INCIDENT: Thousands rallied in Seoul in early June to protest perceived North Korean threats against their country after the severing of bilateral relations following the sinking of a South Korea naval corvette in which 46 sailors died. Despite this, South Korean officials on 8 June said they would not seek any new sanctions against Pyongyang.

SIGNIFICANCE: The sinking of the S Korean navy corvette should be viewed from a perspective of succession drama in Pyongyang, rather than specifically in terms of North-South relations.

BACKGROUND: Pyongyang severed bilateral relations with South Korea after the latter published the results of an international investigation into the 26 March sinking of the South Korean naval corvette, the Cheonon. Pyongyang continues to deny involvement in the incident.

South Korean President Lee Myung-bak responded by suspending trade and aid ties with its neighbor. Then, on 8 June, Seoul said it would not seek new sanctions against Pyongyang, though senior officials were seeking support from Beijing at the UN to "censure" North Korea over the incident. South Korean news agencies quoted Vice Foreign Minister Chun Yung-Woo as saying that new sanctions would have "no practical benefits." This is seen in light of stricter UN sanctions laid against North Korea last year, aimed at the country's weapons trade following missile launches and a second nuclear test.

South Korean military intelligence had warned earlier this year that there was a threat of torpedo attacks from North Korea, and that Pyongyang appeared to be planning an attack to revenge an incident in November 2009 in which it lost a skirmish with the South's naval forces in the disputed Northern Limit Line.

Seoul now fears that Pyongyang may be planning massive cyber attacks on the Group of 20 summit in the South Korean capital scheduled for November. Pyongyang has also scrapped a pact designed to prevent naval clashes in the Yellow Sea, with leader Kim Jong-Il telling his country's armed forces to prepare for military action.

BOTTOM LINE: As far as South Korea is concerned, Seoul has taken a noticeably softer stance on the incident since the release of the investigative report. The fact that it is calling for support in the UN largely to reprimand Pyongyang without seeking additional measures is significant. Seoul is aware of the succession drama being played out in Pyongyang, and it also has politics to consider at home.

Problems in Seoul: Local elections held last week did not bode well for South Korean President Lee Myung Bak. The South Korean president is seen as advocating a tougher line with Pyongyang than his predecessors, and local elections last week were unfortunate to take place against the backdrop of the investigation into the sinking of the Cheonan. The opposition Democratic Party won seven mayoral and gubernatorial posts, with the president's conservative Grand National Party (GNP) winning only six posts across the country. This is a clear indication of public sentiment ahead of 2012 presidential elections and shows a major loss for the GNP, which won twice as many posts in the last local elections. Though the government has said it did not intend to soften its stance and would instead look to change public opinion, the GNP is short on time and it is likely that the president will refrain from any measures against North Korea that would be perceived at home as risky.

Succession Drama in Pyongyang: Supreme Leader Kim Jong-Il's third and youngest son, Jong-un (who holds a mid-level position on the National Defense Committee) is being heralded as the next likely head of state of North Korea. The transition of power is not necessarily an easy affair, and there is no clear approach to succession. The attack on the South Korean warship was likely intended as a stage-setter for Jong-un's succession. The fact that North Korea, given its economic situation, appears to be facing imminent collapse will make succession even more difficult, and it must be played out cleverly. News reports suggest that the attack was made to look as if it was planned by Jong-un on his 27th birthday. Whether another succession will take place before North Korea collapses remains an open question.

Opportunity for China: The US and Japan support the results of an international investigation into the sinking of the South Korean warship, which points the finger at North Korea; China and Russia have not signed off on the results. The sinking of the South Korean warship is not likely to lead to a wider conflict at this point, and much of what happens on the geopolitical scene will depend on China's willingness to play a mediating role, and its determination to seize the opportunity to use its economic leverage to help denuclearize a North Korea that is on the edge of famine. Beijing is planning $10 billion worth of infrastructure investments in North Korea (an amount that represents 70 percent of North Korean GDP). This is where the main opportunity is to move beyond simply "managing" Pyongyang to "resolving" major security issues. However, the People's Liberation Army, which has close relations with the North Korean armed forces, may prove a spoiler here.

Source: http://oilprice.com/Geo-Politics/Asia/Behind-and-Beyond-The-Sinking-of-The-Cheonan.html

By The OSINT Group for Oilprice.com who offer detailed analysis on Oil, alternative Energy, Commodities, Finance and Geopolitics. They also provide free Geopolitical intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit: http://www.oilprice.com