The deployment of North Korean troops in direct support of Russia’s war in Ukraine has implications not only for the conflict in Eastern Europe, but also for the Asia-Pacific region.

A key consideration is that the North Korean deployment will, in strategic terms, link the Ukraine conflict to tensions on the Korean peninsula, and by extension to the current Taiwan and the South China Sea issues – owing to the US alliance system. The deployment thus promises to heighten the risk of conflict, accidental or intended.

Why is this relevant to businesses operating in Asia ?

Perhaps of more direct importance for business, though, is that these tensions will sour the commercial environment, engender suspicion, and so add to the day-to-day risks facing business – particularly given uncertainties related to the policies of the incoming Trump administration.

Companies operating around the Asia-Pacific region thus need to monitor developments closely, mindful of the intricate linkages at play, and should act to strengthen their resilience in the face of these risks. SVA stands ready to assist.

North Korean soldiers in Ukraine

The deployment of, initially, at least 11,000 troops from the Democratic Republic of Korea (“DPRK”) in support of Russian combat operations against Ukraine has added to tensions in Europe. In response, the US and UK have approved the firing of missiles they supplied into Russian territory. Initial reports indicate that a North Korean general was wounded amongst other casualties in the town of Marino, during one such strike.

The deployment should strengthen the DPRK’s military capacity, thanks to funds from Russia, the troops’ new combat experience, and opportunities to test their equipment. Moscow may also choose to support the DPRK’s nuclear weapons and missile programmes, provide oil supplies, and work with Pyongyang to circumvent the US financial system.

South Korea’s National Intelligence Service (“NIS”) is watching developments closely, of course, and the government is framing a response. Seoul may yet provide artillery or other weaponry to Ukraine.

If too controversial at home, Seoul could instead offer platforms or munitions to states such as Poland, so freeing up military supplies for Ukraine. The North Korean deployment will also encourage South Korea to reinforce ties to the US, and (more controversially) to Japan. Thus the nature and scale of regional risk is ratcheted up.

Deep implications for China

The North Korean deployment is liable to have major consequences for China, too. The PRC is not keen on North Korean military expansion.

At the least, Pyongyang’s decision will undermine Beijing’s efforts to present itself as neutral in the Ukraine conflict. China’s relationship with North Korea traditionally is as close as that between “lips and teeth”, although Russian meddling with scant consideration as to long-term strategic issues may erode Chinese influence over Pyongyang.

Beijing will certainly not welcome such developments. China has sought to avoid a Cold War-style standoff with the US, and is trying to prevent smaller trade dispute with the European Union from escalating, but may now find its image beholden to decisions made in Moscow and Pyongyang.

The view from Tokyo

Japan will also be watching developments, closely.

In recent years, Japan has “normalised” defence policy, mostly in response to growing Chinese economic and military power.

As part of this process, Tokyo had focused on the bilateral Senkaku/Diaoyu islands dispute, and rising tensions in the Taiwan Strait – even recently rehearsing for the evacuation of civilians from its southern islands in the event of war.

Now, though, Tokyo will have to consider a possibly concurrent crisis on the Korean peninsula, not least as Russian support for Pyongyang’s nuclear or missile programmes will shortly pose more direct threats to Japan’s islands.

Looking forward, then, Tokyo will likely view developments on the Korean peninsula, over Taiwan, and in the South China Sea, all as part of a much broader regional security challenge – at the centre of which is China.

Building the “lattice”

One immediate result of Pyongyang’s decision, then, will be a strengthening of the US-dominated alliances around the region.

The deployment may bolster Washington’s efforts to create a “lattice” that fills in gaps in the “hub and spoke” ties between Washington and its partners – subject, of course, to President-elect Trump’s actions, and his known scepticism towards the alliances.

Naturally, the deepening of such ties will trouble China, North Korea, and Russia. In turn, these states may coordinate actions, so as to put pressure on the US security system. Worse, one smaller state could act impetuously, and drag the others along – as Kim Il-sung did when he invaded South Korea in 1950.

In this context, it is perfectly possible that a small incident could escalate quickly into something much nastier – particularly given the uncertainties surrounding the policies of the incoming Trump administration.

Implications for business

Obviously, an overt conflict, or even a minor crisis, would have major implications, by disrupting aviation and shipping links, damaging supply chains, and provoking financial instability.

For now, though, that is not likely, and of more direct concern for business is a hardening of regional divisions and rise in hostility towards certain foreign business. In particular, the deployment may encourage governments to dismantle cross-border supply chains, be more sceptical of foreign investment, and take steps to fortify their economies.

The results for business in the near term could be a souring of confidence, then, as suspicions rise. Seemingly minor decisions, on regulations, permits, and licences, may go against foreign companies.

What to do

The North Korean deployment in support of Russia thus not only poses intensified localised security concerns, but also presages a further deterioration in business risk across Asia. The upshot will likely be a more constrained and less friendly commercial environment.

Companies should monitor developments closely, mindful of the complex linkages at play, and should act to strengthen business resilience, including by strengthening communications and reappraising the scope of insurance cover.

SVA has much experience in evaluating such risks, and stands ready to be of assistance.

SVA

SVA (www.stevevickersassociates.com) is a specialist risk mitigation, corporate intelligence and risk consulting company. The firm serves financial institutions, private equity funds, corporations, high net-worth individuals, and insurance companies and underwriters around the world.

SVA has three core lines of business, which are: Business Intelligence and Political Risk; Corporate Investigations; and Special Risk.

SVA also has a dedicated crisis management team which, for our retained clients, stands ready to assist companies during crisis situations.

SVA is based in Hong Kong, Singapore, and London and operates globally.