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Explained: Why The Oil 'Lesson' of 1986 is Wrong

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When I was on the road promoting The Power Surge in 2013, I regularly said two things: First, oil prices could easily plunge for a year or two, though it was far from certain that that would happen. Second, we would not see a repeat of 1986, when the hangover from a price crash lasted for well over a decade before high prices finally returned.

As oil prices have fallen, it’s been pleasantly surprising not to see people trot out the 1986 episode as evidence that we might be in for a decade or more of low oil prices once again. Earlier this week, though, a Bloomberg writer decided to buck the trend with “Oil Collapse of 1986 Shows Rebound Could Be Years Away”. The “Chart of the Day” from that article, reprinted here, pretty much tells the story.

But 2015 isn’t 1986.

Then, massive investment in oil production following the twin oil crises of the 1970s led to a buildup of long-lived oil production capacity. With money spent, that production capacity cost very little to operate. Prices needed to stay low for several years to throttle not only new investment but also production back. Non-OPEC oil production fell every year between 1988 and 1993.

Weak demand also played an important role. While consumption originally rose after 1986 in response to lower prices, between 1989 and 1993, world oil consumption rose by a mere 1.5 million barrels a day, dragged down by the collapse of the Soviet Union and economic weakness more broadly.

The biggest difference today is the supply picture. In 1986, the world faced an overhang of conventional oil production capacity. Today, it is buffeted by a surge in tight oil production. The difference is stark. Once investment in tight oil stops, output from existing wells drops sharply, which is very different from what happens with conventional wells. This can, in principle, balance the market much more quickly than was possible in the 1980s.

Of course investment in U.S. production hasn’t come to a halt. That’s why most analysts still expect supply growth this year. But this is a fundamentally different situation from the mid-1980s. If oil prices stay low for as long as they did after 1986, it will be because tight oil production turns out to be massively scalable at remarkably low prices while remaining profitable, not because sunk investment costs have created oil producing zombies that continue pumping at almost any price. (It could also happen if the world rapidly accelerated the deployment of low-cost alternatives and efficiency.) The aftermath of 1986 was almost inevitable at the time given the investment that had already happened. (This brackets the far-from-inevitable decisions by Saudi Arabia and others to boost their own production after 1986.) What happens over the next decade in oil markets still remains very much to be determined.

This piece first appeared in CFR’s blog Energy, Security and Climate here.

Image: Flickr. 

TopicsOil RegionsUnited States

Why Invading Hell (North Korea) Would be a Big Mistake

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The North Korean regime is the closest thing to Nazi Germany still in existence. Toppling it would free an enslaved people. There is perhaps no government on Earth that more deserves to be cast into the dustbin of history.

Yet few military experts have pitched the idea of invading the Hermit Kingdom. That is because opening such a Pandora's box would unleash hell on East Asia. Desperate for survival, Pyongyang would have every incentive to use all its nuclear bombs and other weapons of mass destruction, threatening the lives of millions of innocent people.

So while I tip my hat to Pascal-Emmanuel Gobry for making the case for invasion in The Week, in what amounted to an impassioned plea to rid our planet once and for all of this evil cancer, a dispassionate review of the facts demonstrates why very few have endorsed such an idea. Here is why an invasion would be a great cause for regret:

Please see the rest in The Week here.

Image: Wikicommons. 

TopicsSecurity RegionsNorth Korea

The Real Problem With America's Rebalance to Asia: A Crisis of Expectations

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CSIS’s release of its recent report Pivot 2.0—intended to help nurture a bipartisan consensus in Washington in favor of the policy—shows the topic of the ‘rebalance’ is still a live one in US foreign and strategic policy circles. The report succinctly covers a range of issues, starting with the prospects for the Trans-Pacific Partnership, and working its way through China, defense, Korea, India and Southeast Asia. Australia’s clearly not seen as a problem—it barely rates a mention.

The US rebalance (née ‘pivot’) dates from the first term of the Obama administration. So at the start of 2015 it seems quaint still to be writing a blog post on the policy. But around the region, and even within the US, it’s a policy about which people remain uncertain. Some critics describe it as merely the name for Obama’s Asia policy, but in private conversations I’ve heard harsher judgments.

So let me put down here a set of assessments about the rebalance. The policy itself emerged from an early policy review undertaken by the Obama administration to identify where the US was overweight and underweight in its international commitments. The answer was that it was overweight in Europe and the Middle East, and underweight in Asia—underweight across a range of dimensions including the diplomatic, military, economic and institutional.

