Q+A: What might be at stake in South Korean ship sinking

By Jon Herskovitz

SEOUL (BestGrowthStock) – South Korean President Lee Myung-bak on Monday vowed to find out what caused last month’s deadly navy ship sinking but avoided any direct reference to neighboring North Korea, which many believe was the culprit.

The defense minister said the ship may have gone down due to a torpedo attack, immediately putting suspicion on North Korea. Here are some questions and answers about what might happen if the North was behind the incident.

WILL THIS LEAD TO ARMED CONFLICT ON THE PENINSULA?

It is neither Koreas’ interests to have armed conflict. Investors would worry about the potential of this spilling into a war that would deal a severe blow to the South’s fast-recovering economy and to North Asia, which accounts for about one-sixth of the global economy.

An all-out war would be suicide for North Korean leader Kim Jong-il because his ill-equipped military would likely fall quickly to South Korean forces supported by the might of its U.S. military ally. There are about 28,000 U.S. troops in the South.

HOW MIGHT SOUTH KOREA RESPOND MILITARILY?

If Pyongyang was behind the sinking, South Korea might try a small-scale strike on the North for what would be one of its deadliest attacks since the 1950-53 Korean War ended with a cease fire. This would be unlikely because it could risk a North Korean retaliatory attack.

Experts said the South might respond by a military show of strength near the contested sea border and drills along its side of the land border. The South might also place mines in the Yellow Sea waters off the west coast where the incident took place to bottle up the North’s submarines.

The South might also try to make it more difficult for the North’s commercial shipping by diverting its vessels farther away from its waters.

WHAT ABOUT ECONOMIC PUNISHMENT?

South Korea has few economic options left to hurt the North. It has already suspended its unconditional handouts that once were worth more than $1 billion to the North, which has an estimated yearly GDP of $17 billion. The South has also suspended a joint tourism project at a mountain resort in the North that once supplied Pyongyang’s leaders with hard currency.

The last remaining major joint economic project is a factory park in the North Korean border city of Kaesong where South Korean firms use cheap local labor and land to make goods. Seoul would be reluctant to end this project because it would deal a blow to the more than 100 small to mid-sized South Korean firms there and could violate contracts it struck with them.

South Korea’s foreign minister said if the North were proven to be the culprit, the South would take it to U.N. Security Council. But fresh sanctions are likely to have a limited impact on the North, already subject to resolutions that all but cut off its lucrative arms trade after last year’s nuclear test.

WHAT ARE THE POLITICAL RISKS TO SOUTH KOREA?

President Lee Myung-bak’s government has already been criticized for its weak response to the ship’s sinking. The left-leaning opposition has been trying to score points by accusing the Lee government of hiding information and not doing enough to protect the country’s soldiers.

Lee could face calls to avenge the deaths of the sailors that would put him in a difficult spot. His ruling conservative Grand National Party is also trying to strengthen its hand ahead of elections in June for local posts, including provincial governors and major city mayors.

WHAT ARE THE POLITICAL RISKS TO NORTH KOREA?

Internally, the ship sinking could be a boon for North Korea, offering an opportunity to leader Kim to rally support particularly in the powerful military. It could also help support his plans to pave the way for succession to his youngest son in the state his family has ruled for more than 60 years.

However, the incident could undermine his position when he is expected to visit China in the coming weeks. Beijing, his biggest backer and closest thing he can claim as an ally, would likely be angered by any move that increases instability on its border.

It could also delay the resumption of dormant international talks on ending the North’s nuclear ambitions.

The United States, with a military stretched thin due to its actions in Iraq and Afghanistan, does not want to make a major deployment of troops to the South. It may try to head off military action by punishing the North with U.S. Treasury moves that would cut off almost all of its international finances.

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(Additional reporting by Jack Kim, editing by Jonathan Thatcher and Ron Popeski)

Q+A: What might be at stake in South Korean ship sinking