In Stratfor's 2017 Fourth-Quarter Forecast, we wrote that the emerging threat on the Korean Peninsula would rise to the top of the U.S. agenda this quarter and that Washington would work furiously to both avoid and prepare for the worst. We forecast that the U.S. government would continue to prod China to increase its pressure against North Korea and that China might consider it to avoid U.S. intervention. We also noted, however, that even if China does increase its economic pressure against North Korea, it won't risk increasing it to the point that the North Korean government destabilizes.
Washington is becoming more and more concerned that North Korea will achieve its goal of creating a nuclear weapon capable of reaching the United States as early as next year. The United States is doing all it can economically, politically and militarily to stop it, but North Korea hasn't slowed the pace of its test launches, the latest of which it conducted Nov. 28. In response, U.S. President Donald Trump phoned Chinese President Xi Jinping on Nov. 30 to discuss the launch and to urge Beijing to cut its economic ties to North Korea. Less conspicuously but perhaps more notably, the day before the call, U.S. and Chinese military leaders engaged in rare security talks in Washington.
China has recently increased its economic pressure on North Korea and its compliance with U.N. sanctions, investigating companies with trade ties to North Korea and those under U.N. sanctions. But the efforts have done little to deter North Korea, and the United States wants China to do more. According to the White House, during the phone call Trump urged Xi to use all the levers at his disposal to convince North Korea to halt its nuclear program, including cutting all oil exports to the country. U.S. Ambassador Nikki Haley later warned in an emergency session of the U.N. Security Council that if China did not take that critical step itself, the United States would "take the oil situation into [its] own hands." China, for its part, is sticking fast to its demand that the United States and South Korea stop military drills in the region in exchange for North Korea halting its weapons program.
Despite its frustrations with North Korea, China still judges that the government in Pyongyang poses less of a liability than would its collapse, and Beijing won't push for the economic collapse of North Korea unless it's guaranteed that another pro-China, independent and stable government will replace it. Thus, China will continue implementing only limited sanctions meant to warn Pyongyang and appease the United States rather than those meant to irrevocably harm the North Korean economy. Though Beijing has used oil cutoffs in the past as its most powerful tool against Pyongyang, it's unlikely to implement a complete and sustained oil embargo on the country for fear it would damage the North Korean economy too much, inviting chaos and an expanded U.S. security presence next door.
On the military front, U.S. Director for Strategic Plans and Policy Lt. Gen. Richard Clarke and Maj. Gen. Shao Yuanming led talks between Chinese and U.S. military leaders on how the two militaries would communicate in a crisis. In the past, China has been extremely reluctant to enter defense talks with the United States or to discuss military contingencies, because of concern it would inflame and provoke Pyongyang. It's notable then that Beijing has been more open to such talks since mid-year, when it participated in talks led by Gen. Joseph Dunford. China's increasing willingness to engage with the United States on the issue indicates that it gauges that the threat of military conflict is growing and that it's willing to take measured steps to avoid military miscalculation.