For those who want to see what is—and isn’t—occurring under the rebalance, I’d recommend doing more than reading the CSIS report. Have a look at two other US sources. The first is the presentation that US Deputy Secretary of Defense, Bob Work, gave to the Council on Foreign Relations at the end of September 2014. In that presentation, Work provided a robust defence of the efforts being made to enhance US military capacities across the region. The four largest defense construction projects since the Cold War are all located in Asia. By 2020, 60% of US air and naval forces will be based in the region. And that’ll include the newest equipment, like the F-35s, the P-8s, and the Zumwalt-class destroyers.

In Work’s view, the rebalance is occurring but its effects are somewhat diluted by an even larger global shift within the US defense force—after Afghanistan and Iraq, a smaller emphasis on forward-deployed forces and a larger one on reconstitution of US surge-force capabilities.

The second source is the majority staff report prepared for the US Senate Foreign Relations Committee back in April 2014. That report looked in greater detail at the non-military side of the rebalance—including diplomacy and aid—and in general found a set of policy instruments that were even less well-resourced than the military effort. The East Asia and Pacific Bureau in the State Department, for example, had 12% less funding in 2014 than it had back in 2011.

So yes, the rebalance exists. But it struggles for oxygen, in part because of the broader strategic baggage carried by the president. Moreover, substantial parts of the rebalance will take time to unfold—it’s not designed to address allies’ and partners’ demands for instant gratification and constant assurance. And, even when it’s run its course, the rebalance isn’t going to restore the regional status quo ante China’s rise.

It’s that last point that highlights the extent to which the rebalance faces what we might call a crisis of expectations. Since different people believe it was meant to do different things, they judge it by different standards. Some of those metrics strike me as unrealistic. For example, it’s perfectly true that even after the rebalance is completed, the US’ position in the region won’t be restored to what it was in the glory days of the 1990s. But the rebalance was never intended to do that. It wasn’t meant to reverse the rise of the Asian great powers, nor to roll back the tides of history.

Similarly, the rebalance was never intended to suggest that the US was happy to ignore what went on in Europe and the Middle East. Washington might have thought it was overweight in those areas, but it certainly didn’t think they were irrelevant. So have events in Ukraine, Syria and Iraq distracted the US from Asia? Of course. But the US is a global player, not just a regional one.

The rebalance, even if successful, is merely one variable in a shifting strategic landscape. By itself, it won’t return the US to the position of the ‘indispensable player’ in Asia. Still, its principal value lies in the fact that the policy strengthens Washington’s ties to Asia. And that’s why Australia should want the rebalance to succeed: because its various components—including a comprehensive TPP agreement, a military reorientation into the region, and US membership of key regional institutions—will mean a US more closely engaged with both our and the region’s strategic future.

Rod Lyon is a fellow at Australian Strategic Policy Institute and executive editor of The Strategist where this piece first appeared.

Image: U.S. Navy Flickr. 

TopicsSecurity RegionsAsia-Pacific

The China Question: Great Power or Great Crash?

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The Black Swan, by Nassim Nicholas Taleb, is a parable for unanticipated risk: the possibility of 'unknown unknown' events that no-one sees coming.

In a new essay, The Calm Before the Storm, Taleb further posits that perceptions of risk are distorted by “fragile stability.” Some countries (eg. Saudi Arabia) are inherently more vulnerable to exploding one day in spite of – or likely because of – their continuity, concentration and monolithism. The flip-side of this concept, less intuitively, is that “anti-fragility” can be borne out of the very experience of crisis. The likes of Italy may be resilient precisely because they continually face chaos and flux.

Taleb's idea isn't a new one – the economist Hyman Minsky noted “the instability of stability” decades ago – but his anecdotal depth and topical understanding of current affairs makes the essay a riveting read.

Even to the formidable Taleb, though, one country is sui generis and escapes easy identification. At the very end of the essay, he acknowledges “the China puzzle.”

Another superbrain, historian Niall Ferguson, also concedes that “China is the country hardest to categorize” as a political-economic risk. China is difficult for Westerners to understand because its singular pursuit of economic development tempts excesses and imbalances. Yet the farther, faster and longer it gallops, when a bust would typically loom more probable, China looks ever more invincible and assured. As Ferguson admits, “there is unlikely to be a Lehman moment.”

China may end up with something different, however: a prolonged correction.

