What War With North Korea Could Really Look Like

One possible scenario being tossed around is the U.S. launching a surgical strike on key North Korean infrastructure and leadership. A problem with that approach is how the regime’s missiles and nuclear facilities are dispersed and hidden in mountainous terrain.

Failing to hit them all would leave some 10 million people in Seoul, 38 million people in the Tokyo vicinity and tens of thousands of U.S. military personnel in northeast Asia vulnerable to missile attacks — with either conventional or nuclear warheads. Even if the U.S. managed to wipe out everything, Seoul would still be vulnerable to attacks from North Korea’s artillery.”

A chief concern also is that a limited U.S. strike could provoke dictator Kim Jong-un into deciding it’s the beginning of an all-out assault and he then would use his nuclear arsenal against South Korea.

The possibility of a full-scale invasion of the North remains problematic, given the logistics needed to get the forces in place to pull it off. Then, there’s the problem of whether or not Russia and China could be drawn into the conflict, thus creating a true world war.

Realistically, war has to be avoided,” said John Delury, an assistant professor of international studies at Yonsei University in South Korea. “When you run any analysis, it’s insanity.”

Insanity or not, as Capital Economics writes in a May 17 note, while the most important impact of a full-scale conflict on the Korean peninsula “would be a massive loss of life” but added that there would also be significant economic consequences. While we focus on the latter below, first here are some big picture observations courtesy of Bloomberg, including an analysis of whether all out war can be avoided:

• Can’t the U.S. try a surgical strike?

It probably wouldn’t work well enough. North Korea’s missiles and nuclear facilities are dispersed and hidden throughout the country’s mountainous terrain. Failing to hit them all would leave some 10 million people in Seoul, 38 million people in the Tokyo vicinity and tens of thousands of U.S. military personnel in northeast Asia vulnerable to missile attacks — with either conventional or nuclear warheads. Even if the U.S. managed to wipe out everything, Seoul would still be vulnerable to attacks from North Korea’s artillery.

• Why might Kim go nuclear?

“Even a limited strike” by the U.S. “would run the risk of being understood by the North Koreans to be the beginning of a much larger strike, and they might choose to use their nuclear weapons,” said Jeffrey Lewis, director of the East Asia nonproliferation program at the Middlebury Institute of International Studies. Somehow, the U.S. would need to signal to both North Korea and China — Pyongyang’s main ally and trading partner — that a surgical military strike is limited, and that they should avoid nuclear retaliation.

• Is regime change an option?

New leadership wouldn’t necessarily lead to a new way of thinking among North Korea’s leadership. Kim’s prolonged exposure to Western values while at school in Switzerland led some to speculate that he might opt to open his country to the world — until he took power and proved them wrong. Moreover, if Kim somehow were targeted for removal, the ruling clique surrounding him would have to go as well — making for a very long kill list. China, fearing both a refugee crisis and U.S. troops on its border, would likely seek to prop up the existing regime.

• Does that mean all-out war is the best U.S. option?

A full-scale invasion would be necessary to quickly take out North Korea’s artillery as well as its missile and nuclear programs. Yet any sign of an imminent strike — such as a buildup of U.S. firepower, mobilization of South Korean and Japanese militaries and the evacuation of American citizens in the region — could prompt North Korea to strike preemptively. China and Russia may also be sucked in. “Realistically, war has to be avoided,” said John Delury, an assistant professor of international studies at Yonsei University in South Korea. “When you run any cost-benefit analysis, it’s insanity.”

• How might North Korea retaliate?

The most immediate reaction would likely be massive artillery fire on Seoul and its surroundings. North Korean artillery installations along the border can be activated faster than air or naval assets and larger ballistic missiles that can target South Korean, Japanese or American bases in the region with nuclear, chemical and biological weapons. Those countries have ballistic-missile-defense systems in place but can’t guarantee they will shoot down everything. Japan has begun offering advice to its citizens on what to do in the event a missile lands near them — essentially try to get under ground — and U.S. firms are marketing missile shelters. While it’s unclear if North Korea can successfully target U.S. cities like Denver and Chicago with a nuclear ICBM, it’s similarly unknown if U.S. defense systems can strike it down — adding to American anxieties.

Short of war, what other options remain on the table? Some might consider regime change, but there’s no assurance Kim’s replacement would be any less belligerent.

Whatever unfolds on the Korean peninsula, it’s apparent that North Korea’s military might could wreak havoc on South Korea.

North Korea’s conventional forces, which include 700,000 men under arms and tens of thousands of artillery pieces, would be able to cause immense damage to the South Korean economy.”

Clearly, analysis of past military conflicts shows the tremendous impact they can have on local and global economies. The Korean War led to the death of 1.2 million South Koreans and caused that country’s Gross Domestic Product (GDP) to fall by more than 80%.

South Korea accounts for around 2% of global economic output. A 50% fall in South Korean GDP would directly knock 1% off global GDP. But there would also be indirect effects to consider. The main one is the disruption it would cause to global supply chains, which have been made more vulnerable by the introduction of just-in-time delivery systems.”

South Korea is the biggest producer of crystal displays in the world (40% of world production) and the second biggest for semiconductors. It also is a leading automotive supplier and home to the world’s three biggest shipbuilders. Any damage to these vital industries would create shortages around the world.

Closer to home, the impact of a full-scale war on the U.S. economy would be significant.

The total cost of the second Gulf War (2003) and its aftermath has been estimated at US$1trn (5% of one year’s US GDP). A prolonged war in Korea would significantly push up US federal debt, which at 75% of GDP is already uncomfortably high.”

While less sophisticated observers worry that a conflict could be just one harsh statement or tweet away, more savvy analysts note that the investment community had seen global tensions before, such as the Cuban missile crisis, and weathered them well.

In a note from the bank’s [Goldman] chief credit strategist, Charles Himmelberg said that “our sense is that investors have grown comfortable with the view that geopolitical tensions invariably result in diplomatic talks, in which case the right trade is to buy any dips. The result is a market psychology that is relatively resistant to the pricing of geopolitical risk.“

Speculation of possible outcomes of the U.S.-North Korean faceoff will continue, but prudent investors will still look for safe havens for their money.

However, there remains huge uncertainty as to how the crisis will play out and this may benefit gold prices over the coming weeks. Indeed, increased geopolitical risk might even see the price rise beyond $1,350 per ounce, which hasn’t been breached since the Brexit referendum last year.”

Armed conflict may not be an inevitable result, but it certainly would be the worst result. With so much at stake globally and the recent increase in sanctions on North Korea by the United Nations, the possibility of a diplomatic solution remains a viable scenario as well.

Source: ZeroHedge