Transcript North Korea

The Korean Nuclear Crisis and
Its Possible Effect on the Global
Economy
Steven M. Wheat
South Korea’s Booming Economy
after 1997 Crisis
South Korea’s economy averaged an annual growth of
7.7% between 1999 and 2001 after a decline of 6.7% in
1998. In 2002, South Korea’s economy climbed 6.3%.
South Korea has fully repaid the $19.5 billion loan it had
taken out from the IMF in order to climb out of recession
three years ahead of schedule.
South Korea amassed a $90 billion trade surplus after
years of chronic current account deficit.
Currently, South Korea’s economy ranks 12th in the
world, comparable to many European Union members.
“The Axis of Evil”
•President Bush, January 9, 2002: “North Korea is a regime arming with missiles
and weapons of mass destruction, while starving its citizens…States like these,
and their terrorist allies, constitute an axis of evil, arming to threaten the peace of
the world.”
•October 4, 2002: North Korea openly declares it has restarted its nuclear
weapons program out of fear that a U.S. invasion is imminent.
•January 10, 2003: Exactly one year and one day after “Axis of Evil” speech, North
Korea formally withdraws from the Nuclear Proliferation Treaty.
Diplomatic Steps toward Northeast
Asian Cooperation
Kim Jung-Il meets with outgoing South Korean President
Kim Dae-Jung in April 2002 in Pyongyang, where North
Korea pledged to pursue dialogue with the U.S.
Kim Jung-Il meets with Japan’s Junichiro Koizumi in
September 2002.
Bush meets with the South Korean President and
Japanese Prime Minister in October 2002, but
refuses to hold bilateral talks with Pyongyang.
The U.S. will hold six way talks with North Korea
later this year.
South Korean Distress
•Protests over America’s supposed
inflammation of Nuclear Tensions on
the Korean Peninsula have become
increasingly frequent among South
Korea’s youth.
North Korean ThreatConventional and Nuclear
North Korean Threat 1Conventional Threat
North Korea’s standing army boasts over 1 million
soldiers; its reserve corps has 1.7 million troops; its
trained militia consists of 4.1 million older men and
unmarried women; the Young Red Guards number 1.2
million high school boys and girls (These children must
train a total of 610 hours per year).
Population is highly indoctrinated against the United
States and South Korea, and would likely fight to the
death. Therefore it can be assumed that there would be
few surrenders, in stark contrast to instances of entire
army divisions surrendering in recent war in Iraq.
Military expenditures constitute 33.9% of North Korea’s
budget, as opposed to 3.2% for the United States, 2.8%
for South Korea, and 1% for Japan.
North Korean Threat 2Conventional Threat, cont.
The North Korean Army possesses
approximately 6,000 armor pieces and 11,000
artillery pieces.
North Korea retains an undisclosed number of
heavy ordinance conventional missiles capable
of reaching most of Japan, including Tokyo, and
all of South Korea.
Recent missile sales to Iran and Pakistan
suggest that North Korea likely possesses large
surplus of conventional missiles.
North Korean Threat 3Nuclear Threat
January 2003 Institute
for Science and
International Security
Report:
North Korea currently possesses at
most 2 or 3 nuclear weapons, if any at
all.
If unchecked, North Korea could
construct enough weapons by the
middle of 2003 to total 5-7 nuclear
weapons.
Over the next several years, North
Korea could construct two large
reactors capable of producing 55
nuclear weapons per year.
By 2010, North Korea could have as
many as 200 nuclear weapons, rivaling
China’s arsenal of roughly 400.
North Korean Threat 4Nuclear Threat, cont.
North Korean Threat 5Nuclear Threat, cont.
Most important factor: North Korea’s leadership knows from recent
occurrences in Iraq (Hussein brothers) that if the situation turns to war with
the U.S., they will likely be killed. Therefore, no action is without
consideration to them, including a nuclear strike.
Economic Consequences
Japan’s economy ranks 4th in the world in
terms of Gross Domestic Product; South
Korea’s, 12th.
South Korea’s GDP is 20 times larger than
North Korea’s.
China has the second largest economy in
the world in terms of purchasing power
parity and GDP.
Economic Consequences 2
Crash of Thailand’s economy in 1997 resulted in
worldwide economic recession.
Destruction of major cities in South Korea,
Japan, and/or China would certainly cause
economic depression that would dwarf 1997
crisis.
North Korean mass production of nuclear
weapons would likely cause Japan to go
nuclear, instigating an arms race between Japan
and China. Such an arms race would further
strain Japan’s and China’s stalling economies.
The Latest
August 21, 2003: South Korean government announces
that its economy shrank 0.7% from the first to second
quarters of this year. This is the first recession in South
Korea after 5 years of mostly unprecedented economic
growth.
This in comparison to OECD’s prediction in February
that South Korea’s economy would grow by 5.8% in
2003.
Recession is likely due to South Korea’s deferment of
budget resources to an emergency fund as well as lack
of market confidence caused by the gravity of the current
nuclear crisis.
How Long Can the Standoff Last?
Will Tokyo, Seoul, and Pyongyang
Share Nagasaki’s Fate?