The Moscow Model for Korean Unification
No. 4 2013 October/December
Shepherd Iverson

Professor of the Center for Korean Studies at Inha University in Incheon, South Korea.

A Lucrative Exit Plan

The growing dissent inside North Korea and the ascension of a new generation of leaders has opened a window of opportunity for political acquiescence. As with second-generation Soviet reformers following the Khrushchev de-Stalinization era, the post–Kim Jong-il power elite need a secure plan for exit from the failing Stalinist system they inherited. A reunification would solve the growing nuclear threat, ease regional and geopolitical tensions, and result in the development of a resource-rich Northeast Asia. As in Soviet Russia, this can be achieved by changing the incentives for all North Koreans, and by offering its leaders a safe, honorable and beneficial way out of the deteriorating situation. The Moscow model for Korean unification is a detailed proposal to secure this result.


The danger imposed by the inter-Korean partition exists within a wider framework where changing balances of power and new geopolitical impulses prevail. As the economic center of the world shifts east, export-driven capital accumulation is funding an arms race. China, Russia, Japan and South Korea spent a combined $330 billion on defense in 2013. Chinese military spending has been increasing by over 10 percent annually in the past twenty years. Tension is increasing with the rise of China, the U.S. military pivot to the Pacific, and North Korea nearing its goal of miniaturizing nuclear warheads.

A recent poll revealed that two-thirds of South Koreans support Seoul’s possession of a nuclear deterrent, while Japanese officials have discussed policy changes. With the specter of a more capable and assertive Chinese military, Japan is increasingly uncomfortable entrusting its security to the United States. At some point Japan and South Korea are likely to become more resolute in securing an independent nuclear deterrent. Beijing’s billion-dollar per year strategic decision to prop up the Kim regime may ultimately result in regional nuclear proliferation, as China is trapped in a lose-lose geopolitical gambit for which it has yet to find a solution.

In spite of Chinese life-support, without reform experts believe internal contradictions will eventually lead to political implosion in North Korea. Sanctioned and cut off from foreign capital, state enterprises perform dismally and a moribund economy has been stagnant or worse for over two decades. Per capita incomes are less than they were in 1990, agricultural production is half its potential, and an obsolete industry operates at a quarter of capacity. Its currency is worthless abroad, inflation is a recurring problem, and hyperinflation is an existential threat.

The Juche, Suryong, and Songbun institutions of social control are losing credibility. Children are asking questions their parents dare not try to answer. Regime control over its military is tenuous, market reforms could lead to civil unrest, and economic recovery is impossible without capital investment that is unobtainable. Despite ten trillion dollars worth of minerals in the ground and valuable warm water seaports, per capita purchasing power is 1/17th that of the South – the largest economic disparity along a sovereign border in the world.

Support for the Kim dynasty has steadily declined since the mid-1990s after the death of Kim Il-sung and a confluence of crises led to the collapse of the food distribution system and widespread famine. When the state stopped providing food, institutions of social control began to disintegrate, markets and trade networks emerged, and wholesale bribery and corruption ensued. Weakened central leadership and rampant profiteering has created insecurity and distrust among the power elite. Military-first policies allowed the armed forces to metastasize almost into a separate state as they gained control of over 80 percent of businesses that obtain foreign currency.

People without money either migrated toward food or went hungry; over half a million starved. Another half million traveled back and forth across the porous Chinese border to feed their families, and brought back stories of the better life in China and the almost unimaginable wealth of South Korea. The impact of state propaganda has declined as people now realize they will never live in a workers paradise. Glimpses of modernity through South Korean news reports and cultural contents have created a sense of relative poverty and a new social context for political change.

There is no obvious long-term solution for regime stability. Without investment, prospects for economic revival are dim. Despite recent announcements of adding free trade zones, who will invest? China is interested in natural resource extraction, not in exporting its jobs to cheaper labor. Policy alone will not manufacture exportable commodities, replenish depleted soil, or put food on the table.

Pyongyang assumes the world will resign itself to its nuclear capacity, as it did with India and Pakistan. The Kim family saw what happened in Libya to Colonel Gaddafi, and probably considers its nuclear program vital to national and personal security. Many experts now concede Six-Party Talks were predicated on a faulty premise and that denuclearization can only come after reunification (or a surgical strike).


