After some two years of rising tensions on the Korean peninsula, the reprieve, however brief, that the upcoming Winter Olympics in the South Korean city of Pyeongchang promises to bring is more than welcome. But, with some military experts estimating that the probability of war now surpasses 50%, complacency is not an option.

After years of accelerated missile development, which culminated in successful tests of intercontinental ballistic missiles and, allegedly, a hydrogen bomb last year, North Korea’s nuclear program has become an imminent threat not only to its neighbours, but also to the United States. The response of President Donald Trump’s administration—which has included unprecedented saber-rattling on Twitter—has escalated tensions further.

Yet, on 1 January, North Korean leader Kim Jong-un called for better relations with the South, before agreeing to participate in the Olympics. What accounts for Kim’s sudden extension of an olive branch to South Korea?

Since coming to power in 2011, Kim has been committed to a policy called the ‘Byungjin line’, which emphasises parallel goals: economic development and a robust nuclear weapons program. With one of those goals now ostensibly achieved, Kim has shifted his focus to securing new economic opportunities for North Korea’s sanction-battered economy. For example, the sanctions imposed in September 2017 on textiles, coal and other exports are said to have reduced North Korean exports by 90%. According to South Korea’s central bank, North Korea’s economy grew by 3.9% in 2016, but may have contracted in 2017.

Kim now seems to have decided that his best hope for boosting North Korea’s economy, without reversing progress on its nuclear program, is to weaken the international coalition enforcing the sanctions. His campaign begins with South Korea, where he is attempting to use ethnic nationalism to drive a wedge between that country and its US ally and potentially even to convince it to abandon the alliance altogether. In the longer term, Kim appears to hope that he can convince the international community that it can co-exist with a nuclear North Korea, much as Pakistan did.

But South Korea is unlikely to be fooled so easily. Since his inauguration last May, President Moon Jae-in has known that he needed to find a way to mitigate the existential threat of nuclear war. So he decided to treat the Winter Olympics as an opportunity not only to defuse tensions on the Korean peninsula, but also to spur momentum for dialogue on denuclearisation.

While the possibility that South Koreans may be drawn into North Korea’s honey trap cannot be ruled out, most Koreans, including young people, have had their fill of the North’s provocations, and are highly unlikely to be seduced by Kim’s charm offensive. Moon himself made it clear last month that no improvement in the South’s relationship with North Korea will be possible without denuclearisation. Indeed, his efforts to open a dialogue with the North seem to be driven by cool diplomatic realism, not naive idealism.

As for the US, its take on the intra-Korea dialogue reflects a mixture of skepticism and expectation. Trump has expressed support for the effort, but Americans remain concerned about any potential strain on their country’s alliance with South Korea.

More dangerous, some US policymakers continue to entertain the possibility of delivering a ‘bloody nose’ strike to the North—a decision that could cost hundreds of thousands of lives. After all, there is no guarantee that North Korea would be able to discern whether it really is a one-time strike, or a declaration of war. And even if the North could read the Trump administration’s intentions, there is no telling how it would respond.

To help prevent this outcome, and with Kim refusing to discuss denuclearisation with his ‘brethren’ in the South (at whom he claims his missiles are not aimed), Moon now must figure out how to build up the intra-Korea dialogue to enable talks between North Korea and the US. To this end, a quiet meeting between the second-highest officials of the two countries—Vice President Mike Pence and President of the Presidium of the Supreme People’s Assembly of North Korea Kim Yong-nam, both of whom are expected to come to Pyeongchang—might be possible.

But, ultimately, it is Trump who needs to seize the opportunity to initiate talks. The fact is that, despite their importance, sanctions alone cannot bring about the outcome desired by the US or its allies. Talks are needed, if only to try to find out the North’s true intentions: is its nuclear program a defensive or offensive project? For that, the Trump administration will need to move beyond the ‘maximum pressure’ promised by its stated North Korea policy and get started on the ‘engagement’ that it also acknowledges will be indispensable to forging a solution.

As North Korean dictator Kim Jong-un’s and US President Donald Trump’s war of words escalated, Independence Day celebrations—commemorating the Korean peninsula’s 1945 liberation from Japanese colonial rule—was unfolding in both North and South Korea. The occasion underscores not just the shared history between the two countries, but also the South’s unique qualifications to bring about a peaceful resolution to the current military standoff.

