This article is taken from World Energy (WE) number 43, "The Challenge". Read the magazine.

Aparticular saying is often used to describe South Korea’s foreign policy position, which is that “when whales fight, the shrimp’s back is broken.” In fact, while the relative geographical isolation of the peninsula has sometimes offered protection to its people, over the centuries Korea has often found itself involved, against its will, in a tumultuous dispute between powers, a situation that has repeatedly caused massive devastation. In the 16th century Japanese determination to replace Ming China as a regional superpower led to the Imjin River War, with Korea as a theater of battle. In the following century it was the turn of the Manchus, who dragged Korea into a bloody conflict in their attempt to subvert the rule of the Ming dynasty. In the 19th century, Korea was caught up in the Sino-Japanese conflict and in the next, control of Korea led to a dispute between Russia and Japan, which resulted in brutal colonization by the latter. At the end of the World War II, when liberation from the colonial yoke might have marked the beginning of a period of tranquility and independence, the peninsula suffered the bloody Korean War from 1950 to 1953, which led to a division imposed by the two blocs that emerged from the Cold War.

The fate of Korea does not seem to have changed during this century: the country appears to be caught between its historic ally, the United States, and the rising power of the People’s Republic of China, which, after reopening formal diplomatic channels in 1992, has  become Seoul’s main economic partner. However, its relationship with the United States has also evolved and extends beyond security alone: trade between Seoul and Washington, for example, is currently worth more than 70 billion dollars. Growing tensions between the United States and China, however, are likely to place South Korea in a dangerous crossfire, as already demonstrated on several occasions, such as in the summer of 2015, when South Koreans began discussing the possibility of joining the Asian Infrastructure Investment Bank, a Chinese creation strongly opposed by the United States. And above all, there were tensions the following summer due to the age-old dispute over American deployment of the THAAD anti-missile system on South Korean soil.

Immediately after being elected president in May 2017, Moon Jae-in was confronted with one of the thorniest issues bequeathed to him by his predecessor, Park Geun-hye, who, following the fifth North Korean nuclear test in January 2016, had decided to equip her country with the THAAD (Terminal High Altitude Area Defense) system, to be supplied by the Americans. Revelations about the corrupt management of power by President Park, which led to her impeachment and subsequent arrest, brought into question the need to install the THAAD system, which Moon Jae-in, a progressive presidential candidate at the time, was not entirely convinced about, mainly due to strong Chinese discontent. The decision, however, could not be overturned, and the THAAD system was duly installed in the area of Seongju, despite strong opposition among the local population. The dispute surrounding the THAAD system encompassed a multitude of primary issues relating to the internal political structure of South Korea, the future of relations between Seoul and Beijing and the effectiveness of deterrence against Pyongyang. In its foreign policy, the Moon administration was obliged to balance its significant alliance with the United States against the new position taken in respect of North Korea and the increasingly important ties with Beijing. The latter was particularly irritated by the South Korean decision to accept the deployment of the THAAD system, arguing that it would potentially have made its ability to react more difficult and, above all, would have “extended its gaze” into Chinese territory, thanks to the system’s powerful radar. Chinese media were insistent about the “consequences” that South Korea would suffer as a result of the decision to accept the anti-missile system, asserting that this would potentially lead to a rearmament race on the Asian continent aimed at “containing” China. Beijing immediately decided to exert intense pressure on South Korea and responded by adopting a series of economic sanctions. The THAAD issue has raised a major, interesting question regarding Beijing’s attitude to Seoul. While the relationship between Seoul and Beijing has continued to grow and strengthen both economically and politically since the opening of diplomatic channels in 1992, this disagreement shows how Beijing is making continued demands on Seoul to observe the principle of sovereignty and non-interference for China’s own benefit, but adopts a completely different attitude towards “weaker” powers such as Korea. Chinese interference in Seoul’s internal politics, open pressure, failure to respect any diplomatic protocol and, above all, total indifference to Seoul’s indisputable right to accept any system capable of defending its national borders could certainly arise again, given South Korea’s need to proceed with modernizing its defense apparatus, jointly or independently of the United States.

The dispute over THAAD had significant repercussions on the South Korean economy, given that the Chinese market accounted for about a quarter of the country’s exports, and more generally on relations between Seoul and Beijing. When retaliation commenced against one of South Korea’s leading industrial conglomerates, the Lotte group, responsible for selling the land on which the THAAD was installed, the cost borne by the South Korean economy was very high, amounting to around USD 7.6 billion in 2017 alone. The Chinese government, furthermore, citing a series of security-related violations, decided to suspend the activities of the Lotte group, which was forced to sell many of its stores. In addition, television programs produced in Korea were banned and a strong squeeze was also imposed on the tourism and car industries. The Chinese disguised these measures by claiming they were a result of choices freely made by consumers.

