The quarter started with a bang, literally, as North Korea made good on its threat to test a nuclear weapon, resulting in a strongly worded (but not strongly enforceable) UN Security Council resolution (UNSCR 1718) imposing sanctions. To the surprise of some, Pyongyang agreed to return to another round of Six-Party Talks this quarter; to the surprise of virtually no one, the talks went nowhere. The most anticipated multilateral event of the quarter, the second East Asia Summit (EAS), was postponed (ostensibly due to weather), but the Asia Pacific Economic Cooperation (APEC) Leaders Meeting did take place on schedule, along with a side meeting between President Bush and the “ASEAN Seven.” Democracy took another hit in the region, this time via a military coup in Fiji, even as the road back to democracy in Thailand is proving to be longer than promised. The Asia Pacific economic outlook remains good, with the region continuing to set the pace for the rest of the world. The political outlook is not as sunny.

The third quarter of 2006 began with North Korea’s July 5 missile launches. This quarter, Pyongyang added another provocation with the Oct. 9 nuclear test. The prospect of another nuclear weapons state in Japan’s neighborhood was bad news, but the test also created an opportunity for Japan and its neighbors to begin forging consensus on an approach to this new regional security challenge. While the nuclear test posed a significant threat to Tokyo and prompted discussions (normally considered taboo) of nuclearization as a means to strengthen Japan’s deterrence, it also led the United States to reaffirm its commitment to defend Japan under the nuclear umbrella.

Prime Minister Abe Shinzo, in his first meeting with President George Bush as prime minister, demonstrated a strong commitment to the U.S.-Japan alliance and pledged to cooperate closely on North Korea and other regional security issues. He also pledged to move toward implementing an agreement on the realignment of U.S. forces in Japan, particularly on Okinawa where the new governor appears willing to work with the central government. It is unclear if implementation will go smoothly, but the dynamics of Japan’s security environment, complicated by the North Korean nuclear test, could facilitate further progress in bilateral security cooperation. In the fourth quarter, Abe engaged in a series of security and diplomatic challenges that allowed him to show that he has the “right stuff” to be prime minister, despite his relative youth and inexperience.  But a sudden sag in popularity at home in December and questions about his commitment to economic reform will be areas to watch in the new year.

A gaggle of Cabinet secretaries, led by U.S. Treasury Secretary Paulson, traveled to Beijing in mid-December to launch the Strategic Economic Dialogue. No breakthroughs were achieved, but both sides had low expectations for near-term results and seemed pleased with the outcome. On the North Korea nuclear front it was all bad news, with Pyongyang testing a nuclear device in early October and no tangible progress achieved at the resumption of the fifth round of Six-Party Talks after a 13-month hiatus. A positive byproduct was that intensive consultations between Washington and Beijing boosted bilateral ties. The U.S. mid-term elections that resulted in the seizure of control over both the House and Senate by the Democratic Party generated some concern in China about increased pressure on trade and human rights. On balance, however, Beijing remained confident that China-U.S. relations would remain on a positive track. Military-to-military ties continued to develop with a three-day U.S. ship visit to Zhanjiang, China, joint military exercises between the U.S. Navy and Marines and their Chinese counterparts, and a visit to China by U.S. Pacific Fleet Commander Adm. Gary Roughead.

North Korea made good on its long-time threat to conduct a nuclear test when it exploded a small nuclear device of less than a kiloton on Oct. 9. The test generated political shock waves and led to comprehensive sanctions imposed by the UN Security Council Oct. 14. Under tremendous pressure from the international community and China, in particular, North Korea announced Oct. 31 it would return to the Six-Party Talks.

When the talks reconvened in Beijing on Dec. 18, they made little progress other than reaffirming the main accomplishment of these negotiations to date – the Sept. 19, 2005 joint statement in which North Korea agreed to abandon its nuclear program in exchange for security, political, and economic benefits. Given North Korea’s nuclear test, the real surprise this quarter was that a new round of nuclear negotiations occurred at all.

In their ongoing negotiations on a free trade agreement (FTA), the U.S. and South Korea ran into difficulty on issues including autos, pharmaceuticals, antidumping measures, and beef. At the end of the quarter, Korean negotiators were reportedly considering whether to propose a “big deal” that would resolve outstanding differences on major issues. Both the U.S. and Korean negotiating teams are aware that they must wrap up an agreement by March 31 and give Congress 90 days for review before President Bush’s “fast-track trade promotion authority” (TPA) expires June 30, 2007.

The U.S. and South Korea agreed in late October to transfer wartime operational control of Korean troops to South Korea between Oct. 15, 2009 and March 15, 2012. The precise time of transfer along with detailed implementing arrangements will be decided in joint consultations during the first six months of 2007. The U.S. will continue to provide significant air and naval “bridging capabilities” as well as intelligence, surveillance, and reconnaissance until South Korea acquires sufficient capabilities of its own in these areas.

