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Five years on, the BRI is still being perceived as a Debt Trap

M Waqas Jan

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Five years since President Xi Jinping laid out his grand vision for the Belt and Road Initiative (BRI), the implications of China’s economic supremacy have brought about marked questions over the impacts of its rise as a potential global superpower. These questions apply particularly to whether China, based on its present trajectory, may soon supplant the US’s hold over the International System as it increasingly comes to challenge it.

China has gone to great lengths to distance itself from the US, in terms of its approach towards International Politics. A key cornerstone of its foreign policy has always been based on the principle of non-interference in the internal affairs of other States. This has often been presented as a direct anti-thesis to the long history of US led interventions witnessed across the Middle East, Latin America and key regions in Asia. Within the Post-Cold War scenario, China’s insistence on non-interference in the internal affairs of states, and greater inclusivity within the international system have served as a rallying cry against what many have termed as US Imperialism and unilateralism.

However, the many intricacies of China’s newfound ability to project power overseas have brought with them their own set of challenges in direct contradiction to the above principles. Powered by its massive economy, China’s investments under the BRI spanning across Europe, Africa, The Persian Gulf, and large swathes of Asia, have caused feverish speculation, amongst both proponents and critics alike, as to the true motives behind its financial largesse. China has repeatedly justified its investments in under-developed countries as part of its vision for global economic development. Yet, in whatever way China has maneuvered to ensure that these investments remain secure and true to their objectives, it has had to continuously ward off the perception that it is laying the foundations of a new form of imperialism of its own.

Particularly with respect to the BRI, these perceptions of Chinese Imperialism are rooted in what numerous analysts have termed as China’s ‘Debt Trap Diplomacy.’ Citing the cases of the Hambantota Port in Sri Lanka, the Bar-Boljare highway in Montenegro and the China Pakistan Economic Corridor (CPEC) in Pakistan, a growing number of critics have pointed out that, these projects while being funded through highly attractive and concessional loans from China are leading to unsustainable levels of debt for these countries. It is argued that with mounting debt in the guise of BRI funding, these countries would likely be reduced to being mere client states, with their sovereignty firmly in the grasp of Chinese creditors.

This issue of Chinese Debt was once again brought forcefully into the international spotlight, owing to a dramatic shift in Malaysia’s foreign policy towards China. The newly elected government under Mahathir Mohammad recently cancelled a series of large investment projects that were being implemented under the BRI framework. These comprised of the $20 billion East Coast Rail Link as well as two natural gas pipelines worth $2.3 billion. All of these projects were deemed as unaffordable by the new government based on the ensuing debt that would have followed.

Speaking at a press conference in the Great Hall of the People in Beijing, Prime Minister Mahathir stated clearly that he did not want a situation where there was a new version of colonialism based on unequal relations. His entire visit to China last week was geared towards delicately balancing Malaysian interests with respect to China’s sustained push towards realizing its BRI ambitions. He went at great lengths to lay the blame on his predecessor’s mismanagement of the economy, claiming he was confident that China would appreciate Malaysia’s present fiscal constraints, and its inability to afford such projects at this time.

It is worth noting that during the run-up to the Malaysian elections, Mr. Mahathir had centered his election campaign on calling for greater oversight over Chinese funding. This was based under widespread allegations of corruption regarding the mismanagement of BRI project funds under his predecessor Mr. Najib Razzak. Partisan politics aside, Mr. Mahathir’s statements bear a striking resemblance to the election rhetoric of another newly elected leader in yet another key BRI partner country.

On the other side of the Indian Ocean, the newly elected Prime Minister of Pakistan, Mr. Imran Khan too had campaigned for greater oversight over the management of BRI funds under the massive China Pakistan Economic Corridor (CPEC). These were part of a series of allegations leveled against his predecessor, former Prime Minister Nawaz Sharif who also is accused of widespread corruption and mismanagement of the economy. Pakistan’s rampant debt crisis has been attributed in part to Mr. Sharif’s mismanagement. Since assuming power Mr. Imran Khan has been delicately balancing increasing calls for greater transparency and oversight over CPEC projects, all while ensuring that the bonhomie between Pakistan and China remains intact.

