De-escalation? Trump Says Military Action In North Korea "Not His First Choice"

In yet another attempt at de-escalation by the US, moments ago as president Trump was leaving the White House, he responded to a reporter question on whether there will be military action in North Korea, saying that "it"s not his first choice", but adding that "we"ll see what happens."

• TRUMP: WILL HAVE TO SEE WHAT HAPPENS WITH NORTH KOREA


• TRUMP: MILITARY ACTION IN NORTH KOREA NOT FIRST CHOICE

NEW: On military action in North Korea, President Trump tells me it"s not a first choice, but "we"ll see what happens."

— Trey Yingst (@TreyYingst) September 6, 2017

The announcement prompted a modest relief rally in the USD, as well as a knee jerk reaction across other markets, with gold and Treasurys both ticking lower, while the USDJPY has rebounded by 25 pips to just shy of 109.00.

And some other comments further hinting at descalation:

• TRUMP LEAVING WH SAYS TO REPORTERS HAD "VERY FRANK & VERY STRONG CALL" WITH CHINA"S XI JINPING

Earlier in the day, Xinhua elaborated on the phone call, making it clear that China will not allow a non-peaceful resolution of the North Korea crisis.

• CHINA TO STICK TO TALKS, PEACEFUL MEANS ON KOREA ISSUE: XINHUA


• XI PERSISTENT ON DENUCLEARIZATION ON KOREAN PENINSULA: XINHUA


• XI, TRUMP EXCHANGE VIEWS ON KOREAN PENINSULA OVER PHONE: XINHUA

More from Reuters:

Korean Peninsula nuclear issue through talks and peaceful means, Chinese President Xi Jinping told U.S. President Donald Trump in a telephone call on Wednesday. 

Washington and its allies have said there is a growing urgency for China, North Korea"s top trading partner, to apply more pressure on its already isolated neighbour to get it to back down on its nuclear weapons and missiles programmes. China "unswervingly" works to realise denuclearisation on the Korean Peninsula and to safeguard the international nuclear non-proliferation system, Xi told Trump, according to a statement from China"s Foreign Ministry. 

"At the same time, we always persist in safeguarding peace and stability on the Korean Peninsula and resolving the issue through dialogue and consultation," Xi said. "It is necessary to stay on the path of a peaceful solution." 

Xi also said that China attaches importance to Trump"s visit to China later this year.

The statement cited Trump as saying that the United States was deeply concerned about the Korean nuclear issue and that it valued China"s "important role" in resolving the problem.  U.S. Ambassador to the United Nations Nikki Haley accused North Korean leader Kim Jong Un on Monday of "begging for war" and urged the Security Council to impose the "strongest possible" sanctions. 

It is unclear if China will back further sanctions. Beijing fears that completely cutting off North Korea could lead to its collapse, unleashing a wave of refugees into China"s northeast. China accounted for 92 percent of North Korea"s trade in 2016, according to South Korea. China"s foreign ministry said on Tuesday it would take part in Security Council discussions in "a responsible and constructive manner".

China and Russia have advocated a plan in which the United States and Seoul stop major military drills in exchange for North Korea halting its weapons programmes, but neither side is willing to budge.

Trump and Xi last spoke by telephone on Aug. 12. The White House said in a statement at the time that their relationship was "extremely close" and "will hopefully lead to a peaceful resolution of the North Korea problem." 

But tensions in China-U.S. ties have increased since Trump took office, with the U.S. president having authorised an investigation into China"s alleged theft of intellectual property, and suggesting trade relations would be linked to Beijing"s help on North Korea.

China Slams Trump's Trade Threat As "Unacceptable"

An angry China slammed President Trump"s threat on Monday to cut off trade with countries that deal with North Korea, as "unacceptable" and "unfair." As a reminder, following Sunday"s nuclear test by North Korea, Trump threatened to increase economic sanctions and halt trade with any country doing business with North Korea, a threat he has used before without following through. That list would include China, the U.S.’s biggest trading partner, which accounted for about a sixth of its overseas commerce.

The United States is considering, in addition to other options, stopping all trade with any country doing business with North Korea.

