Is North Korea stable?

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Is North Korea stable?

In her Independence Day speech, President Park suggested that North Korea may not be politically stable. Is she right?

People have bet against the Kim regime before, and they have consistently been proven wrong.

But circumstances have changed. North Korea’s survival increasingly depends on China, and the regime is potentially vulnerable as a result. However, Beijing is showing a decreasing appetite for pressuring Pyongyang. Openly talking about regime change will likely have perverse effects, increasing rather than reducing China’s support for the family dynasty and thus increasing its chances of survival.

How would regime change happen? The concept of “collapse” that is frequently used in discussions of North Korea is not very useful or even very clear. The single-party regime in the North is not a weak or failed state like Syria; it will not “collapse” like Libya did.

Nor are there robust civil society organizations like unions or churches to lead mass mobilization from below, as was the case in Argentina, the Philippines, Poland and Korea. The Eastern European transitions to democracy were in fact anomalous. Most single-party regimes transition not to democracy but to competitive authoritarian politics — as in Russia — or to military rule. In Asia, communist regimes in China, Vietnam and Laos have proven surprisingly resilient.

But the North Korean economy is increasingly fragile, and the extent of its isolation underappreciated. In 2000, China, Japan and Korea each accounted for about 20 percent of North Korea’s trade with Europe and the developing world accounting for another 30 percent.

As the nuclear crisis unfolded, North Korean dependence on China steadily increased. With the closure of Kaesong it could approach as much as 90 percent of the country’s total trade. Sanctions have constrained the country’s shipping, limited its access to the international financial system, and closed off both illicit and commercial activities. Its efforts to attract foreign investment — except from China — have failed not simply as a result of sanctions but due to lack of credibility with respect to property rights.

Unless it reflects deeper internal tensions that we are not seeing, the wave of defections by North Korean diplomats is unlikely to lead to a regime change. But it does reflect the effects of economic isolation. Diplomats are tasked with generating foreign exchange for the regime, but have declining chances to do so. Failure to deliver can be punished not only by repatriation but by much worse.

With de facto reforms and marketization, North Korea is an increasingly open economy. Dependent on imports and financing from abroad, the country is increasingly vulnerable to the types of balance of payments crises that struck many other developing countries.

Iran — another state with nuclear ambitions — provides an example of how these crises unfold. When sanctions were tightened in mid-2011, the country’s black market exchange rate collapsed and inflation accelerated. Not coincidentally, it was in the middle of this crisis — and before the election of Hassan Rouhani — that Iran chose to launch secret negotiations with the United States.

So what is keeping the black market exchange rate and rice prices in North Korea stable? The short answer: China. Under UN Security Council Resolution 2270 — negotiated after the fourth nuclear test — China agreed for the first time to restraints on North Korea’s commercial trade, vowing to restrict coal exports.

If this measure had been undertaken with determination, North Korea would have faced problems quite similar to those faced by Iran. But overall trade, including trade in sanctioned items such as coal, remains robust and sanctions enforcement is not transparent.

There is a real possibility that both China and North Korea may underestimate the country’s vulnerability. Gradually tightening sanctions and a loss of confidence could still trigger severe financial distress, perhaps exacerbated by defectors raiding the regime’s bank accounts.

But it is more likely that joint exercises, the Terminal High Altitude Area Defense (Thaad) deployment and talk of regime change will push China and North Korea closer together. Thaad is strategically justified and expressions of hope about North Korean liberty are, too.

But if there is a chance for a peaceful resolution of the North Korean nuclear question, the United States and Korea need to engage China on the question and enlist its support; if such diplomacy fails, North Korea wins by dividing both Korea and the U.S. from China.

U.S. and South Korean defenses — including exercises and Thaad — result from the behavior of the North Korean regime, not from a conspiracy to contain China. Similarly, expressions of concern about North Korean stability stem from the regime’s own authoritarian excesses.

If North Korean behavior with respect to its nuclear and missile program moderated, so would the need for South Korea and the U.S. to deploy Thaad as scheduled. Similarly, were the regime to moderate its authoritarian practices, it would be less necessary for the rest of the world to point them out.

Reminding President Xi Jinping of these facts and appealing — once again — for support is crucial for President Park’s coming visit to the G-20 summit.

*The author is a Krause Distinguished Professor at the Graduate School of University of California in San Diego.

Stephan Haggard
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