U.S. Pacific Commander Calls North Korea a ‘Clear’ Threat

North Korea’s development of nuclear weapons and long-range missiles poses a “direct threat” to the U.S. and its allies, a top U.S. military commander plans to tell Congress today amid rising tensions on the Korean peninsula.

The situation, fanned by hostile rhetoric from dictator Kim Jong Un, “creates an environment marked by the potential for miscalculation” and military escalation, Admiral Samuel Locklear, the head of the U.S. Pacific Command, said in prepared testimony for a Senate Armed Services Committee hearing.

Efforts by Kim’s regime to build and test nuclear weapons and ballistic missiles violate United Nations Security Council resolutions and “represent a clear and direct threat to U.S. national security and regional peace and stability,” Locklear said in his testimony.

North Korea’s threats to carry out pre-emptive nuclear strikes against the U.S. and South Korea have fueled a crisis atmosphere in the region and prompted calls for dialogue. South Korean shares fell yesterday for the sixth straight day, the won tumbled and credit risk surged as the South Korean government said Kim’s regime may be ready to conduct a nuclear test or missile launch as early as this week.

Locklear’s remarks follow a prediction by the chairman of the U.S. House intelligence panel, Representative Mike Rogers, that North Korea is likely to carry out a small military attack to try to burnish Kim’s domestic image.

“I do think there will be some small skirmish before this is over,” Rogers, a Michigan Republican, said in an interview yesterday at Bloomberg News headquarters in New York.

Previous Flare-Ups

A military strike may be similar to previous flare-ups such as North Korea’s sinking of a South Korean ship in 2010 or a later artillery attack on the border island of Yeonpyeong, Rogers said.

North Korea is also ready to conduct a fourth underground atomic weapon test at its Punggye-ri site, after carrying out its third on Feb. 12, according to South Korean Defense Ministry spokesman Kim Min Seok. National security chief Kim Jang Soo said April 7 the North may stage a provocation including a ballistic missile test around April 10.

While North Korea has intensified its threats, the U.S. and South Korea have said they’ve seen no unusual military movements suggesting preparations for war. North Korea is incapable of hitting the U.S. with a nuclear missile, and its chances of winning a second war with South Korea and the U.S. are poor, according to Joseph Bermudez, a military analyst who has studied North Korea’s strengths and weaknesses.

Industrial Complex

Locklear’s appearance today will be his first before the armed services panel since the crisis erupted last month. Citing the tensions, the U.S. commander in South Korea, General James Thurman, canceled his plans to testify this week.

North Korea said yesterday it will suspend operations indefinitely at a jointly run industrial complex. Workers are being recalled from the Gaeseong industrial park, the official Korean Central News Agency said.

South Korea sees no unusual North Korean troop movements near the complex, said a Defense Ministry official who declined to be named, citing ministry policy. Suspending work at the complex would eliminate a source of hard currency for Kim Jong Un’s impoverished regime as well as the last link of exchange between the two countries.

“The value of Gaeseong is not in the value of the products made there, but as a deterrent against war,” said said Koh Yu Hwan, a North Korean studies professor at Dongguk University in Seoul. “This is the most serious the situation there’s ever been since Gaeseong started operating” in 2005.

Sliding Won

The crisis has weighed on financial markets. South Korea’s won slid to its weakest level in eight months as the heightened risk of conflict spurred foreign fund outflows. The currency closed down 0.8 percent at 1,140.15 per dollar. The benchmark Kospi index of shares declined 0.4 percent, and has fallen 4.3 percent this month.

The Kospi 200 Volatility Index, a measure of the cost to protect against equity losses, slid 1.2 percent yesterday after surging 11 percent April 5. International investors unloaded $3.1 billion of South Korean shares this year, the most among 10 markets tracked by Bloomberg.

Five-year swaps used to protect against a default by South Korea rose 2.7 basis points, or 0.027 percentage point, to 87.7 basis points, the highest level since Sept. 26 based on New York prices compiled by Bloomberg. South Korea’s five-year credit default swaps have surged 78 percent over the past month, the third-biggest jump by percentage after Finland and Denmark among countries tracked by Bloomberg.

‘Integrated Response’

In Washington yesterday, Deputy Defense Secretary Ashton Carter said “the United States remains steadfast in its defense commitments” to South Korea, including extending the U.S nuclear umbrella to its ally.

“We are working with our friends and allies around the world to employ an integrated response” to North Korea’s “unacceptable provocations,” Carter said in a speech at the Center for Strategic and International Studies, a Washington policy group. “We’re in close contact with our South Korean civilian and military counterparts, as well as with the governments of Japan, China and Russia.”

American officials are looking to China, North Korea’s biggest trading partner, to use its economic and political clout to rein in Kim and prevent an armed conflict. U.S. Secretary of State John Kerry travels to Asia this week to meet leaders from South Korea, China and Japan.

Negotiations are “the only effective solution,” Chinese Foreign Ministry spokesman Hong Lei told reporters yesterday in Beijing, adding his government wants to see tensions ease.

“I do think that China could play, and I wish they would play, a larger role in influencing the North Koreans to stop the provocations,” Carter said. “China has more influence than any other country over North Korea.”

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