— Donald J. Trump (@realDonaldTrump) September 3, 2017

The comments were seen as a not-so-veiled warning to China, Kim"s closest ally and commercial partner, and led to a prompt response by China"s Foreign Ministry spokesman Geng Shuang who classified Trump"s comments as "definitely unacceptable."

“What is definitely unacceptable to us is a situation in which on the one hand we work to resolve this issue peacefully but on the other hand our own interests are subject to sanctions and jeopardized,” Geng said at a regular briefing in Beijing, according to the Associated Press.

Of course, a full-blown trade war would have adverse consequences for both nations: China would be drastically affected if the US were to cut trade ties with it, as the United States imports goods worth about $40 billion a month. Of course, such a move would have devastating, and inflationary, consequences on the US as supply chains are forced to find alternatives to China.

When asked on Monday whether Beijing would support tougher UN sanctions including cutting off oil supplies to North Korea, Geng said that whatever happened would depend on discussions among UN Security Council members. He added that China – a permanent member of the UN"s Security Council with the power to veto UN actions – would take part in a “responsible and reconstructive way.”

Geng also addressed Australian Prime Minister Malcolm Turnbull"s recent remark that Beijing “has by far the greatest leverage” as Pyongyang’s main trading partner and needs to “step up now and bring this regime to its senses.”

“We keep stressing that we cannot solely rely on China to resolve this issue,” Geng said. “We need all parties to work in the same direction.”

China has previously noted that it is not solely responsible for ending the crisis on the Korean Peninsula. In July, Geng said that “certain people” had been “exaggerating and giving prominence to the so-called ‘China responsibility theory’,” in an apparent reference to Trump"s repeated calls for Beijing to put pressure on Pyongyang.  China has repeatedly called for all sides to avoid further provocations in the crisis, warning last week that tensions on the peninsula were at “tipping point” and “approaching a crisis.”

As discussed previously, Beijing and Moscow have proposed a "double-freeze" plan which would see North Korea suspend its missile launches in exchange for a halt in joint US-South Korea military drills. That plan was promptly rejected by Washington, with State Department spokesperson Heather Neuert stating last month that the US is “allowed” to conduct exercises with its ally and “that"s just not going to change.”

* * *

On Sunday afternoon, Julian Assange also reacted to Trump"s threat to end trade with China, with the WikiLeaks founder tweeting that the US president would be “deposed immediately” if he followed through with the proposed idea.

90% of North Korea"s trade is with China. If Trump blocks $650B of US trade with China he"ll be deposed immediately. https://t.co/gSrVc10uos

— Julian Assange ???? (@JulianAssange) September 3, 2017

US trade with China totaled $648 billion back in 2016, according to data from the USTR. This makes China the “largest goods trading partner” of the US, and the 3rd largest US goods export market.

In the meantime, China’s Global Times newspaper warned against cutting off the North’s oil supply.

“If China completely cuts off the supply of oil to North Korea or even closes the China-North Korea border, it is uncertain whether we can deter Pyongyang from conducting further nuclear tests and missile launches. However, confrontation between the two is likely to occur,” it said.

The newspaper warned that a potential conflict between Beijing and Pyongyang would “transcend any conflict between the US and North Korea, and take center stage on the Korean Peninsula.

China Says Trade With North Korea Grew Only 10.5% In First 6 Months Of 2017

New data released by the Chinese government suggests trade with its restive neighbor, North Korea, has only increased by a modest degree since the beginning of the year, rebutting criticisms from President Donald Trump and UN ambassador Nikki Haley that the world"s second-largest economy is undermining US efforts to curb trade with the North.

A Chinese official said Thursday that China"s trade with isolated North Korea rose more than 10 percent in the January-June period from a year earlier, according to Reuters. The data show a sharp decline in trade in April, May and June after data released by China Customs in April showed a 37.4 percent increase in trade with North Korea in the first quarter of 2017. However, data released a week ago by China"s Ministry of Commerce show trade between the two countries grew by 13.7 percent from January to May, suggesting a significant dip since April, according to CNBC.