The parallels between Prime Ministers Imran Khan and Mahathir Mohammad present a highly interesting comparison, specifically within the context laid out earlier in this discussion. Both politicians have more or less defined their political identity as being staunchly against the last few decades’ US imperialism. Both came in to power on a surging wave of populism, on the promise of fighting corruption and providing better oversight over the economic direction of their countries. Both while being initially skeptical of Chinese investments were quick to acknowledge and provide a reaffirmation of China’s role in National development. Mr. Khan’s direct appreciation of Chinese assistance in his speeches as well as his tweets in Chinese, directly point towards his attempts at alleviating Chinese suspicions regarding his commitment to the BRI. Mr. Mahathir’s visit to Beijing, as one of his first overseas visits as Malaysia’s newly elected Prime Minister, also present a similar story. By positively engaging with China immediately after assuming office, both leaders have attempted to directly address any misperceptions that may have arisen from their pre-election rhetoric.

Both leaders however, while whole-heartedly welcoming Chinese assistance have also taken a much more measured response in terms of ensuring that their own countries’ interests achieve precedence. Looming debt and the maintenance of sovereignty still remain at the forefront of their political agenda, regardless of the commitments made by past governments. That is still the crux of the message being delivered to China by both countries.

Speaking at a seminar, marking the Five Year Anniversary of the Belt & Road initiative in Beijing earlier this week, President XI Jinping was clear in asserting that the BRI was geared more towards economic cooperation as opposed to a geo-political or security alliance. He re-emphasized the openness and exclusivity of the BRI and dismissed allusions to the formation of a ‘China Club’, in a direct riposte to the BRI’s critics. While his speech shows that there is a growing acknowledgement of such challenges amidst China’s top leadership, there are still certain issues that need to be addressed more directly. No matter how much China depoliticizes the BRI at the international level, the stark reality of debt repayments still remains as the most pervasive issue for its partner countries. This holds true even for staunch allies such as Malaysia and Pakistan.

Taking into consideration its experience over the past five years, China should take a long hard look at how to decouple its Belt and Road Initiative from being perceived as a ‘Debt Trap’. While the BRI’s critics have been quick to equate this aspect as a key characteristic of growing Chinese Imperialism, its proponents are still facing difficulty in financially justifying the grand scale of the BRI to their impoverished constituencies.

If China is to truly chart a more inclusive path to global leadership via the BRI, it must let its diplomatic goodwill take precedence over the economic reality of being a creditor to it indebted allies. If not, it would likely lose its ability to stand in contrast to what itself refers to as the US’s imperialist hold over international politics; all, in spite of China’s strict adherence to its long cherished principles of ‘non-interference’, and respect for the sovereignty and territorial integrity of its allies.

Research Associate and Program Coordinator for the China Study & Information Centre (CS & IC) at the Strategic Vision Institute, a non-partisan think tank based out of Islamabad. He can be reached at waqas[at]thesvi.org

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East Asia

BRI: Shared Future for Humanity

Sabah Aslam

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The terrestrial and maritime connectivity proposed by the Chinese government back in 2013 with six connectivity corridors reflects the vision of shared future for humanity. Belt and Road Initiative (BRI) is an omen of modern transformation of the globe. The journey of transition from geo-politics to geo-economics is itself a huge achievement. As geo-economics brought in the partnership and collaboration for mutual gains whereas geo-politics reflects competition, for instance, arm race.

BRI a network of terrestrial and maritime passages encompassing (1) the New Eurasian Land Bridge connects Western China to Western Russia; (2) the China-Mongolia-Russia Corridor, from Northern China to Eastern Russia; (3)the China-Central Asia-Western Asia Corridor, links China to Turkey; (4) the Corridor from Southern China to the Indochinese peninsula up to Singapore; (5) the China-Pakistan Economic Corridor; and (6) the Bangladesh-China-India-Myanmar Corridor. In other words BRI is one of the longest connectivity route from the Chinese coast to Singapore to Gwadar up to the Mediterranean. Among all the above mentioned projects, CPEC is a model project with so much in its credit.

