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Future Outlook for
the Korean Peninsula Situation
By Chanwoo Lee

Author Chanwoo Lee

Introduction
The situation around the Korean Peninsula changed dynamically in
2018. The Korean Peninsula risk, which rapidly grew in 2017, wasmitigated with the convening of US-North Korea negotiations. North
Korea blew up its nuclear testing site and has cancelled new missile
launch tests. The United States has decided to suspend joint US-South
Korea military exercises. The US and North Korea agreed to a“complete denuclearization of the Korean Peninsula” at their summit
held on June 12, 2018 in Singapore, and have since been conducting a
denuclearization process, and negotiations to improve their relations.
The outcome of this may lead to the possibility of achieving a peacebuilding process on the Korean Peninsula.
But it is also a fact that on the back of the current risk-easing
situation on the Korean Peninsula, each of the stakeholders isincreasingly being more calculating in acting in its own interests. One
cannot make light speculations about whether the Korean Peninsula
risk, which has remained unchanged for decades, will really beresolved, whether North Korea will really change, what future vision for
North Korea the US and the surrounding nations have, and otherchallenges. This article analyzes the situation on the Korean Peninsulain 2018, and examines the future outlook.

The Situation in 2018
Formation of a Korean Peninsula risk-easing paradigm
Since the Korean War and throughout the post-Cold War period,
North Korea has consistently promoted two policies: “route toeconomic independence” and “route to political and military autonomy
and self-defense”. Its economic policy can be described as a noninternational division-of-labor type, import-substituting
industrialization policy which relies on its domestic resources (coal,electricity, and minerals) with the aim of maintaining a heavy industry
oriented socialist economy and an independent national economy. Thiseconomic policy has been shown to have vulnerability risks based onwhat North Korea has been experiencing since the economic crisis of
the 1990s. In addition, its political and military policy has entrusted
leadership to Kim Il Sung and his blood descendants in order tosafeguard the socialist regime, and this policy can also be described as
being designed to maintain a “totalitarian guidance system” andensure the security of the regime through military power (nuclear
program and missiles). But the North Korean nuclear program andhttps://www.jef.or.jp/journal/

