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Strategies & Market Trends : Investment in Russia and Eastern Europe

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To: Rob Shilling who wrote (1080)7/28/2000 5:00:10 PM
From: CIMA   of 1301
 
Putin and the North Korean Missile Offer

Summary

The G-8 talks used to rivet international attention, as they dealt
with major economic issues. Today, neither the G-8 nor economics
are nearly as important as various geopolitical and military issues
- U.S. President Bill Clinton could barely wait to get back to Camp
David. The major news out of Okinawa was an offer by North Korea,
floated by Russian President Vladimir Putin, to abandon its missile
program in return for "civilian" space technology. The key here is
not North Korea but Russia. Putin is busy repositioning Russia as a
power broker in the world and is using the U.S. anti-missile
deployment as a means of driving a wedge between the United States
and its allies. The latest move, on the eve of U.S.-North Korean
talks, is designed to drive a wedge between the United States and
Japan. North Korea, delighted to have a major power as patron
again, is happy to play. It's the U.S. move, with Russia trying to
shut down its room for maneuver.

Analysis

During the past decade or so, the G-7 (later G-8) meetings were the
main forum for discussing pressing global economic issues. For
example, they provided an arena for major showdowns between the
United States and Japan over trade issues. This week's meeting in
Okinawa not only seemed to have no meaningful economic content, but
it interfered with the major item on the international agenda, the
Israeli-Palestinian negotiations at Camp David. Whatever substance
this G-8 meeting had, it had nothing to do with economic issues.
Instead, it had to do with a politico-military matter. Russia's
President Vladimir Putin carried a cryptic message from North Korea
offering to shut down its missile program in return for missile
technology.

This was not trivial news, although the message had less to do with
North Korean missiles than it had to do with Putin's decision to
use the missile issue and North Korea as a lever against the United
States. That is an affair that requires careful consideration.
However, before moving on to that, we should pause for a moment to
measure the distance traveled by the world in the last few years.
Economic issues, once king, now don't even register. We have
returned to a more traditional world, where politico-military
issues increasingly dominate. If we think about the fantastic
predictions of worlds without borders, that is the most significant
news of the week.

Not that the other news was insignificant. Putin went to China for
a summit with Chinese President Jiang Zemin, where little of public
substance was achieved. In fact the atmosphere was quite chilly.
Clearly, the expected Russian-Chinese entente has run into
problems. The main problem is American power. Neither Russia nor
China wants to enter into a confrontation with the United States in
particular or the West in general until each has explored all
opportunities for extracting concessions. They are both prepared to
flirt with each other in order to do so, but neither is prepared to
burn any bridges. Moreover, there are some sticky issues developing
between China and Russia, particularly over south and southwest
Asia. So, the Russian-Chinese entente waits while each explores its
opportunities with the United States.

The one issue that both countries agreed upon is that neither wants
the United States to deploy a missile defense system. There is an
element of irony here, of course. On the one hand, U.S. opponents
of ballistic missile defense have focused on the fact that it can't
possibly work. If that is the case, it seems hard to understand why
either Moscow or Beijing would care about it. They should be
delighted to see the system soak up U.S. resources in a futile
effort. The domestic and foreign opponents of missile defense are
therefore in complete opposition to each other. The former argue it
won't work; the latter fear that it will.
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The real issue is, of course, that it might work. Neither China nor
Russia believes that the United States will stop at the minimalist
system currently envisioned. If the United States can defend
against five incoming missiles, it will be able to defend against
500 or 5,000. If it can defend against 5,000, then Russia and
China's lever against the United States will disappear. The last
claim that Russia has to being a superpower is its nuclear arsenal.
The first claim that China has for having become a superpower is
its nuclear arsenal. If a working U.S. missile defense system is
deployed, both China and Russia face a United States freed from the
limiting factor of nuclear weapons.

Neither Russia nor China is certain that the United States can pull
this off. Their problem is that they have seen too many impossible
technologies become real after the United States decided to do it.
Nuclear parity is too important to Moscow and Beijing to risk being
wrong. Moreover, if they are wrong, the resources required by each
to build similar systems would cripple their other defense spending
- if not simply beyond their economic or technical capabilities.
There are too many chips on the table for them to take their
gamble. Therefore, they cannot accept the complacent view of U.S.
critics who argue that ballistic missile defense is impossible.
They have to act.

For both Russians and Chinese, there is a diplomatic opening
provided by the missile defense issue. During the 1980s, the Soviet
Union mounted a massive campaign directed toward a nuclear freeze.
The United States was deploying Pershing missiles in Europe,
something the U.S.S.R. did not want to see happen. Although the
probability of nuclear war during the 1980s was extremely remote,
the Soviets mounted a campaign designed to convince the Europeans
that U.S. missile deployments were dramatically increasing the risk
of nuclear war. The point was not the missiles. The point was to
convince U.S. allies that the United States was an irresponsible
cowboy. The campaign ultimately failed, but it was effective in
creating an atmosphere of tension between the European public, pro-
U.S. governments and the United States. Putin was in Germany during
this period and had a front row seat.