CPEC is the flagship project of the Belt & Road Initiative. CPEC is a mutually agreed initiative including 4 key areas of cooperation i.e. energy projects, infrastructure development, Gwadar Port, and industrial cooperation. This cooperation has further strengthened the time tested friendship. China – Pakistan strategic cooperation is an essential ingredient for the South Asian peace recipe. CPEC, not merely focus on commerce and trade but also include social development projects as well. Pak-China Friendship Hospital, Pak-China School, Gwadar Airport, and many more are prominent examples of this initiative. The first phase of CPEC is almost complete and is all ready to enter into the second phase. The first phase was comprised of energy and road projects whereas the second phase might also entails agriculture, education, health, water and much more. Here in our case, when there is an atmosphere of non-kinetic threats, development is the only option. Internal harmony and peace can only be achieved when there is no sense of deprivation. In addition, inclusion of third party in CPEC project, and also connecting it with the Central Asian Republics and Russia is also a progressive move. Opening it for the private business sector and creating 80,000 jobs, all are signs of social uplifting and gradual development. CPEC is an inclusive project for Pakistan and for the region.

China is focusing on and playing a key role in connecting the continents. Being an emerging power, China, considers the role of regional connections vital for the global peace and prosperity. Hence, BRI is a positive-sum cooperation. It’s a platform for dialogue, and developing new paths of cooperation encompassing government to government, people to people, business to business and media to media relations. BRI is the, opening up and connectivity, with an aim on promoting global peace and cooperation, and building a global community with a bright future for mankind. Moreover, it promotes connectivity through passages of commerce and trade. There is also a shift in the international balance, leaning towards east from west, considering it a breath of fresh air. Belt and Road Initiative is turning the myth “21st Century is the Asian Century” into reality.

BRI is a network of exchange, exchange of happiness and prosperity, exchange of knowledge and technology, exchange of expertise to perform well for mutual interests. It is the beginning of the inclusive global future. Hence, it is the time for profound change and reforms. For growth, for being dynamic, change is normal. So, reforms, propel states to accomplish goals not only at national level but international level too. The way BRI brought countries and regions together, enhancing trade, developing state of the art infrastructure, boosting investment, strengthening cultural ties, and people to people exchanges, all making BRI, the Central Nervous System of the world.

The true essence of BRI is regional integration, a horizontal, non-vertical integration with no hegemonic designs with an aim to limit the world recession damage. Furthermore, as the second BRI forum is scheduled in late April this year, there is much more to come. As mentioned, BRI is a pie, having share for all; it’s not a debt trap. In order to win the confidence of all the partnering states, and to lessen the suspicion, China is trying to avoid the ‘debt traps’. Though, there is no such state in unsustainable Chinese government debt pressure. It basically provides equality based cooperation, and a green & sustainable development. Second BRI forum is the right time to kickstart the “Second Phase” of Belt & Road. Many foreign heads of state and government, and thousands of delegates will be attending the Belt and Road Forum for International Cooperation, or BRF.  As mentioned by Chinese Foreign Minister Wang Yi, “it will include a series of events, such as leaders’ round table, high-level meeting, and thematic forum, CEO conference, under the theme of Belt and Road cooperation shaping a brighter shared future. There will also be more side events, including 12 thematic forums focusing on practical cooperation, and for the first time a conference organized specifically for the business community”.

The globe has already been struck by two major economic depressions. Asian continent also faced one in 1997 when East and Southeast Asia was crippled economically. The world direly needs a remedy in order to sustain the global economy which can only be done through economic and cultural interconnectivity.BRI aims to be a torch bearer in order to bring the financial benefits to the globe. The global prosperity is need of an hour in modern world order but this can be achieved through collective efforts.

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China: Via Portugal into Africa and Latin America

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Portugal is a major geographical link in the European leg of China’s New Silk Road project (NSR). A visit by Chinese President Xi Jinping to Lisbon on December 4-5, 2018 produced seventeen cooperation agreements thereby reaffirming the two parties’ readiness to expand economic partnership.

China is Portugal’s top trading partner in Asia, with bilateral trade steadily on the rise amounting to $5.6 billion in 2017. The volume of Chinese investment in the Portuguese economy has reached $ 10.2 billion. Simultaneously, the influx of tourists from China to Portugal has gone up by 40% and from Portugal to China by 16%. The Chinese Embassy in Lisbon has described the current state of Sino-Portuguese relations as the best since the establishment of diplomatic relations in 1979.

