Monday, July 13, 2009

How might events unfold in North Korea Post Kim?

North Korean leader Kim Jong-il reportedly has pancreatic cancer and the illness is life-threatening, South Korean broadcaster YTN said on Monday based on information gathered by Chinese and South Korean intelligence sources. Along with his stroke last August, all this raises questions about the longevity of the regime in Pyongyang.

Following are scenarios Reuters puts forth:

1. SMOOTH TRANSITION

The longer Kim lives and remains in reasonable health, the greater the chance of a smooth transition of power to his youngest son, Kim Jong-un, 25. Kim junior is also believed to have the backing of Jang Song-taek, effectively the country's number 2 leader.

2. MESSY TRANSITION

The early death or incapacitation of Kim would complicate the transition. Given his youth, inexperience and the fact few North Koreans even know of his existence, it is hard to see Jong-un taking over in the near future. That puts the onus on the elite to manage the transition. North Korea could become even more bellicose to build internal support.

3. MILITARY TAKES OVER

The sudden death of Kim Jong-il could prompt a military coup. The Council on Foreign Relations said a military coup was possible. A coup would be bearish for financial markets given that the military is seen as a prime backer of recent belligerence.

4. COLLAPSE OF THE STATE

Economic disintegration or a protracted leadership crisis could lead to North Korea's collapse, sending millions across the border into the wealthy and more populous South or across the more open northern border with China. For South Korea, this would wreck its economy and create social upheaval. South Korean estimates have said it would cost $1 trillion or more to absorb the North. Financial markets in Seoul would plunge given how expensive and messy such a transition could be.

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