Q+A-Is North Korea crisis cooling off or heating up?

Wed Sep 9, 2009 3:05am EDT

By Jon Herskovitz

SEOUL, Sept 9 (Reuters) - The United States moved on Tuesday to freeze the assets of two North Korean entities believed to be involved in atomic and missile programmes, raising pressure on Pyongyang to resume disarmament talks. [ID:nN08174954]

Pyongyang has been sending out conflicting messages. In August, it made a series of conciliatory gestures, followed this month by more nuclear threats and then straining ties with Seoul by releasing water from a dam on a river flowing across the border, triggering a flash flood that killed six South Koreans. [ID:nSEO352948]

WHAT ARE NORTH KOREA'S LEADERS UP TO?

Destitute North Korea wants cash and an end to U.N. sanctions that are cutting into its arms trade -- worth an estimated $1 billion a year for a state with a $17 billion annual GDP.

The North also wants to serve notice to the international community that it could revert quickly to provocations if it feels its overtures are being rebuffed.

North Korea wants to change tactics but analysts said it will not change heart and negotiate away its nuclear arms programme, seen in Pyongyang as the crowning achievement of leader Kim Jong-il's military-first policy and its only real defence in a hostile world.

HOW WILL THE SITUATION PLAY OUT?

The crisis will stay in flux while North Korea watches how its traditional foes, and in particular the United States, respond to its signals.

North Korea can claim victory at home either way -- if it engages with the world and secures help for its broken economy or it returns to sabre rattling and bolsters Kim's standing with his powerful military.

HOW WILL NORTH KOREA WEIGH RISKS AND BENEFITS?

The two most pressing issues for Kim, 67, are engineering a succession plan to prepare his son to take over Asia's only communist dynasty and his campaign to build what official media calls a "great and prosperous nation" by 2012 to mark the 100th birthday of his late father and state founder, Kim Il-sung.

Economic benefits from engagement help Kim buy the perks he needs to win support from military and communist party leaders. The money also helps him retool his military and purchase equipment for its nuclear and missile programmes.

Military grandstanding has cemented the support of senior cadres and been used by his propaganda machine to rally the masses by saying he is a wily genius who has prevented a U.S. invasion and produced an army feared by the world.

North Korea, long one of the world's most sanctioned states, has grown used to punishments. While it may welcome additional cash coming from engagement, global punishments have done nothing to destabilise Pyongyang's leaders.

WHY IS THE NORTH REACHING OUT TO THE UNITED STATES?

North Korea may be hoping to have direct nuclear talks with the United States and blunt as much as possible Washington's push to implement U.N. sanctions.

President Barack Obama's administration has indicated it will not bend on either of these points, but would allow for bilateral talks on the sidelines of repeatedly stalled six-way discussions.

The ultimate rewards from winning over Washington are immense for Pyongyang. Its leadership would finally have a peace treaty to end formally the 1950-53 Korean War, it would be accorded the importance of being a fellow nuclear power and it would have access to massive aid from global financial institutions such as the World Bank.

IF U.S. PUSH WON'T WORK, WHY DOES THE NORTH BOTHER?

The North's conciliatory tone may sit well with neighbour China, the closest Pyongyang has to a major ally and, more importantly, the country that has the greatest influence on how effectively U.N. sanctions are enforced.

China's leaders have been opposed to measures that could destabilise the North's leaders in fear of sparking chaos in the North and a flood of refugees coming over the border.

WILL THE MOVES HAVE ANY IMPACT ON STALLED NUCLEAR TALKS?

Analysts expect no breakthrough in the talks among the two Koreas, China, Japan, Russia and the United States. Pyongyang has repeatedly said it sees that process as dead.

But there might be a deal for nuclear talks among China, the United States and North Korea, which would please Beijing.

(Editing by Jonathan Thatcher and Paul Tait)