The 1991 Russian revolution provides a model for political change in North Korea. Interviews with former members of the Soviet elite suggest the revolution was orchestrated by a pro-capitalist coalition of Russian party-state leaders who realized the socialist system was fracturing and could not compete with international capitalism, and who saw an opportunity for personal gain. Elites quickly abandoned ideology for the pragmatic pursuit of material privilege and continued power in a free-market system.

As early as 1987, several years before privatization became official policy, party-state elites began positioning themselves to take over state industries and take advantage of the changes they were about to make. In the final months of 1991, they did little to stop the populist revolt as they told their troops to stand down, and then sat back and watched the relatively bloodless revolution unfold on CNN along with the rest of the world.

Indeed, Mikhail Gorbachev and his family have lived comfortably in Moscow ever since and many of the Soviet political elites are members of the new Russian economic elite. This political maneuver provides a model for North Korean elites to honorably step aside, but they need sufficient material incentives and assurances of personal safety. In Russia there were significant state resources to distribute among elites. This is not the case in North Korea. The current North Korean economy is 40 times smaller than Russia’s was in 1991. Pyongyang elites have few state resources to divvy up and therefore in order to enrich their incentive package and change their perspective, reunification incentives must be offered from an external source, to which I now turn.THE KOREAN PEACE FUND

In One Korea: A Proposal for Peace, I propose the institution of an internationally financed Korean Peace Fund, commissioned to collect and disburse $300 billion to North Koreans (over five years) if they reunify under South Korean political leadership. Besides incentive, this money will fund economic integration and critical humanitarian assistance, since almost 90 percent is given to impoverished families and malnourished children.

Paying for peace was a high-level topic of discussion during the Clinton Administration in the 1990s but the idea was discarded because it was felt at the time the psychic rewards derived from absolute power were probably too compelling to give up. However, recent dynastic transition, emerging geopolitical and economic forces, and cultural changes inside North Korea over the past two decades have made this proposal more relevant today.

Autocracies are notoriously brittle and more unstable than they appear. Although there are more private cars, restaurants, and luxury shops in Pyongyang, and the standard of living for elites has marginally improved over the past few years, it has not improved for the vast majority of citizens. Behind the façade of high-rise apartment-lined boulevards are more than two million less privileged residents who do not belong to the communist party, who live along dirt roads in small brick-and-clay huts, without refrigerators, running water, many without televisions; they use public (cold water) showers and toilets, and rely on coal-based stovepipe heating. The frustrated ambitions of this more informed generation (many of whom now have mobile phones) is a growing threat to the Kim regime.

Promises to the masses of food security, modern health care, property ownership, a reliable supply of energy, international communication links, and thousands of dollars in a personal bank account will give people incentive to take action to make this happen. Peace fund promises will also increase incentives for a coup d’état. According to the proposed payout, the top 1,000 generals and power elites would each become double-digit millionaires, 1,200 officers will receive half a million dollars, and 30,000 junior officers are well compensated. This payment up-and-down the military chain of command will give incentive for an armed elite and middle level supra-civil society to claim their just rewards in a reunited Korea.

Kim Jong-un will be compelled to acquiesce, as he will win the Nobel Peace Prize (like Gorbachev in 1990 and Kim Dae-jung in 2000), and be hailed as the young heroic leader who brought, peace, prosperity and unification to his people. He would secure his legacy, the personal wealth and safety of his family, and become an international celebrity with enormous personal credibility. As a recent college graduate thrust into a difficult situation, young Kim has virtually no reputational baggage. Most experts assume his elders are making state decisions, and that he has had limited involvement in the threatening brinkmanship that has transpired since his dynastic crowning. His father will be the scapegoat for decades of malfeasance and human rights abuse.

In spite of crimes against humanity, there can be no truth-and-reconciliation commissions or international tribunals. Why would North Korean leaders give up their guns if they had any reason to fear the worst? Amnesty from punishment is an essential precondition of this peace model even though we know human rights abuses have permeated North Korean society for decades. There will be political temptations for reprisal. Healing will be painful and take years, but in spite of resentment and the desire for retribution, this one-time pragmatic forgiveness is necessary in order to permanently solve this increasingly dangerous situation that jeopardizes many more innocent lives.


It may seem preposterous to think that governments, corporations and private interests would give hundreds of billions of dollars to individual North Koreans, but this makes the most sense in this particular economic and security situation. The elimination of nuclear weapons from a failing totalitarian state in the epicenter of East Asian prosperity is worth $300 billion; as is reducing the potential for conflict between great powers that would capsize the global economy and threaten the lives and livelihoods of millions.