Japan in the 1980s was also a robust, healthily growing country with a dominating political system and abundant domestic savings. Few would have characterised Japan then as endangered, but its unwillingness to confront its economic excesses haunted it for 20 years and left Japan today “moderately fragile” (in Taleb's definition) because of soaring leverage. Some of Japan's blights have become worryingly apparent in China: zombie companies supported by zombie local governments often hiding local debt and propping up their own land markets.

It is often joked that there are no communists in China, and that Japan and North Korea are the only communist regimes remaining in Asia. But one commonality between China and Japan is their distaste for social disruption from the capitalistic purges of bankruptcy.

This is where Chinese see things differently from Americans. Chinese officially viewed the 2008 financial crisis, America's “Lehman moment,” as an unmitigated failure of the US system and a mistake to be avoided at all costs. They proclaimed their “superior system advantage” as they poured on the stimulus. “The Chinese lost a lot of respect for the West,” a car company executive famously commented. “When you've seen a multinational exec on his knees begging for help, you are not so intimidated by him after that.”

But a funny thing happened on the way to America's decline. Its stock market has tripled from its 2009 bottom; employment and growth have recovered. Americans of a certain persuasion would argue that it is the boom and bust cycle that undergirds their system, that the elixir of progress is the creative destruction of crisis that moves capitalism forward.

So the +70% jump in Shanghai's A-share market, now the world's second largest, in just two months is remarkable. When US$2 trillion of market value appears so suddenly, the world pays attention. True, stock markets are notoriously poor short-run predictors of economic health. This recent action could be more noise than signal, as Taleb would understand. Supportive factors such as lower oil price may be at work. But the bull case doing the rounds is the “removal of risk,” meaning government stimulus and “doubling down on mega-infastructure.” Taleb would revel in the irony of this explanation: Chinese domestic investors think that policy continuity, and therefore more leverage, is positive. Yet since 2009 Chinese shares have badly lagged America's, belying the narrative of relentlessly monotonic Chinese growth. There is a giddy, speculative retail feel to the latest bounce. Japan's market also saw huge episodic rallies during its grinding recession. Shanghai's bull market today could be implying that Chinese growth is solidly sustainable, or alas it might be telling us nothing at all.

Because of its vast savings pool, China won't experience a precipitous financial collapse as America did in 2008. Its model of rigid resilience will continue. Just as Chinese media exaggerate problems elsewhere, outsiders can easily take a dark view of China. Adult Chinese have living memory of crisis and struggle; that is an antidote against fragility. Despite occasional external glimpses of frailty and utterances of humility, most Chinese remain convinced of their unstoppable rise. Fragility, either economic or political, would surely be a “black swan” event in 2015.

This piece first appeared in the Lowy Interpreter here.

TopicsEconomics RegionsChina

America's 'Crusader' Media

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All major American newspapers have adopted Wilsonianism to a greater or lesser degree, Robert Kaplan, a Senior Fellow at the Center for a New American Security, said at an event hosted by the Center for the National Interest on Thursday.

The event featured a panel discussion on national security in the changing media landscape. In addition to Kaplan, Henry Farrell, a professor at George Washington University and Monkey Cage contributor, and the National Interest’s Jacob Heilbrunn, sat on the panel. The Atlantic’s Steve Clemons moderated.

Kaplan began the discussion by noting that in tackling national security, the editorial boards of U.S. legacy media outlets like the New York Times, Wall Street Journal and Washington Post, “mostly discuss values.” All three editorial boards adopt the Wilsonian view that if the United States doesn’t actively spread democracy across the globe, “we are not living up to our values.”

The major difference between the editorial pages of the three newspapers, Kaplan contended, is the Wall Street Journal’s editorials are more militant Wilsonian (though the most interesting to read), whereas the New York Times’ editorials are more moderate Wilsonian. The Washington Post editorial page falls somewhere in between, according to Kaplan, although it has veered to the more militant Wilsonian end of the spectrum in recent years.

Still, except for a brief period around 2006 and 2007 when the Iraq War was at its low, the editorial pages of the newspapers have largely eschewed realism in favor of Wilsonian foreign policies. Kaplan argued that this is because “quasimilitant Wilsonianism” has become deeply embedded in the American political tradition, which—unlike the rest of the world—has rarely had to worry about more fundamental matters like how to maintain order. As a result, the only time realism is popular among the media elite is in the brief moments after the start of something “demonstrably wrong,” like the Iraq War, Kaplan observed.

