10.    THE KOREAN PENINSULA

10.1   The Korean War ended by reaffirming the partition of the country but since the 1960s South Korea has leapt ahead of the North by every indicator of growth. Democracy is now well established in South Korea and the country's economy, while still with some structural weaknesses, has had the most successful bounceback following the Asian economic crisis. North Korea has not recovered from the loss of Soviet and eastern bloc aid at the beginning of the 1990s.

10.2   North Korea's nuclear programme was seemingly brought under control in the 1994 Agreed Framework (averting what was potentially a US/North Korea conflict), but Pyongyang is continuing to build, test and sell missiles. The flight test of the three stage TaepoDong missile over Japan in August 1998 demonstrated a level of technical capability that few thought the North Koreans could have attained. The missile could in fact reach Alaska. Reaction has been twofold. The test jump-started support in Japan for the development of theatre missile defences in association with the US; and the US has since been negotiating with North Korea on its missile programme. The potential rewards from engagement with the US may be sufficient to constrain North Korea from further flight testing, but not from further development of missile technology or from sales of missiles. We believe that North Korea's chemical and biological weapons capabilities pose a significant threat to South Korea.

10.3   There is always the risk that a confrontation across the armistice line could lead to a larger incursion. The North Korean conventional armed forces, while large, are poorly equipped and there has been a steady degradation in their capabilities since the early 1990s. And considerable weight can be placed on the fact that despite many incidents since 1953 the armistice has not been seriously threatened. The risk is rather that an isolated and ill-informed regime, perhaps on the brink of collapse, might misjudge the consequences of its actions and thus precipitate a conflict. US forces along the demilitarised zone would quickly be involved inevitably resulting in wider US intervention but South Korea would certainly look for wider external support.

10.4   The reunification of Korea, whenever it happened, would be very costly, and would have wider consequences. A reunified Korea would find it beneficial to be on good terms with Japan and China, and to maintain links with the United States. And Korea would continue to have an interest in maintaining a circle of relationships with countries in the wider region and beyond.

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