Seoul, November 24, 2010--In wake of North Korea's artillery bombardment of the South Korean island Yeonpyeong on Tuesday November 23, the nation is at ThreatCon Bravo, peninsula wide. Analysts are referring to this situation as 'a pattern of aggressive actions' by the communist government when it feels under stress or threatened.
The South Korean military went to "crisis status" and threatened military strikes to the North after they fired dozens of shells at the South Korean island, killing two South Korean soldiers and setting off an exchange of fire in one of the most serious clashes between the two sides in decades. The South Korean Defense Ministry said that in addition to the two soldiers who were killed, 15 soldiers and 3 civilians were wounded.
The chief presidential spokesman, Hong Sang-pyo, commented that President Lee Myung-bak would assure "a strenuous retaliation" if there was any further provocation, as the government officials met with security-related ministers and senior aides in the underground situation room at the Blue House.
The official North Korean news agency said in a brief statement on Tuesday night that the South "recklessly fired into our sea area." The attack on Yeonpyeong came as 70,000 South Korean troops were beginning an annual nationwide military drill called 'Safeguarding the Nation'. The exercise has been harshly criticized by Pyongyang as "simulating an invasion of the North" and "a means to provoke a war." American officials said the South's military exercise had been announced well in advance, and should not have come as a surprise to the North.
Yeonpyeong Island sits just two miles from the Northern Limit Line, the disputed sea border which the North does not recognize, and only eight miles from the coast of North Korea. A garrison of roughly 1,000 South Korean marines and nearly 1,600 civilians occupies the island; fishermen make up most of the civilians there. This incident instigated over 200 residents to flee by ferry or fishing boat from Yeonpyeong Island to the mainland town of Incheon, South Korean news media reported.
Artillery conflicts between the two countries have not been unusual in recent years, but Pyongyang's attack on a civilian-populated target was different from previous moves. Their already tense relations have worsened causing what John Swenson-Wright, an expert with the Royal Institute for International Affairs calls "a serious escalation." Although the North and South have clashed at sea before, most notably was the sinking of South Korea's warship, the Cheonan, which resulted in the killing for 46 sailors in March 2010. If the sinking was the work of the North, it would be the most lethal military attack since the end of the Korean War in 1953.
What will this latest "crisis status" do to the economy Recently we have been seeing U.S. dollar rates decline, reaching closer and closer to being one-to-one (or as close as we can get) with the Korean won. Tuesday's attack came too late to affect the South Korean KOSPI stock market, but next day outcomes showed that the won took a beating, experiencing its biggest one-day drop in several months and touching a three-month low of KRW1,170/US$ at one point, from KRW1,126/US$ at the open.
This is a blow to South Korea's otherwise booming economy, one that might have credit rating consequences. Shares on Wall Street have declined since last night's heightened uncertainty over the conflict in Korea in addition to the debt crisis in Europe which has sent investors fleeing for safer assets. Traders have been confronted with tensions on two continents. The "economic war room" South Korea's finance ministry has set up is a 24-hour emergency financial monitoring system. Officials say they are scrutinizing Korean indexes and any moves by credit rating companies and investors. Hopefully South Korea is conscious of the impact of conflict on its financial markets and its position as Asia's fourth-biggest economy.
As a foreigner here in Korea, the decline of the U.S dollar or an increase in the Korean won, whichever would come first, is what I've been waiting for; as most of us send money to our native countries to pay for, or pay off X, Y and Z, I'm sure you can empathize. This sharp influx keeps us waiting again, but fortunately the recent circumstances have prompted the central bank to announce that it would act to stabilize the markets if necessary. As a whole, when you combine tensions in Korea, debt worries in Europe, hedge fund investigations, and a weak housing report; there's a tremendous amount of bad news to absorb. That's not going to encourage a risky appetite for the populace.