missiles have been recognized by the international community as
being a security threat not just to Northeast Asia, including Japan andSouth Korea, but also to the US by displaying itself as an external
threat.
Therefore, the consensus amongst the international community wasthat an independent and autonomous system of self-defense by North
Korea would pose a Korean Peninsula threat, and so North Korea was
asked for “reform and opening-up” of its economic policies and for“denuclearization”. In 2017, the response to this from North Koreanleader Kim Jong Un in a New Year’s Address was that “every mannerof abuse and slander aimed at offending the other party and inciting
confrontation cannot be justified on any account, and an immediatestop should be put to the malicious smear campaign and other acts ofhostility.”
But in Kim’s New Year’s Address in 2018, the response had changed
to “respect the autonomy of the nation, expand good neighborly andfriendly relations with all nations that are friendly to us, and try to do
as much as possible to build a new world with justice and peace.” On
the back of this declaration of the “completion of nuclear military
power” by Kim was the successful ICBM missile launch on Nov. 29,
2017. North Korea, now a self-proclaimed “nuclear superpower” which
no longer required nuclear weapon or ICBM developments, planned ona “turning point” which aimed at a possible compromise between the
security of the regime and the denuclearization that the international
community was demanding. What added to this was that after China
had fully joined the sanctions against North Korea by banning importsof minerals, coal, marine products, clothing etc., North Korea had tostrive to avoid the possibility of an economic crisis in the near future.
On North Korea’s efforts toward a “transition in situation”, US
President Donald Trump said he will promise to secure the North
Korean regime if its denuclearization is completed. He decided toabandon the “strategic patience” policy of his predecessor Barack
Obama and adopt an interventionist policy that aims for abreakthrough. This allowed negotiations between the US and North
Korea to become full-scale and for a summit to be held. Several highlevel talks among senior officials are still ongoing.
The question is, from which policy alignment has this transition
strategy of North Korea come about? There are two differing views: (1)the “buying time” theory where North Korea is trying to increase its
bargaining power by gaining nuclear power status, and (2) the “policychange” theory where denuclearization is bartered for a guarantee of
regime security. The former theory argues that more time is needed
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for North Korea to be fully equipped with ICBM technology andtechnologically secure ICBM reentering the atmosphere, and therefore
the need for regime security. According to this notion, it means thatnegotiations were ultimately being utilized by North Korea to buy time
for nuclear development. From this perspective, nuclear developmentby North Korea, which was a party to the Treaty on the NonProliferation of Nuclear Weapons (NPT) until it withdrew in 2003, is in
itself “bad behavior”, and there is no compensation to be paid for bad
behavior. What is behind the latter theory is the notion that North
Korea is serious about denuclearization (of the Korean Peninsula), as
seen from the dialogue between Kim and Special Envoy Chung EuiYoung from South Korea on March 6, and Kim’s comments during the
China-North Korea Summit on March 26-27, such as the possibility ofbalancing denuclearization with regime security, a moratorium on
nuclear weapons and missiles, consent for US-South Korea joint
military exercises, and non-usage of nuclear weapons andconventional weapons against South Korea. At the third Central
Committee of the Workers’ Party of Korea in April, whose members
were elected at the party’s seventh general assembly, North Korea
seemed to have shifted from an economy-nuclear parallel policy to an
economy-focused policy and made an important decision which canbe interpreted as a policy change towards denuclearization.
The recent situation suggests that North Korea is unlikely todenuclearize without regime security, but the possibility that it is trying
to buy time cannot be ruled out either. Notably, the engagement ofChina, a major stakeholder, has brought two results for Kim throughthe three summit meetings he held with President Xi Jinping between
March and June. The first is the confirmation of a friendly relationshipbetween China and North Korea as well as Chinese support for North
Korea, and second is the notion that even if a socialist market
economy was to be implemented, the socialist regime would notcollapse. A policy change which implements denuclearization andeconomy-focused policies has become more realistic, whereby North
Korea secures Chinese support and aims for domestic economic
stability, while aiming for a comprehensive agreement and step-bystep negotiations with the US that could lead to the lifting of economic
sanctions and also reform and opening.
As such, it can be said that a paradigm for easing the Korean
Peninsula risk has been formulated in 2018. But because this was due
to a policy change which North Korea made ad hoc (by factoring in the
behavioral change of the counterpart country), there is a possibility
that it will go back to being hardline again, depending on how thesituation changes. In this respect, North Korea did transition awayfrom the tensions on the Korean Peninsula, but this is not definite.

Beginning with a reconciliation between North Korea andSouth Korea
Changes in the situation surrounding the Korean Peninsula beganwith a change in inter-Korean relations. Kim’s 2018 New Year’s
Address was a concrete beginning of a transition in situation from thetensions on the Korean Peninsula in 2017. The breakthrough camefrom South Korea. First, a policy change for inter-Korean relations waspresented to North Korea, and called for a reconciliation between the
50 Japan SPOTLIGHT • September / October 2018

North and South through North Korean participation in the
PyeongChang Olympics in February 2018. This was also in part
because a new and progressive administration under Moon Jae In,
who took office in May 2017 in South Korea, had been conducting
behind-the-scenes unofficial negotiations with the North asking for its
participation in the Olympics. North Korea decided to use thePyeongChang Games as an opportunity to play the South Korea card
effectively. The effect of North Korea sending athletes, cheering teams,
artistic teams, Taekwondo squads, as well as a high-level delegation to
PyeongChang was huge. Dialogue between the North and South
materialized and the inter-Korean summit on April 27, senior official
talks, military talks, and sporting event exchanges were hosted
consecutively. Reunions of separated families also took place.
South Korean President Moon’s administration came up with the“simultaneous achievement of denuclearization and peace” strategy.
This strategy materialized in July 2017 when Moon visited Germany
with his “New Berlin Declaration”. The declaration states that the mostprioritized value in South Korea’s North Korea policy is “peace”, andrather than “unification” which is ideal, the more realistic “peace”
became the pillar of its policy expansion. The actual content of thestatement was (1) not to seek the collapse of North Korea, (2) oppose
unification through absorption, (3) co-existence and co-prosperity, and(4) establishment of peace. Since then, several behind-the-scene
dialogues between the North and South, mainly through government
information channels, have been taking place, and although North
Korea officially criticized the South Korean government, it is thoughtthat it has reached an understanding that improved relations with
South Korea is possible. Policies on the Korean Peninsula as put
together by the South Korean government are as shown in Chart 1. Of
these, “peaceful co-existence” under the policy vision,“denuclearization and establishment of peace” under goals, a “step-bystep comprehensive approach” under strategy, and “South Korea-led”
under principle are prioritized.
CHART 1

