Earlier this week we speculated that the explicit recognition of food insecurity problems in the joint New Year’s editorial could be interpreted as a North Korean signal that they were interested in re-engaging on the food-for-nukes negotiations sidetracked by the death of Kim Jong-il. Whatever their motives (true desperation, stockpiling in anticipation of the Kim Il-sung centenary, stockpiling in anticipation of renewed provocations, desire to show Kim Jong-un's diplomatic acumen) the signal was that the DPRK was open for business. That interest was made explicit on Wednesday when KCNA, the official news agency, quoted a spokesman for the Foreign Ministry as saying “The issue of food aid now on the agenda between the DPRK and the U.S. came up early in 2011 when the U.S. raised the provision of 330 000 tons of food it failed to do. The U.S. promised to offer 500 000 tons three years ago….But, the U.S. has drastically changed the amount and items of provision contrary to the originally promised food aid of more than 300 000 tons. So, the DPRK cannot but have doubt about the U.S. will for confidence building, and this compels the former to return to the boundary discussed in May 2011. We will watch if the U.S. truly wants to build confidence.”
This would appear to put the ball back in the US court. As Seoul based North Korea watcher Park Syungje has observed, in light of the North Korea’s political culture, one should not be surprised if the North Koreans interpret near-term events through the lens of the US testing the new leader. Whether the Obama Administration is testing Kim Jong-un, or simply manifesting a perception of political costs of doing a deal with the North Koreans in an election year is another matter.
Alan Blinder, my former boss at the Council of Economic Advisers once remarked that he hoped that the stock market would rise and the bond market would fall on the announcement of his appointment as Vice Chair of the Fed. (My vague memory is that in the event, he got his wish.) Last week it was noted that Asian stock markets briefly fell on a rumor that there had been a nuclear accident in North Korea. Less noticed was that there was a brief spike in the market on the rumor that there had been a military coup in North Korea and that Kim Jong-un was dead. Poor guy. What does it mean when people think that you are dead and the stock market rallies?
Of course, as we observed earlier, the financial market vulnerabilities are highly asymmetric and not in the way that people normally think. It is the North Korean markets that really get rattled by these sorts of shocks, not those in South Korea.
On a lighter note, is it possible for a single week to go by without more on tourism? Apparently not. Yesterday we posted a photo of the Mangyongbong-92, which last year did a run between Rason and Mt. Kumgang. Walter Keats kindly passed along an entire 20 page brochure on the Love Boat. Thanks, Walter!