Trump has leaned on China to curb trade that might help support North Korea’s nuclear program - even coaxing the Communist Party to verbally commit its support for "complete, verifiable and irreversible" denuclearize of the Korean Peninsula. But Chinese reluctance to act against their longtime ally forced the US’s hand last month, when it introduced sanctions against 10 Chinese entities suspected of helping support the North’s nuclear program.

The data appear to support China’s claims that it is fully enforcing United Nations sanctions on nuclear-armed North Korea and there is nothing wrong with what it terms "normal" trade with Pyongyang, referring to areas not covered by sanctions.

“Chinese customs spokesman Huang Songping told a briefing on China"s overall trade figures that total trade with North Korea expanded by 10.5 percent to $2.55 billion in the first six months of the year. While China"s imports from North Korea dropped 13.2 percent to $880 million in the period from January to June, exports to North Korea rose 29.1 percent to $1.67 billion, he said.

The exports were largely driven by textile products and other traditional labor-intensive goods not included on the United Nations embargo list, Huang added.

"As neighbors, China and North Korea maintain normal business and trade exchanges," he said, adding that goods for ordinary people and those used for humanitarian reasons are not subject to sanctions."

Reuters said that overall trade with North Korea declined in June, compared with previous second-quarter months, while trade in dollar terms with North Korea rose about 12% from the previous month to $499 million. In May, trade with North Korea gained 14.5 percent from April to $443.5 million, previously released customs data show.

As a Chinese government spokesman noted, China has complied with UN Security Council sanctions on North Korea  - though, in its role as a permanent member of the security council, the North’s only major ally has worked persistently to soften international sanctions against the hermit kingdom and its officials. It is also responsible for 90% of trade with North Korea.

“Numbers showing an increase are not evidence that China is failing to enforce UN resolutions, with imports from North Korea falling every month since March, Huang added. China suspended imports of North Korean coal in February, while imports of iron ore accord with relevant U.N. resolutions, he said.

"China customs have all along fully, accurately, conscientiously and strictly enforced relevant Security Council resolutions.""

Relations between China and the US have cooled in recent weeks – a development highlighted by the North’s July 4 test of its first genuine ICBM. Late last month, the US antagonized the Chinese by finalizing a $1.4 billion arms sale to Taiwan in defiance of its longstanding "one China" policy.

While China has been angered by North Korea"s repeated nuclear and missile tests, it also blames the US and South Korea for worsening tensions with their military exercises, while not doing enough to open talks with the North Koreans, as Beijing has proposed. China"s Foreign Ministry this week urged a halt to what it called the "China responsibility theory" on North Korea, saying all parties needed to pull their weight, according to Reuters.

Trade between China and North Korea has declined in both 2015 and 2016, a senior government-backed academic said in a front-page comment in the overseas edition of the official People"s Daily on Wednesday.

In this particularly trying time for US-China relations, US officials would do well to remain well alert – particularly after Guo Wengui, a billionaire investor who fled China and moved to New York after becoming a major critic of the Chinese regime, revealed that Chinese intelligence might have more than 25,000 deep-cover operatives in the US. Their primary mission is to steal military technologies. But they’re also here to “buy” high level government officials, as well as political and corporate elites who can give China favorable business deals.

South Korea Delays THAAD Deployment – What Next?

Authored by Michael Brady via The Strategic Culture Foundation,

On June 5, South Korean President Moon Jai-in ordered an environmental impact assessment in the area where four additional Terminal High Altitude Area Defense (THAAD) launchers were to be deployed. THAAD is a mobile system capable of hitting ballistic missiles inside or outside the atmosphere in their final, or terminal, phase.

The unexpected move has caused alarm for policy makers in Washington, DC, who are worried about Beijing’s influence on the newly elected president.

THAAD is a defensive system designed to track and shoot down missiles designated for targets inside South Korea and throughout the region. Its primary purpose is to defend US military personnel (approximately 28,000) and South Korean critical infrastructure from North Korean missile launches. Tensions on the Korean Peninsula continue to ebb and flow as Washington has requested assistance from Beijing to reign in the reclusive Kim regime.

