SINGAPORE (Mar 4): US President Donald Trump and North Korea leader Kim Jong-un’s meeting in Vietnam on Feb 28 for a second US-North Korea summit was cut short as both leaders could not agree on the lifting of sanctions in connection with denuclearisation.
At a press conference after the meeting, Trump said the two leaders had not committed to holding another summit. Despite not having a joint signing ceremony, Trump believed the meeting was productive.
Trump added that his relationship with Kim was “very strong” and they agreed “it wasn’t a good thing to sign anything”. “Sometimes you have to walk, and this was just one of those times,” he said.
The main point of contention was denuclearisation, with both leaders unable to come to an agreement on what level of denuclearisation North Korea had to do for the US to lift sanctions. “To me, it’s obvious; you have to be willing to get rid of the nukes,” said Trump.
Kim has publicly said he is in favour of denuclearisation, pointing out that he would not have come to Hanoi unless he wanted to denuclearise.
“We have made a lot of efforts so far and we thought that now it’s time to come to Hanoi to sit together and then have this wonderful dialogue… and let me assure you I’ll do all my best to bring a good result ultimately today,” said Kim.
The North Korean leader was apparently willing to dismantle the Yongbyon facility, a major nuclear facility that operates the country’s nuclear reactor. Kim, however, wanted the sanctions lifted in their entirety before dismantling the facility, which Trump was unwilling to do.
US Secretary of State Mike Pompeo also noted that even if the Yongbyon facility was dismantled, there were still other facilities and weapons in North Korea that the US could not get Kim to agree on disabling. “Unfortunately, we didn’t get something that would be helpful to the United States...We asked him [Kim] to do more, he wasn’t prepared to do that,” said Pompeo.
Trump also said his decision not to sign any agreement was aligned with his preference to “do it right, rather than do it fast”. He also blamed previous US presidents for not doing a deal with North Korea. “It should have been done by many presidents before me. I’m not just blaming the Obama administration,” he said.
Despite both parties walking away from the negotiating table, Trump insisted that it had been done in a “friendly” manner. While there were no plans for future summits, he hopes that he and Kim will meet again.
Such an outcome had been expected by experts, with global risk consultancy Control Risks predicting that denuclearisation — or even a timetable to achieve it — would not be delivered at the Hanoi summit.
“However, the summit is likely to prolong the stabilisation achieved in 2018, and give it a more sustainable foundation: a basic outline of a realistic deal formula or roadmap to reconcile US and North Korean demands, beyond the extremely vague aspirations set at the Singapore summit,” says Andrew Gilholm, director of analysis for North Asia at Control Risks.
At the summit held in Singapore last June, there was a vague declaration on a commitment towards a full denuclearisation of the Korean Peninsula. This was a shift in relations between the US and North Korea from the hostile tone in 2017 to a more conciliatory one.
South Korean stocks plunged and the Korean won weakened on the news that the summit had been cut short and that no agreement had been reached. The Kospi Index closed 1.8% lower on Feb 28, while the won slipped 0.5%. Peace stocks, a group of South Korean infrastructure names such as Hanil Hyundai Cement that rallied in the hope that a positive outcome of the summit would lead to new business opportunities in the Hermit Kingdom, also fell. Futures contracts on the Standard & Poor’s 500 index dropped as much as 0.4%.
The summit was just one of many events rocking markets in February, including Brexit, the US-China trade deal and the US Federal Reserve’s “patience” policy mantra to Congress and markets.
Lukman Otunuga, research analyst at FXTM, warns that with concerns over plateauing global growth among many other geopolitical risks straining investor confidence, much uncertainties remain. The latest development in talks between the US and North Korea is merely adding to the growing list of worries.
“Amid these developments, the fundamental questions remain: Will the US and China strike a new trade deal that mutually appeases the world’s two largest economies? When will the UK divorce itself from the European Union, and how? Should there be a return on any of these fronts in the coming weeks, risk aversion will be seen returning with a vengeance,” says Otunuga.
“Moving forward, investors’ risk appetite will continue to be tested as they also digest other risks, such as geopolitical tensions between India and Pakistan, China’s Manufacturing PMI contracting further in February and political uncertainty in Washington. Should these tail risks become more pronounced, this may add another layer of concern to the markets,” he adds.