The other panelists largely agreed with this assessment, but noted other factors that could be at work. For example, as alluded to in the recent National Interest cover story he co-authored with Carden, Heilbrunn pointed out that many of the media elite put great faith in the Yeltsin era in Russia and were deeply disillusioned when it didn’t usher in the liberal democracy in Moscow for which they had hoped. These media elite seem to be constantly refighting that battle, he said, not only in their editorials on Russia, but with most other countries as well.

Clemons believed some of the blame fell on the realists themselves, who he argued had become complacent in recent decades. Clemons noted that realists didn’t have the deep networks and institutional infrastructure to connect them to the media in the same way that the neoconservatives and liberal hawks do. He also pointed to other factors, such as the fact that value-ridden and activist arguments tend to gain better traction on social-media sites than nuanced realist viewpoints.

Farrell disagreed. He argued that while highly charged and partisan arguments do well with cable-news audiences, social and online media has introduced more pluralism into political debates. Instead, Farrell felt the bigger threat to objective and informative news sources was the “buzzfeedication” of online media.

The Irish-born Farrell also expressed alarm at how “incapable” U.S. newspapers are of understanding the viewpoints of people in other countries. In a similar vein, Kaplan mourned the decline of the traditional foreign correspondent; that is, highly educated Western journalists that speak three or four languages and spend a number of years reporting from the countries they cover. While expensive for newspapers to maintain, Kaplan praised these reporters for their ability to be objective about the countries they covered, because they did not have any personal interests vested in the outcomes. By contrast, Kaplan pointed to the “super stringers” that have replaced these reporters. According to him, these are usually local cosmopolitan elites who have been educated at the best Western universities, but then return to their home countries to report for major American newspapers. Unlike the foreign correspondent, they can have stakes in the outcomes of the events they are covering, negatively impacting their ability to report on them.

Zachary Keck is managing editor of the National Interest. You can find him on Twitter: @ZacharyKeck.

Image: Wikipedia/Daniel X. O'Neil​

TopicsSecurity RegionsUnited States

Somalia: The Next Oil Superpower?

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Last month, Soma Oil and Gas, a London based energy company, searching for hydrocarbon deposits off the coast of Somalia, announced that it had completed a seismic survey to ascertain the potential for recoverable oil and gas deposits. Although further details have yet to be released, chief executive Rob Sheppard announced that the results were encouraging. However, Somalia, and potential investors, should proceed with caution when considering entering this frontier market.

East African oil exploration, and in Somalia specifically, is not a secret. Energy firms like Royal Dutch Shell and Exxonmobil operated in Somalia before the government collapsed in 1991. But recent gains against the insurgent group al Shabaab in the south and the decrease in piracy off the coast have sparked a regeneration of the industry. The Somali president, riding these positive evolutions, recently stated that the country is “open for business.”

Although recent security developments are encouraging, substantial hurdles still exist. The Heritage Institute recently released “Oil in Somalia: Adding Fuel to the Fire?,” by Dominik Balthasar. The paper discusses how the oil industry in Somalia could have a promising future, but it also explores the risks facing Somalia if the development of its petroleum resources is not carefully managed. Balthasar rightly asks, “is Somalia ready for oil?”

The historic challenges that have limited business opportunities in Somalia, domestic insurgency and piracy, have diminished for now, but these threats have not disappeared. Al Shabaab has been largely pushed out of southern Somalia by multinational forces, but has recently proven that it is still able to operate in the north of Kenya. As Kenya flexes to counter al Shabaab in its own country, it could provide an opportunity for al Shabaab to return to its previous strongholds in Somalia. And even as piracy has largely stopped, it is conceivable that al Shabaab or others could see oil tankers as opportunities to resurrect that practice as well.

Beyond these security challenges there may be political disadvantages to developing the hydrocarbon sector in Somalia. Balthasar notes, among other things, that oil will likely exacerbate existing rifts and political tensions. In the context of the recent political turmoil and contentious federalism process, it is clear that any foreign oil companies would face a high degree of political instability and uncertainty. Balthasar also points out that the legal and constitutional conditions in Somalia are ambiguous in determining who can enter or negotiate contracts with oil companies. Without a well-defined regulatory environment for oil and gas resources, federal states, semi-autonomous regions, and the central government could all separately negotiate and enter into conflicting extraction agreements with private companies. The opaque regulatory nature of these resources has already proven problematic in the semi-autonomous regions of Puntland and Somaliland. Even with updated agreements on how to negotiate for and claim oil fields, Puntland and Somaliland have already leveraged their autonomy and granted their own licenses without the central government’s blessing. This is all likely to lead to further turmoil and maybe even conflict over profitable fields and the distribution of revenues.

