Today North Korea put their medium-range missiles on combat alert and repeated threats against US military bases including in South Korea, Guam, and Hawaii. The US Defense Department sent a strong signal by flying two nuclear-capable B-2 Stealth Bombers over South Korea in training exercises, and through comments to the press by the Defense Secretary that indicate a readiness for conflict should that be necessary. A Defense Department spokesman softened those comments by reiterated that the US seeks to deescalate tensions, and that the important goal is to stay ahead of North Korea in terms of its capability to marry a nuclear warhead with a missile delivery vehicle (CNN). However, a potentially greater threat from North Korea is an unconventional or terrorist delivery of nuclear or other weapons of mass destruction (WMD). Were a nuclear device to explode in a major port city, for example, it would likely cause up to one trillion dollars of damages, 500,000 deaths, and $40-70 billion in trade losses  (Bloomberg. Congressional Research Service).

It is unlikely that the North Koreans would follow-through on their most recent threats, and unlikely that were they to try, a missile strike would be effective. The North Koreans are having difficulty with the technical challenges of component miniaturization that would allow them to place a nuclear warhead on a missile. To stave off such an attack in the future, the US must nevertheless maintain robust intelligence, deterrent, and preemptive strike capabilities. North Korea could provide us with an unpleasant surprise. Saddam Hussein surprised the world in 1990 with the progress he had made towards achieving nuclear status, and there is much more technological improvement in rogue state nuclear capabilities twenty years later.

China and Russia are likely sharing, to a limited extent, nuclear technologies with Pakistan, Iran, and North Korea. These rogue states are likely sharing with each other as well. This sharing does not necessarily have to be state-sanctioned. A poorly-supervised agency within a rogue state would have the capability to proliferate nuclear or other WMD technologies without the knowledge of its government. Many individual scientists or government officials in these corrupt countries, if offered sufficient incentive, would likely be willing to share technological expertise or hardware necessary for the making of blueprints or reverse-engineering.

Staying ahead of North Korean improvements is a challenging task, and risky. As Defense Secretary Donald Rumsfeld famously said,  “There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say, we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know.” (Press Briefing, February 12, 2002)

The risk is not only that North Korea has a nuclear delivery capability about which we are unaware, but that they could be considering unconventional approaches to delivery. These approaches could include smuggling a nuclear weapon into the United States, Japan, or South Korea. Radiation detection used on all containerized cargo coming into the United States does not effectively detect nuclear materials encased in lead. X-ray scanning, which might detect such encased materials, is only used on 4% of the highest-risk cargo inbound to the United States. The Department of Homeland Security has found it impractical to implement a 2007 Congressional mandate to scan 100% of incoming containerized cargo  (Bloomberg). Implementation of scanning and detection technologies is currently insufficient to guard against nuclear terrorists or rogue states that use containerized cargo as a delivery vehicle.

North Korea could also simply drive nuclear materials and components across the Canadian or Mexican borders, or smuggle them on fast boats from a nearby Latin American country. Such components can be reassembled once in the United States.

Finally, North Korea is in a unique position to use biological weapons of mass destruction. Often referred to as a hermit kingdom, North Korea has the world’s strictest restrictions on immigration and emigration. This makes them relatively invulnerable to blowback from a biological WMD. The most dangerous biological weapons are highly contagious. Contagion through humans is the delivery vehicle. Thus a strong disincentive for use of biological weapons by non-secluded states is the danger that the contagion will spread to one’s own country. This applies to a much lesser degree for North Korea. Biological weapons have the advantage over nuclear weapons in that they cannot be detected by radiation detectors or x-ray scanners, can be produced by small teams of bio-chemists with relatively ordinary lab equipment, and would be easily smuggled in containerized cargo. North Korea certainly has the capability to construct such weapons, and Defense Secretary Rumsfeld’s “unknown unknowns” applies. Finally, unconventional delivery of WMD has the advantage over missile delivery for North Korea in that its origin is less traceable.

The United States came close to a preemptive strike against North Korean nuclear capabilities in the 1990s. While there are certainly risks of retaliation against regional US bases and allies, such a strike is still on the table as a policy option. It could have a salutary demonstration effect for other rogue states and proliferators, including Iran and Pakistan. The option of waiting, and continued technological development by a belligerant and immature North Korea, could make it impossible to take such actions in the future.

The Wall Street Journal reported today that a North Korean closure of the Kaesong Industrial Complex would be a signal of increased probability of hostilities with South Korea. North Korea hosts the industrial complex a few miles within its boundary, where approximately 50,000 North Koreans work for 123 South Korean companies. On an average workday, about 120 South Korean managers cross the border into the complex. South Korean companies operating in the complex pay $80 million in cash wages directly to the North Korean government, and conduct approximately $2 billion worth of North Korean trade. This is a significant amount considering North Korea’s largest trading partner, China, yields only $6 billion worth of trade. The complex is a source of inexpensive labor for South Korea, rare US dollars for North Korea, and a foundation for pan-Korean economic and political cooperation (Reuters, WSJ).