Both Putin and China have not only opposed the deployment of the
anti-missile system, but have worked very hard to create an
atmosphere of crisis among U.S. allies. They have had fertile
ground with which to work. France does not want to see the United
States get any stronger than it already is. Germany, eager to avoid
a U.S.-Russian confrontation, has also decided to oppose the
deployment. China, not wanting to see Taiwan get the technology,
has also hammered Japan over the issue. Japan has pointed to the
North Korean threat as necessitating some sort of missile system.

Getting Japan to join France and Germany in opposing anti-missile
defense is therefore a critical move. Given that, it is not
surprising that Putin showed up in Okinawa carrying an offer from
North Korea. According to Putin, North Korea was prepared to
abandon its ballistic missile program in return for technology to
help it develop a civilian space program. Proving that the
technology can't be deployed for military uses is a major
challenge. More important is that Moscow is signaling that it holds
the keys to the Northwest Pacific logjam.
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For more on North Korea, see:
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Russia has publicly told Japan that it does not have to deploy a
U.S. built anti-missile defense in order to protect itself from
North Korean missiles. The North Koreans, according to the
Russians, are prepared to abandon their missile program in exchange
for civilian technology. This is a strategy considered before with
North Korea's nuclear reactors, but this time, a great power is
prepared to underwrite and guarantee the agreement. If Japan
refuses the North Korean offer, it not only alienates Russia, but
it increases rather than decreases risks. If Japan is worried about
North Korean missiles, this is the most secure path to follow.
Russia has therefore put Japan in a position where it can adopt a
low cost, high security solution to its problems.

From North Korea's point of view, this is the best possible thing.
As we have argued for a while, the essence of North Korea's
strategy has been to hang on until it becomes valuable to some
regional power. Through most of the last decade, both China and
Russia regarded North Korea as an irritant on the way to good
relations with the West. North Korea devised a strategy intended to
make it appear too unstable to bother with and too dangerous too
mess with. That was the point of their missile program. Now, to
Pyongyang's delight, North Korea is no longer an irritant, but has
become a genuine asset to a great power, Russia. That is the
ultimate guarantee of the survival of the North Korean regime. So
Pyongyang is happy to be forthcoming, as long as Russia brokers for
it and quietly guarantees the regime's survival.

China is also pleased to see Russia in this role. Beijing has
developed good relations with Seoul. The economic ties with South
Korea outweigh any benefits of close North Korean ties. At the same
time, China does not want to see North Korea collapse. Most
important, China does not want Taiwan or Japan deploying anti-
missile systems, nor does it want the United States deploying them.
If Russia is prepared to carry the water in using North Korea as a
lever against U.S. deployment, then China will certainly cooperate.

The United States is put in a quandary. North Korea is only one of
the threats the worrying Washington. Iran and Iraq could also pose
problems and, in the long run, the threat can come from anywhere.
The Russians are trying to drive a wedge into the U.S. alliance
system. If Japan were to join the U.S. allies that have lined up
against the missile defense system, deploying it would become
extremely difficult. That is exactly what Putin wants. He does not
like missile defense, but he also loves the opportunity to disrupt
the U.S. alliance system.

Madeleine Albright is meeting with her North Korean counterpart
this Wednesday. The Washington is quite baffled by Pyongyang's
offer, since it does not know what North Korea means when it speaks
of non-military technology. That ambiguity can be a deal killer.
Putin has probably anticipated this and will be prepared to offer
on-site inspection including China, France, Japan, the United
States - and above all, led by Russia. This will back the United
States into a corner.

Putin learned during the closing days of the Kosovo crisis that the
West depended upon Russia to solve critical problems. He also
learned that the United States in particular had limited gratitude
and was prepared to isolate Russia once it had done the heavy
lifting. Putin also learned that if Russia had not allowed itself
to be excluded, its influence in the Balkans would be substantial,
and that that influence can be traded for U.S. economic and
political concessions.

Putin is using the anti-missile issue to disrupt normal U.S.
alliance processes, draw closer to China without burning bridges to
the United States, and help gather a group of client states with
which to harass and manipulate Washington. Albright is moving
toward a negotiation with a North Korea that can no longer be
defined as an isolated hermit kingdom. It is, instead, the cat's
paw of a Russian strategy designed to resurrect some measure of
Russian power. North Korea is happy to be in this role. America's
allies are happy to have alternatives. The United States, on the
other hand, is heading into a diplomatic buzz saw.

_______________________________________________________________

For more on Russia & the CIS, see:
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For more on Asia, see:
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(c) 2000 Stratfor, Inc.
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