Korean Peninsula policy of Moon Jae In
government
Policy Vision① Peacefulco-existence② Co-prosperity

Three Major
Goals

Four Major
Strategies

Five Major
Principles① Denuclearizationand establishmentof peace② Development ofinter-Korea
relations③ New economic
community① Step-by-step,
comprehensive
approach② Translational
promotion ofinter-Korea
relations anddenuclearization③ Basic Agreement
between Northand South Korea④ Mutually beneficial
inter-Korea
cooperation① Led by South
Korea② Strong security③ Mutual respect④ Mutual
understanding
amongst thenational
citizens⑤ International
cooperation

Source: Ministry of Unification of the South Korean government

Restoration of the China-North Korea economic relationshipIn principle, China’s foreign strategy can be understood to be a setof the following four strategies.

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Strategy 1: stabilization of neighboring nations + protection ofnational interests + extension of its influence;
Strategy 2: linkage of Northeast Asia, East Asia, Southeast Asia
security line;
Strategy 3: integration of the Eurasian continent (energy +transport + security);strengthening economic cooperation with Russia,
Central Asia, India, Middle East, and connecting it to
the global economy;
Strategy 4: turning the Chinese yuan into a key currency as part ofinternational finance, and expansion of the AsianInfrastructure Investment Bank (AIIB).
The four strategies (or concepts) have led China to pursue its “OneBelt, One Road” policy and develop a global transport corridor witheconomic and financial cooperation. On the Korean Peninsula, China
has restrained the US and Japan, and has taken a policy of individuallysubsuming North Korea and South Korea separately under the
influence of China. Especially for North Korea, it has combined support
for stabilization and international cooperation (sanctions) while
maintaining the friendly relations at the core of its policy, and thus it isa fact that China’s sanctions have only remained a formality. What
were once only “pretending” economic sanctions against North Korea
by China to appeal to the international community suddenly became
fully implemented in 2017. It was originally a policy designed to avoid
conflict with the new Trump administration in the US and cooperatewith it. But meanwhile China had encountered Trump’s “America First”
policy and a potential trade war with it, and to alleviate this problem
China had no choice but to cooperate further with the US, and thus
lost its initiative on the Korean Peninsula issue. Therefore, upon seeing
the change in the situation in 2018, the Chinese government reverted
to an appeasement policy towards North Korea with the aim of
re-emphasizing China’s role through its policy on the Korean
Peninsula.
Without fundamentally changing the strategy to denuclearize the
Korean Peninsula through international cooperation, China chose to
take a path that can reconfirm its friendly relations with North Korea
with the aim of being able to engage more aggressively with the policy
to stabilize the Korean Peninsula’s political situation. China is keen to
lift trade sanctions against North Korea and resume economic
cooperation.

Improved US-North Korea relations and denuclearization:
chicken or egg?
The pillar of the Korean Peninsula risk-easing paradigm is US-North
Korea relations. Looking back on the few months of bilateralnegotiations, North Korea has shown that if the US does not go after aregime collapse or military strikes, it plans on exchanging nuclear
weapons and missiles for “normalization” of relations with the US andeconomic cooperation. On the other hand, a certain anti-Trumpatmosphere can be seen in US domestic polls, and there are opposing
views against Trump’s external policies as well as differing approaches
to North Korea policies even within the White House. The US demands

CHART 2

Recognition system around nuclear
development of North Korea
Awareness

Problem Solving
MethodUS

Nuclear program ofNorth Korea

North
Korea

Fundamental problem of Nuclear armament
the Korean Peninsulaand dialogue(ceasefire, stationed US
military forces)