Somalia is probably not ready for oil development. With excellent access to shipping lanes and supposedly massive untapped wealth (perhaps as much as 110 billion barrels) it is no surprise that multinational oil companies are intrigued, but responsible investors would be wise to think twice. The underlying political instability and security challenges of Somalia will likely inhibit the long term feasibility and profitability of these projects. It could also cause backsliding for the hard fought improvements in Somalia’s government.

This piece appears courtesy of CFR's Africa in Transition blog

Image: Wikicommons.

TopicsEnergy RegionsSomalia

America's Massive Military Dilemma in Asia: Visibility vs. Vulnerability

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In this last quarter of the Obama administration, U.S. leaders have a critical opportunity to make progress on a host of policies vital to strengthening the U.S. position in Asia. While the Trans-Pacific Partnership will rightfully dominate the domestic debate in early 2015, an equally important debate is occurring in the halls of the Pentagon and Capitol Hill one between visibility and vulnerability.

This tradeoff is critical because the value of visibility and the danger of vulnerability differ in peacetime and wartime. In peacetime, U.S. forces are most useful when they are most visible. Visible forces reassure allies and partners while deterring potential adversaries. Yet, visibility comes at a cost – increased vulnerability. Publicly sailing a carrier strike group into a disputed area can be a strong signal of resolve, but in wartime such actions open these forces to attack. Therefore, while U.S. leaders seek to maximize visibility in peacetime, they often attempt to minimize vulnerability is wartime.

The capabilities that maximize visibility and those that minimize vulnerability are quite different; sequestration is forcing U.S. leaders to choose between them. How should leaders in Washington decide in which capabilities to invest? One way is to examine the range of possible conflict scenarios and assess the advantages and disadvantages of visibility and vulnerability in each. Three types of potential Asian conflict scenarios—arrayed on a spectrum from peacetime to wartime—are particularly instructive: low-level coercion, short war, and protracted war.

Low-level coercion, such as China’s ongoing efforts in the East and South China Seas, sit between peacetime and wartime. Because low-level coercion does not fit cleanly into the black and white categories of war and peace, some experts refer to these conflicts as “grey zones.” In the grey zones, visibility is valued because U.S. allies want Washington to demonstrate its resolve both to their publics and their adversaries.

Short wars require a different set of capabilities. In short wars, striking first and striking hard is vital, so forces must be resident in the region. In such conflicts, visibility can be a danger, opening forces to attack. Yet, visible strength can also deescalate conflict. Furthermore, although vulnerability is a risk in these situations, some degree of vulnerability is required as surging forces into a conflict zone puts U.S. forces at risk. Thus, in short wars a balance between visibility and vulnerability is necessary.

Protracted wars, on the other hand, typically advantage the least vulnerable forces. As the World Wars demonstrated, protracted wars often turn into economic contests. During such conflicts, units that can be seen can typically be struck, making visibility dangerous. Such conflicts therefore necessitate platforms that are hard for opponents to find.

How do these different types of conflicts and capabilities shape the 2015 debate? Briefly examining trends in military investments in the two most likely contestants in instructive, particularly because the United States and China have been headed in opposite directions.

The United States has long relied on highly visible forces to demonstrate resolve. Visible forces have reassured allies and deterred adversaries by committing the United States to involvement if a conflict were to occur. Increasingly, however, anti-access/area denial capabilities (A2/AD) have exacerbated the vulnerability of visible forces, such as forward deployed bases and platforms. Therefore, the Pentagon has increasingly invested in minimizing vulnerability, such as submarines and stealth.

China, on the other hand, has long sought less vulnerable forces. Chinese A2/AD systems, such as its missiles forces and submarines, limit China’s vulnerability to a U.S. strike. Recently, however, Beijing has sought to acquire more visible power projection forces such as aircraft carriers. These visible platforms are intended to coerce Chinese neighbors, even if they risk increased vulnerability.

These opposing trends in U.S. and Chinese military investment have important implications for potential contingencies in East Asia. The decrease in the vulnerability of U.S. forces is helping Washington to prepare for a protracted conflict. Beijing, on the other hand, is building more visible forces ideal for grey zone conflicts. As a result of these investment trends and policy choices in both countries, China has been successfully pressuring its neighbors on maritime disputes. U.S. leaders, therefore, are starting to ask how the United States can better address grey zone coercion.