Russia and China continue to oppose the deployment. China’s Foreign Ministry spokeswoman, Hua Chunying, recently stated, “We have said many times before that the United States deployment of THAAD not only is not beneficial for the resolution of the Korean Peninsula nuclear issue, it is also not good for regional stability.”

The unexpected delay in fully deploying the THAAD system could result in several scenarios going forward.

First, the delay could give the United States a window of opportunity to completely reassess its strategic posturing on the peninsula. Options to execute a phased withdrawal from the region could unfold, something many experts believe would be a mistake.

 

Secondly, the delay could embolden the North Korean regime to continue its furious pace of missile testing. North Korea has already fired 16 missiles in 10 tests in 2017. As Beijing and Washington continue to squabble over how to exert pressure on the DPRK, it is no wonder this lack of a coherent strategy will allow continued testing to occur unabated.

 

Third, its unclear if Moon is signaling that that he is open to a fresh approach toward Chinese and South Korean relations. China’s influence in the region is clearly growing as Washington continues to espouse an incoherent strategy in the region while maintaining an “American first” approach toward its decision-making process. It’s no wonder South Korea is weighing its options carefully with Beijing. Closer ties between the two states would benefit both nations in the long run, particularly on economic and regional security issues.

The United States should consider South Korea’s decision to delay THAAD as an opportunity to withdraw from the peninsula. The cold war is long over, and Washington’s ability to contain the DPRK has failed. Allowing China to take a greater leadership role may not be such a bad thing.

China Demands "Immediate Halt" Of US Missile Shield Deployment In South Korea

As we pointed out earlier today, Reuters cited US military officials who said that the U.S. military"s THAAD anti-missile defense system has "reached initial intercept capability" in South Korea, although they added that it would not be fully operational for some months. Just hours after the announcement, Beijing lashed out at DC and demanded an "immediate halt" to the controversial US missile shield. China"s Foreign Ministry spokesperson Geng Shuang voiced the government’s position against the move during a briefing on Tuesday.

"We oppose the deployment of the US missile system to South Korea and call on all parties to immediately stop this process. We are ready to take necessary measures to protect our interests," he said according to AFP, adding that “China’s position on the THAAD issue has not changed."

THAAD missile captured during launch

As Reuters noted earlier, the spokesperson didn’t specify what "necessary measures" China had in mind. However, responding to the THAAD installation, last week China announced on Thursday that it will stage live-fire exercises and test new weapons to protect its security.

Curiously, while on one hand Beijing lashed out at the shield"s deployment, on the other, the foreign ministry expressed support for US President Donald Trump"s surprise comments that he would be "honored" to meet North Korean leader Kim Jong-Un under the right conditions.

Asked about Trump"s remarks, Geng said that China "has always believed that dialogue and consultation... is the only realistic and viable way to achieve denuclearisation."

"We also said many times that the US and DPRK... should make political decisions at an early date, take action and show good faith so that we can create a better atmosphere for resuming the peace talks and settling the issue," he added.

Beijing has previously expressed loud concerns over the THAAD system and joint US-South Korean drills near the Korean Peninsula, consistently urging all the parties involved to find a peaceful solution to the volatile situation in the region. Backed by Russia, it also proposed a halt to military drills in exchange for an end to Pyongyang’s missile and nuclear tests during a United Nations Security Council (UNSC) session held in New York on Friday.

Moscow has likewise opposed the stationing of the THAAD system to be an “additional destabilizing factor for the region” amid alarmingly increasing tensions. It has called on Washington and Seoul to reconsider the decision.

In response to the THAAD deployment, China has imposed a host of measures seen as economic retaliation against South Korea, including a ban on tour groups. Retail conglomerate Lotte, which previously owned the golf course, has also been targeted, with 85 of its 99 stores in China shut down, while South Korea"s biggest automaker Hyundai Motor has said its Chinese sales have fallen sharply. The THAAD deployment comes as tension soars on the Korean peninsula following a series of missile launches by the North and warnings from the administration of US President Donald Trump that military action is an "option on the table."