Goal

Sanctions, pressure, Abandonment of nuclear
and dialogue
program by North Korea(What’s after that?)
Voluntary unification of
the Korean Peninsula(denuclearization,
normalization of US-North
Korea relations)

Source: compiled by the author

a “complete, verifiable and irreversible dismantlement” of its nuclear
program, but compensation for this cannot be determined just by the
US president. What the president can offer are “reversible” verbal
promises such as “regime security” and “halting the US-South Korea
military exercise”, and lifting sanctions and providing economic
support will only come after a verification of complete denuclearization(Chart 2).
From the US standpoint, the denuclearization of North Korea is thegoal, and making concessions without verification is impossible. But
from a North Korean standpoint, the goal is regime security andnormalization of US-North Korea relations, and since nuclear
armament was done for this purpose, denuclearization without
accepting concrete measures from the US would be nothing but a kindof defeat. North Korea has been proposing measures such as an
official declaration of the end of the Korean War and concluding apeace agreement to build peace on the Korean Peninsula, so that its
regime can be secured. To build trust between the leaders of the US
and North Korea and to nurture trust between the two countries, North
Korea blew up its nuclear testing site, closed a missile engine testing
site, and took measures to return the remains of US military personnel
from the Korean War, all without concession measures from the US.
There have even been stories circulating from tourists who saw that“anti-US” slogans have been removed in Pyongyang and other ruralplaces. But at the high-level talks between US Secretary of State Mike
Pompeo and Vice-Chairman of the Central Committee of the Workers’
Party of Korea Kim Yong Chol that took place on July 6, the US refused
to proclaim an end of war declaration on the day of ceasefire on July
27 as a measure of trust prior to completion of the verification of
denuclearization. For the US, the verification process of a complete
denuclearization of North Korea is a top priority, and it emphasizes that
North Korea should undertake step-by-step denuclearization, andduring that process identify US trust measures each step of the way.
Bargaining is currently under way between the Trumpadministration, which is pushing for a complete denuclearization andpromising improved relations after verification, and North Korea,
which wants the “pressure” turned down and a combination of thedenuclearization process and improved relations. But the mostimportant challenge is whether the US has a blueprint for the Korean
Peninsula after North Korea denuclearizes. At the US-North Korea
summit on June 12, a video of what North Korea would like in the
future was shown, but it only touched on what North Korea would
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CHART 3

UN Security Council economic sanctions against North Korea
UN Sanctions
Resolution

No. 1718(2006.10.14)

No. 1874(2009.6.12)

No. 2094(2013.3.7)

No. 2270(2016.3.2)

No. 2321(2016.11.30)

PeriodAfter the first nuclear test

After the second nuclear test

After the third nuclear test

After the fourth nuclear test

After the fifth nuclear test

Primary Goal
Trade Sanctions

Sanctions against development of Weapons of Mass Destruction (WMD)① Ban on arms deals of 7
major conventional
weapons② Ban on NSG, MTCR, AG
deals③ Ban on exports of luxury
items④ Ban on technical training,inquiry, and service
support on banned trade
items① Ban on all arms deals anddeals on other relatedmaterials(excluding small weapons)

UN Sanctions
Resolution

No. 2356(2017.6.2)

PeriodAfter the ballistic missile launch test

Primary Goal
Trade Sanctions① Ban on overseas travel and freezingof assets for 14 individuals and 4
organizations① Ban on luxury items with 7
items designated(including pearls, jewelry,
precious metals, yachts,
luxury cars)② WMD-related “catch all”

Sanctions against WMD development capacity(full economic sanctions)① Ban on small weapons as well
① Correction on exceptions
on North Korean coal
② Ban on exports, supply andexportstransfer of North Korean minerals
・Coal, iron, and iron ore other than ・Limiting annual import
volume to 7.50 million tons
for “consumer use”
or less, or import value of(Except for export usage of Rajin$4 billion or less,Port for Russian coal)
whichever is lower
・Trade ban on gold, vanadium,titanium, and rare earth elements ② Items added to exportban on minerals③ Ban on exports and supply of・Silver, copper, zinc andaviation oil to North Korea
nickel・Exception: crude oil export,③ Ban on exports and supply
humanitarian causes, andto North Korea of ships
overseas refueling of privateand helicopters
North Korean aircraft④ Export ban on 5 additional luxury
items(luxury watches, recreational
gear, snow mobiles, crystal, etc.)