South Korea notified the U.S. in early December that it would extend the deployment of its troops supporting U.S.-led coalition forces in Iraq for another year, although at a reduced level. South Korea’s “Zaytun Division” has contributed humanitarian and reconstruction assistance since 2004 in the northern Iraqi city of Irbil. Korean commandos have also provided security for the UN Assistance Mission for Iraq.

In a relatively quiet quarter for U.S.-Russia relations, the issues topping the bilateral agenda were trade, nuclear proliferation, and energy security. That nuclear proliferation and energy security were at the top of the list should come as no surprise. The big news was the announcement that the U.S. government had agreed in principle to Russia’s long-awaited accession to the World Trade Organization (WTO). Presidents George Bush and Vladimir Putin met twice during the quarter, a few days apart in Moscow and Hanoi. At their meetings the discussions centered on WTO, Iran, and North Korea. A surprise announcement by the Japanese foreign minister concerning the dispute over the Northern Territories caused a few ruffles in both Moscow and Tokyo, but the Japanese-Russian relationship returned again to its stagnant state by the end of the quarter.

In his November visit to Southeast Asia attendant to the Hanoi Asia Pacific Economic Cooperation (APEC) Leaders Meeting, President George W. Bush raised the prospect of an Asia-Pacific free trade area, discussed implementation of the ASEAN-U.S. Enhanced Partnership that emphasizes good governance, praised Indonesia for the success of the peace process in Aceh, and assured Vietnamese officials that permanent normal trade relations would be approved by the U.S. Congress by year’s end. (It was.) The Visiting Forces Agreement in the Philippines survived a severe test when a U.S. Marine was convicted of rape and sentenced to 40 years in a Philippine prison. The conviction is being appealed. At the APEC summit, Philippine President Gloria Arroyo asked the U.S. president for a “deeper and broader” U.S. role in combating Philippine terrorists as well as in the ongoing peace process with the Moro Islamic Liberation Front. Although continuing to press the Thai coup leadership to restore democracy, Washington announced plans to hold the annual multinational Cobra Gold military exercise in May 2007 and continued to provide assistance for counterterrorism.

Top Chinese leaders engaged Southeast Asian counterparts during a meeting in China celebrating 15 years of China-ASEAN ties, and during the APEC leaders gathering in Hanoi. The implications of China’s rising prominence for the changing regional order were reviewed in detail during a meeting in the United States of Chinese and international specialists, and in assessments by prominent scholars that went beyond headline-driven media accounts.

As the year ends, cross-Strait tensions remain remarkably low. This is so despite President Chen Shui-bian’s continuing efforts to promote his Taiwanese nationalist agenda in ways that could threaten cross-Strait stability. However, as Chen is a seriously wounded lame duck, his influence is declining and his initiatives are often just rhetorical flourishes. Despite President Chen’s restrictive approach to cross-Strait economic ties, his administration finally approved some long-pending proposals for high-tech investments in China. Beijing continues to pursue President Hu Jintao’s policy of positive outreach to Taiwan. Discreet talks between designated associations have reportedly neared agreement on arrangements for Chinese tourism to Taiwan. Progress was made toward breaking the deadlock over arms procurement, with hope that some initial appropriations may be approved by the Legislative Yuan early in the new year. If any progress is to be made on functional issues next year, it will have to occur early before the sides become engaged in preparations for the 17^th Chinese Communist Party (CCP) Congress and Taiwan’s elections.

Events on the Korean Peninsula in the latter half of 2006 exhibited, to quote the poet William Blake, a “fearful symmetry.” Just as the third quarter had been dominated by North Korea’s July 5 launch of seven missiles, including a long-range Taepodong-2, so the final three months of last year were overwhelmingly focused on the momentous and baleful test-firing by the DPRK Oct. 9 of a small nuclear device.

As with the Taepodong, so a fortiori this nuclear test sent the region, the world, and especially Pyongyang’s five interlocutors in the then-stalled Six-Party Talks – the U.S., China, South Korea, Japan, and Russia – scurrying first to condemn, unanimously, and then to try to devise appropriate countermeasures. Unanimity fast evaporated as familiar policy splits persisted. While Washington and especially a newly assertive Japan sought to punish, Seoul joined Beijing and Moscow in its reluctance to press Pyongyang too hard, for instance, in searching its vessels on the high seas.

To the surprise of some, but in fact quite typically, Kim Jong-il then deigned to return to the Six-Party Talks, which met briefly in mid-December after a hiatus of over a year. No progress was made, and at this writing no date to resume has been fixed. As a new year dawned, with Pyongyang boasting of its new nuclear status – and amid reports that it might be preparing a second nucleat test – it was hard to see a way forward on this crucial issue, despite hopes that the Six-Party Talks would reconvene ere long.

