Night Watch

North Korea: Several South Korea media carried a report this week from a North Korean news outlet that North Korea's newly amended constitution explicitly states for the first time that North Korea is a nuclear-armed state. The Supreme People's Assembly approved the constitutional amendment at last month's session to honor the legacy of the late Kim Chong-Il. The Assembly also appointed Kim Jong Un as First Chairman of the National Defense Commission.

The news media carried the following pertinent quote:

"National Defense Commission Chairman Kim Cho'ng-il has turned our fatherland into an invincible state of political ideology, a nuclear-armed state and an indomitable military power, paving the ground for the construction of a strong and prosperous nation."

Comment: One of the tasks of the Supreme People's Assembly is to approve amendments to the constitution. These are not trivial acts because they invest the amendments with foundational authority. They become part of the definition of North Korea as much as they do any other state that abides by a constitution. Amendments become part of the ideological indoctrination of North Koreans.

The implications of the nuclear-armed state language are significant. Now the North cannot agree to eliminate its nuclear weapons in any negotiating forum without a constitutional amendment. This action signifies North Korea's determination to remain nuclear armed.

It also means that nuclear disarmament will never be a topic for discussion, even if nuclear talks of some kind resume. The constitutional amendment also represents a face-saving tactic -- plan B, as it were - for not detonating a nuclear device. The condition of being nuclear-armed is now enshrined as a component of North Korean identity, even though the detonations in 2006 and 2009 probably were not successful.

Finally, the amendment means that no amount of domestic hardship, international sanctions or external pressure will force North Korea to abandon its nuclear weapons. To do so would be a constitutional crime, in other words an act of treason. North Korean negotiators can never seriously discuss nuclear disarmament, unless and until the constitution is changed again. They have deliberately tied their own hands.

China-North Korea: South Korean news services published statements purportedly from a North Korean cadre of the central party organization about Chinese and Russian pressure on North Korea.

Supposedly the cadre said that North Korea is prepared to attempt a second space launch but is concerned about Chinese and Russian reaction as well as the prospect of another failure.

The cadre also supposedly said that despite the North's determination to appear subservient to or dependent on no one, it must continue to improve its relations with China in order to survive as a state system.

He indicated that Chinese cooperation is essential and that the central party organs have send an instruction to all organs, enterprises and units ordering them absolutely to refrain from doing anything or uttering any remarks that might cause feuds with China. North Korea, he said, is under pressure from the Chinese government to avoid making trouble in the border region over the issue of defectors or conducting any nuclear test.

Comment: There is no way to verify the authenticity of the statements, but their themes help explain the political exchanges between China and North Korea since mid-April. China's national economic plans and strategy require stability in Northeast Asia. The Chinese consistently have conveyed that message to North Korea by means of high level emissaries.

The North often has asserted its independence by defying Chinese advice. It is now clear the North was acting defiantly when it attempted to execute a space launch. After the failed launch, a senior North Korean delegation was summoned to China, under conditions reminiscent of Imperial China summoning high officials of a tributary state. The North Korean tributaries were instructed to stop making trouble, meaning stop preparing a nuclear detonation.

The cadre's comments match the facts as reported in open sources. The episode proves China has and uses clout with North Korea on issues of importance to China. China does not use this clout to advance issues important to the other members of the six party talks.

Finally, China's post-space launch diplomacy was an exercise in raw power, without using military force. It is an important lesson about client status in the schooling of Kim Jong Un and the vice marshals on the National Defense Commission, who surround and advise him.

Kim Jong Un is young and inexperienced. Most of his advisors have no experience of the world outside of North Korea and are inexperienced as state leaders. They learned the Chinese play hard ball with their tributaries … er …allies. 

International North South Transport Corridor: Special Report. An Indian news service published an update on the status of an important Asian infrastructure project, encouraged by the United Nations, which ensures Iran will never be isolated again.