As much as Kim may enjoy threatening the most powerful country in the world, the United States has never been North Korea’s primary target. On the contrary, the North’s real objective has always been to ensure the survival of the Kim regime and, in the longer term, to secure the reunification of the Korean peninsula under that regime’s leadership. South Korea thus faces the most acute danger, and has the strongest incentive to alleviate tensions with the North.

That goal will not be advanced by South Korea’s annual joint military exercise with the US, Ulchi-Freedom Guardian (UFG), which is geared towards preparing both countries for a conflict with the North. On the contrary, with saber-rattling between North Korea and the US at an all-time high, the exercise—which will begin on August 21—could escalate the conflict dramatically.

Even in normal times, North Korea reacts angrily to UFG. Last year, it tested its fifth nuclear device just after the exercises were held. But now that North Korea is overtly threatening to launch missiles at the US territory of Guam, and being further provoked by Trump, its response to another round of UFG could be less symbolic, and far more devastating.

If North Korea lashes out, the strategy of deterrence that underpins the US – South Korea alliance will have been fatally undermined. Deterrence means using a credible threat of serious punishment to prevent an opponent from initiating military engagement. And yet North Korea has already dismissed Trump’s threats as a ‘load of nonsense’. If this month’s war games trigger a military confrontation or an outright exchange of fire, deterrence will officially have failed.

The problem is that, even if Trump and Kim recognise the corner into which they have painted themselves, neither has the political space to backpedal on his threats without risking serious domestic and international humiliation.

Worse still, each leader lacks credibility in the eyes of the other, and of the world. China’s leaders have long viewed Trump as unreliable, or ‘bu kaopu’. Now, Trump’s emotional response to North Korea’s actions has further reinforced that assessment, and given Chinese leaders even less of a reason to get involved in the drama. Even Japanese Prime Minister Shinzo Abe, who has been Trump’s most steadfast supporter among East Asian leaders, is wary of the domestic political consequences of Trump’s brinksmanship.

Of course, Japan, as North Korea’s ultimate historical enemy, would have no leverage over Kim anyway. The only country with the credibility, leverage, and motivation to lead the way towards a peaceful resolution to the current crisis is South Korea. But South Korea has so far straddled the line between antagonism and diplomacy.

On the one hand, South Korea agrees with Trump on the need for tougher sanctions and military readiness, including full deployment of the US anti-ballistic missile defence system, known as Terminal High Altitude Area Defense, or THAAD. On the other hand, it has indicated that it would be willing to engage in joint military talks and diplomatic dialogue with North Korea, and it even invited Kim’s government to participate in a joint Independence Day celebration. (The North refused, citing the planned UFG.)

South Korea now needs to take a stronger approach. Rather than shove a weak opponent into a corner and risk them lashing out, South Korea should formally request an indefinite postponement of this year’s UFG, which would be counterproductive and is not essential at this time. The US and South Korea already held massive joint exercises involving about 320,000 troops—more than six times the combined troop strength of the planned UFG—in March and April of this year, and in 2016.

During that period, the US also deployed a strike group, including the nuclear-powered aircraft carrier USS Carl Vinson, to the region, saying that it would counter ‘reckless acts of aggression’ with ‘whatever methods the US wants to take’. The US also docked one of the largest nuclear-powered submarines in the world, the USS Michigan, in South Korea, and held ‘decapitation exercises’ to prepare troops to infiltrate North Korea and eliminate Kim and his ruling cohort.

Simply put, this month’s UFG exercises are far from critical to the US – South Korea alliance. By suspending them, South Korea would have an opportunity to pursue inter-Korean military-to-military dialogue with the North, while reinstating basic communications channels, including hotlines, which were cut off early last year. South Korea would then emerge as a legitimate broker in the conflict between the US and North Korea, rather than as a US lackey, as the Kim regime likes to view it. That would greatly improve the prospects of a future negotiation among the three actors, once things have cooled down.

South Korea, with its affinity to both the US and North Korea, is uniquely suited to defuse the current situation. The stakes are too high for it not to try.

Moon Jae-in of the Democratic Party of Korea has just been elected South Korea’s new president. This is the second conservative-to-liberal transition of power in the country’s democratic history. It began unexpectedly last October, with the eruption of a corruption scandal involving then-President Park Geun-hye, culminating in her impeachment and removal from office earlier this year. Although Park’s ouster was painful, it also demonstrated the resilience of South Korea’s democracy.