The North Korea’s Oct. 3 announcement and Oct. 9 test of a nuclear device provided the catalyst for regional diplomacy this quarter, including enhanced scrutiny and a possible reevaluation of China’s strategic relationship with North Korea. Near-term Chinese responses to North Korea’s test included public rhetorical condemnation of North Korea’s “brazen” act, a Chinese decision to back a stronger-than-expected UN Security Council resolution that imposes limited sanctions on North Korea, stepped-up speculation among Chinese and international analysts about how China might effectively utilize its economic leverage to rein in North Korea, and enhanced efforts to manage diplomatic fallout from the test by re-establishing direct dialogue with Kim Jong-il and through efforts to re-establish multilateral dialogue through Six-Party Talks.

North Korea’s nuclear test also stimulated intensive high-level Chinese meetings with South Korea (although South Korea’s diplomatic influence was further constrained by regional responses to North Korea’s test). President Roh Moo-hyun met Hu Jintao during a Beijing summit one week after North Korea’s test. Incoming UN Secretary General and former South Korean Foreign Minister Ban Ki-moon, who could not have been selected for the post without China’s support, made a special visit to Beijing in November to discuss the response to North Korea’s test prior to departing for New York to take up his new post. Despite a steady increase in Chinese-South Korean trade, investment, and tourism, the tone of China’s relations with South Korea has become more sober due to persistent sensitivities in Seoul regarding China’s Northeast Asian history project and rising anxieties about slowing growth of South Korean exports to China and rising imports of cheap Chinese industrial goods, among other issues.

The long search for a Japan-China Summit was realized Oct. 8, when Japan’s new Prime Minister Abe Shinzo arrived in Beijing and met China’s President Hu Jintao and Premier Wen Jiabao. Abe and Hu agreed to build a “strategic, reciprocal relationship” aimed at enhancing cooperation and advancing a wide range of mutual interests. Both leaders agreed to address the difficult issues of history and the East China Sea, setting up expert panels to explore ways to resolve them. On the topic of visiting Yasukuni Shrine, Abe relied on strategic ambiguity, which the Chinese leadership appeared to tolerate, if not accept, in the interest of moving relations ahead. The joint history panel met in Beijing at the end of December and the East China Sea experts meeting was scheduled for early in the new year. After several years of tough going, the road ahead appears smoother and more promising.

With Abe Shinzo becoming prime minister of Japan in late September, Japan-Korea relations entered a new period. Political relations with both North and South Korea deteriorated badly under Prime Minister Koizumi Junichiro, and both Koreas waited to see whether Abe would take a new course toward the peninsula. His initial act of visiting South Korea and China won cautious praise from the South Koreans, although the real test of his leadership and where he plans to take Japanese foreign policy remain to be revealed. With North Korea’s nuclear test, Japan became one of the most eager participants in implementing UN Security Council Resolution 1718, although this was widely expected and thus did not unduly affect relations with South Korea. North Korea’s nuclear test marks a new phase in Northeast Asian politics, and how Japan and the two Koreas manage their relations in the coming year could have a major impact on stability in the region.

By any standard, the last quarter of 2006 was extraordinary for Moscow and Beijing, the first “Russia Year” in China was winding down, trade rose nearly 20 percent to $36 billion, the Shanghai Cooperation Organization (SCO) strengthened, and their strategic interaction deepened.

The rest of the world was in a state of chaos and crisis, if not catastrophe: North Korea tested nukes; the Six-Party Talks went nowhere; the United Nations Security Council imposed sanctions on Pyongyang and Tehran; Saddam’s execution at yearend has yet to bring stability, let alone peace, to the Middle East. Meanwhile, the world’s sole superpower is seen as weakened by challenges from both outside (Iraq) and inside (midterm elections). Ironically, other major powers, including Russia and China, found themselves both unable and unwilling to manage the mess.

Two years have passed since India’s relations with East Asia have been considered in this journal (see “India-East Asia Relations 2004: A Year of Living Actively,” January 2005). In the interim, a steady if un-dramatic consolidation of ties has occurred between India and its neighbors to the east. On a parallel track, India has also gained membership or observer status in regional organizations such as the East Asia Summit (EAS) and the Shanghai Cooperation Organization (SCO). India’s immediate South Asian environment continues to demand considerable Indian attention and energies given the multiplicity of challenges there, and India’s relations with Pakistan, Bangladesh, and Nepal remain complex, but this situation has not impeded India’s relations with East Asia. India’s economic growth during the past two years has also been healthy. And though not directly related, India’s improved relations with the U.S., capped by the approval by the U.S. Congress of the U.S.-Indian nuclear cooperation agreement, also provided a positive basis to engage key Asian countries and organizations.