The livening up of Sino-Portuguese relations is key to Beijing’s comprehensive strategy of boosting cooperation with Portuguese-speaking countries. Adopted fifteen years ago, this strategy has brought about an increase in the volume of trade between the PRC and the Portuguese-speaking nations by more than 19 times – from $ 6 billion in 2002 to $ 117.6 billion in 2017.

In this context, an economic union with Lisbon is designed to geographically complete the European sector of the New Silk Road project (NSR) given the location of Portugal as the western tip of the European continent. Also, such an alliance is set to project Chinese economic influence through Portugal to countries of Africa and Latin America.

China is number one trading partner of three Portuguese-speaking countries: Brazil (trade turnover in 2018 at $ 29.5 billion), Angola ($ 26 billion) and Mozambique ($ 168 million).

The port of Sines – Portugal’s sea gate to the Atlantic and Africa – carries a particular importance with its well-developed infrastructure and all the facilities to be used as a transit point for Chinese products bound for America and Africa. Another important point is the Azores, a part of Portuguese territory stretching deep into the Atlantic. Lisbon has consented to Beijing’s participation in the construction of scientific and logistics infrastructure in the archipelago, which is tantamount to a stronger Chinese economic presence in the region.

Lisbon favors joint participation with Beijing in investment projects in Portuguese-speaking Africa. African countries have expressed a similar intention. In January 2019, the Angolan Parliament ruled to abolish double taxation with Portugal, China and the United Arab Emirates.

Lisbon-mediated cooperation with Portuguese-speaking countries will enable Beijing to guarantee food security. According to UN reports, Angola is among the top five countries with the greatest agricultural potential (58 million hectares of arable land), Mozambique has 36 million hectares, of which less than six are cultivated, while Brazil is the main supplier of soybean, a popular food product for China (14 million tons in 2018).

In relation to China and within the NSR project, Portugal plays the role of an infrastructure and logistics counterweight to France, which is trying to shift the focus of French-Chinese cooperation in the direction of the Mediterranean and North Africa – to fight against terrorism in the Sahel region and provide investment support of the French-speaking Sahel “Five” (Chad, Mauritania, Burkina Faso, Niger, Mali).

Beijing is interested in moving via the Atlantic westward. From the geographical point of view, Portugal is a good partner here – cooperation with it takes China beyond the Mediterranean. According to the Chinese leader, for Beijing, Lisbon is a point of linking the land and sea segments of the NSR and a promising partner in the development of the “sea wave economy”.

The position of Paris regarding the NSR project is characterized as cautiously positive, envisaged by the Franco-German Aachen agreement of January 22, 2019 and affected by competition with Italy (Italian Trieste and French Marseille compete for the main port of the NSR in the Mediterranean).

The Aachen agreement diplomatically outlines the geopolitical axis Paris-Berlin, endowing the French-German relations with a special status. Against export-oriented German economy (in 2018, exports went up 3% against 2017, reaching $ 1.318 billion), Beijing’s economic activity in Europe is seen as a challenge.

Negotiations between French President Emmanuel Macron, German Chancellor Angela Merkel and European Commission Chairman Jean-Claude Juncker and China’s Xi Jinping on March 25-26 demonstrated the EU’s consolidated position and marked a successful attempt to secure common gains from building up cooperation between the EU (without Italy) and the PRC.

While France readily signed multibillion-dollar contracts with China and agreed to the opening of the Chinese market for French goods, it refrained from actively assisting the Chinese in pursuing transcontinental infrastructure projects as unwelcome for the economic health of the Franco-German duumvirate.

 First published in our partner International Affairs

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North Korea’s future international relations

Giancarlo Elia Valori

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Rumors are rife in world diplomacy circles that the United States wanted to force the hand in the recent talks with North Korea held in Hanoi last March.

 The US side, in particular, tried to achieve a broader definition of “denuclearization”, a criterion capable of simultaneously eliminating the missile network, precisely the nuclear one, as well as the North Korean facilities for chemical warfare.

 At the end of March, a report informed that the United States had asked North Korea to remove the whole stock of fissile material and relinquish all bacteriological warfare programmes.

 All this only in exchange for the lifting of sanctions. Too much, considering the level reached by the previous negotiations.

 Obviously, the North Korean delegation was certainly not very close to US requests, while North Korea’s deputy-Foreign Minister, Choe Son Hui, argued with Mike Pompeo and John Bolton because they created a strong “obstacle” to negotiations.

