Latest provocation aimed at improving negotiation position

By Kim Jae-kyoung

SINGAPORE -- North Korea's latest test of an intercontinental ballistic missile (ICBM) aims to get an edge over the U.S. and its rivals in a negotiation, S&P Global Ratings said, Wednesday.

In its analysis report on North Korean provocations, the global ratings agency said that North Korea "wants a peace" and seeks to "avoid a military conflict with the U.S.," wary that it could lead to regime change.

The report came right after Pyongyang fired an apparent ICBM from an area north of Pyongyang early Wednesday, resuming its provocations after a 75-day lull. The missile flew some 960 kilometers at an apogee of around 4,500 km.

The government said that it was apparently fired at a lofted angle, and if done at a standard one, it could have gone over 10,000 km, given its maximum altitude, which means that it could reach the U.S. mainland.

"These moves appear calculated to improve North Korea's negotiating position with its international rivals," said KimEng Tan and YeeFarn Phua, both based in Singapore.

"Consequently, we see a low likelihood that the country will raise tensions to a degree that makes an outright military conflict likely."

In their view, the Kim Jong-un regime is aware that a real fight with the U.S. will likely lead to regime change even as it brandishes its missile and nuclear capabilities.

According to their analysis, heavy investments in these advanced weapons and a weak economy leaves little funding for the country's conventional armed forces, and what the conventional armed forces get is disproportionally allocated to a small number of elite units.

"This leaves much of the country's large standing army poorly equipped, and large-scale military exercises are rare," they said.

"For this reason, triggering a war on the Korean peninsula could cost the regime its rule of the country," they added. "This also means that we see little likelihood that the North Koreans will use a long-range nuclear missile even if it is successful in developing the weapon."

Against this backdrop, they said that S&P has no plans to take negative ratings actions on sovereign ratings of South Korea and its neighboring countries.

Possibility of war increases

However, the two analysts said that the latest provocation has raised the possibility of a U.S. military action in response to another missile or nuclear test.

They expect that Pyongyang's such strategy could backfire with disastrous consequences for regional stability in Asia.

"The threat of a nuclear strike is adding greater urgency to how the U.S. views North Korea's nuclear development; any miscalculation in further provocations could lead to war," they said.

They pointed out that the North Korean leadership risks over-reaching in a future provocation if it does not appreciate this change.

"While still very unlikely, the possibility of a U.S. attack on North Korea in response to a future provocation has increased," they said.

"If conflict becomes significantly more likely, the sovereign ratings on a number of countries could be negatively affected."