WASHINGTON — Last year, U.S. President Bill Clinton spent his final months in office trying to cobble together a peace agreement between Israel and the Palestinian Authority. Today, the Middle East teeters on the edge of the largest-scale violence since the Persian Gulf War and the greatest involving Israel since its invasion of Lebanon nearly 20 years ago. Palestinian leader Yasser Arafat was unwilling or unable to accept the olive branch offered by former Israeli Prime Minister Ehud Barak and now confronts Prime Minister Ariel Sharon, a man known primarily for his belligerence.

Something similar may well be occurring on the Korean Peninsula. For reasons that may never be known, North Korean leader Kim Jong Il took nearly a year and a half to respond to the peace overture made by Clinton through his emissary, former Defense Secretary William Perry. Now Kim confronts a less accommodating U.S. president in George W. Bush.

Even more importantly, it is virtually impossible to imagine that the North Korean leader will ever encounter a South Korean counterpart as forthcoming as the current South Korean president, Kim Dae Jung. South Korea will hold a presidential election next year, and it is almost assured that the next occupant of the Blue House will not take the same political risks in the pursuit of North-South rapprochement that his predecessor has.

So while there is plenty of evidence of positive change on the Korean Peninsula, a window of opportunity for the North to lock in some of these changes may be closing.

Among state actors, South Korea will most likely have the biggest impact on future developments in North Korea, and one can identify several junctures in North-South relations that could evolve in either a positive or negative direction.

A successful 2001 summit would appear to be key in maintaining the positive political momentum that has developed in the last two years. Among the deliverables at a 2001 summit would be an expanded program of family reunions, a reaffirmation of the Kaesong industrial-park project and an agreement in principle for South Korea to supply electricity to the North.

In the longer run, improved North-South relations could lead to conventional-arms reduction and a significant peace dividend. This could reduce the need for reform on the part of the North, or, alternatively, provide capital inflows to support a reform program if the North chose to go in this direction.

Conversely, a failure by Kim Jong Il to reciprocate Kim Dae Jung’s visit to Pyongyang or a summit that went badly would have negative implications for North-South engagement and, by extension, political stability in North Korea.

With respect to the United States, the major issue is the extent to which the Bush administration will continue the engagement policy of its predecessor. Signals have been mixed in this regard. The issue of most intense interest is the possibility of reaching a deal on missiles. An agreement between the U.S. and North Korea on missiles would presumably yield both improved diplomatic relations between the two states, as well as compensation for the North.

Such an improvement in political relations would increase the likelihood of the U.S. removing North Korea from its list of countries supporting state-sponsored terrorism, thereby opening up the possibility of the U.S. backing North Korean membership in international financial institutions (IFIs) such as the International Monetary Fund, the World Bank and the Asian Development Bank.

U.S. law allows the president a fair amount of flexibility in the application of the law. In February 2000, the Clinton administration reportedly presented North Korea with four hurdles to achieve its removal from the terrorism list: (1) issue a written guarantee that it is no longer engaged in terrorism; (2) provide evidence that it has not engaged in any terrorist act in the last six months; (3) join international antiterrorism agreements; and (4) address issues of past support for terrorism.

The last hurdle involves the interests of third parties against whom North Korea has committed past acts of terrorism, most prominently South Korea and Japan. In private conversations during Kim Dae Jung’s March 2001 visit to Washington, South Korean officials urged the U.S. to remove North Korea from the terrorist list and did not raise any third-party issues.

Japan is a different story. On the terrorism issue, Japan maintains two principal demands. First, that the North extradite for trial the aging Japanese Red Army airline hijackers that it shelters. Second, that it account for Japanese citizens allegedly abducted by North Korean agents. If anything, Japan appears to be increasing the weight that it places on the second demand. Moreover, the Bush administration has made improving U.S.-Japan diplomatic cooperation a foreign-policy priority, and the families of the alleged abductees were well-received during a recent visit to Washington. Thus the issue of removing North Korea from the terrorist list and getting them into the IFIs appears increasingly linked to progress in Japan-North Korea relations.