No. 2371(2017.8.5)

No. 2375(2017.9.11)

No. 2397(2017.12.22)

After the ICBM launch test

After the sixth nuclear test

After the ICBM launch test

Full economic sanctions after ballistic missile launch testing and nuclear testing① Full export ban on coal, iron ore,and marine products① Cap on petroleum products
exported to North Korea- after 2018, annual 2 million barrels② Ban on exports of textile products③ Ban on work permits for North
Korean workers① Cap on petroleum products
exported to North Korea- after 2018, annual 0.5 million barrels② Ban of imports from North Korea on
food, machinery, electricalequipment, and timber③ Full export ban of industrial
machinery and transport machineryto North Korea④ Sending North Korean workers backto North Korea within 2 years of theresolution⑤ Capture, inspection, and foreclosureof ships suspected of violating theresolution

Source: compiled by the author from various press release materials

experience with economic development, and certainly did not showwhat the US envisioned as the future of the Korean Peninsula. It may
be that the only goal is for North Korea to return to a state in which it
did not possess nuclear weapons. If this is the case, thedenuclearization of North Korea, which rejects this as the “Libya
method”, will become difficult. The feasibility of the “Trump method”
must be shown during the denuclearization process with North Korea.

Future Outlook
Possibility of easing and lifting sanctions against North Korea
The US and Japan have been implementing full-scale sanctions
against North Korea. South Korea is conducting only humanitarian,cultural and sports exchanges. Other countries are following theUnited Nations Security Council’s resolution for sanctions against
North Korea (Chart 3) and have been implementing trade controls.
Individual sanctions against North Korea will depend on what pathbilateral relations between Pyongyang and that country are following.
For the US, lifting sanctions against North Korea by Congressional law
will occur once a complete denuclearization has been verified and after
52 Japan SPOTLIGHT • September / October 2018

other concerns such as humanitarian issues have been considered. It
is thus thought that improvement in US-North Korea relations still has
numerous obstacles. For Japan as well, there are unique issues
involved such as settlement of the past as part of the postwar process
for bilateral relations and the abduction issue. Normalization ofrelations will be difficult unless these issues are resolved. South Korea
is unable to commit to lifting sanctions to keep in line with theinternational community, but public opinion within the country ismoving towards lifting its own sanctions and revitalizing inter-Korean
economic exchanges.
Neither China nor Russia have implemented their own sanctions,but have implemented the UN Security Council resolution on
sanctions. But the Chinese and Russian governments have beencalling for easing the UN sanctions, including submitting a draft to themembers of the Security Council for a press release on June 29
proposing easing of sanctions.
Whether the Security Council’s sanctions will be eased or lifted will
depend on the progress of US-North Korea negotiations. If North
Korea can agree on a roadmap to abandon its nuclear weapons, whichis crucial to its denuclearization, if prospects for a verification process

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become clear, and in addition, if the US can work on a mutual trustbuilding measure such as an end-of-war declaration with North Korea,
there may be a possibility for the Security Council to move towards a
resolution to lift sanctions.
If North Korea can eradicate the concerns of the international
community and work towards a policy change for complete
denuclearization, and if the US can also work on a regime security as it
verifies North Korea’s steps, then UN sanctions may eventually beeased or lifted in the latter half of 2018.

