The quarter opened with Assistant Secretary of State Christopher Hill proclaiming that we were “a few days away” from overcoming the “technical issues” that were holding up the Korean Peninsula denuclearization process. Unfortunately, those few days did not take place until mid-June, postponing the long-awaited 60-day test of the Feb. 13 “action for action” agreement until next quarter. Also pending is a test of the willingness of the nations of Southeast Asia to develop a meaningful Charter in commemoration of ASEAN’s 40^th birthday, following this quarter’s review of (and reported revisions to) the groundbreaking draft provided last quarter by its Eminent Persons Group. The commitment of Thailand’s military leaders to restore democracy is also being tested, as is Beijing’s commitment to Hong Kong’s Basic Law on the 10^th anniversary of reversion. Meanwhile, new U.S. Secretary of Defense Robert Gates and China’s new PLA Deputy Chief of the General Staff Zhang Qinsheng passed their initial diplomatic tests this quarter while making their first appearance at the Shangri-La Dialogue in Singapore. Finally, East Asia’s economy, 10 years after the Asian financial crisis, appears to have nicely survived the test of time.

After taking office last September, Abe Shinzo won kudos at home and abroad by flying to China and South Korea to mend relations with Japan’s two disgruntled neighbors. Critics who worried he would be too blunt and nationalistic to succeed as prime minister were quickly proven wrong. Few anticipated how many problems he would have on the domestic front. In the last quarter, Abe’s high poll ratings were driven down by a series of scandals in his Cabinet and by backroom political maneuvering that gave the impression he was reversing Koizumi’s reformist agenda. At the beginning of this quarter Abe once again used foreign policy – this time a successful summit with President George W. Bush and at the G-8 – to push his poll numbers up again. The success of the summit was particularly reassuring in the context of growing Congressional criticism of Japan over Tokyo’s treatment of the “comfort women” issue.

Abe’s overseas successes were soon offset by a domestic scandal over the government’s mismanagement of pension accounts (that his government could ill afford) in the lead up to Upper House elections at the end of July. Abe will have to survive the Upper House election (he is not running but it will be seen as a referendum on his job) if he is going to move forward with his greatest goal: constitutional revision. Abe and the Liberal Democratic Party (LDP) hoped at one point that the constitutional revision pledge would carry them to victory in the Upper House election, but the pension system scandal has clearly become the issue on voters’ minds – much to the government’s chagrin. Still, Japanese voters appreciate toughness and perseverance, which Abe has in abundant supply, and that may save him yet.

The second round of the Strategic Economic Dialogue produced a few agreements, but failed, as expected, to make headway on the contentious issue of the value of China’s currency. U.S. lawmakers on both sides of the aisle called for Beijing to take immediate steps to reduce its $232 billion trade surplus with the United States. Presidents George Bush and Hu Jintao met on the sidelines of the Group of Eight (G-8) summit in Heiligendamm, Germany. While both countries opposed Germany’s push for binding caps on greenhouse gas emissions, they continued to disagree on the degree of responsibility that emerging economies (that are among the top emitters of greenhouse gasses) should bear for reducing emissions. The failure of many Chinese products to meet safety standards became a new source of friction in the bilateral relationship. The fourth round of the Senior Dialogue provided an opportunity for high-level officials to review a broad range of bilateral, regional, and global issues.

The summit meeting at Kennebunkport, Maine between Presidents George W. Bush and Vladimir Putin was meant to smooth over the harsh rhetoric bandied about between Moscow and Washington over the past several months. The primary points of contention are similar to past controversies, namely defense issues in Eastern Europe and Eurasia, as well as political developments in Russia. But in fact, the Kennebunkport summit may have signified something much more profound: the death of the bilateral relationship of the 1990s. In this case the death was both literal (with the passing of Boris Yeltsin) and figurative, given Russia’s economic and political resurgence and the United States’ reeling international image.

The 1990s marked the nadir of Russia’s international standing. Few in Russia look wistfully back on the days of economic and political chaos in that country. GDP declined by 50 percent between 1991 and 1995, unbridled NATO expansion took place along Russia’s western borders, and the bilateral relationship was viewed by most in Russia as one in which the U.S. was clearly the dominant partner. The perception was that every time Washington told Moscow to jump, the response was: “How high?” Now, Vladimir Putin, flush with cash, possessing undisputed political power at home, and author of an ambitious agenda overseas and domestically, has come at the invitation of George Bush to be recognized as a political equal. A headline in the influential Russian daily Izvestia on July 2 summed up the expectations in Russia: “Normal Relations Between Big Boys.” People can argue about whether the Cold War has reemerged or whether it ever went away. But one thing is clear: the 1990s have died. Russia has boldly declared that it will no longer stand by and watch the U.S. dictate the political agenda in Eastern Europe and Eurasia. A literal sign marking this change can be seen with the passing on April 23 of Boris Yeltsin, Russia’s first post-Cold War president who oversaw the 1990s chaos.

