North, South Korea agree to official talks

SEOUL: North and South Korea agreed in principle Thursday to hold their first official talks for years, signaling a possible breakthrough in cross-border ties after months of escalated military tensions.

A surprise offer from Pyongyang proposed discussions on a range of commercial and humanitarian issues from reopening a joint industrial complex to resuming cross-border family reunions.

The South replied within hours, with the Unification Ministry saying it viewed the offer "positively" and would announce a date, venue and agenda later.

"We hope that South and North Korea can build trust through this opportunity," the ministry added.

Analysts welcomed the development but some advised caution, saying the precise nature and agenda of the dialogue might create insurmountable sticking points.

"I think this is an attempt by the North to seize the initiative, but it's premature to say whether the offer is likely to lead to a sincere dialogue," said Yang Moo-Jin, a professor at the University of North Korean Studies in Seoul.

Official contacts between Seoul and Pyongyang have been essentially frozen since South Korea accused the North of torpedoing one of its warships in March 2010 with the loss of 46 lives.

April and May this year saw tensions soar to worrying levels as the North, angered by joint South-US military drills and UN sanctions imposed after its nuclear test in February, threatened pre-emptive nuclear strikes.

The situation has calmed in recent weeks, with both sides circling warily around the idea of opening some sort of dialogue.

The North's proposal, carried in a statement from the Committee for the Peaceful Reunification of Korea (CPRK), said the venue and date for talks "can be set to the convenience of the South side".

Initial subjects for discussion would be the Kaesong joint industrial zone, which was closed at the height of the recent tensions, and the resumption of cross-border tours to the North's Mount Kumgang resort, the CPRK said.

Humanitarian issues such as reuniting family members separated after the 1950-53 Korean War could also be discussed.

The CPRK said a positive response would see the North consider rolling back measures it took when relations went into a tailspin in April, including restoring a cross-border hotline.

South Korea had already offered working-level talks on Kaesong and Seoul is likely to be wary of agreeing to a much wider-ranging agenda.

While President Park Geun-Hye has spoken of the need for dialogue, she has made it clear -- with US backing -- that substantive talks would require the North to show commitment to abandoning its nuclear weapons programme.

Pyongyang has repeatedly insisted that its nuclear deterrent is not up for negotiation.

"There could be some trouble in setting the agenda, and it's natural to doubt North Korea's sincerity," said Paik Hak-Soon, an analyst at the Sejong Institute think-tank in Seoul.

"But this a typically strategic change of direction by the North, which puts the ball in the South's court and I think it presents a genuine opportunity," Paik said.

The Kaesong complex, established inside North Korea in 2004, was the most high-profile casualty of the recent tensions.

Born out of the "Sunshine Policy" of inter-Korean reconciliation initiated in the late 1990s by South Korean president Kim Dae-Jung, Kaesong was a crucial hard currency source for the impoverished North, through taxes and revenues and its cut of workers' wages.

Operations at the complex ground to a halt after the North pulled all its 53,000 workers out in early April. The South withdrew its managers and officials soon afterwards.

The Mount Kumgang resort, developed by the South's Hyundai Asan company, opened in 1998 as a symbol of reconciliation. It once earned the North tens of millions of dollars a year.

But Seoul suspended tours by its citizens after a North Korean soldier shot dead a South Korean housewife there in July 2008. In response the North scrapped a deal with Hyundai Asan and seized its properties there.

Hundreds of thousands of family members were separated by the Korean War, and the last temporary reunions, arranged by the two Koreas' Red Cross authorities, took place in 2010.

Nearly 80,000 people in the South alone are on the waiting list for reunions should they be resumed.

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The South China Sea is an important world energy trade route

April 4, 2013

Stretching from Singapore and the Strait of Malacca chokepoint in the southwest to the Strait of Taiwan in the northeast, the South China Sea is one of the most important energy trade routes in the world. Almost a third of global crude oil and over half of global liquefied natural gas (LNG) passes through the South China Sea each year.

The Strait of Malacca is the shortest sea route between African and Persian Gulf suppliers and Asian consumers. The strait is a critical transit chokepoint and has become increasingly important over the last two decades. In 1993, about 7 million barrels per day (bbl/d) of oil and petroleum products (20% of world seaborne oil trade) passed through the Strait of Malacca, according to the Center for Naval Analysis. EIA estimates that by the end of 2011, trade through Malacca was greater than 15 million bbl/d, or about one-third of all seaborne oil. In comparison, the world's most important chokepoint for maritime transit, the Strait of Hormuz between the Persian Gulf and Arabian Sea, had an oil flow of about 17 million bbl/d in 2011 (see World Oil Transit Chokepoints). Average daily oil consumption worldwide in 2011 was about 88.3 million bbl/d.

A significant amount of crude oil arriving in the Strait of Malacca (1.4 million bbl/d) goes to terminals in Singapore and Malaysia instead of continuing on to the South China Sea. After processing, this crude oil is shipped out again to Asian markets through the South China Sea as refined petroleum products, such as motor gasoline and jet fuel. The rest of the crude oil passes through the South China Sea to China and Japan, the two largest energy consumers in Asia. Finally, about 15% of crude oil moving through the South China Sea goes on to the East China Sea, mostly to South Korea.

Crude oil flow in the South China Sea also comes from intraregional trade, particularly from Malaysian, Indonesian, and Australian crude oil exports. Intraregional trade is distributed evenly among Singapore, South Korea, Japan, and China, with smaller amounts going to other Southeast Asia countries.

The South China Sea is also a major destination for LNG exports. About 6 trillion cubic feet (Tcf) of liquefied natural gas, or more than half of global LNG trade, passed through the South China Sea in 2011. Half of this amount continued on to Japan, with the rest of it going to South Korea, China, Taiwan, and other regional countries. Almost 75% of all LNG exports to the region came from Qatar, Malaysia, Indonesia, and Australia.

With growing demand for natural gas in East Asia, the South China Sea's share of global LNG trade will likely increase in the coming years. Moreover, Japan has increased its LNG imports to replace the energy lost from nuclear power outages following the Fukushima crisis. Much of the new supply will come through the Strait of Malacca, although some countries like Indonesia are investing in their own LNG export capacity.

Finally, large quantities of coal from Australia and Indonesia, the world's two largest coal exporters, pass through the South China Sea to markets around the world, especially to China, Japan, and India. These coal shipments include both steam coal used for generating electricity and process heat as well as metallurgical coal that is a key ingredient in primary steel production.

For more information, see the South China Sea Regional Analysis Brief.

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Video: GM's Akerson mulling South Korea exit options due to North Korean tensions [w/video]

Dan Akerson, CEO of General Motors, says his company is making contingency plans to move workers from South Korea should tensions escalate further between that country and North Korea. While speaking in an interview on CNBC's Squawk Box, Akerson said, "We are making contingency plans for the safety of our employees to the extent that we can."

The executive also touched on production. GM has over 17,000 workers across five plants in South Korea, which produce around 1.3 million vehicles per year for export. Those include the Chevrolet Spark subcompact sold in North America. The factories also produce 145,000 vehicles for the South Korean Market.

Akerson says that GM can't shift production out of South Korea quickly, but that if the region continues to destabilize due to North Korean saber rattling, the company may have no choice but to consider shifting its operations out of the region as part of long-term planning. He also makes it clear that any issues in South Korea could have wide-ranging impacts on the global automotive industry as a whole. You can watch the interview for yourself below.

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