Looking back, it was a hostage to fortune to title our last quarterly review: “Things can only get better?” Even with that equivocating final question mark, this was too optimistic a take on relations between the two Koreas – which, as it turned out, not only failed to improve but deteriorated further in the first months of 2009. Nor was that an isolated trend. This was a quarter when a single event – or more exactly, the expectation of an event – dominated the Korean Peninsula and Northeast Asia more widely. Suspected since January, announced in February and awaited throughout March, despite all efforts to dissuade it North Korea’s long-anticipated Taepodong launched on April 5. This too evoked a broader context, and a seeming shift in Pyongyang. Even by the DPRK’s unfathomable logic, firing a big rocket – satellite or no – seemed a rude and perverse way to greet a new U.S. president avowedly committed to engagement with Washington’s foes. Yet, no fewer than four separate senior private U.S. delegations, visiting Pyongyang in unusually swift succession during the past quarter, heard the same uncompromising message. Even veteran visitors who fancied they had good contacts found the usual access denied and their hosts tough-minded: apparently just not interested in an opportunity for a fresh start offered by a radically different incumbent of the White House.

Beijing and Taipei have been making preparations for the third round of ARATS-SEF talks to be held in May or June at which time additional agreements on finance, flights, and crime are expected.  The global recession has precipitated a dramatic decline in cross-Strait trade and that, in turn, has contributed to accelerated plans to negotiate a comprehensive cross-Strait economic agreement.  However, the planning for such an agreement has produced a storm of opposition protest in Taiwan, which represents the most serious challenge yet to President Ma’s cross-Strait policies. Officials on both sides are speaking optimistically about finding a formula under which Taipei could be an observer at the World Health Assembly (WHA) in May.  Although defense reports from both sides acknowledge reduced tensions, there is as yet no sign that Beijing will reduce the military threat directed at Taiwan.

Top-level diplomacy between Beijing and Pyongyang intensified this quarter in honor of China-DPRK Friendship Year and the 60^th anniversary of diplomatic relations.  Prior to the Lunar New Year holiday in mid-January, Kim Jong-il held his first public meeting since his reported illness with Chinese Communist Party International Liaison Department Head Wang Jiarui. In March, DPRK Prime Minister Kim Yong-il paid a return visit to Beijing.   The Chinese have accompanied these commemorative meetings with active diplomatic interaction with the U.S., South Korea, and Japan focused on how to respond to North Korea’s launch of a multi-stage rocket.  Thus, China finds itself under pressure to dissuade Pyongyang from destabilizing activity and ease regional tensions while retaining its 60-year friendship with the North.  Meanwhile, South Korean concerns about China’s rise are no longer confined to issues of economic competitiveness; the Korea Institute for Defense Analysis has produced its first public assessment of the implications of China’s rising economic capabilities for South Korea’s long-term security policies.  The response to North Korea’s rocket launch also highlights differences in the respective near-term positions of Seoul and Beijing.  Following years of expanding bilateral trade and investment ties, the global financial crisis provides new challenges for Sino-ROK economic relations: how to manage the fallout from a potential decline in bilateral trade and the possibility that domestic burdens will spill over and create new strains in the relationship.

The year 2008 ended with reports that China would begin construction of two conventionally powered aircraft carriers, while February brought news that China was planning to construct two nuclear-powered carriers.  January marked the first anniversary of the contaminated gyoza controversy and despite concerted efforts to find the source of the contamination and the interrogation of several suspects, Chinese officials reported that the investigation was back at square one.  Meanwhile, efforts to implement the June 2008 Japan-China joint agreement on the development of natural gas fields in the East China Sea made little progress and the long-standing territorial dispute over the Senkaku Islands found its way into the headlines following Prime Minister Aso’s February visit to Washington.  In mid-March, China’s defense minister confirmed to his Japanese counterpart Beijing’s decision to initiate aircraft carrier construction.

The first three months of 2009 saw Japan-North Korea relations go from stalemate to hostility, as North Korea’s “satellite” launch on April 5 heightened tensions throughout Northeast Asia. As Pyongyang tried to goad its partners in the Six-Party Talks (the new Obama administration in particular) to induce more favorable terms, Tokyo took steps that may have more far-reaching implications for regional security than merely a plan to deal with the current North Korean missile crisis. Meanwhile, Tokyo and Seoul continued to focus on a practical partnership for economic cooperation and stayed on good terms. The highlight of the quarter was Prime Minister Aso’s successful two-day visit to South Korea in mid-January for a summit with President Lee Myung-bak. Although historical issues lingered as a potential factor that might challenge and disrupt this mood of détente, Japan-South Korea relations improved due in no small part to the Lee administration’s tough policy toward Pyongyang.