Further complicating matters, Trump stunned Seoul last week when he suggested South Korea should pay for the $1 billion THAAD system. "I informed South Korea it would be appropriate if they paid. It"s a billion-dollar system," Trump was quoted as saying in a published report. "It"s phenomenal, shoots missiles right out of the sky."

Seoul retorted that under the Status of Forces Agreement that governs the US military presence in the country, the South would provide the THAAD site and infrastructure while the US would pay to deploy and operate it.

Meanwhile, Thomas Karako, the director of the Missile Defense Project at the Center for Strategic and International Studies, noted that South Korea"s sole THAAD battery does not quite have the range to cover the entire country. But he called it an important first step. "This is not about a having a perfect shield, this is about buying time and thereby contributing to the overall credibility of deterrence," Karako told AFP.

"South Korea with THAAD helps communicate to the North that today is not a good day to attack. It doesn"t mean that they could not do a lot of damage -- they would -- but it strengthens the overall posture."

That, however, is irrelevant to China which sees the THAAD deployment as drastically shifting the regional balance of power; as such look forward to aggressive moves by Beijing which will now seek to enforce its own national interest, even if it means dstabilizing South Korea, while boosting Kim"s regime.

US Aircraft Carrier Group Begins "Routine" Patrols In Disputed South China Sea

Threatening to destabilize the tentative improvement in Sino-US relations achieved in recent days following Trump"s recent concession over the "One China" policy, was the US deployment of the aircraft carrier USS Carl Vinson (CVN-70) to the disputed waters of the South China Sea on Saturday as part of maritime "routine operations", according to an announcement posted on the Vinson"s Facebook page.

Sailing with the 97,000-ton Vinson is the guided-missile destroyer USS Wayne E. Meyer, the Navy said in a statement. The Vinson carries a flight group of more than 60 aircraft, including F/A-18 jet fighters.

The deployment comes just one day after China wrapped up its own naval exercises in the South China Sea on Friday, CNN reported. War games involving its own aircraft carrier have unnerved neighbors with which it has long-running territorial disputes.

US aircraft carrier operations in the South China Sea are not unusual. Almost a year ago, the USS John C. Stennis led a similar cruise through the area. And the Vinson was in the South China Sea in 2015, just one of its 16 operations in the South China Sea in its 35-year history. The cruise of the Vinson in the South China Sea is the second of a high-profile US Navy vessel this month.

It also follows training operations in the South China Sea conducted by the littoral combat ship USS Coronado, which is temporarily based in Singapore, according to a Navy statement. "While underway, we are conducting training across multiple mission areas including weapons training, manned and unmanned flight operations, ship handling, and damage control drills," said Cmdr. Scott Larson, the Coronado"s commanding officer. "Training at sea in these warfare areas maintains crew proficiency and ensures we are ready to operate successfully in a variety of missions."

Quoted by the Navy News Service, Rear Adm. James Kilby, commander of the Vinson strike group, had a similar message: "The training completed over the past few weeks has really brought the team together and improved our effectiveness and readiness as a strike group," Kilby said in a statement. "We are looking forward to demonstrating those capabilities while building upon existing strong relationships with our allies, partners and friends in the Indo-Asia-Pacific region."

The operation, which is the latest test of Chinese response to US naval presence in the contested region comes amid growing tensions between the United States and China over territory and trade, and as the Trump administration looks set to take a more confrontational stance toward China than its predecessor. During his confirmation hearing, new Secretary of State Rex Tillerson said China should be blocked from accessing the artificial islands it"s built, setting the stage for a potential showdown.

As CNN reports, in a news conference Wednesday, China"s Foreign Ministry said it heard about the planned deployment of the Vinson days before it happened, and warned Washington against challenging its sovereignty.  "China respects and upholds the freedom of navigation and overflight in the South China Sea, which countries enjoy under international law, but firmly opposes any country"s attempt to undermine China"s sovereignty and security in the name of the freedom of navigation and overflight," China"s Foreign Ministry spokesman Geng Shuang said.

In an overnight op-ed in the nationalistic Global Times tabloid, China wrote that it "should strongly object to the US in this case. Having freedom of navigation is reasonable in certain areas in the open sea. But, in an exclusive economic zone over which a country has exclusive rights to explore and use the marine resources, the US" freedom of navigation does not apply and it may harm the economic interests of other countries."

