purse. Citing the influential Johns Hopkins foreign policy professor Michael Mandelbaum, Blackwell and Harris assert that since the quest for power is competitive and zero-sum, while the quest for wealth is positive-sum and unlimited, we should de-emphasize conventional power politics in favor of geoeconomic statecraft.

With this objective in mind, I have designed a model to peacefully relieve the Kim regime of power while creating positive-sum economic and security benefits for all concerned interests. This model is predicated on the assumption that economic instruments can advance geopolitical goals and that the provision of incentives is the best and perhaps the only peaceful solution to nuclear proliferation in North Korea. This strategic geoeconomic approach expands the set of policy options at a time when it is painfully obvious conventional policies are not working.

BACKGROUND

Although there have been differences, US and South Korean policies toward North Korea have been correspondingly schizophrenic. Inconsistent policies of accommodation, containment, coercion, engagement, and isolation has led to twenty-plus years of frustration and resulted in strategic deception, retaliatory brinkmanship, and the perpetual impasse of Six-Party Talks—dormant since 2008. In Seoul a decade of hopeful engagement (1998-2007) was disrupted by the neoconservative tactics of the Bush Administration and eventually by a change of faces in the Blue House—Korea’s Presidential Palace.

Hardliner policies of the Lee Myung-bak Administration angered Pyongyang elites and after several deadly naval skirmishes in preceding years, with North Korea incurring the most losses, in May 2010 a North Korean torpedo sunk a South Korean Navy ship, killing 46 seamen, and in November North Korea fired 170 artillery shells and rockets onto Yeonpyeong Island, killing four more people. Wisely refraining from knee-jerk retaliation and escalating the situation, Seoul nevertheless was compelled to level sanctions against Pyongyang. This forced the Kim regime to look to Beijing as a new source for trade and capital. This was a reactive period, not a time for policy innovation or the proactive management of relationships. Many Korean citizens hoped this would change with a new administration. However, President Park Geun-hye’s cautious initiatives failed to improve inter-Korean relations, and after the Kim regime vacated President Obama’s 2012 Leap Day agreement, diplomatic engagement was discontinued.

President Park is now in the final lame duck days of her presidency and the US has a new commander-in-chief. Campaign remarks and a growing consensus suggest strategic patience will be abandoned and more pressure will be imposed on China to resolve this increasingly dangerous security situation. East Asia expert Jonathan Pollack observes: “By sharpening the choices confronting Beijing, Washington shows it believes that equivocation or indecision by China is no longer acceptable.” Before introducing my geoeconomic model, let us consider evidence that supports the prevailing opinion that China could do more, and its obvious reluctance.

WILL CHINA STOP NORTH KOREA?

Conventional wisdom is that China prefers a divided peninsula in order to preserve a fraternally allied communist authoritarian state as a buffer between itself and the democratic South. While this rationale was reasonable thirty years ago, it is not today. With over two million men in boots and 2,000 fighter aircraft, it is understood no modern army would push toward Beijing over land through Korea, and after unification, THADD and a US military presence becomes unnecessary. Continue reading “A Peaceful Geoeconomic Approach”

North Korea’s Overseas Trading Networks

A 2016 Asan Institute study of North Korea’s overseas trading networks using corporate and tax registries in East Asian countries was able to identify 562 ships, companies, and individuals that are within one degree of separation from North Korean entities. In one example a Chinese trading conglomerate had conducted over $500 million in business with North Korea in the past five years. It is asserted in the report:

North Korea’s external economy has increasingly assumed the characteristics of a hybrid network of licit and illicit components. These networks have grown adept at hiding their illicit activities within licit systems of global trade, finance, and transportation. They use a variety of schemes to disguise beneficial ownership, including using flags of convenience for ships, establishing shell and front companies to register their holdings, fabricating manifest and financial documents, and using multiple layers of intermediaries to conduct business. The net result, as UN Panel Expert Katsuhisa Furukawa has noted, is that various legitimate companies, including multi-national banks, shipping companies, and air carriers, are likely to be inadvertently facilitating North Korean illicit activity. (1)

These overseas resource and capital lifelines to the Kim regime are vulnerable to primary and secondary sanctions mandated under UN Resolution 2270. However, the detection and enforcement of illegal activities will be difficult without Chinese compliance and oversight, which to this point has been virtually nonexistent.

(1) Quoted from “In China’s Shaddow: Exposing North Korean Overseas Networks”, The Asan Institute for Policy Studies, (August 2016); also see “Note by the President of the Security Council”, United Nations Security Council, (February 23, 2015), http://www.ncnk.org/resources/publications/DPRK_Panel_of_Experts_2015.pdf; and K. Furukawa, “The Sanctions Regime of UN Security Council Resolutions 1718 (2006), 1874 (2009), 2087 (2013) and 2094 (2013)”, (April 20, 2015), https://csis.org/files/attachments/150406_FurukawaPresentation.pdf.

ilicit-shipping