The year of 2009, which marks the 60^th anniversary of diplomatic ties between China and Russia, unfolded with a series of high-profile interactions. The “Year of Russian Language” in China was launched, which is to be reciprocated by Russia’s “Year of Chinese language” in 2010. An oil pipeline is finally to be built from Skovorodino to northeast China 15 years after its initial conception. The two militaries were engaged in the first round of talks for joint exercises to be held in July-August. The Shanghai Cooperation Organization held its first special session on Afghanistan as it officially reached out to NATO. Meanwhile, top leaders and senior diplomats were busy coordinating policies regarding the financial crisis and growing tensions on the Korean Peninsula. All of this, however, could hardly conceal a sense of uneasiness, particularly from the Chinese side, about the sinking in mid-February of a Chinese cargo ship by the Russian Coast Guard near Vladivostok. While Beijing requested a thorough and timely investigation, Moscow seemed more interested in a weapons smuggling case allegedly involving top Russian naval officers.

Things generally went from bad to worse in the Asia-Pacific this past quarter. The Six-Party Talks began on a low note and went steadily downhill from there as Pyongyang stonewalled against even a moderately intrusive verification regime.  Crippling demonstrations in Bangkok not only dealt a severe blow to Thailand’s economy (and image) but forced ASEAN to postpone both its annual round of summitry (including ASEAN Plus Three and the East Asia Summit) and its planned celebration of its Charter ratification. The Plus Three (China, Japan, and South Korea) did manage to hold their first non-ASEAN-affiliated summit and the Asia Pacific Economic Cooperation (APEC) Leaders Meeting did go off without a hitch, but neither had much impact on growing regional (and global) economic woes as economic forecasts kept being revised downward. Many in Asia saw a possible light at the end of one tunnel with the election of Barack Obama as the next U.S. president, although elite opinion, especially in Northeast Asia, remained mixed as they kept a watchful eye out for Asia policy pronouncements and the names of those who will be chosen to implement them.

The U.S. decision to rescind the designation of North Korea as a state sponsor of terrorism tested the bilateral relationship this quarter as the Bush administration was perceived in Japan as having softened its commitment to the abductee issue in favor of a breakthrough on denuclearization in the Six-Party Talks, which ultimately proved elusive.  The Aso government managed to extend the Maritime Self-Defense Force (MSDF) refueling mission in the Indian Ocean for one year, though bilateral discussions on defense issues continued to center on whether Japan could move beyond a symbolic commitment to coalition operations in Afghanistan.

Japanese domestic politics remained tumultuous as the opposition led by the Democratic Party of Japan (DPJ) thwarted the Aso legislative agenda to increase pressure for a snap election.  Prime Minister Aso’s approval rating plummeted over the course of the quarter due mostly to frustration with the response to the financial crisis, prompting him to postpone the widely anticipated Lower House election in an attempt to shore up support for the ruling Liberal Democratic Party (LDP).  Public opinion polls revealed increased interest in offering the DPJ a chance at the helm with most observers predicting an election sometime next spring.  Other polls at the end of the quarter showed the Japanese public less sanguine about the U.S.-Japan alliance, a sobering development as President-elect Obama prepared to take office.

The U.S. and China held the 5^th Strategic Economic Dialogue and the 6^th Senior Dialogue this quarter.  The global financial crisis was a focal point of discussion in both dialogues, as well as in the meeting between Presidents Bush and Hu Jintao on the sidelines of APEC in Lima, Peru. Beijing responded to the announced U.S. sale of $6.5 billion in arms to Taiwan by suspending bilateral military exchanges between the U.S. and China and talks on nonproliferation.  China’s internal debate about the international structure of power and the status of the U.S. was revived as the two prepared to celebrate the 30^th anniversary of the establishment of diplomatic ties.

The last four months of U.S.-ROK relations under the Bush administration saw the completion of a mission that helped to define the broadening global scope of the alliance as well as the final resolution of the troublesome “beef issue.”  Tough negotiations were completed on a new defense cost-sharing agreement and the ruling party in the ROK began the process of passing the implementing legislation for the free trade agreement.  All of this amounts to President Obama’s inheritance of an alliance relationship that is in fairly strong shape, but a North Korean nuclear negotiation that remains unfinished.  Despite the best efforts of the U.S., Pyongyang remained unwilling to accept standard verification procedures as part of the six-party denuclearization agreement.  This was despite the fact that on Oct. 11, the U.S. removed the country from the terrorism blacklist.  Obama’s team will need to adhere to seven key principles as it continues to navigate the labyrinth of these difficult negotiations and bolster the strength of the alliance.