Saturday, 19 August 2017

With Bannon Out, Is War With North Korea More Likely?

Steve Bannon was a dove. With him removed from the scene war is much more likely.

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Bannon’s Dovish Side Emerges as He Contradicts Trump on North Korea

With Bannon Out, Is War With North Korea More Likely?: Here Are The Scenarios

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18 August, 2017
When just three weeks ago today Trump fired Reince Priebus and replaced him Gen. John Kelly, we said that "with a military veteran now whispering in Trump's ear every day, Kim Jong-Un's days are now numbered." Then, just two days ago, Steve Bannon himself confirmed in an interview with The American Prospect, that when it comes to matters North Korean Bannon had been the biggest "dove" in the White House, and the natural anti-neocon foil to Kelly and Mattis, both of whom are quite eager and itching to launch a some military engagement against the Kim regime with the following surprising, "off the record" statement:

Contrary to Trump’s threat of fire and fury, Bannon said: “There’s no military solution [to North Korea’s nuclear threats], forget it. Until somebody solves the part of the equation that shows me that ten million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you’re talking about, there’s no military solution here, they got us.” Bannon went on to describe his battle inside the administration to take a harder line on China trade, and not to fall into a trap of wishful thinking in which complaints against China’s trade practices now had to take a backseat to the hope that China, as honest broker, would help restrain Kim.
 
Bannon said he might consider a deal in which China got North Korea to freeze its nuclear buildup with verifiable inspections and the United States removed its troops from the peninsula, but such a deal seemed remote.

 Given that China is not likely to do much more on North Korea, and that the logic of mutually assured destruction was its own source of restraint, Bannon saw no reason not to proceed with tough trade sanctions against China.


Of course, the implication is that with Bannon now out, the probabilities of a real war with North Korea are substantially higher. How much higher? Well, for the answer take the following analysis from Nomura of 5 specific "scenario" outcomes, and 5-10% to the bellicose ones. As they stand currently, the breakdown is as follows:
  • Continuation of current trajectory: 60%
  • "Killer" saanctions by year end: 20%
  • War sooner rather than later: 10%
  • "Out of left field" event: 10%
Consider today's departure of Bannon to be one such "left field" event, one which skews the entire matrix in a significantly pro-war direction.
As for what a potential catalyst may be, 
recall that earlier today we previewed next week's main geopolitical event: massive war games held just off the Korean coast:




on Monday US and South Korea are scheduled to begin joint military exercises, a massive show of force which every time in the past has infuriated North Korea, sometimes triggering a show of force.
Held every fall in South Korea, the Ulchi-Freedom Guardian war games are the world’s largest computerized command and control exercise. Some 30,000 U.S. soldiers and more than 50,000 South Korean troops usually take part, along with hundreds of thousands of first responders and civilians, some practicing for a potential chemical weapons attack.
Scheduled long before the recent diplomatic fallout between Washington and Pyongyang, the U.S. and South Korean militaries will simulate warfare with North Korea from Aug. 21 to 31, well aware that North Korea could respond with another missile test. 
On Thursday, North Korean state media declared that the military exercises will “further drive the situation on the Korean Peninsula into a catastrophe.”

So while one may speculate, the answer of what the "Bannon-vacuum" means for world peace, or in this case war, may reveal itself as soon as next week. Which, incidentally is also the reason why the market isn't exactly surging on the news that Bannon is out: traders have realized that all that took place today is the replacement of some domestic policy security with far more foreign policy insecurity.