Reunification would secure free market access to Korean minerals and seaports, Russian rails and energy, and spur the economic development of the Pacific Northeast. And if China considers access to the Pacific vital to its interests, it is conceivable Korea could deed or lease a kilometer wide corridor of land connecting Jilin province with the sea in return for reunification support.

The world is flush with money. After several decades of expanding world trade and the unparalleled production of global wealth, private capital is available. A few thousand corporate elites effectively control $100 trillion dollars, two-thirds of the world’s total assets. There are over 1,500 billionaires, more than 200 in East Asia, 100 in Russia, and 25 in South Korea (including at least seven high billionaires in Seoul). The rich are so rich that the top 50 could give $6 billion each and entirely underwrite the fund with barely a dent in their wallets. Bill Gates and Warren Buffet have separately made $30 billion commitments to philanthropy. In 2012 the net worth of the top 40 billionaires increased by $100 billion and worldwide charity by the superrich surpassed $300 billion.

Indeed, in today’s multi-layered global balance of power, private interests represent a formidable countervailing and often unifying force in the competitive nation-state system of world governance. With better organization and more collaboration they could have a more positive effect. If spearheaded by a single billionaire, or if a consensus emerged within the G20, a corporate consortium, or among international elites, this peace proposal could be funded. Power elites could institutionalize the fund and give it legitimacy by promising highly publicized donations. Unconstrained by the parochialism of public opinion, international power elites could set in motion a partnership between private wealth, international media, banks, business, and global institutions that would fundamentally change the political and economic incentive structure in the region.

Evolutionary biologists have shown how cooperation is deeply embedded in the success and survival of our species. From humankind’s primordial epigenesis to the emergence of world trade and global culture, the fittest individuals and groups are those who cooperate as often as they compete, intuitively grasp seminal change, and alter their perspectives and behavior accordingly. Given modern levels of capital accumulation, $60 billion in each of the next five years could easily be obtained from some cooperative combination of private and corporate donations, foreign reserve withdrawals and redirected military spending. More than $7 trillion in mostly dollar and euro denominated currency reserves and sovereign wealth fund assets are held by Northeast Asian nations; China owns 66 percent. Less than 5 percent of this money would underwrite the Korean Peace Fund, and is not only an investment in the sustained growth of capital funds, but would amount to the greatest humanitarian gesture and security reversal in the history of humankind.

Once the fund acquires international legitimacy and gains momentum, no nation would be able to stop it, as it takes on an institutional life of its own. The new transformative power of our digitally connected world to amass global resources and broad based political support may play a decisive role. Full funding could come faster than anyone would imagine. As seen in other realms, ideas that envision the whole oak tree from an acorn often ignite thresholds that incite a cascade of events that change everything. The elimination of nuclear weapons, free-market access to Russian energy and North Korean minerals, and a secure political platform for the economic development of the Pacific Northeast, are shared objectives that public and private interests should be willing to pay for.

The Korean Peace Fund offers a cost-effective, positive-sum, smart-power solution to the Korean problem that would benefit everyone with something at stake in the region. The United States gets nuclear non-proliferation and the dissolution of a perceived military threat; Japan gets new export and investment markets and safety from missile attacks and weapons of mass destruction; Russia gets secure rail and energy profits, as well as year-round passage to Pacific shipping; China gets dependable free-market access to Korean minerals and ports, Korea’s cooperation in developing its northeast provinces, and the probable retreat of U.S. military forces from the Korean Peninsula and perhaps East Asia; and South Korea gets permanent peace, a more reliable supply of energy, an estimated $10 trillion in mineral resources, 50 percent more people, more than double its current territory, and according to a Goldman Sachs report, development synergies that might produce enough growth for a greater Korea to exceed the GNP of France and Germany in as little as thirty years.

There is incentive for China, Korea, Russia and Japan to settle lingering territorial disputes, expand cultural relations, and form a strong economic free-trade union. This grand alliance of cooperation and harmony in a peaceful Northeast Asia would become the most important and powerful trading bloc in the world. And by diffusing a dispute that has civilization-level military implications and eliminating flashpoints for conflict, multinational corporations will have long-term security for commodity and capital flows and will be unencumbered in the economic development of the resource-rich Pacific Northeast.