A multi-national and multi-mode transport corridor from Mumbai to Moscow via Iran and Tajikistan will be completed within the next year, provided final funding is found for one last segment in Iran. The new corridor which involves some new construction to link existing infrastructure will reduce cargo transportation time significantly between India and Russia and points in between.

A three-day meeting of experts from 16 countries on 30 May discussed ways to smooth the way for the International North South Transport Corridor (INSTC) and at least six supplementary routes.

In contrast with a US-backed Silk Road proposal that would bypass Iran, the INSTC depends on Iran's port of Bandar Abbas as the hub of all north-south cargo shipments. The meeting on the INSTC proposed a joint venture between Iran, India, Russia and Azerbaijan to find solutions to various issues, such as infrastructure and funding. It also suggested a core group on customs -- India, Russia, Iran and Turkey -- consisting of experts from these countries, based in Delhi to sort out issues

In stark contrast, Iran plays a crucial role in the multi-modal North-South Corridor because its port Bandar Abbas will be the hub of all activity. Experts proposed the setting up of two four-nation groups to resolve many of the issues. Iran along with Russia and India (all three initiators of the project) will be in both groups.

Comment: All that remains for completion of the infrastructure for this corridor is fewer than 150 kms of railroad in northern Iran. That segment should be finished in the next year. The mix of national partners is unprecedented. The route is unprecedented, bypassing Pakistan and Afghanistan as well as the Suez Canal. When finished, it will be the shortest high-volume, low cost cargo route between India and Russia.

Saudi Arabia: Update. Bloomberg reported that Saudi Arabia increased oil output to 9.9 million barrels per day in May. This is the highest output since January 1989, according to Bloomberg's monthly data.

Comment: The Saudis are keeping their promise to compensate for any loss of Iranian oil. On 1 July, the oil sanctions against Iran become fully effective.

Europe: For the record. Today, Mario Draghi, President of the European Central Bank, warned that the structure of the eurozone had become 'unsustainable' and criticized political leaders whom he said have been slow to respond to the sovereign debt crisis. 'The configuration we had for 10 years, which was considered sustainable, has been shown now to be unsustainable unless further steps are undertaken,' Draghi told a committee of the European Parliament in Brussels.

Comment: European bankers and European Union politicians use coded language to talk around political measures to tie the 17 eurozone states into a single, confederal nation. Centralization and increased central power to coerce compliance are the consistent demands that bankers direct at national politicians. Draghi concluded stating the problems are such that only the member nations' politicians could now solve them, apparently meaning they must surrender more authority to the European Parliament in Brussels.

It is not clear that European national voters share the vision of the Brussels-based banking and political clerisy.

Spain: Spain should explain how it plans to recapitalize ailing Bankia SA and reveal whether other Spanish banks burdened by toxic real estate assets need assistance, a European Commission spokesman said 31 May.

Comment: Prime Minister Rajoy urged the European Central Bank to buy more Spanish sovereign debt while assuring the bankers that Spain does not need a Greek-style bailout by the Bank and the International Monetary Fund. His appeal was rejected by the ECB.

The Financial Times reported capital flight from Spain now totals nearly €100 billion in the first quarter of 2012. That signifies extensive loss of confidence as well as the onset of a crisis. Among the PIIGS (Portugal, Ireland, Italy, Greece and Spain) Spain seems to be emerging as the next country requiring a bailout. As the 13th largest economy in the world, it is considered too big to fail.

Its GDP is $1.537 trillion. Per capita GDP is $30,000 for its 47 million people. But unemployment is over 20% for the second year. The budget deficit is 8.5% and sovereign debt is at least 68% of GDP. It cannot pay its bills as they are due without outside help, especially when investors are pulling up stakes.

Estimates of low but positive growth in the economy this year -- .08% -- now seem optimistic. The economy has contracted in the past two years and appears likely to do so again.

End of NightWatch.

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Night Watch

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