A slightly optimistic piece from the BBC regarding the recent flare up on the Korean peninsula. Perhaps the analysis is correct and this is just another incident that both sides will use to adjust their diplomatic and military stance against each other. The relationship between North and South Korea is so dysfunctional (primarily due to the actions of the North) that it almost seems routine that the North can sink a South Korean vessel (and kill over 40 sailors) and only face economic consequences.
I don't think Kim Jong-Il wants war. Although the North could inflict horrible damage upon the South, including direct artillery bombardment of Seoul, any conflict with the South and its allies would result in the destruction of the existing regime. Yes, the U.S. is currently fighting wars all over the place but the combination of allied air superiority, logistics and technology would eventually wear down and decimate the North's vaunted million man army. I think we would also see a surprisingly quick internal overthrow of the regime by the disaffected populace and military units once things started heading the wrong way.
Other analysis I have read opines that Kim Jong-Il ordered the ship attack to firm up his leadership within the regime and help pave the way for the eventual succession of his son. Over the years, Kim Jong-Il has acted like a spoiled child, throwing temper tantrums in order to focus world attention on him and allow him to then negotiate concessions from the South and the U.S. This time, however, he may have finally overplayed his hand.
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