Moon will take office at a time of heightened tensions with North Korea. To understand what kind of policy he will pursue requires familiarity with liberal foreign-policy thinking in South Korea since the 1998–2003 presidency of Kim Dae-jung.

Kim had watched the Cold War come to a peaceful end in Europe, and he wanted to bring his own country’s ongoing confrontation with the communist North to a similarly nonviolent conclusion. So he pursued direct engagement with North Korea, and his ‘Sunshine Policy’ was taken up by his successor, Roh Moo-hyun. Before he died in 2009, Roh (under whom I served as Foreign Minister) was a political mentor and close friend to Moon.

German reunification, preceded by West Germany’s policy of direct engagement, or Ostpolitik, with East Germany in the last decades of the Cold War, was a source of profound inspiration for Kim. Former German Chancellor Willy Brandt began pursuing Ostpolitik in earnest in the 1970s, and Helmut Kohl maintained the policy after he came to power in 1982. Although Ostpolitik could not change the East German regime’s nature, it did make East Germany heavily dependent on West Germany, and gave Kohl significant political leverage during the reunification process.

Of course, most Korean liberals recognize that North Korea is not East Germany, which never threatened West Germany or the United States with nuclear weapons. But Moon and his supporters nonetheless find it regrettable that conservative South Korean presidents since Lee Myung-bak did not maintain the Sunshine Policy, as Kohl had done with Ostpolitik. If they had, North Korea might have become more dependent on South Korea than on China, in which case US and South Korean leaders would not have to plead constantly with China to rein in the North Korean regime.

South Korea’s liberals also recognize that the strategic situation has changed significantly since the Kim and early Roh eras, when North Korea had not yet become a de facto nuclear state. To realize his liberal dream of national unification, Moon will have to confront a much larger challenge than anything his predecessors faced.

Moon will still pursue his dream, but he will do so prudently, and with an eye toward geopolitical realities. In a recent interview with the Washington Post, he made it clear that he sees South Korea’s alliance with the US as the bedrock of its diplomacy, and promised not to begin talks with North Korea without first consulting the US. But, beyond formal talks, he could also try to engage with the North by reviving inter-Korean cooperation on health or environmental issues, which fall outside the scope of international sanctions.

Over the last nine years, conservative presidents—especially Park—cut all contacts with North Korea to try to push it toward denuclearization. South Korean liberals argue that this policy compromised the national goal of peaceful reunification, by turning it into an empty slogan. They believe that maintaining inter-Korean relations will lay the groundwork for reunifying the Peninsula, just as Ostpolitik did in Germany. Thus, Moon will most likely pursue a two-pronged strategy that pairs denuclearization with engagement and preparations for eventual reunification.

Moon has acknowledged that strong sanctions will be necessary to bring North Korea to the negotiating table. So his government will have no fundamental disagreement with the US, especially now that Secretary of State Rex Tillerson has said that the US is not seeking regime change in North Korea.

Moon will also have more flexibility than his conservative predecessors to accommodate a US-led Iran-style deal aimed at freezing North Korea’s nuclear and missile activities. But if US President Donald Trump tries to make South Korea pay for America’s recently deployed Terminal High Altitude Area Defense (THAAD) anti-missile system, Moon will have to refuse. Otherwise, he would face a serious domestic backlash from both the left and the right.

A final but crucial issue is China, with which Korea has had a bitter history. China has intervened whenever it has viewed the Korean Peninsula as a potential beachhead for an invading maritime power. China intervened in 1592, when Japan prepared to attack the Ming Dynasty by first subduing Chosŏn Dynasty Korea. It happened again during the Sino-Japanese War of 1894, and then during the Korean War in the early 1950’s.

Despite this history, Korean liberals recognize that Chinese cooperation will be necessary for achieving reunification. Accordingly, Moon’s government will have to maintain a rock-solid alliance with the US while trying to improve relations with China, which have cooled since South Korea decided to host the THAAD system. Moon might try to soothe Chinese concerns by suggesting that the system is temporary, and could be removed, pending North Korean denuclearization.

Those who predict that a Moon presidency will disrupt South Korean relations with the US and Japan are surely mistaken. After all, it was during the liberal Roh presidency that South Korea concluded the South Korea-US Free Trade Agreement, allowed for US troops to be redeployed within its borders, and dispatched its own troops to fight alongside the US in Iraq. Moon will affirm that legacy and attempt to revive another, an updated and renewed version of the Sunshine Policy, which embodies South Korea’s most fundamental long-term aspiration.

