Nov. 23 – North and South Korean forces traded artillery fire today, jacking up diplomatic tension across the region and sending the South Korean won downwards.
Two South Korean marines were killed and 15 South Korean soldiers and civilians were wounded after North Korean forces fired about 100 rounds of artillery at Yeonpyeong Island in the Yellow Sea, South Korea authorities said.
South Korean units returned fire and Korean television footage showed large plumes of smoke from the island.
North Korea issued a brief statement accusing the South of starting the fight when they “recklessly fired into our sea area.”
South Korean forces acknowledged conducting artillery drills near the North Korean border but denied that any shells had crossed the sea boarder between the two countries that are still officially in a state of war following the 1953 cease fire that brought an end to the Korean War.
In terms of the financial implications as a result of the shelling, the Asian markets on Wednesday are likely to be volatile, especially in Japan, which is closed today. Seeking to boost confidence, Finance Minister Yoon Jeung Hyun said the shelling would have limited impact on the economy, according to Yonhap News.
North Korea has previously fired missiles over Japanese territory and several Japanese cities remain within close reach of North Korean artillery. The South Korean cabinet are also meeting at present in secure bunkers to discuss the likely impact of the skirmishes on the Korean Won, which is steadily losing value, and the KOSPI 100, South Korea’s benchmark stock index. China and Hong Kong are also likely to take a beating as China is wary of any escalation resulting in a flood of refugees across the border with North Korea should matters continue to deteriorate.
“I suspect this is a one-off action designed to attract attention to North Korea,” said Chris Devonshire-Ellis, a member of the business advisory council for the Greater Tumen Initiative, the United Nations body responsible for the region. “The country fears it is being ignored and wants the United States to return to six party talks over disarmament. It may be trying to accomplish this by creating problems with the South near its borders as we saw earlier with the sinking of the South Korean naval ship Cheonan earlier in the year. North Korea has a habit of utilizing confrontational behavior to gain attention and this latest incident appears to be following that pattern. I would be surprised if this escalates further, although the South Koreans must be feeling rather vulnerable right now.”
One of the immediate effects, although probably recoverable, will be a weakening in the stock markets. The South Korean won may remain depressed for a while, a fact that will almost certainly be noticed by the North Koreans. China meanwhile is urging restraint, and no doubt will be in high-level discussions with the North Korean leadership over this latest skirmish. Such incidents do not tend to sit well with the Chinese either, although their own policy is patience, rather than aggressiveness.
China would almost certainly be called into a conflict with the South, Beijing not especially favoring a reunited Korea backed by the United States, as it brings the United States up against its borders. Neither however does Beijing want to be pressurized by North Korea to provide military support as it would end up in a position against the United States. How China plays its hand with the North Koreans has extensive repercussions for the country.
The likely outcome to all this will be a resumption of the six party nuclear talks, and the provision and resumption of previously suspended aid.
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