On Friday, the DPRK announced it is rescinding the 1991 Agreement on Reconciliation with South Korea (h/t to Nautilus Institute). The document is brief—so it is worth a read.
Among all of the stipulations in the document, the media has focused on the appendix in which the DPRK agreed to respect the NLL (the de facto, but disputed, maritime border in the West Sea). The DPRK’s actions have led some analysts to predict that the DPRK will resort to staging provocations along the border in the near future.
Why the drastic policy change? Well, we are talking about North Korean policy making here, so in a sense unpredictable changes in foreign policy should be…predictable.
Although the DPRK claims it is taking this action in response to South Korea’s ‘hostile policy,’ (which is what Pyongyang euphemistically calls South Korea’s decision to end unconditional financial and economic subsidies), some have speculated that Pyongyang is experincing a bit of a power struggle. Others believe the DPRK is merely raising tensions to get the attention of the new Obama administration which has been so busy with domestic issues that it has not yet named a North Korea envoy. If this is merely a play for more financial assistance from both South Korea and the US, then the use of provocative language and tactics is rational on the part of the DPRK as they have generally yielded results in the past.
Of course, as with any sequential game, players do adjust to adversarial strategies. For now, South Korea is simply ignoring the DPRK’s complaints. Financial markets also seem unimpressed:
“Market participants are sick and tired of the North’s rah rah … investors remain pretty much unmoved now,” said Y.S. Rhoo, an analyst at Hyundai Securities.
Major ratings agencies said they saw no reason to adjust their view on South Korea following the threats.
And according to Reuters:
Credit ratings agencies played down the impact on South Korea’s ratings of Friday’s threat by North Korea to scrap all key agreements with the South, calling the remarks yet more diplomatic manoeuvring.
“We have tolerance for both positive and negative news flow out of North Korea up to a certain limit,” James McCormack, Head of Asia-Pacific Sovereign Ratings at Fitch Ratings, said by telephone from Hong Kong.
“But I think what we’ve seen today is probably within the tolerance band,” he added.
Kim Eng Tan, a sovereign ratings official at Standard & Poor’s Ratings, also predicted little immediate impact on South Korean ratings from the North Korean remarks.
“Unless things develop to the point where there is a real threat to security or stability on the Korean peninsula, we are unlikely to change our assessment of the South Korean government’s creditworthiness as a result of this declaration,” he said in an email to Reuters.
Fitch has an A-plus sovereign rating on South Korea with a negative outlook while S&P has an A rating with a stable outlook. They have said security concerns regarding North Korea are among the main constraints on South Korean ratings.
If this is true, then the South Korean government is not under any pressure from financial markets to resolve the situation quickly…which is not good news for the DPRK. Could it be that the DPRK is now unable to credibly project itself as a threat to the South?
What an interesting scenario that would be.
See also: DPRK Studies, One Free Korea, and the Economist.
UPDATE: The full statement in KCNA:
DPRK to Scrap All Points Agreed with S. Korea over Political and Military Issues
Pyongyang, January 30 (KCNA) — The Committee for the Peaceful Reunification of Korea issued a statement Friday in connection with the situation on the Korean Peninsula growing tenser as the days go by due to the south Korean conservative authorities’ reckless moves to escalate the confrontation with the DPRK.Citing facts to prove that the Lee Myung Bak group, far from reflecting on the treacheries of pushing the north-south relations to a serious crisis, shamelessly is challenging the north, raising a hue and cry over the “threat from the north” and “adherence to principle,” the statement said:
The inter-Korean relations have reached such pass that there is neither way to improve them nor hope to bring them on track. The confrontation between the north and the south in the political and military fields has been put to such extremes that the inter-Korean relations have reached the brink of a war.
The group of traitors has already reduced all the agreements reached between the north and the south in the past to dead documents.
Under such situation it is self-evident that there is no need for the DPRK to remain bound to those north-south agreements.
The statement vehemently denounced on behalf of all the Koreans the Lee group for having pushed the inter-Korean relations to the brink of a war through its moves to escalate the confrontation with the DPRK in gross violation of the inter-Korean agreements.
In view of the prevailing situation the statement solemnly clarified as follows:
First, all the agreed points concerning the issue of putting an end to the political and military confrontation between the north and the south will be nullified.
Second, the Agreement on Reconciliation, Non-aggression, Cooperation and Exchange between the North and the South and the points on the military boundary line in the West Sea stipulated in its appendix will be nullified.
Holding the Lee Myung Bak group wholly accountable for the present grave situation to which the inter-Korean relations have been pushed, the statement continued:
Never to be condoned are the crimes the Lee group has committed against the nation and reunification by bedeviling overnight the inter-Korean relations that had favorably developed amidst the support and encouragement of all the Koreans and ruthlessly scrapping the inter-Korean agreements.
The Lee group seems to wait for something, calling for “adhering to the principle” but it will only face a heavier blow and shameful destruction.
Read more on this story below:
North Korea Ramps Up Rhetoric Against Seoul
Wall Street Journal
Evan Ramstad
1/30/2009
North Korea, trying to jolt Obama, warns South
Reuters
Jonathan Thatcher
1/30/2009
North Korea Scrapping Accords With South Korea
New York Times
Choe Sang-hun
1/29/2009
NKorea ditches nonaggression pact with SKorea
AP (Via Washington Post)
Jae-Soon Chang
1/30/2009
Ratings agencies play down North Korea remarks
Reuters
Yoo Choonsik
1/30/2009
Power struggle suspected in N. Korea
Washington Times
Andrew Salmon
1/31/2009
