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North Korea Ė Yes, you have our attention

North Korea has tested a low yield nuclear device with 4% of the destructive power of the bomb that the United States dropped on Hiroshima, Japan at the end of World War II.
Some believe that the device was much larger but may have failed for technical reasons.
We donít know the truth, because the United States has not devoted the resources to know what is really going on. If you are surprised, donít be. Intelligence collection is a tricky business.

When Richard Nixon was President, you may remember that one of our ships, the USS Pueblo was brazenly attacked and hijacked in international waters in 1968, off the coast of North Korea. The 82 member crew was taken prisoner and tortured over an 11 month period before their release was negotiated.

There is such a thing as institutional memory. The senior members of the military remember the Pueblo incident well, and it still influences our behavior towards North Korea. As an aside, President Nixon gave the order to attack North Korea in retribution for the Pueblo incident. At the time the President believed a show of force was absolutely necessary to dissuade the Koreans from further provocative acts. Nixonís Secretary of Defense at the time did not carry out the Presidential directive. To the end of his life, Nixon felt the biggest foreign policy error of his administration was the failure to carry out a retaliatory raid against North Korea for the Pueblo capture. The Pueblo incident has emboldened the North Koreans ever since.

Both the Clinton and Bush Administrations were aware of the Pueblo incident and its aftermath, when attempting to configure a new US policy towards North Koreaís nuclear program. We have 37,000 American soldiers stationed in South Korea protecting our alliance and interests with South Korea. There is a phased troop withdrawal from the South Korea Peninsula taking place.

You have to wonder why we are willing to withdraw troops from South Korea during a time when they wish to pursue a nuclear development process. The answer is that this area of the world is loaded with dynamite, and if it blows up, you donít want to have 37,000 American troops sitting in the middle of it. North Korea has one of the largest stockpiles of artillery weapons of any army in the world. They are capable of striking Seoul, South Koreaís capital from across the border.

It was recently reported that Prince Bandar, the Saudi Arabian Ambassador to the United States had a private conversation with President Bush. In the conversation the Prince told the President that the United States should withdraw US troops from South Korea. Bandar felt it was too dangerous to leave our soldiers in the middle of a possible confrontation where our OPTIONS would be limited. As Bandar put it, without troops on the border, if thereís problem, itís a REGIONAL PROBLEM. With troops, you could have thousands of American lives at risk, and it becomes a major WAR instantly.

So what do we do about the North Koreans announcing the ACTUAL testing of a nuclear weapon? We have to realize that words have power. We have to be careful what we say. President Bush announced the ďaxis of evilĒ speech several years ago. He named North Korea and Iraq as two of the three countries. It would seem that he started his anti-terrorism campaign in the wrong end of the world.

Iraq did not have weapons of mass destruction (WMD), while North Korea has gone live with them. Now we are in a bind. Our defense policy has been altered whereby we can only fight one war in one country at a time, while fighting a holding action in a second country. Prior to the Bush Administration holding power, we were postured to fight two simultaneous wars on two fronts.

The bad guys know our new policy and will take advantage of us being pinned down in Iraq to expand their own power bases. Since we have a fear of losing pilots or better yet, having a pilot shot down, we are not doing the reconnaissance flights that we would normally do over North Korea.

The best thing to do right now is to realize that if North Korea is a problem for the United States, it is a much bigger problem for Japan, China, Philippines, and South Korea. This is a regional problem in spite of our alliances, and treaty involvements. Its one thing to build and detonate a nuclear weapon, itís quite another to have a long range missile delivery system. North Korea could fairly easily develop a delivery system capable of hitting the countries in its immediate vicinity.

Hitting the United States from a 9,000 mile plus distance is another story, not so easy really. Since the countries bordering North Korea have the most to lose, they should be the ones bearing the brunt of the responsibility for multi-lateral talks among the powers involved.

The real deal is that North Korea is a dictatorship that routinely starves its own people for the benefit of the small leadership that has basically enslaved the country. This leadership wants to play the cards that it can. What it now has is nuclear weapons. They will use this card to maximize whatever concessions they can from the United States and the immediate surrounding neighbors.

Are we going to cave, and make concessions to the North Koreans? Of course we are, because thatís what superpowers do. Itís not about appeasement, itís about business, and what makes good business sense. Churchill said that ďPeople have friends, nations have interestsĒ.

It is in our interest to not divert ourselves from the issue of extricating ourselves from a tortuous situation in Iraq. It is costing us treasure, and beginning to eat at the social fabric our country as Viet Nam did a generation ago. We must put a good face on Iraq and get out. The President may not be aware of it, but he is on a short leash in Iraq. The American people are very intolerant of wars without objectives that last too long, and thatís precisely where George Bush finds himself. It is highly questionable that his party will survive the mid-term elections intact. The country will embrace CHANGE, even from a Democratic party that is devoid of ideas.

About the Author: Richard Stoyeckís background includes being a limited partner at Bear Stearns, Senior VP at Lehman Brothers, Kuhn Loeb, Arthur Andersen, and KPMG. Educated at Pace University, NYU, and Harvard University, today he runs Rockefeller Capital Partners and
Value Investing at

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