Normalization of relations with Japan could provide North Korea with yet another avenue for increased capital inflows. It is widely expected that normalization of relations between Japan and North Korea would be accompanied by a multibillion-dollar financial settlement similar to the agreement reached between Seoul and Tokyo in 1965.

If North Korea could improve its diplomatic relations with South Korea, the U.S. and Japan, this could help get the 1994 U.S.-DPRK Agreed Framework and the Korea Peninsula Energy Development Organization on more solid political and economic footing. Funding the U.S. commitment to supply North Korea with heavy fuel oil is a constant political battle in Washington, and it is fair to say that the Bush administration is unenthusiastic about building two nuclear reactors in North Korea.

Still, unilateral abrogation of the deal by the U.S. is highly unlikely. However, North Korea’s recent appeal to the South for electricity could be interpreted as a sign that the North is more interested in electricity now than two nuclear reactors in a decade. The North’s immediate needs, together with a Republican-controlled Congress that could be expected to cut Bush more slack than his predecessor, opens up the possibility of extending the Agreed Framework in ways that would both be more valuable to North Korea and more politically sustainable in the U.S.

It is possible that rather than reinforcing in a positive direction, external developments could be largely negative. North Korea could resume missile testing out of impatience or frustration with the KEDO process, as a way of attracting attention or as a way of developing its missile program for its own strategic use or for exports. Resumption of missile testing by North Korea would have an enormously negative impact on relations with the U.S. and Japan, and even a politician as committed to engagement as Kim Dae Jung would find it difficult to move forward in that atmosphere.

Worsening relations with the U.S. and Japan would make continued progress in KEDO difficult. Indeed, were South Korea to supply electricity to North Korea in a manner delinked from the Agreed Framework, the North would have less incentive to meet its obligation to submit to International Atomic Energy Agency inspection as required by the deal. (This assumes that North Korea would find increased, open-ended reliance on South Korea for electricity to be acceptable, surely a debatable proposition.) The Agreed Framework could collapse as a result of a worsening diplomatic climate and reduced North Korean interest in compliance.

From a Chinese perspective, North Korea, with its 20 million people, is equivalent to a small province. For a relatively small expenditure China can keep North Korea on economic life support, though whether this would be sufficient to maintain political stability in the North is unknowable.

The character of U.S.-China relations could affect the way that China chooses to behave with respect to North Korea — whether it continues to act in a more or less cooperative fashion with the U.S., South Korea and Japan, or whether it chooses to play a spoiler role.

China and Vietnam have demonstrated the possibility of introducing reforms into centrally planned economies while maintaining regime stability. Of course, as argued, in economic terms North Korea is dissimilar from China and Vietnam in important respects, and politically, it must deal with the divided-country issue, which could pose a difficult ideological challenge to would-be reformers in the North (i.e., given the existence of an economically prosperous democratic South Korea, increased integration may undercut the basic ideological justifications of the Kim Jong Il regime).

Given both the economic and political difficulties of implementing reforms in the North, a more cautious “muddling through” outcome is a distinct possibility. In this scenario, the North would engage in less internal change than in the previous example, and as a consequence, would presumably encounter a less supportive international environment. In essence this amounts to a continuation of the status quo.

A third possibility could be generated by the unsuccessful implementation of economic reforms. In this case, deteriorating economic and political conditions could spur an intra-elite coup in which new leadership takes control in an attempt to save the regime. Kim Jong Il’s dramatically increased profile in the past two years would appear to reduce the likelihood of this outcome, by making it more difficult to establish a modus vivendi in which he would reign as a symbol of continuity, but not rule.

A final possibility is the collapse of the regime. Mass mobilization, presumably in response to deteriorating economic conditions, would be a prerequisite for this to occur. The problem, of course, is that North Korea appears to lack the societal institutions to mobilize and channel mass discontent into political action. Again, this could occur in response to failed implementation of economic reform, or it might occur more or less spontaneously if, after a period of improvement in economic conditions (particularly in the availability of food), North Korea were to experience another downturn, and system-fraying began to occur as a coping mechanism. Given North Korea’s increasing dependency on aid, particularly for food consumption, foreign actors could be critical in this scenario.

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