North Korean threats and provocations are primarily bluster and bluff meant to elicit talks and appeasement payouts from the west. North Korean closure of the Kaesong Industrial Complex would be no different.

More informative signals would be: 1) South Korean closure of the border crossing, or 2) North Korean capture of South Korean complex workers by abruptly closing the border. The first of the two scenarios would indicate that South Korea believes hostility is imminent. The hostility could include the second scenario, or more seriously but less likely, a North Korean attack on South Korea. The capture of South Korean complex workers would be the most serious Korean crisis since 2010, when North Korea sunk a South Korean naval vessel and shelled a South Korean island. It would likely lead to US and Chinese-mediated negotiations, a payout to North Korea, and a definitive end to North Korea’s access to trade through the Kaesong Industrial Complex. Not North Korean, but South Korean closure of the border, is the signal to watch.

Today Fitch Ratings upgraded the Philippines to investment-grade, which will substantially increase investment in the country. Expect particularly strong growth in electronics and textiles, which will buttress current export strengths in electronic assembly and garments.

Update 5/22/2013: The Philippines obtained the #3 position in foreign investment among South-East Asian countries so far in 2013 (WSJ).

French Foreign Minister Laurent Fabius recently indicated that development would be a priority in Mali as a counterinsurgency strategy. The theory is that after winning the war, an infusion of development funding will solidify gains among the population and strengthen their resolve against Islamist rebels. French and Malian officials are currently in Lyon, France, discussing details of 300 projects that will focus on water, health, education, and job training (BBC, EuroNews).

While providing development to impoverished Malians is intuitively good, the likely small scale of the overall project, combined with its implementation in a conflict zone, pose complications and could even lead to confounding effects. Mali has an overall population of 15.5 million sharing a GDP of $9.6 billion ($619 per capita) (CIA Factbook). While the amount of development funding planned by France has not been revealed, development funding in Afghanistan can be used as a point of comparison: $62 billion over ten years from 2002-2011 (National Defense University), or about $200 per person per year. An equivalent development level for Mali would require $3.1 billion for 2014 alone, which is unlikely given the state of France’s economy.

The impact of $200 of funding per person per year in Mali could actually be negative. Twenty-five percent is probably lost to legitimate administration. Through corruption, government officials could absorb 5-15% of the remaining funding. Through extortion, Islamist rebels could “tax” the development contractors doing the actual construction or service delivery in Northern Mali. This could provide them with access to scarce cash necessary to take their rebellion to a more lethal level. Finally, populations with heightened expectations from advance hearsay of the development projects could have those expectations dashed by the inadequacy of those projects once they reach the villages. While a nice gesture, whatever development funding remains after administration, corruption, and extortion costs (about $120 per capita by my calculation) may seem stingy to a Malian villager who is now intimate with the French rolling around in million-dollar armored vehicles, and streaking across the sky in jets.

On March 15, 2011, popular protests erupted in Syria as part of the Arab Spring. The Syrian regime brutally suppressed the protests, which grew into armed opposition and civil war. President Bashar Hafez al-Assad’s Ba’athist government fought against a splintered but militant opposition. The United Nations tracked atrocities committed on both sides, including more than 70,000 killed (CNN).

Assad obtains most of his political support from the authoritarian regimes in China, Russia, and Iran. The Arab League previously supported him, but as the atrocities mounted, now supports the opposition. There is substantial public support for action against the Syrian regime in the United States, France and Britain. The types of action palatable to the voting public in the United States and Britain, weary of wars in Iraq and Afghanistan, do not include intervention. The public in newly-interventionist France does support deploying United Nations troops to Syria. All three countries support economic sanctions, and there is increasing support for supplying opposition groups with military materiel  (Council on Foreign Relations). Political leadership in the United States, France and Britain are responding with proxy war proposals consistent with this public opinion.

Expect limited military materiel support to Syrian rebels from the US, Britain and France in the near future. Due to insufficient public support, this will not include deployment of troops, and will only be sufficient to prolong — not win — the war. Over time, limited and therefore ineffectual military support may lead to increasing public support for deployment. If deployment occurs, expect a quick apparent win by the opposition, which turns into a long (5-15 years) and expensive period of nation-building and civil war as in Iraq and Afghanistan. Increased western military expenditures will improve yields in the defense sector, but increase government debt and taxes. Expect lower economic performance overall as defense expenditures aimed at Syria increase.

Opposition groups that will immediately benefit from western intervention in Syria will solicit such intervention in the short term. However, public opinion in Islamic countries find western intervention highly disagreeable, as do China, Russia and Iran. Expect increased global tensions and Islamic terrorism from western intervention in Syria. Expect Syrian opposition groups to quickly spurn their western benefactors as soon as military and other aid ends.