And from a risk management perspective, this money is unspent until its objectives are met. There is no possibility of loss. Paper promises can be shredded and electronic donations held in escrow and returned. Although this payment idea may seem exorbitant and unrealistic to skeptics, there is no good reason such a fund should not exist and be promoted on the chance that it might work. Indeed, I am aware of no other more promising alternative for creating permanent peace and reunification on the Korean Peninsula.RUSSIA AND JAPAN

Korean reunification would greatly enhance Russian and Japanese economic prospects. Russia needs peace and cooperation above all else because it wants Korean links to its Trans-Siberian Railway system for Asian exports to Europe and a pipeline for natural gas deliveries to the South. Russia is aspiring to become an energy superpower and sees enormous growth potential in East Asian markets. To promote these interests President Putin in May 2012 launched a new Ministry of Development of the Russian Far East. Japan imports 90 percent and South Korea 70 percent of its oil from the Middle East. Any future conflict in the volatile Middle East or along ocean shipping lanes would jeopardize vital oil supplies. Thus, greater reliance on Russian energy, gas now and oil in the future, appears to be in everyone’s interests and, along with a nuclear-free Korean Peninsula, is a basis for multilateral cooperation. Russia has already forgiven $10 billion in North Korean debt because it wants to move forward with cooperative projects. Considering Russia’s potential economic gains from a stable, reunified Korea, it should be willing (secretly at first) to contribute significant sums to the Korean Peace Fund. Indeed, one of Russia’s 100 billionaires may inaugurate this fund.

Japan’s contribution would be contingent upon assurances that a unified Korea would give up its newly acquired nuclear weapons, as Ukraine and Kazakhstan did after the disintegration of the Soviet Union. Of course, the United States would also insist on this. However, Japan is a conservative democracy and there is no guarantee it will support the peace fund initially. It has conflicting geopolitical interests. Although North Korea is considered a threat, a stronger united Korea is not as preferable as a divided Korea embattled with itself.

However, once the fund gains legitimacy and momentum, Japan will likely bandwagon with the group, since it is afraid of being isolated in East Asia and would want to win favor with an increasingly powerful Korea to offset its fear of China. Indeed, cooperation in a strong and vibrant East Asian economic community is Japan’s best option for a secure and prosperous future. With expectations of rapid growth for another half century, access to the Chinese market is a strong incentive for cooperation. Combining Russian energy resources, Chinese capital, and South Korean technology will lead to rapid economic development. Korean reunification may motivate an unprecedented era of political and economic cooperation in Northeast Asia, from which Russia and Japan will accrue significant advantage.


Although not required, as the sole provider of aid to North Korea, a change in Chinese policy would be decisive in creating lasting peace. It is presumed China prefers a divided peninsula to preserve a fraternally allied communist-authoritarian state as a buffer between itself and the U.S. garrisoned democratic South Korea. But support for this atavistic Cold War notion is declining. In spite of “lips and teeth” rhetoric, China and North Korea are not close allies. Historic mistrust, current resource predation, and ethnic-nationalist prejudice characterize what has been called a “mutual hostage” relationship.

Beijing increasingly regards North Korea as a strategic burden and provocative threat to regional stability. Criticism increased after Pyongyang successfully launched a three-stage missile in December 2012 and two months later conducted its third underground nuclear test in seven years. This led to Chinese support for tougher U.N. sanctions and a harsh array of uncensored public comments from foreign policy experts.

In the prominent U.S. journal Foreign Policy, Fudan University Professor Shen Dingli tersely wrote: “China has reached a point where it needs to cut its losses and cut North Korea loose.” In a Financial Times article, Xie Tao of Beijing Foreign Studies University commented: “Having an unpredictable, ungrateful, and totalitarian regime armed with nuclear weapons is the last thing China wants on its border.” And reprinted in the Financial Times after its original publication in the Central Party School journal, Study Times, deputy editor Deng Yuwen asserted, “China should consider abandoning North Korea and take the initiative to facilitate North Korea’s unification with South Korea.”

