South Korean President Lee Myung-bak on Monday labelled North Korea’s artillery attack on an island a crime against humanity, but markets judged there was little immediate risk of the crisis escalating into war.
Moody’s Investors Service said uncertainty over confrontations with the prickly North have already been factored into South Korean credit ratings and the recently increased tensions would not immediately affect the ratings.
But the ratings agency said the heightened tension may increase “event risk” on the South Korean ratings and that it was still determining whether the recent attacks marked a fundamentally more reckless stance by North Korea.
Markets in Seoul mirrored the broader region on Monday, as players judged the latest spat as being no worse than previous clashes between the Koreas, who are still technically at war having only signed a truce to stop fighting in the 1950-53 war.
Lee, under pressure at home for his indecisive response to last week’s attack, made his first address to the nation as United States and South Korean war ships took part in military manoeuvres, prompting concern in regional power China and threats of all-out war from North Korea.
“North Korea will pay the price in the event of further provocations,” Lee said. “Attacking civilians militarily is an inhumane crime that is strictly forbidden in a time of war.”
Clashes in disputed waters off the west coast are not uncommon, with dozens of sailors killed and warships sunk over the past 11 years, but Tuesday’s attack was the first time a residential area was hit. Of the four killed, two were civilians.
The attack raised tensions on the peninsula to their highest level in at least two decades, but experts say they are unlikely to tip over into a full-scale war.
China has proposed emergency talks amid global pressure on Beijing to be more aggressive in helping resolve the standoff between the rival Koreas and try to rein in ally Pyongyang which depends on China for aid.
Washington and Tokyo were non-committal, saying they would consult with Seoul, which was sceptical of the proposal to sit down with North Korea, effectively rewarding it for bad behaviour.
The reclusive North was previously offered massive aid in return for disarmament pledges that went unmet.
A senior North Korean official also expressed scepticism about the Chinese call, Japan’s Kyodo news agency said. North Korea has yet to issue an official response but the official, speaking on condition of anonymity, said countries “responsible for [the latest stand-off] should first hold talks.
The Chinese Foreign Ministry said State Councillor Dai Bingguo, who advises senior leaders on foreign policy, phoned US Secretary of State Hillary Clinton late on Sunday.
According to the account on the Foreign Ministry’s website, Dai told Clinton: “China feels deeply anxious about developments on the Korean peninsula, and believes it is imperative to strive to ease the current situation.”
Disarmament talks
The United States said six-party talks cannot substitute for action by North Korea to comply with its obligations, referring to disarmament talks which North Korea abandoned two years ago.
The call for the two Koreas, the United States, Japan, and Russia to meet at a forum hosted by China must be reviewed “very cautiously” in view of North Korea’s provocations, Seoul said.
China did not say if Pyongyang had agreed to join.
Beijing is wary of the collapse of North Korea, which could send millions of refugees across its border and strengthen the US-South Korea alliance in a possibly combined Korea.
The whistle-blowing Wikileaks website, revealing a cache of US diplomatic cables, said there had been talks between US and South Korean officials about the prospects for a unified Korea, according to the New York Times.
South Korea considered commercial inducements to China to “help salve” Chinese concerns about living with a reunified Korea, according to the American ambassador to Seoul, the newspaper said.
In the South Korean capital Seoul, dusted in snow, life and business went on as normal despite the raised tensions.
Authorities lifted a ban on South Korean travel to the joint Kaesung industrial complex in North Korea for the day.
“It feels a little more strained than previous occasions, but we’ve been here before,” said Tom Brown (42) a Briton working for the Tesco supermarket chain in Seoul. “It’s just sabre-rattling … there’s not much point in worrying too much.” – Reuters
View out gallery
Members of Korea Freedom Federation shout slogans during a rally denouncing last Tuesday’s bombardment on South Korea’s Yeonpyeong island, at the Chinese Embassy in Seoul on Monday. (Ahn Young-joon, AP) View the rest of our gallery here.