by Bill O’Grady

On March 8, officials from South Korea, including Chung Eui-yong, the director of South Korea’s National Security Office, came to Washington to brief U.S. officials on a recent dinner with Kim Jong-un, the leader of North Korea.  The dinner was held in Pyongyang at North Korea’s Workers’ Party Headquarters, Kim’s workplace, where Mr. Chung and Suh Hoon, the National Intelligence Service director, were joined by Kim and his sister.  This event marked the first time that South Korean officials had been inside North Korea’s Communist Party headquarters since the Korean War.

According to reports, the dinner meeting was a surprising success.  Kim was said to be warm and open.[1]  He proposed a hotline between the two Koreas and a summit meeting with himself and South Korean President Moon Jae-in.  Kim also wanted the South Koreans to send a message to Washington that the North Korean leader would like a summit meeting with President Trump.

As the South Korean delegation was meeting with Trump administration officials on March 8, President Trump made an unscheduled appearance; he was scheduled to meet with the South Koreans the next day.  At this meeting, the South Koreans informed the American president of Kim Jong-un’s desire to have a meeting and President Trump immediately agreed.

This decision was a shock and set off a plethora of uncertainties.  This would be the first time since the creation of North and South Korea that a sitting American president has met directly with the leader of North Korea.  It appears the State Department was not aware of the invitation or the acceptance.  U.S. allies, such as Japan, were not warned and major powers in the region, such as China, were also informed after the fact.

So, in the matter of a few months, we have moved from fears of war to an unprecedented meeting.  This meeting is a high stakes wager; if the summit fails to improve relations between the U.S. and North Korea, it isn’t clear how the path forward doesn’t include war.  At the same time, if it works, Trump will have resolved one of the most intractable problems in American foreign policy.

In this week’s report, we will discuss the geopolitical goals, constraints and meeting positions of the major regional parties.  Next week, we will examine why the talks have been proposed now.  We will then offer the reasons why the talks may fail or succeed.  We will summarize the costs and benefits from the summit meeting and conclude with market ramifications.

The Players
There are six nations involved in the North Korean issue—North Korea, South Korea, China, Japan, Russia and the U.S.  We will cover the geopolitical goals, constraints and meeting concerns of each country.

View the full report

[1] https://www.wsj.com/articles/north-koreas-kim-jong-un-was-jocular-and-at-ease-at-boozy-banquet-1520606867