Military-to-military ties with Indonesia were significantly enhanced this quarter as plans were made for joint training that included counterterrorism for the first time. Jakarta also supported UN Security Council sanctions against Iran’s nuclear program despite negative domestic reactions for opposing a fellow Muslim country. Regarding the Philippines, a U.S. Congressional hearing condemned extra-judicial killings and the impunity with which some elements of Philippine security forces have been treating political opponents and journalists. U.S. economic aid to the southern Philippines was praised by the Moro Islamic Liberation Front, currently in autonomy negotiations with Manila. U.S. Special Forces continue to train Philippine soldiers in the south to suppress the Abu Sayyaf terrorists with recent significant successes. Thailand rejected a U.S. offer to provide assistance to Bangkok’s counterinsurgency efforts in the Thai south. U.S. officials regularly remind the Bangkok military caretaker government about the importance of restoring democracy by the end of the year. The two countries are also in a dispute over patent protection for pharmaceuticals needed for public health in Thailand. ASEAN leaders have urged the U.S. to strengthen its Southeast Asian ties and not hold them hostage to U.S. Burma policy. Vietnam President Triet’s June visit to the U.S. led to new economic arrangements, but the visit was marred by Congressional complaints over human rights violations in Vietnam.

The major developments in this quarter included the Vietnamese president’s state visit to China in May and China’s military diplomacy at the Shangri-La Dialogue in early June. Assessments of China’s expansive engagement in Southeast Asia continue to show that while Beijing seeks to increase its influence in the region, it faces persistent challenges and limitations in translating its vision of a strategic partnership with Southeast Asia into a sustainable reality.

Beijing has remained concerned that President Chen Shui-bian will provoke some new cross-Strait confrontation. For his part, Chen has continued to try to create a stronger sense of Taiwan identity during his remaining months in office. These have lead Beijing to be even more implacable in insisting that Taiwan be viewed as part of China. Much of the confrontation has been in the international arena: over the Olympics, in the WHO and other international organizations, and for diplomatic recognition. There has been little movement on cross-Strait functional issues. On the military front, Taipei has been somewhat more open about its development of offensive missiles, and the Legislative Yuan has finally appropriated funds to begin procurement of some elements of the arms package.

The second quarter of 2007 saw growing momentum in inter-Korean relations. Having picked up speed after the Feb. 13 Six-Party Talks accord, this was hardly derailed by subsequent slippage in deadlines as the Banco Delta Asia (BDA) affair dragged on and North Korea’s Yongbyon nuclear reactor failed to close. Only rice aid was withheld by Seoul, after some havering, pending Pyongyang’s full fulfillment of the Feb. 13 agreement. Even this began to flow by quarter’s end, although Yongbyon remained open; by then South Korea, like the U.S. and other six-party participants, took the North’s cooperation with IAEA inspectors as a sufficient signal of sincere intent to play ball, at least for now.

The quarter thus mainly saw renewal of a by-now familiar range of contacts: assorted talks – ministerial, economic, military, and more – as well as family reunions and visits of various kinds (almost all from South to North rather than vice versa). There were also at least two “firsts”: one much trumpeted, the other less so. Halfway through the quarter, May 17 saw the much-delayed first cross-border trains since tracks were severed during the 1950-53 Korean War. Despite much hoopla in Seoul (noticeably less in Pyongyang), these were only one-off test runs, with no indication of when regular service might begin.

Perhaps more significant, albeit far less reported, was an unprecedented tour of China and Vietnam in late June by a joint inter-Korean business team that looked at ROK firms and the investment situation in both countries. Barely a week later, the two Koreas finally agreed on a project involving raw material supply and mining cooperation. Like the railway test runs, this took two years to come to fruition, hardly what the DPRK calls Chollima speed (a winged horse of Korean myth, like Pegasus). If for real, then with the now established – if still small – Kaesong industrial park this may betoken the start of serious economic partnership between North and South, such as has obtained for almost 20 years now between China and Taiwan. Always assuming no more nuclear derailments.

