In 2007 North Korea began to come back from the brink of nuclear confrontation with Western powers. In hindsight, the point of maximum danger appears to have come in 2006, both in July, when the reclusive state test-fired seven missiles including the long-range Taepodong-2, and more significantly in October, when it exploded its first nuclear device. By February 2007, however, Pyongyang had agreed in principle with its main diplomatic contact group (made up of the US, China, Russia South Korea and Japan) that it would shut down its nuclear plant at Yongbyon and allow nuclear inspectors to visit. By early November 2007 a team of US specialists had been allowed to visit the country to oversee the disablement process, in return for promises to deliver 1mn tonnes of heavy fuel oil or equivalent aid, and for moves by Washington to take North Korea off its terrorism blacklist. BMI's view is that danger is not over. North Korean leader Kim Jong-il and the state he has built up around himself remain unpredictable and paranoid. It is evident that posing a credible nuclear threat - and eventually agreeing to remove it under certain conditions - had been part of his approach all along, designed to leverage maximum concessions from the West. Those concessions may stabilise the situation, but a return to the path of confrontation over real or imagined grievances cannot be ruled out. Reports of flooding and new food shortages inside the country in the second half of 2007 were a further factor to bear in mind. For the moment, a summit with presidents Obama, Lee of South Korea, and Hu Jintao of China, along with a generous economic aid package and an end to the diplomatic isolation of North Korea, might be the kind of medium-term objective Kim Jong-il would judge as a satisfactory outcome. North Korea remains a difficult player in the region, and one that the US continues to be fearful of. North Korea's defence industry, while unsophisticated, is capable of producing military equipment to sustain its outdated armed forces, and to maintain a healthy illicit arms trade. Its extensive, if not advanced, defence industry provides it with a self-reliance that can rival most other states' defence sectors. Should North Korea ever fully come in from the cold and its arms trade move from the illicit to the lawful, it could boast a very profitable defence industry.
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