 North Korea’s representatives in the Hanoi negotiations, however, stopped the talks because they had not the qualifications nor the political mandate to treat the issue of denuclearization with the United States in this “global” way.

 Nevertheless, John Bolton, who is certainly not a great supporter of dialogue between the United States and North Korea, seized the opportunity of the block of negotiations. In the lack of a precise North Korean policy line, he asked for an overall, quick and absolute denuclearization, being well aware that this request could not be accepted by the North Korean delegation.

 Again following Bolton’s policy line, the United States  added to this request- which was hardly likely to be accepted – the total destruction of chemical and bacteriological weapons.

 It is strange that,in Hanoi, experienced and skillful mediators conducted so tough negotiations, even naïve in their harshness.

 Furthermore, the United States asked North Korea for news about a “secret base for uranium enrichment” near the Yongbyon facilities.

 Finally, the United States also asked for a “statement of all nuclear activities” in North Korea, as well as a clear roadmap for denuclearization.

 As if the matter were only in North Korean hands.

 A management of negotiations that may probably be fine for US internal political purposes, but certainly does not favour any positive evolution of the North Korean nuclear issue.

  In his last meeting with President Trump, however, Kim Jong-Un brought to Hanoi the sole promise of fully scrapping, in a short period of time, the Yongbyon nuclear research centre.

  The United States, however, did not well understand  whether the Yongbyon facilities to be closed regarded only the reactor that has been producing plutonium since 1980 or whether the closure offered by Kim Jong-Un regarded the whole plant, with its many centrifuges for uranium and reactors.

 Some US analysts think that the Yongbyon facilities are  still at the core of the whole North Korean nuclear system, while  other experts believe they are “obsolete” and, hence, Kim’s offer is not particularly interesting.

 Nevertheless, if there is nothing else besides the “obsolete” facilities, Kim Jong Un’s offer is meaningful and rational.

At the beginning of Hanoi talks, North Korea hoped that economic sanctions would soon be partly lifted, considering that all the UN Security Council Resolutions on the North Korean issue stated that it would be possible to re-examine the sanctions in exchange for clear progress on the nuclear issue.

 North Korea, however, has already imposed a moratorium on missile and nuclear tests. It has also closed its nuclear test sites and has even started to destroy its missile test sites.

 North Korea has even accepted a slow and progressive lifting of sanctions, in exchange for a step-by-step check of nuclear compliance.

 From this viewpoint, the United States thought that sanctions really benefited it and hence they did not try to reduce them. Quite the reverse.

 The United States must have thought that the more sanctions remain, the more North Korea is forced to negotiate.

 Moreover, the Russian and Chinese proposals on the subject, developed within the UN Security Council, have always been blocked by the US contrary vote.

 John Bolton’s and Mike Pompeo’s hard stance, however, was not matched by any immediate negative reactions from the North Korean side, as is customary in North Korea’s diplomacy. Nevertheless, three weeks after the crisis of Hanoi’s talks, the North Korean deputy-Foreign Minister, Choe Son-Hui, who enjoys Kim’s full confidence, said that his country “is not particularly interested in the current negotiations with the United States for denuclearization”.

 Later, after the unexpected end of talks in Hanoi, the United States launched a defamation campaign against North Korea claiming, for example, that North Korea was secretly continuing its missile tests and that this new fact had stopped the US efforts at the negotiating table.

 It is hard to understand how nuclear tests can be stopped “secretly”.

 North Korea, however, has never promised to stop anything else but missile tests alone.

 Hence, neither the uranium enrichment program nor the other biological and chemical activities have rightly ceased.

 Currently, however, the door of negotiations still remains half-open.

  Again in March, the pictures of the Sohae site, which is used for launching satellites, showed a significant pace of facilities’ reconstruction.

 In all likelihood, despite Kim Jong Un’s promise to dismantle the site soon, North Korea still plans to keep and develop it, with a view to maintaining also some diplomatic pressure on the United States, but above all to organizing a new round of talks in the future.

 The next important events will be the meeting between Donald J. Trump and the South Korean leader – already scheduled for April 11 – designed to break the ice between North and South Korea on the denuclearization issue and, on April 15, the North Korea’s great celebrations for the 107thbirth anniversary of Kim Il Sung, namely the “Day of the Sun”.

