Further escalation of the North Korea crisis – Danske Bank

Chief Analyst, Allan von Mehren at Danske Bank explains that North Korea overnight carried out its most advanced missile test so far with the launch of what was probably an intercontinental ballistic missile (ICBM).

Key Quotes

“It was the 11th round of missile tests this year, but the first test of the long-ranging ICMB that is needed to reach the US.”

“The test underlines that North Korea is not backing down from its nuclear ambitions but instead continues to make progress in its goal to reach the US with a nuclear warhead. It is one of the most difficult military challenges the US has faced since the Cold War.”

“While the Trump administration has highlighted that all options are on the table – including the military option – it is also clear that a military intervention against North. Korea comes with a huge risk as North Korea would probably be able to cause severe casualties in South Korea and possibly Japan before being stopped.”

“The key thing to watch is still whether North Korea pursues completion of another nuclear test. The US has made clear that this would have consequences – and would need to respond in some way in order not to lose face. North Korea has been ready to do a test for some time according to military intelligence but has refrained from this.”

“How can North Korea be stopped? What are the scenarios?

This is the million dollar question to which there is no obvious answer. For Kim Jong-Un development of the nuclear deterrence is necessary for the survival of his regime – and possibly himself. Other nations that stopped nuclear weapons programmes were overthrown. Following a nuclear test in January 2016 a commentary in North Korea’s state media said ‘The Saddam Hussein regime in Iraq and the Gaddafi regime in Libya could not escape the fate of destruction after being deprived of their foundations for nuclear development and giving up nuclear programmes of their own accord.’ There are thus no signs that any sanctions or threats are likely to stop the North Korean regime.

In theory a military alliance with China guaranteeing North Korea’s safety – as the US is guaranteeing to defend South Korea – could work. But it requires a degree of trust between China and North Korea that does not exist. Another option is that the US eventually allows the development of North Korea’s ability to reach the US with a nuclear weapon, simply because the cost of stopping North Korea with military force is deemed too high. This would be a major loss of US credibility, however, and would weaken any US show of force in future conflicts. Finally, using the military option and accepting the potential casualties could be the result if all other options are ruled out. The lack of any obvious solutions is what makes the situation so difficult – and the biggest US military challenge since the end of the cold war.”

“Keep an eye on the G20 meeting

Japan said on Monday that the US, South Korea and Japan will have a trilateral summit on North Korea at the G20 meeting in Hamburg this weekend (7-8 July). On Tuesday Japan’s prime minister Shinzo Abe also said he would ask China and Russia to play a more constructive role in efforts to stop North Korea.

As the threat from North Korea rises, Japan may increasingly push to scale up its military power, which would most likely anger China and increase tensions in the Asian region. 

Another hot issue at the G20 meeting that could make the environment for the talks difficult is the area of trade and protectionism. Trump may send a signal of coming protection of US steel workers or of other areas which would anger both the EU and China.”