China May Shield North Korea as Lee, U.S. Seek Action

South Korea’s government is prepared to omit sanctions from any United Nations action against North Korea over the sinking of a warship, a concession that may ease tension and help head off Chinese opposition.

South Korea expects China to maintain a “strategic ambiguity” over whether its ally sank the 1,200-ton Cheonan, though it is unlikely to openly block attempts to bring the case to the UN Security Council, a South Korean official said today, speaking on condition of anonymity. The council passed a statement condemning North Korea’s launching of a ballistic missile over Japan in April 2009, imposing sanctions a month later after the country’s second nuclear test.

China hasn’t followed South Korea, Japan and the U.S. in blaming North Korea for the March 26 sinking, which killed 46 sailors. The North has threatened “all-out war” if it faces any punitive action over the sinking, including the imposition of new UN sanctions.

Chinese Premier Wen Jiabao is due to meet with South Korean President Lee Myung Bak today in Seoul before a three-way summit with Japan’s Yukio Hatoyama on the resort island of Jeju.

The Chinese government has called for restraint and said it is still considering evidence from all sides following a May 20 report by a panel of international experts that concluded North Korea was to blame.

The older generation of Chinese leaders are still fixed to their alliance with the North, the Korean official said. That allegiance was forged on the battlefield during what was known in China as the “Resist American, Support Korea” war from 1950-1953.

Old Allies

Wen met with North Korean leader Kim Jong Il earlier this month in Beijing, when the government offered help and advice on how to develop along Chinese lines. North Korea’s economy has been crippled by UN trade sanctions, failure of crops and mismanagement, while China’s market-oriented reforms have put it on course to overtake Japan as the world’s second-biggest economy this year.

China wants to avoid a conflict on the Korean peninsula, and is concerned that taking South Korea’s side may provoke North Korea into further escalations and even lead to war, Shen Dingli, vice dean of the Institute of International Affairs at Shanghai’s Fudan University, said earlier this week.

China has a big stake in stability in Northeast Asia. Japan and South Korea are China’s third- and fourth-biggest trading partners after the European Union and the U.S., with combined two-way trade reaching $485.1 billion in 2009, Chinese customs figures show.

Falls Into Chaos

“If our region falls into chaos it will undermine the interests of all parties concerned,” Vice Foreign Minister Zhang Zhijun said earlier.

South Korea’s navy yesterday began exercises off its western coast, including anti-submarine operations involving the firing of depth charges, a military official said. About 10 warships are participating in the two-day drill, the official said, asking not to be identified because of security concerns.

South Korea, Japan and the U.S. want the North to acknowledge its responsibility for the incident. An international panel on May 20 concluded North Korea was behind the attack. South Korea wants China to acknowledge the findings.

“They won’t be able to ignore the truth,” South Korean Foreign Minister Yu Myung Hwan said this week at a joint press conference with U.S. Secretary of State Hillary Clinton in Seoul. President Lee said on May 24 that “no responsible country in the international community will be able to deny the fact that the Cheonan was sunk by North Korea.”

Japan Next

Wen will fly to Japan on May 30 and meet with Hatoyama the next day.

China may be willing to condemn the sinking of the Cheonan in a United Nations Security Council resolution provided that North Korea is not singled out for blame, Shen said. Such an outcome may end the cycle of escalation, he said.

Kim’s regime, which has been relying on handouts since the mid-1990s, is suffering from worsening shortages of goods after its botched currency revaluation late last year. Academics including Rudiger Frank, professor of East Asian Economy and Society at the University of Vienna, said that was aimed at rolling back an experiment with free markets that had loosened the state’s control over jobs, food and patronage.

The UN World Food Program said this month its food aid to North Korea will run out by the end of next month.

UN sanctions imposed on North Korea after its second nuclear test caused the country’s international commerce to shrink 9.7 percent last year, according to Seoul-based trade agency, Kotra. The North doesn’t release its own trade figures.

To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net

A combination photograph shows Wen Jiabao, China's premier, speaking at a news conference in Beijing, Lee Myung Bak, South Korea's president, speaking at the 2010 World Economic Forum (WEF) annual meeting in Davos and Yukio Hatoyama, Japan's prime minister, speaking during a news conferencein Tokyo. Photographer: Nelson Ching (Wen), Andrew Harrer (Lee) and Katsumi Kasahara (Hatoyama) /Bloomberg