Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers


Korea: Roh's Death and a Nuke Test

Seoul: Conservative protesters burn placards featuring North Korea's Kim Jong-Il on May 25
Kim Jae-Hwan/AFP/Getty Images

By announcing on May 25 that it has carried out a second test of nuclear weapons, North Korea is sending a message to the world that it is determined to be recognized as a nuclear power—even if the consequence is deeper international isolation. North Korea watchers in Seoul believe the test is a confirmation of Pyongyang's policy to consolidate the repressive regime of its military-backed leader Kim Jong Il in the face of his deteriorating health. "Everything else comes second," says Dong Yong Sueng, head of the economic security team at Samsung Economic Research Institute, a think tank for South Korea's top conglomerate, Samsung. To heighten tensions further, North Korea also fired three short-range missiles from its east coasts on May 25.

South Koreans are accustomed to threats from the communist North, so jitters about military provocations are usually short-lived. On Monday morning the news of a nuclear test hit financial markets, with the main Kospi stock index on the Seoul bourse falling as much as 6.3%. By afternoon, though, investors had calmed down, and the market recouped most of its losses, ending just 0.2% lower. South Korea's currency, the won, closed 0.1% lower after losing as much as 1.8% of its value earlier in the day. Yet the probability of international sanctions against Pyongyang and its vitriolic reactions, with more threats of violence, could prevent South Korean President Lee Myung Bak from focusing on efforts to recover from the recession.

Already the country has been rocked from the suicide of former President Roh Moo Hyun on Saturday amid a corruption probe centering on his wife and close associates but eventually targeting Roh. The former President, who unexpectedly won the 2002 election on a ticket to end abuses and corruption by the Establishment, became unpopular by the time his five-year term ended amid a worsening economy, but the onetime human rights lawyer was credited before leaving office with running the cleanest administration. Since his term ended last year, though, Roh's family and political allies have been summoned by state prosecutors in a move billed by his supporters as a sign of a political vendetta by the Lee administration.

Now, Lee has to manage that crisis at the same time as the challenge from the North. The announcement of the nuclear test and the firing of the missiles is a challenge for President Barack Obama, too, says Dong. In the past, he says, the North suggested it was prepared to trade its nuclear programs for security guarantees and economic benefits from the U.S. "But now it is seeking talks with Washington on condition that it is endorsed as a nuclear-armed nation," he says.

Military-Dominated Party Elites

Pyongyang's saber-rattling isn't like to stop soon. The consensus among North Korea specialists in Seoul is that reclusive North Korea appears ready to accept being pushed further into isolation to promote its nuclear ambitions. Although several million North Korean residents are fighting famine, for the regime, reviving the rickety economy takes a back seat to political and military agendas set by military-dominated party elites in Pyongyang.

North Korea argues that it has no choice but to build an atomic arsenal, which it calls its best defense in a hostile world. North Korea's official KCNA news agency said the latest test was an improvement from its first detonation, conducted in 2006, in terms of "explosive power and technology of its control." The U.S. Geological Survey said it detected a 4.7-magnitude quake in northeast North Korea.

Many North Korea watchers say the test and the North's launch of a long-range rocket in April were designed to strengthen Kim's military power base. Sure enough, the North's propaganda machine has praised the nation's defiance of international calls for an end to its weapons of mass destruction as a triumph for Kim and his "military-first" policy.

Such hard-line steps will help Kim solidify his leadership after his grip on power was questioned following a stroke he suffered last summer. "These days you can't think of North Korea's policies separated from the transition issue," says Lim Kang Taeg, a senior researcher at the government-funded Korea Institute for National Unification in Seoul. Intelligence officials in the South have said Kim wants his loyal army generals to help secure the succession for one of his three sons, as they did when he succeeded his father, Kim Il Sung, in 1998 to create the world's first communist dynasty.

The timing of the North's nuclear announcement, while South Koreans are still shocked by Roh's suicide, could be an intentional challenge to Lee, whom Pyongyang has accused of abandoning Roh's efforts to improve ties between the two Koreas. Conservative Lee took office in February 2008 promising to reverse many of Roh's policies. His death may embolden the former President's supporters. In the past two days, tens of thousands of mourners have lined up to pay their respects to Roh at scores of alters set up across South Korea. But emotional supporters kept away politicians from Lee's ruling Grand National Party. Analysts caution that Lee's leadership will be tested in the months ahead as he tries to soothe Roh's angry supporters. "South Korea could face dangers of social conflicts and turmoil after Roh's funeral unless President Lee deftly handles this situation," says Ahn Young Hoe, chief investment officer at fund manager KTB Asset Management in Seoul.

Moon is BusinessWeek's Seoul bureau chief.

Moon is BusinessWeek's Seoul bureau chief.

blog comments powered by Disqus