Not long ago the world was quaking at the prospect of the outbreak of hostilities between the U.S. and North Korea. Now, the leaders of the two Koreas, the South's Moon Jae-in and the North's Kim Jong Un, are preparing to meet on the inter-Korean border on Friday as a prelude to broader talks involving the U.S. and China. Correspondingly, expectations are rising for a possible deal to bring permanent peace to the Korean Peninsula -- an outcome that if realized would probably bring Nobel Peace prizes to the protagonists. But is that realistic? Much depends on how and why such an accommodation would be reached.
U.S. President Donald Trump has brought something new to the North Korean problem: the understanding, lacked by his predecessors, that it can only be tackled as an element in the larger U.S.-China relationship. Playing bad cop and good cop simultaneously seems to have produced some results. It is reliably reported that the Chinese leadership ordered dramatic cuts in fuel, food and maintenance supplies to North Korea earlier this year and deployed troops near border areas to prepare for a collapse scenario.
After North Korea's Kim agreed to meet Trump in an unprecedented bilateral summit, he was called to Beijing, presumably to be prepped on what to say. Chinese President Xi Jinping had already told Trump by phone that it was time to end the 65-year-old truce and bring the Korean War to a formal end.
Understandably, there is deep skepticism in the financial markets and the policymaking community that change is in the offing. After all, runs the argument, North Korea has achieved much of its goal of developing nuclear capability. Why should it make any concessions to the U.S. and its allies at this stage of the game? Left to its own devices, it surely would not. But under serious pressure from Xi, it would have no choice but to agree.
China's incentive to force change would be strategic, coming from a recognition that the status quo is not sustainable. The existence of a nuclear-armed, independent North Korea will ultimately lead to others following suit. And "ultimately" may not be that far away.
Japanese Prime Minister Shinzo Abe has seen his popularity slump in recent months and there is now some doubt as to whether he will win a third term as party leader, and hence prime minister, in the intra-party election due this September. The favorite to succeed him amongst the general public is Shigeru Ishiba, an ex-minister of defense and noted hawk. Ishiba wants a broad revision of Japan's U.S.-imposed pacifist constitution, rather than the minimalist changes that Abe has proposed.
More to the point, he has publicly called for debate on U.S. nuclear weapons being deployed on Japanese soil, and favors Japan's maintenance of nuclear weapons manufacturing technology. Ishiba is unusual in that he says what he believes. Officially, Japan adheres to its "three non-nuclear principles" -- not to make, possess or allow the introduction of nuclear weapons. These principles have no legal standing and the Japanese establishment's support for nuclear energy and, indeed, the scandal-ridden Toshiba -- an important nuclear energy and defense contractor -- suggests that he is far from alone in his thinking.
This time next year, Beijing could be facing a Trump-Ishiba double act and looking back in nostalgia at the Abe years. But the blowback from sanctioning North Korean adventurism would not stop there. A continued North Korean threat would mean the end of the Treaty on the Non-Proliferation of Nuclear Weapons as a credible mechanism, and would incentivize other regional powers to develop their own capabilities, leading to a nuclear-armed South Korea and, China's worst nightmare, Taiwan.
China would undoubtedly demand a substantial quid pro quo for cooperation. Thus, Korean reunification would be off the menu, although a Hong Kong-style 50-year delay might be possible. Over the intervening period, China would call the shots on North Korean political and economic matters and take the lion's share of the investment opportunities.
If the North Korean threat were credibly defused, there would be little justification for the continuing presence of American troops in South Korea and Japan would become the sole host of American forces in East Asia. South Korea is already much more leveraged economically to the Chinese economy than Japan and over time would probably drift into the Chinese sphere of influence.
Shorter-term, the atmospherics of Sino-American relations would change for the better. There would be no more threats of a trade war, and concerns about other aspects of Chinese behavior, such as theft of intellectual property, would be dialed down. The deployment of America's THAAD (Terminal High Altitude Area Defense) anti-missile system in South Korea, which caused so much angst in Beijing last year, would likely be reversed.
If the U.S. and China could work together on such a thorny issue as North Korea, might that not open the way to a larger rapprochement? At first sight an attractive prospect, that might ultimately have negative implications for U.S. allies in the region, who might find themselves the object of other quid pro quo deals. For the time being, however, any relaxation of tensions would be viewed positively.
Could it lead Trump and Kim to Oslo, to receive the peace prize from the Nobel Academy? Well, stranger things have happened, such as the spectacle of a nation of 20 million people with a per capita gross domestic product lower than Haiti's threatening the U.S. with nuclear attack, and a reality TV star becoming president of the United States. One thing is for sure -- it would be the best Nobel prize ever.
Peter Tasker is an analyst with Tokyo-based Arcus Research