What are the implications of this visibility-vulnerability dilemma for the Pentagon? For the Navy the question is whether to retain more visible aircraft carriers or less vulnerable submarines. For the Air Force the issue is purchasing more visible fighter aircraft or less vulnerable long-range strike bombers. For the Army and Marine Corps the tension is between highly visible forward deployed forces or less vulnerable units surged from afar. Each service is being forced to risk decreased visibility in peacetime or increased vulnerability in wartime.

The leadership at the Pentagon is well equipped to deal with this dilemma, but these leaders cannot avoid the choice between a more visible force and a more vulnerable one. Worse still, sequestration has tied the Pentagon’s hands and forced the United States to accept increased risk across the entire conflict spectrum. Moreover, requirements for deterring a resurgent Russia and combating Middle Eastern insurgents will compel the United States to invest with other regions in mind.

As the U.S. debate on Asia heats up in early 2015, regional leaders will be watching closely. Allies such as Japan, South Korea, Australia, and the Philippines are looking for a more visible U.S. presence. Meanwhile, many U.S. defense experts focused on the military threat from China are pushing for a less vulnerable force. This presents a challenge for leaders in the Pentagon and on Capitol Hill. The next six months are a critical window during which bipartisan cooperation on defense capabilities is possible, but a coherent U.S. strategy for Asia must include a strategy to harvest the benefits of visibility while mitigating the dangers of vulnerability across the full conflict spectrum.

Zack Cooper is a fellow at the Center for Strategic and International Studies and a doctoral candidate at Princeton University. He focuses on Asian security issues and previously served on staff at the National Security Council and in the Office of the Secretary of Defense.

This appears thanks to CSIS. This piece first appeared on the new CSIS Asia Maritime Transparency Initiative website here.

TopicsSecurity RegionsUnited States

Watch Out! North Korea Just Threatened Another Nuke Test

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All signs suggest that North Korea is getting ready to conduct a major provocation, which is likely to include testing nuclear weapons for a fourth time.

Although U.S. officials like to claim North Korea is “dangerously unpredictable,” its provocations tend to follow a well-established pattern. As I’ve explained in the past, the provocation cycle begins with North Korea mounting a highly visible charm offensive towards South Korea, which creates the impression that Pyongyang is seeking to dial down tensions. Amid this persistent charm offensive, North Korea makes a seemingly innocent demand of South Korea and/or the United States, usually that they halt military drills. In the thick of North Korea’s charm offensive, this demand seems to outsiders like an inconsequential afterthought. However, the demand always has two characteristics: it is very specific and it is something that Pyongyang knows full well won’t be obliged. Pyongyang then seizes upon South Korea and America’s failure to comply to justify the provocation it undertakes. Often, this takes the form of a medium or long-range ballistic missile test, which is sometimes followed by a nuclear test (which is justified as a response to the the international community’s “hostility” over the initial ballistic missile test).

North Korea’s behavior over the past few weeks follows this pattern to a t. On the surface, all signs suggest that North Korea is ramping up its efforts to engage South Korea and the United States. For instance, in his New Year’s speech this year— which is always the most important annual speech in the DPRK— Kim Jong-un largely focused on domestic issues. Near the end, however, he made an overture to Seoul, stating: “We think that it is possible to resume the suspended high-level contacts and hold sectoral talks if the South Korean authorities are sincere in their stand towards improving inter-Korean relations through dialogue.”

Having already referenced past major Inter-Korean agreements, Kim held out the tantalizing possibility that he wants to hold a leadership summit with South Korea’s President Park Geun-hye. “And there is no reason why we should not hold a summit meeting if the atmosphere and environment for it are created,” Kim said.

The charm offensive continued in official DPRK media in the days that followed. For example, a Rodong Sinmun editorial last Friday stated: “If the north and the south open their hearts with each other and approach with an open mind the issue of the nation and reunification... it is possible for them to remove differences and record a new history of the inter-Korean relations [sic].”

The same editorial added: “It is possible to resume the suspended high-level contacts and hold inter-sector talks if the South Korean authorities are sincere in their stand towards improving inter-Korean relations through dialogue.”

Naturally enough, these calls for dialogue contained “suggestions” that South Korean authorities drop their “confrontational” stance against North Korea. Some were more specific in demanding that South Korea abandon its anti-DPRK human rights activities and halt all provocative war drills.

North Korea then turned its charm towards the United States— and upped the ante. Specifically, on Saturday the Korean Central News Agency reported that North Korea had sent a message proposing that the U.S. “contribute to easing tension on the Korean peninsula by temporarily suspending joint military exercises in South Korea and its vicinity this year.” In return, North Korea promised that it “is ready to take such responsive step as temporarily suspending the nuclear test over which the U.S. is concerned.”