At the end of October 2017, however, China changed its attitude and decided to bury the hatchet. Both countries issued statements which claimed a desire to leave the incident behind. The reasons for this sudden change have never been entirely clarified but may originate from the belief on the Chinese side that by then nothing could be done to hinder the deployment of the THAAD system on South Korean soil and that any concession still possible from the South Korean side should thus be secured. For its part Seoul made substantial concessions by announcing the so-called “3 nos": no addition to the existing anti-missile system; no South Korean participation in an integrated defense system coordinated by the U.S.; and no possibility of creating a trilateral alliance with the U.S. and Japan. China, however, has never entirely stopped exerting pressure on South Korea: during the bilateral talks held at the annual ASEAN summit in August 2018, the Chinese foreign minister, Wang Yi, ordered his Korean counterpart, Kang Kyung-wha, to find a “complete solution” to the THAAD problem, thus indicating that China was not releasing its grip on that specific issue. Chinese retaliation somehow raised the attention of the Koreans, who believed that bilateral relations had reached a point of maturity since 1992. Given the asymmetry between China and South Korea, Beijing had probably calculated that Seoul would make concessions in the face of increasingly intense pressure. However, the Chinese failed to consider the strong indignation that Korean citizens began to feel towards them after the incident. Despite the growing tensions with Washington in various areas, many began to see the relationship with the United States as vital to stemming the aggressiveness and intimidating posture of the People’s Republic of China. While on the one hand, the deployment of THAAD represented a victory for Seoul and Washington in the short term, it is clear that both Moon and his successors will have their work cut out to keep their balance in the tug of war between Beijing and Washington.

The growing North Korean threat and, more recently, the worrying “ascent” of China have amplified the need to make coordination on matters of vital importance to the alliance between Seoul and Washington even more important. However, while the South Korean and U.S. leaderships are discussing the possibility of formally ending the Korean War by ratifying a real peace treaty, many among Moon’s supporters have begun to wonder if and to what extent the alliance with the United States would still be useful on a peaceful peninsula. The alliance between Korea and the United States is mainly focused on security and reducing critical problems to mere geopolitical fluctuations would risk crumbling the architecture that has contributed to maintaining peace, security and prosperity over the past six decades.

Achieving cohesion in the alliance at this critical juncture is vitally important because of the political changes that could take place between the two Koreas and between them and the major powers. The asymmetric nature of the alliance between Seoul and Washington, moreover, has produced a paradox unprecedented in the minds of Koreans: while they are dissatisfied with the imbalance of power, they accept the strategic necessity of this relationship as the foundation of their defense. This ambivalence towards the alliance is also revealed in the fear felt by Seoul of a potential “entrapment.”  In the event of a conflict between the United States and China, or even a minor confrontation between China and Japan, Koreans would have no room to maneuver and would become unwillingly involved. The pressure exerted by China on South Korea in the recent dispute over the THAAD system enormously amplified the fear among Koreans that stemmed from the need to counterbalance Beijing while keeping its alliance with the United States firm. The responses to a recent survey conducted by the Asan Institute for Policy Studies confirm the importance that the alliance with the United States holds in public opinion: when asked which countries they consider central to the security of South Korea, more than 68 percent of respondents cited the United States, while only 6 percent the People’s Republic of China. Despite the Moon administration’s calls for substantial decision-making autonomy in favor of Seoul in the area of security and defense, there is a strong consensus among his fellow citizens on the need to preserve the alliance with the United States.

Moreover, South Korea could also become imprisoned in the recent “trade war” between Washington and Beijing. Seoul, which has become the fourth Asian economic power, is particularly vulnerable to a bitter conflict over tariffs due to the importance of foreign trade, especially with its two most important partners, the United States and China. The escalation of the crisis, which has upset the markets by seriously threatening global growth, comes at a very particular juncture for South Korea, whose economy has perhaps unexpectedly suffered significant contractions in the first four months of the year. As the leading manufacturer of the microchips used in mobile phones and computers, South Korea has benefited for years from the rapid and continuous development of this sector.  However, global demand for mobile phones is falling and, combined with the slowdown in China and a steadily falling rate of global growth, this has seriously damaged the export-dependent South Korean economy. The possibility of this happening has always existed, due to its geographical and commercial proximity. The imposition of new trade tariffs by the United States could lead to an increase in the price of numerous electronic products. If this were to happen, China could decide to quota the dispatch of these products to the United States, the direct consequence of which would be a contraction in the sale of semiconductors by South Korea. The chain reaction could be fatal for the South Korean economy, given that the semiconductor sector is developing precisely as a result of exports to China. According to other analysts, however, the situation may not be that negative, as South Korea could decide to supply its products directly to the United States, where they would then be assembled.

The trade war may also have a lasting impact on the Asian manufacturing sector, as many companies could decide to pull their production out of China as a means of protecting themselves from the “conflict.” Many South Korean producers have already made this decision, turning their attention to economically more convenient countries in Southeast Asia. What remains to be seen is what countermeasures China will decide to adopt and to what extent they will still backfire against Seoul.

In less than half a century South Korea has become one of the world’s most modern and technologically advanced countries. Its rapid progress has been achieved by instilling a huge sense of competition in society through the search for educational, professional and aesthetic perfection.