These are difficult times for China. After decades of double-digit GDP growth, today’s slowdown points to an economic system in trouble. Once hailed as a model of development, the Chinese economy now appears sclerotic and cumbersome. The Chinese public is growing restive and increasingly questioning the system’s ability to deliver on official promises that the country’s economic ‘miracle’ will continue. Many Chinese fear that the ‘Chinese Dream’ may be just that: a dream.

China cannot fix its economic problems merely by pulling the right combination of existing policy levers. Rather, it must embark on a broader and deeper process of reform and renewal; and it must be willing to swallow the bitter pill of slower short-term growth in the interest of long-term goals.

At the same time, an expansive reform effort cannot be advanced by economic decisions alone. China must also come to terms with the gap between how it wants to be perceived and how the world actually perceives it. China should take a lesson from business and recognize that many of its actions and affiliations on the world stage pose serious risks to its reputation—and to its bottom line.

For example, consider an international observer’s view of developments in the South China Sea. China is plainly bullying its southern neighbors by using the menacing term ‘core interests’ (in pursuit of which a country would resort to the use of force) to have its way in various disputes. But, to hear it from Chinese officials, China is an aggrieved partner in the region. They argue that they have reined in their fishing fleet to avoid incidents with the Vietnamese, only to see Vietnamese fishermen aggressively claim the relinquished waters.

China obviously has the strength to drive out the Vietnamese, the Filipinos, the Malaysians, the Indonesians, and almost anyone else it chooses to confront. Southeast Asia represents but a fraction of China’s size and wealth. But does this behavior make China stronger in the region? Does a nineteenth-century approach to pursuing economic gain justify ongoing enmity with one’s neighbors? The peoples of Southeast Asia, after all, will be China’s neighbors for the rest of its history; while their knives may be short, their memories surely aren’t.

Many Chinese genuinely believe that they are unfairly criticized for China’s new assertiveness in the South China Sea. But certitude has little to recommend itself when the price paid is distrust and condemnation from everyone else. This is a basic social truth that most people know from their personal lives: Happiness and harmony are far more important than the empty comfort of being convinced you’re right.

Beyond Southeast Asia, nowhere in the world is China’s reputation more at stake than on the Korean Peninsula. In the South, the Republic of Korea (ROK) has become a modern, vibrant, and culturally sophisticated country that is admired around the world and addresses its problems forthrightly and transparently. In the North is a state that can best be described as a prison camp, run by a hereditary despotic leader whose regime—most politely described as a cult—is pursuing an unrelenting drive to develop weapons of mass destruction. Its main exports are the black humor produced by its political system, refugees, and claims of exceptionalism that put America’s to shame. And China is its only real—albeit increasingly wary—ally.

To be fair, China’s interests on the Korean Peninsula are more complex than how they are often portrayed in the West. For China, North Korea is not so much a foreign-policy problem as a multifaceted set of issues that impinge on China’s own internal debates as it charts its future course.

What would the demise of North Korea and its potential unification with the ROK mean for Chinese security interests, and for the perception of those interests? What would be the repercussions of losing a historic ‘partner’ (many Chinese today would bristle at such a description), and potentially strengthening a rival, for China’s own political system or foreign policy? One thing seems certain: the future of the legacy relationship with North Korea will be determined by the Chinese themselves, not by the international community.

Still, weighing the disposition of the Korean Peninsula offers China an ideal opportunity to begin reconsidering its long-term interests. It is here, more than anywhere else, that China can align itself within mainstream international thinking and start to close the gap between how it is viewed by the world and how it views itself.

Ahead of ASPI’s Australia’s Future Surface Fleet Conference (30 March to 1 April, here in Canberra) we’ll be bringing you a new feature: a weekly update on maritime strategy and security issues, from here in Australia and internationally.

First, it’s worth noting the recent visit by Australia’s new Defence Minister, Kevin Andrews, to Australia’s Government-owned ship builder the Australian Submarine Corporation. He agreed to meet with South Australian State Defence Industries Minister Martin Hamilton-Smith, after initially declining the meeting. The South Australia government and Hamilton-Smith have been vocal supporters of local shipbuilding. Here’s the press release and the transcript of the Minister’s remarks from the visit, during which he said:

The Australian Government has not yet decided on a particular submarine design and more work is required before such a decision is made. Decisions about this next generation of submarines need to be made on the basis of what is best for our Armed Forces and our national security.

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