President Park had already rejected North Korea’s calls to halt its joint military drills with the U.S., which are scheduled to begin in late February. Instead, she urged North Korea to resume talks without preconditions, something that Pyongyang itself has proposed repeatedly. Unsurprisingly, the U.S. backed its ally in Seoul. As Reuters reported, the State Department rejected Pyongyang’s proposal and “called the offer by North Korea a veiled threat that inappropriately linked nuclear tests and the joint military exercises that have been carried out for decades.”

On Tuesday, North Korea’s deputy UN ambassador responded to the rejection by proposing a joint dialogue with the United States. “The government of the DPRK (North Korea) is ready to explain its intention behind this proposal directly to the United States. We're ready for that if the United States wants additional explanation about our proposal," North Korea's Deputy UN Ambassador An Myong Hun said at a New York press conference. He added that "many things will be possible this year on the Korean Peninsula” if the proposal is accepted.

In other words, North Korea has perfectly laid the groundwork for another nuclear test. On the surface, it has presented itself as a reasonable party genuinely interested in dialogue and compromise. But, as the State Department recognized, the seemingly overture by the North was in reality a “veiled threat” that linked the U.S. and South Korea’s joint military exercise to North Korea’s nuclear tests. This creates the pretense that a North Korean nuclear test is justifiable if the joint military exercises proceed as they do each and every year. Thus, once the military drills begin, watch for North Korea to respond with a major provocation, which could very well take the form of a fourth nuclear test.

Zachary Keck is the managing editor of The National Interest. You can find him on Twitter: @Zachary Keck

Image: Wikipedia

TopicsDiplomacySecurity RegionsAsia-Pacific

A Tragedy in the Making? North Korea Is Not a US Priority

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On January 2 the US announced additional bilateral sanctions against North Korea, adding embargoes on three entities and 10 individuals. The  stated reason was the alleged North Korean cyber attacks on Sony IT infrastructure late last year.

In so doing, the US reinforced a trend in its policy toward the peninsula. As the Obama Administration is trying to isolate the regime, contain North Korea's nuclear program and halt its financial transactions, dialogue and negotiations have categorically been put on the back burner.

Washington's latest move was clearly targeted at institutions and individuals linked to arms proliferation, including North Korea's central intelligence organization (the Reconnaissance General Bureau), as well as two trading companies. The move adds to a UN General Assembly resolution in November condemning North Korea's crimes against humanity and opening the way for a referral to the International Criminal Court, thereby further marginalizing the regime.

The signal is clear: North Korea policy is not on the US priority list. The US Government refrains from any kind of dialogue with the DPRK and opposes any resumption of negotiations, no matter how Pyongyang conducts itself. At the same time it seeks to limit Pyongyang's scope of action.

The rationale of this approach is rooted in domestic considerations inside the US rather than based on an elaborate strategy. Advocates of the so-called “collapse theory” are strong position among senior advisers and continue to influence policy-making—often in contradiction to the State Department's preferences. Instead of engagement and negotiations, the idea is to topple the regime by sanctioning the increasingly demanding urban elite and functionaries, thereby stirring discontent.

Due to the supervisory powers of Congress and its ability to flex its political muscle against any engagement with North Korea, the State Department is unwilling to risk political disagreements on issues of low priority. Regardless of whether this is an excuse for inaction or a real political bottleneck, neither formal nor informal talks on the level of the Special Representative (or subnegotiators) have been possible, let alone a return to the negotiating table.

The US Government's sole focus on sanctions may narrow its own scope for action. The cases of Iran and North Korea both show that it has been easier to implement new sanctions than to lift them. The reason: embargoes are de facto laws that cannot be lifted without the backing of the US Congress. Getting Congress to do anything that favours Pyongyang is an uphill battle.

Meanwhile, the gap between expected sanction outcomes and unintended (positive and negative) side effects is growing.

In Pyongyang, US sanctions have not been perceived as a disciplinary measure but as a hostile act. The North still considers the US as party to its long running conflict with the South, and thus a wartime enemy. By that logic, the sanctions are seen as targeted at the North's strategic capabilities and ultimately toward regime change. US sanctions have thus strengthened military hardliners in Pyongyang's delicate power structures and impeded fragile moves toward opening up the country's economy.