CHART 4

Korean initiatives

Basic
Agreement
between North
Korea andSouth Korea

In order to achieve improvement in inter-Korean relations together
with the denuclearization of the Korean Peninsula process, Seoul isconsidering a dialogue between the governments of North and South
Korea, an end-of-war declaration and six-party talks, people exchanges
between North and South, and an action plan for inter-Korean
economic cooperation (Chart 4). Of these action plans, creation ofpeace through governmental negotiations is a top priority, followed byinter-Korean people exchanges. Inter-Korean economic cooperation
can only take place if sanctions against North Korea are lifted.
The inter-Korean economic cooperation concept of the Moon
administration is, in principle, based on the policy of the Roh Moo
Hyun administration (2003-2007). In the “10.4 Declaration” which wasannounced at the inter-Korean summit in October 2007, agreements
included (1) infrastructure expansion and development of natural
resources, (2) establishment of a “special peace and cooperation zone
in the Yellow Sea”, (3) joint use of the estuary of the Han River, (4)development of the Kaesong industrial park region, (5) repair andmending of the railway system and highways, (6) construction of a
shipbuilding cooperation complex, and (6) cooperation in agriculture,
health and medical care, environmental protection and other areas. But
this 10.4 Declaration was not approved by the parliament andtherefore had no legally binding power. Making this into an agreement
will allow implementation of the 10.4 Declaration to be possible,
regardless of a change in administrations, and entering an “InterKorean Basic Agreement” is the institutionalization process for interKorean cooperation that the Moon administration is pursuing. Once
economic cooperation is made possible between the North and South,
the Moon administration plans to undertake cooperation by integrating
and developing the North Korean economy under the framework of
Northeast Asia regional economic cooperation. With this in mind, theadministration proposed the “New Economic Map of the Korean
Peninsula” concept to North Korea. This concept integrates the wholeof the Korean Peninsula under three economic belts — the transYellow Sea economic belt, trans-East Sea (Sea of Japan) economic
belt, and North-South border area economic belt — and connects thepeninsula to Northeast Asia economic cooperation. The trans-East Sea(Sea of Japan) belt is the “natural resources belt” where a pipeline
connecting Russia and the coastal cities of the sea in North and South
Korea will be constructed, and the trans-Yellow Sea belt is a “transportof goods and transportation” belt which connects Seoul and Kaesong,
Pyongyang and Sinuiju in North Korea.
South Korea is likely to ease or lift some of its own sanctions, andAction plan for North-South relations of Moon
Jae In government
Government
Severalinter-Korean
summits
Regular prime
minister talks
Inter-Korean
military andeconomic talks

Peace Regime
End of war
declaration

PeopleExchange

Economic
Community

Regular reunions ofseparated families

Realization of the
10.4 Declaration→Peace Agreement Social and cultural
exchanges
Hosting of thesix-party talks

Mount Kumgang,
Kaesong
Railways androads
Underground
Natural resources

Source: from interviews by the author

expand inter-Korean exchanges as much as possible so that it canwork on full development of an inter-Korean economic relationship in
conjunction with the lifting of UN sanctions against North Korea.

Conclusion
The process to denuclearize the Korean Peninsula has begun, andthe US and North Korea have entered a “flow”-like transaction where
they are able to exchange goods with profit-and-loss statements. To
seek a declaration of defeat at a certain period in time, and also aim fora “stock”-like perspective of looking at the balance sheet in terms ofachievements, may not be suitable to resolve the North Korean issue.
An optimistic future roadmap for the denuclearization of the Korean
Peninsula will involve halting missile production and verification of theclosure of nuclear weapons’ sites, together with a possible blueprint
for lifting of sanctions and normalization of US-North Korea relations,and a peace agreement. The timeframe for this is not short term. If
important measures such as North Korea returning to the NPT and
accepting an inspection team from international organizations such as
the International Atomic Energy Agency (IAEA), and opening a US
liaison office in Pyongyang were to be implemented, the co-existenceof North Korea and the international community may be possible.
But a pessimistic view is also possible. That is the breakdown of the
US-North Korea negotiations. If the US cannot accept the peacebuilding process that North Korea demands on the Korean Peninsula,then North Korea will stop denuclearization and, as a self-proclaimed“nuclear power”, its relations with the US will once again be very
confrontational.
It is not too late for Japan to act once it has identified which route
North Korea is taking. But for Japan to take proper strategic action, it
must act in collaboration with the international community, and also
have its own North Korean policy ready.

Chanwoo Lee is an associate professor at the Department of Contemporary
Business at Teikyo University, Junior College. He researches economic
cooperation in the Northeast Asian region, including the Korean Peninsula
issue.

Japan SPOTLIGHT • September / October 201853