Korea and the AIIB

Min Hyung Kang is a former intern for Korea Studies at the Council on Foreign Relations.

South Korea’s decision to join the Asian Infrastructure Investment Bank (AIIB) as a founding member reminded observers of Korea’s place as a middle power caught between great powers. Korea’s interest in joining the AIIB is indicative of improving Korea-China relations, one of the determinants for security of the Korean peninsula. However, to the United States, South Korea’s strongest ally, Korea’s involvement in the AIIB may not be very pleasing especially when the AIIB seems like a mechanism designed to oppose U.S. influence in Asia. It seems that Korea is at a critical moment that may either extensively benefit or severely undermine its national interest.

Korea’s security interests have, since the Korean War, been protected by the United States, while Korea’s contemporary relationship with China has concentrated on economic exchange. The U.S.-Korea alliance has been critical to Korean security, especially with regard to the unpredictable yet continuous North Korean threat. Due to China’s close relationship with North Korea, South Korea has seen China more as an economic partner rather than a strategic ally. For this reason, ROK-China relations have been often referred to as “cold in politics, hot in economics” because Korea and China rarely cooperated on political terms even while cooperating economically.

However, the strict notion of “Korean security as linked to the United States” and “Korean economy as linked to China” seems to have lost ground since President Park Geun-hye came into office in 2013. Speaking of unification as “jackpot,” President Park has placed unification at the forefront of her agenda from the very beginning of her administration. Recognizing that support from China, as well as that of the United States, is necessary for peaceful unification of the Korean peninsula, Park has been putting unusual effort into strengthening South Korea’s relationship with China. After President Xi Jinping’s visit to Seoul in July 2014 and President Park’s reciprocal visit to Beijing the following year, South Korea and China are at a peak of their bilateral relationship, reaching a level of “hot in politics, hot in economics” – a term used by both Korea and China after the Xi-Park summit last summer to signify a cooperative political and economic relationship. Since then, it has become difficult for Korea to strictly distinguish political and economic spheres of cooperation, respectively, with the United States. and China. Korea’s strategy seems to have shifted so as to maintain the U.S.-ROK alliance and also to improve ROK-China relations. The problem with this change in Korea’s strategy comes when conflicts in the U.S.-China relationship run the risk of Korea being put in a corner, potentially having to send conflicting signals to the United States and China.

The emergence of the AIIB has complicated Korea’s strategic position because the AIIB debate has been framed in the context of an intensifying U.S.-China rivalry. As countries began to announce their interest in the AIIB, the United States strongly advised its allies to refrain from joining the AIIB mainly because a new financial order may challenge the existing U.S.-led international order. In response, China criticized the United States for being a “destroyer of the current international order” for deterring the rise of China by using an outdated method of containment. Denouncing the U.S. focus on maintaining hegemonic power, China urged the United States to cooperate with a China-led institution for regional and global stability. South Korea, conscious of the claims made by both countries, waited to announce its decision to join the AIIB on March 26, only a few days before the application deadline to be a founding member on March 31.

While China may not have capability to directly challenge the United States at present and, therefore, Korea does not have to clarify its position yet, Korea is constantly aware that making a choice between the United States and China is not an option in a situation in which Korea can hardly control its security environment by itself and, at the same time, is in need of both countries for its national goal of peaceful unification of the Korean peninsula. Korea’s stable security environment and economic prosperity are largely dependent on U.S.-ROK alliance and China-ROK relations. Therefore, Korea seeks to avoid placing itself in the uncomfortable situation in which the United States and China both are suspicious about Korea’s position in this emerging rivalry. If either country turns its back on Korea, it would be very difficult for Korea to secure its goal of reunification. Korea’s geographic location reflects Korea’s strategic position: as a country located in between the United States and China, Korea is best served by maintaining friendly relationship with both powers. In the coming years, Korea’s strategy is likely to enter into the scrutiny of both countries as controversial issues, such as the Trans-Pacific Partnership (TPP) debate and the Terminal High Altitude Area Defense (THAAD) deployment, will continue to challenge Korea.

In this circumstance, one solution for Korea to manage frictions between the United States and China and to reinforce its position as a middle power is through securing buy-in from both Beijing and Washington on President Park’s proposed Northeast Asia Peace and Cooperative Initiative (NAPCI). NAPCI aims to be a multilateral cooperation mechanism to bring regional players, including the United States and China, together to resolve tensions in Northeast Asia—a mechanism sorely missing in Northeast Asia where economic integration is high but trust is low. The core of NAPCI is centered neither in the regional dominance of one country nor in improving Korea’s bilateral relationship with a specific country, but is rather focused on providing a framework for the region. NAPCI attests to Korea’s role in the region and between the United States and China: a middle power that manages the regional affairs to prevent conflicts from escalating into direct confrontation. Although Korea may, at times, be pressured to make tough choices, NAPCI would preserve Korea’s space between the two great powers.

To serve the goal of building trust and a process for addressing security issues in Northeast Asia, U.S. support for NAPCI is crucial for the U.S.-ROK alliance as NAPCI would be a win-win for both the United States and Korea. Because the United States has been the dominant power in Asia for nearly a century, its support for NAPCI would empower Korea to play a more active leadership role in shaping the regional framework, at the same time, showing that NAPCI serves boththe U.S. national interest as well as that of Korea’s. More importantly, NAPCI would be able to lend more credibility to the U.S. rebalance to Asia policy, since China scored credibility in the region with so many countries signing on to the AIIB. The rebalance has been continuously challenged by China’s claims that the policy is used to deter the rise of China and, thus, is not suitable for bringing Asia together. However, if the United States supports NAPCI, the goal of which is to build trust and to enhance cooperation among Northeast Asia countries, the United States may argue that the aim of the rebalance policy aligns with that of NAPCI. With U.S. support, NAPCI would be an important platform for the U.S.-ROK alliance and China would then, either enthusiastically or grudgingly, be brought to the table to cooperate within the framework of NAPCI as part of its often-stated need for peaceful cooperation with the United States Therefore, NAPCI may act as a stepping stone for the United States to regain its dominance in Asia, secure U.S.-ROK alliance, and even facilitate cooperation between China and the United States.

Korea’s ability to serve as a middle power player in the region will suffer so long as the rivalry between the United States and China persists. However, there is hope. Instead of backing away from controversial issues that will influence Korea’s bilateral relationships with the United States and China, by promoting and attaining U.S. and Chinese support for NAPCI, Korea may not only establish a venue in which to exert its middle power role, but amplify its middle power capabilities as convener and agenda-setter.