The North has increasingly diversified its foreign and trade relations. This has been particularly evident since China reset its priorities and no longer unconditionally supports North Korea's economic and energy needs. Pyongyang has since reached out to other partners. While Russia will increasingly be a partner for energy supplies, diplomats have stepped up contacts in Southeast Asia and Europe, and even reached out to the EU. An additional driver of this process is the willingness under Kim Jong-un's regency to gradually open up economically.

Due to the US reluctance to return to the negotiating table, the North is forced to concentrate its efforts on engagement with the South. This might strengthen President Park Geun-hye's engagement policy and bring cooperation and reunification higher onto the agenda. Leaving negotiations to the two Koreas might be a desirable outcome. Nevertheless, in terms of conflict settlement, and in order to guarantee long-term success, the US will eventually have to return to the negotiating table.

Bernt Berger is a Senior Research Fellow and the Head of Asia Program at ISDP. He has two decades of work and study experience in China and broader Asia, focusing on issues in foreign and security policy, political development and regional security. This piece first appeared in the Lowy Interpreter here.

Image: Wikicommons. 

TopicsSecurity RegionsNorth Korea

Why to Fear ISIS's Cyber Caliphate

The Buzz

Yes, most 12 year old children could probably figure out how to hack a Twitter feed.  But yesterday, the “Cyber Caliphate”— allegedly connected with the Islamic State of Iraq and al Sham— managed to gain access to social media accounts of US Central Command, responsible for American security interests in the Middle East.

Ok, they've got our attention. And the message is: "we are tech savvier than you thought, and we want to do more."  The timing of the intrusion a week after the gruesome attacks in Paris is also not lost on us.

So, what is the Cyber Caliphate?  We don’t know much.  But some suggest that the ringleader is Briton Junaid Hussain who was once imprisoned for hacking into former Prime Minister Tony Blair's Gmail account.  Hussein has been connected with a group of hackers called Team Poison, which claims to have gained unauthorized access to the networks of Blackberry and NATO and teamed up with “Anonymous” to infiltrate banks.  Other reports indicate Hussain recruits digital experts to come to Syria and Iraq to join ISIS.  If accurate, this is extremely concerning.

The CENTCOM hack matters because it demonstrates that the Cyber Caliphate’s skills are developing.  No, the group didn’t access classified systems or even unclassified ones.  What’s more likely is that the group picked CENTCOM for a different reason – because it would get more attention than the previous intrusions they’ve claimed.  In the past month, the group twice hacked the Albuquerque Journal: once on Christmas Eve (the website) and once last week (the Twitter account).  The group also swapped out the main headline on New Mexico’s Mountain View Telegraph website and broke into Maryland's WBOC 16 tv station website and Twitter feed.  Changing headlines on a website is more complex than just obtaining a password and sneaking into Twitter. It's serious enough that the FBI is investigating.

It's easy to miss blips on the digital radar when there are so many, but if our miscalculation about the kinetic capabilities of ISIS is any measure, we ought to pay attention to the CENTCOM hack.  There’s been lots of chatter online about "cyberjihad" and "digitaljihad."  For months, we've seen messages boasting about advanced capabilities, better encryption and that cyber attacks against critical infrastructure in America and elsewhere are coming. ISIS's social media sophistication is impressive, and this online network is ready-made for seeking out sympathetic supporters with coding expertise. 

Last year, the former head of McAfee David DeWalt told the Financial Times that "We've begun to see signs that… terrorist organizations are attempting to gain access in cyber weaponry."  Software exploits can be bought relatively easily online.  How to use them is the hard part, but if those behind the Cyber Caliphate have better skills than we give them credit for, we need to act now.  Thankfully, earlier today the president provided Congress with another draft cyber security bill; hopefully politics won’t get in the way.

It's one thing to publish slick and engaging online magazines like Dubiq and even to use hashtags effectively to attract attention.  It's quite another to actively infiltrate websites and take over Twitter accounts.  Even if the Cyber Caliphate isn't directly related to ISIS (which it seems to be), the fact that someone wants to help this terror group with its digital offense is sobering.  Those of us tracking the electronic capabilities of terrorists have been anticipating this moment — with dread— for some time.  Today, it's just a non-violent intrusion into Twitter.  Tomorrow, it could be much more complicated.  We've got to actively prevent scenarios that could be much worse.

Meg King is the Strategic and National Security Adviser to the President & CEO of the Woodrow Wilson International Center for Scholars.  The views expressed in this piece are solely those of the author.

Image: Twitter

TopicsCyber SecurityTerrorism RegionsMiddle East