In the past few years, the US administration under then president Barack Obama limited the US Navy operations in disputed areas such as the Nansha Islands and did not perform freedom of navigation operations in the South China Sea from 2012 to 2015 so as to avoid unnecessary clashes. 

After all, frequent US activities in the waters can easily lead to clashes with China. Obama"s restriction has to some extent prevented such scenario from happening. Recently, a Chinese early warning aircraft nearly collided with a US Navy patrol plane. In matters like this, Trump needs to learn from his predecessor.

The contested waters are a key shipping route at the heart of a territorial dispute that pits multiple countries against one another. China has a long history of maritime disputes with its South China Sea neighbors. China claims almost all of the South China Sea, including islands more than 800 miles from the Chinese mainland, despite objections from neighbors such as the Philippines, Malaysia, Brunei and Vietnam.

Beijing has also created artificial islands in the area, outfitting some of them with military features. According to the US, China has reclaimed more than 3,000 acres in the Spratly Islands since 2014. In December, satellite imagery released by Asia Maritime Transparency Initiative showed China has installed weapon systems on all seven artificial islands.

Though the US takes no position on the territorial dispute in the South China Sea, its warships have conducted routine "freedom of navigation" operations near the reclaimed islands, eliciting warnings from Beijing. The most recent of those was in October by the guided-missile destroyer USS Decatur. China at the time called it a serious breach of law and an intentional provocation. There is no word whether the Vinson or the Meyer would be getting near the Chinese-claimed islands.

In a preemptive move to limit foreign naval presence in proximity to China and the disputed South and East China Sea islands, last Thursday China"s People"s Daily reported the Beijing is set to revise its 1984 Maritime Traffic Safety Law, which would allow the relevant authorities to "bar some foreign" (read U.S.) ships from passing through Chinese territorial waters. The Legislative Affairs Office of the State Council announced Tuesday it is soliciting public opinions on the revisions. Think of it as an Air Defense Identification Zone, only in the water. China has yet to make a formal decision.

The latest distribution of US naval forces around the globe is shown in the map below.

US, China Military Aircraft Have "Unsafe, Close Encounter" Over Contested Islands

After years of "close encounters" of the Russian-kind, it appears the US military has found a new nation to fly close to.

Nine months after China demanded US "immediately cease" spying near its borders...

"It must be pointed out that U.S. military planes frequently carry out reconnaissance in Chinese coastal waters, seriously endangering Chinese maritime security," China"s Foreign Ministry spokesman Hong Lei Hong told reporters, adding that  "we demand that the United States immediately cease this type of close reconnaissance activity to avoid having this sort of incident happening again."

CNN reports that two US defense officials confirmed that there was an "unsafe" close encounter between a US Navy P-3 Orion aircraft and a Chinese surveillance aircraft Wednesday in the general vicinity of the contested Scarborough Shoal in the South China Sea.

One official said the Chinese plane was a People"s Liberation Army Air Force KJ-200.

CNN reports the two planes flew within 1,000 feet of each other in the general vicinity of the contested Scarborough Shoal in the South China Sea.

A second official said that the American P-3 had to alter course to ensure that there wasn"t an aerial collision.

A spokesperson for US Pacific Command, which oversees US troops in the region confirmed, the incident, calling it "unsafe" in a statement provided to CNN.

"The U.S. Navy P-3C was on a routine mission operating in accordance with international law," Maj. Rob Shuford said.

"The Department of Defense and US Pacific Command are always concerned about unsafe interactions with Chinese military forces," he added.

"We will address the issue in appropriate diplomatic and military channels."

While the Navy considers the encounter to be "unsafe," it does not assess that any malign intent was behind the incident, though the event was considered serious enough to be raised up the chain of command.

The official called encounters between US and Chinese aircraft like the one that took place Wednesday "extremely rare," noting that there were zero such incidents in 2015 and two in 2016. It was the first such instance of 2017.

We look forward to China"s official response tomorrow, especially considering President Trump"s positive outreach earlier today.