 As some US analysts claim, should we go back to the strict and effective style of the old Six Party Talks?

 Instead of a team that – at least in the US case – knows the complex issue of relations between the United States and North Korea only superficially, a new negotiation would be useful, with a traditional preliminary document and clear purposes.

  A new negotiation that – as was the case with the Six Party Talks – makes the North Korean deputy-Foreign Minister and the deputy-Secretary of State, as well as many US experts of the academic and intelligence worlds sit around the negotiating table.

Certainly, we need to imagine that the negotiation is and will be long and complex.

 Simple negotiations are those that do not succeed in reaching the goal.

 Hence it will be useful to imagine multiple and different trade-off and mutual satisfaction factors, compared to a harsh and brutal negotiation on nuclear potential alone.

 Kim Jong-Un knows all too well that what is at stake here is the future of his country, not only nuclear and bacteriological-chemical disarmament.

 His nuclear and bacteriological-chemical network has led North Korea to be a member of the world decision-making system.

 If this happens even in a shift from the nuclear threat to a major economic role, Kim Jong-Un will have won his bet.

 If this does not happen, the United States shall not believe that North Korea will consume itself on its own. Quite the reverse.

 In any case, it will be necessary to clarify that, as usual, the North Korean issue cannot be resolved with a mere bilateral negotiation mechanism.

 The North Korean strategic role is a vital problem for Japan, for South Korea, but also for China and the Russian Federation.

 Without a project that is good for all these actors, and not only for the United States, no peace nor disarmament will be possible. Not even for the United States alone.

 China does not certainly want a nuclear, bacteriological and chemical system on its border that is, however, completely out of its control.

 This is the real reason for the initial tensions between Kim Jong-Un and Xi Jinping.

 Any increase in military tension in North Korea also spreads suspicions in China.

  Nevertheless, it is a factor that the United States – in agreement with China – could use to reach North Korea’s denuclearization.

 In particular, however, China wants neither a new war on the Korean peninsula – an interest obviously shared with South Korea – nor the US Armed Forces on its border, if North Korea’s complete nuclear demilitarization is achieved.

 And if the United States and South Korea are still able to quickly reach the nuclear threshold in an initially conventional conflict with North Korea.

 Hence, for China, high conventional and credible militarization for North Korea, but also with a non-negligible anti-US nuclear deterrent, albeit certainly not capable of setting fire to the whole Southeast Asia.

  The same strategic paradigm largely applies to the Russian Federation.

 It is not in favour of a demilitarized North Korea, which would be easy prey to the US-South Korea axis, and would not serve as a military buffer for Russia. However, it is even against a North Korea capable of threatening South Korea, and hence even the countries on its Northern border.

 Therefore, considering the scenario of the negotiations between North Korea and the United States, the current stalemate will serve – after the Hanoi talks – to select the rational requests of the two actors and to shape the possible responses.

 For example, the spreading of nuclear technology from North Korea to other States is a new topic to be included in the negotiation agenda.

As well as the decrease in conventional North Korean forces, to be linked to a rational decrease in the US and South Korean Armed Forces.

 The five sanctions that North Korea wants to be lifted concern only the civilian economy and the well-being of the North Korean people, while we need to note that also Kim Jong-Un is put under pressure by the North Korean people and, even more,  by his ruling class.

 The North Korean Foreign Minister, Ri Yong Ho, said so explicitly: in fact, he has clarified that the North Korean power is aimed – in a rational negotiation – “at the complete  dismantling of the Yongbyon site”.

 Ri Yong Ho also added that the dismantling of Yongbyon facilities would take place “with the presence of US experts”.

 Clearly Kim Jong Un has now China’s full protection.

 Certainly China does not want to have the huge mass of migrants from North Korea within its borders and, above all, is not interested in a “sister” country which, besides threatening the United States and South Korea, forces even the great China to follow its policy.

 This could lead the North Korean leadership to seek economic compensation at any time of the denuclearization talks.

 Hence will the US leadership be able to finalise negotiations with North Korea without too many mistakes and wrong moves?

 Will the US leadership be capable of actively involving China, Japan, Russia and South Korea in a radical dismantling of the North Korean nuclear capacity?

 We do not know it yet.

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