A hermit kingdom where government officials flatter their leader with odd songs. A lady in pink, in an enthusiastic tone, announcing some “successful” missile test or the video of the test it-self is the most we get to see of it. North Korea is a different country. Criticism and sanctions has done little to stop its ambitious nuclear program.  

While discussing the conflicts that can lead to an all-out war, the one between North Korea and USA is the most unstable and dangerous one. Time and again, tensions had escalated between the two but the world has been fortunate enough. However, this is not a solution. The conflict can best be described in terms of a volcano that can erupt at any given time.

Even the slightest spark between the countries send ripples across the world. Because the stakes are high, very high. The point of discussion is nuclear. The men concerned, capricious and hence, dangerous. Strings connect other countries and drag them inside most of the times, unwillingly (China is an ally of North, Russia hosts the greatest number of North Korean workers and South Korea looks to USA for help, with thousands of US troops stationed there). Despite sanctions and international criticism North Korea continues to conduct nuclear experiments, blatantly degrading Non Proliferation Treaty. This year the country conducted 18 missile tests. In an attempt to quenching their thirst for nuclear pyrotechnics, they tried a hydrogen bomb as well.

On August 29, 2017, North Korea launched a ballistic missile that flew over the Japanese island of Hokkaido and fell into the Pacific, 1180 km east of Japan. Proving inured to international flak and ire, on September 14th, 2017, the regime launched another missile that followed the same trajectory: flying over Hokkaido islands dropping into Pacific Ocean. This was just after the KCNA, news agency of North Korea, released a statement threatening to sink Japan into the sea. South Korea responded by a fire drill. Japan was on high alert. Evidently, the second test was a reaction to the recently imposed sanctions on North Korea. (See image below).

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Japanese Prime Minister Shinzo Abe has reprimanded North Korea in a stern manner, conducting emergency exercises in Japan teaching people how to evacuate in case of a strike. Mr. Trump has also said that “all options are on table” to deal with DPRK.

By a scrupulously observing the intricate geo-political milieu of the said region one can easily see that there are more than two stake-holders in the game. North Korea shares a border with China. Also, China is the biggest trading partner of the former. Whereas South Korea is a US ally. Both China and USA wants to have a strong hold in this region given the magnitude of international trade and tanker traffic passing through it. South China Sea (which would be analyzed in the last part) is the most disputed and significant area, which is located in this region. China is not happy with their naughty neighbor but acting against the country to an extent that it becomes unstable is not an option. Hence, their balking in adopting a complete oil embargo. If this happens there can a huge outflow of people which will, naturally, enter China…disturbing and disrupting the socio-economic order there. Also, in case of a total economic collapse of North Korea, South can takeover it which in turn will give US an opportunity to “contain” China.

Evidently, there are financial dimensions to it as well. Mr. Mir Mohammad Ali Khan, Wall Street Investment Banker and Chairman of an Advisory Company, shared a very comprehensive view of the financial repercussions of this conflict

“We are about to see an Asian Financial Crisis bigger than 1997 and become a contagion which will make 2008 crisis look like a joke. Mr. Trump without realizing the financial implication of his threatening tweet(s) has promised to sanction banks doing business with North Korea and cut off "All" trade ties with countries doing business with the North Koreans.

The problem is Trump threatening to put sanctions on all financial institutions doing business with Kim Jong's nation. China is the biggest trade partner of North Korea. 85% of the North Korean trade goes through China. What Trump forgot to realize that the four lenders of China are the biggest in the world. Bigger than JP Morgan. HSBC. Or any other bank in America. The Industrial and Commercial Bank of China has assets over $ 3.47 trillion dollars. China Construction Bank over $2.8 trillion dollars. Agricultural Bank of China and Bank of China, $ 2.93 and $3.02 trillion respectively. And all these banks do business with North Korea. While JP Morgan comes in at the 6th place with $ 2.49 trillion in assets and HSBC at 7th place with $ 2.37 trillion dollars. Another noteworthy fact is that the size of the Chinese lending pool has surpassed the entire Euro Zone lending pool. At above $33 trillion dollars. If Trump does what he is promising to do, to put sanctions on any financial institution doing business with the North Koreans, then we will see the world's biggest financial crisis. Something which will even dwarf the famous 1929 market crash. This will be a crash of the entire financial sector of the world.

Secondly if America breaks all trade ties with China then China will immediately en-cash what it has in United States Treasuries, or what is better known as the American debt, which is 4% of the entire American debt of $19 trillion dollars. If China liquidates almost a trillion dollars of its holdings in the treasuries, the American debt market will crash and it will cause the European Debt market of €13 trillion to crash with it. It's a wait and see approach at this moment….economic WORLD WAR ONE is in the making. Trump is caught between the Devil (himself) and The Deep Blue Sea. I hope the devil gets his senses back and listens to his advisors.”

Matters are made worse when the leaders on both sides are what they are: unpredictable. If Kim is a dangerous man, Trump is amateur politician. With the hope that things won’t move towards a military action, that would be unimaginably destructive, we can hope for more stringent sanctions that can put a kibosh on any further nuclear plans subsequently preventing escalation.

However, the response from North Korea, after the imposition of recent sanctions, is symptomatic of the regimes’ obstinacy in pursuing its nuclear program. Korean regime may be inured to criticism but had to be stopped at some point. Otherwise, they can be a cause of unnecessary turmoil, for themselves, and for the whole world as well.

Osama Rizvi

Independent Economic Analyst, Writer and Editor. Contributes columns to different newspapers. He is a columnist for Oilprice.com, where he analyzes Crude Oil and markets. Also a sub-editor of an online business magazine and a Guest Editor in Modern Diplomacy.

His interests range from Economic history to Classical literature.

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