China’s shadow over the Korean Peninsula is growing larger, stimulating strategic efforts in Seoul and Pyongyang to draw in the U.S. As soon as KORUS FTA negotiations were concluded, the South Korean media played up the FTA as having both strategic and economic significance as a counter to the centripetal pull of China’s economic rise. Likewise, despite a quarter of delay, North Korea’s eagerness to accept a surprise visit by Assistant Secretary of State Christopher Hill in an effort to confirm North Korea’s intention to shut down the Yongbyon reactor has stimulated concern among some Chinese analysts that a rapid U.S.-DPRK rapprochement would cut China out of the picture. Meanwhile, the Sino-DPRK trade and aid relationship continues to grow, creating another source of anxiety for South Koreans worried that China is taking advantage of special concessions in economic relations with the North.

During Chinese Premier Wen Jiabao’s meetings in Seoul on April 9-10, he pressed for an early opening of FTA negotiations with Seoul, celebrated the 15^th anniversary of China-ROK diplomatic normalization, and cultivated deepening economic ties. In seeming parallel with the improved mood in U.S.-DPRK relations, China and South Korea agreed to open a military hotline and exchanged top-level visits between defense ministers and army chiefs of staff. While the Sino-South Korean economic relationship continues to grow steadily, China is gradually cutting the technology gap, either because South Korean employees are willing to sell proprietary technologies for personal gain or because of China’s continuing wage advantages and increasingly modern plant.

The April 11-13 visit of China’s Premier Wen Jiabao proved to be a public diplomacy success. Wen met with Prime Minster Abe, and, focusing on environmental cooperation, both leaders agreed to advance their strategic relationship. Wen addressed the Diet, a historic first; engaged early morning Tokyo joggers in conversation; and played catch with the Ritsumeikan University baseball team in Kyoto. Before his departure, Wen made clear that he considered his visit a success in strengthening bilateral relations. And, judging from the attention given to a mid-June meeting between President Hu Jintao and former Prime Minister Nakasone and members of the Japan-China Youth Friendship Association, so did his boss. In the run-up to the September Party Congress, the media suggested that Hu was running on a platform of improving relations with Japan. Success at public diplomacy, however, did not translate into success at the nuts and bolts level. Despite repeated high-level commitments to a resolution of the East China Sea issue, little progress was evident as the quarter drew to a close. And testing times, the 70^th anniversary of the Marco Polo Bridge Incident in July and the 70^th anniversary of the Nanjing Massacre in December loom on the horizon.

Although progress was made in resolving the Banco Delta Asia dispute between North Korea and the United States, and international inspectors were invited back into North Korea in June, relations between Japan and North Korea remain deadlocked, with no apparent progress or even political will to address the deep issues that divide them. Seoul and Tokyo made little progress on their history issues. However, the meeting of the foreign ministers of China, Japan, and South Korea this quarter was a positive step, and with elections coming up in Japan and South Korea, the prospect of further foreign policy changes appears likely.

Russia’s first-ever “Year of China” was somewhat “routinized” during the second quarter, following an extravagant opening in early 2007. Politicians, artists, journalists, and businessmen continued to flock to each country’s major cities as hundreds of celebration activities took place. Normal balancing and bargaining between interlocking institutions of the two strategic partners, however, provided both progress and problems, particularly in the economic area.

Much of the festivity of Russia’s China Year was in sharp contrast to Moscow’s tension with Washington. It was unclear, toward the end of the quarter, how this Western “civil war” of words would affect Russia’s strategic matrix with China. Moscow and Beijing were working hard to prepare the Shanghai Cooperation Organization (SCO) for two events: The Peace Mission-2007 military exercise in Russia and a friendship treaty for SCO member states to be signed at the SCO August summit in Kyrgyzstan.

Concerted efforts by the U.S., China, South Korea, and Russia in mid-June finally overcame “technical problems” and led to the return of approximately $25 million in frozen funds to North Korea. After helping to break this logjam, U.S. chief envoy to the Six-Party Talks Christopher Hill traveled to Pyongyang for meetings with the DPRK foreign minister and chief delegate to the Six-Party Talks.

Hill strived to accelerate North Korea’s compliance with the Feb. 13, 2007 joint agreement by urging Pyongyang to quickly accept inspectors from the International Atomic Energy Agency (IAEA), shut down its nuclear facilities, and participate in a new round of nuclear negotiations in July. Hill’s meetings were the highest level of U.S. bilateral contacts with North Korea’s regime since October 2002.

The U.S. and South Korea signed the free trade agreement (FTA) at the end of the quarter, just one day before President Bush’s “fast track” authority to negotiate trade agreements expired. Despite the positive notes struck by U.S. and Korean trade officials, however, Democratic Congressional leaders immediately announced they would oppose the FTA because it adversely affected U.S. auto manufacturers and workers. Democrats, who control Congress following the 2006 mid-term elections, are likely to block ratification of the FTA unless the Bush administration undertakes a strong lobbying effort in the coming months.