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Vista del Palacio Gyeongbokgung [Freepik]
EXECUTIVE SUMMARY
Facing an increasingly uncertain scenario, the Korean Peninsula is witnessing the multiplication of international actors in the area. With the presence of not only North and South Korea, but also regional and global actors such as Japan, Taiwan, China, Russia, and the US, the situation of the ROK is delicate and requires analysis at the national, regional, and international levels.
First and foremost, to understand South Korea's position in the international arena, we must study its national power from within. Several changes have modified internal equilibriums and will generate challenges and opportunities. Firstly, the demographic decline of the ROK—its TFR stands at 0.73—will have consequences on the economy, with an unbalanced welfare state in the long run and increasing government debt; on defense, facing a decrease of 180,000 men by 2040; and on politics, eroding the democratic legitimacy in an effect proper of “aging democracies.” Immigration has increased in recent years, although the arrival of the DPK in power may limit the expansion of visas under the previous administration. Secondly, political instability is expected to remain in the medium term. President Lee now holds the majority in the National Assembly—unlike former President Yoon—but he has also contributed to polarization in recent years. Thirdly, although facing increasing challenges, the ROK's soft power strategy is expected to continue in the medium term, thanks to joint public-private efforts. Lastly, previous years have seen greater government support for the semiconductor and AI industries. Pressure from international competition is increasing, and this has led to problems in terms of talent shortages and continued innovation. The ROK government has acknowledged this and taken considerable steps.
When it comes to the relationship between the DPRK and the ROK, President Lee has inaugurated his term with a conciliatory approach. He proposes what he calls the “END Policy”, i.e. exchange, normalization, and denuclearization. Although perhaps not on the scale of the previous Sunshine Policy, we expect to see different trust-building measures in terms of culture or humanitarian aid. Nevertheless, the North Korean attitude will foreseeably continue to be hostile. This is to be understood in the context of multiplication of actors. On the one hand, both facing international isolation, Russia and the DPRK have moved closer in the past years, even signing a mutual defense treaty in 2023. North Korea’s help in the Ukraine War may be compensated with military technology. Additionally, broken isolation increases the leverage of Pyongyang in negotiations and reinforces internally its regime, whose succession is quite assured. This situation heightens the risks of ground skirmishes in the medium term, more so if South Korea decides to adopt a more confrontational stance, as our scenario construction on the prospects for ROK-DPRK relations demonstrates. On the other hand, the return of Trump to the White House introduces a new actor to the Peninsula. He will probably push for the denuclearization of the DPRK and continue with staff with Kim Jong-un.
Regarding the role South Korea plays in the East Asian scenario, we consider three main actors. When it comes to the US, the main issues are Trump’s tariffs and the future of the US security umbrella. On the one hand, tariff negotiations are still ongoing, though it seems they will soon culminate. The ROK government has shown interest in the Japanese deal. However, for the moment the deal consists only of investments and 15% tariffs. On the other hand, regarding defense, scenario construction allows us to affirm that continuous US commitment with increased South Korean autonomy is to be expected for the following 20 years. The development of a nuclear program by South Korea is unlikely. Secondly, regarding the PRC, its economic relations may have turned into dependence and negative trade balances were recorded in 2023. Adding this to other less important disputes, the ROK could finally overcome its hedging strategy of "commerce with China; security with the US" and start veering decisively towards the US. This, however, excludes for the moment a Korean intervention in case of increased tensions in the Taiwan Strait. Lastly, the new administrations of Lee and Takaichi have both expressed their willingness to deepen their ties. In fact, some steps have been taken by the Japanese side—PM Takaichi renounced her visit to the Yasukuni Shrine this autumn. It is true that the same parties are in power as in 2019-2020, when the ROK-Japan trade war took place. Nevertheless, the context is quite different and the DPRK’s and PRC’s strengthening may solidify once and for all the relationship between these two countries.