Although Chinese policy conservatives have prevailed over political pragmatists thus far, their patience and authority is not unlimited. Since the Mao Zedong era, Chinese political leaders have exhibited an admirable faculty for pragmatic reform in response to changing circumstances. Beijing’s contribution to Korean unification would send a message of cooperation to Washington that could result in the retreat or elimination of U.S. forces in Korea and a more limited balancing presence in the Pacific, since a unified peninsula and more conciliatory relations between Taipei and Beijing reduce points of contention and leave little left to fight over. With expectations of favorable economic and geopolitical consequences, this peace fund model could provide the win-win face-saving solution, institutional platform, and impetus for a new consensus in Beijing, Pyongyang and Washington.EXPANDING OPTIONS

To prevent conflict we must consider a full range of mediating alternatives. This model expands the existing options for creating peace because it proposes several possibilities that have heretofore been presumed exceedingly improbable:

1. Global elites and governments will promise billions of dollars to a peace fund.

2. China will stop bankrolling the Kim regime and will support unification.

3. Kim Jong-un and the North Korean military and power elite will acquiesce under certain favorable circumstances.

Consideration of these imponderables has been beyond the normal range of discourse among political scientists, policymakers and world leaders. However, the ultimate success of this pay for peace plan does not require an academic or policy consensus. Any one of over a thousand outlier billionaires or a few thousand corporate elites could set this peace process in motion. Or, as the late Steve Jobs once proclaimed, someone who has the imagination to “push the human race forward, while some may see them as crazy, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do.”

As tension mounts in East Asia, a strategy that injects the persuasive power of money into the diplomatic process may be necessary in order to overcome path dependencies that too often terminate in conflict. By design or by default, a new world order is emerging. As we transition into this bi- or multi-polar interdependent global system, it makes sense that cooperative checkbook diplomacy replace gunboat diplomacy, and that the proliferation of weapons of mass destruction cease altogether.

Despite persistent posturing and rhetoric, as the Kim Jong-il generation dies out, North Koreans should be viewed less as perpetrators and more as victim inheritors of an ignoble history. Its new leaders live in perpetual fear and insecurity, and invariably go-along-to-get-along, trapped in an inhumane and unworkable Stalinist system without a promising alternative. By offering a safe, honorable and profitable escape route, the international community would provide a new path for peace. This is the smart thing to do.

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The fundamental tool we have repeatedly employed to improve our human condition is an innate ability to devise new ways to solve old problems. Through our invention of language and culture we have displayed a remarkable ability to cooperate with each other, and when challenged by new problems we have exhibited the adaptive flexibility to envision new perspectives and adopt non-programmed non-path dependent behavior to uncover their ultimate solution.

Spanish essayist and philosopher George Santayana once proposed that we must learn from history or we are condemned to repeat it. The changing balance of power, military arms build-up, and resurgent ethnic nationalism in East Asia today evokes comparisons to Western Europe prior to the great world wars of the twentieth century. Let us hope that lessons learned from the poor choices, ineffective institutions, failed diplomacy and leadership that led to the carnage of the past century, will not allow this to happen again in East Asia. Support for the Korean Peace Fund could reverse these ominous tendencies and perhaps alter the inertial outcomes of an excessively violent world history.

North Korean leaders, who command a 1.2 million–man army, also have personal lives, families, grandchildren, and hopes and dreams for a peaceful and prosperous future. We must view North Koreans not through a media-distorted lens as goose-stepping saber-rattling soldiers and belligerent missile-launching miscreants, but instead as a culture of mostly innocent flesh-and-blood people, who get married, love their children, cry at funerals and try to get by as best they can in a difficult society. They are rational and pragmatic people who are amenable to compelling incentives and might consent to a uniquely enriching opportunity for themselves and their families if their personal safety and well-being were assured.

In spite of the appearance of erratic behavior, experts agree North Korea behaves quite rationally. Therefore, we can presume the regime would acquiesce if this were their best option. Considering the policy failures of engagement, containment and coercion, and the dismal results of Six-Party Talks, a new approach is warranted. This proposal offers North Korean leaders a safe, honorable, and profitable way out of a deteriorating situation. Once the money is on the table it will be difficult for the Kim regime not to accept this peace package. Therefore, it is incumbent upon the leaders of this new world order to give 30-year-old Kim Jong-un an attractive option that could win his support and that of those around him.

The esteemed twentieth century economist, John Kenneth Galbraith once observed: “Politics is not the art of the possible. It consists of choosing between the disastrous and the unpalatable.” One need not agree with or approve of every aspect of this proposal to acknowledge that it is preferable to most other alternatives and that it could be successful. Every key political leader that makes important decisions about North Korea was elected, reelected or appointed very recently. It is possible that if these new leaders were to learn about the details of this proposal, and carefully weighed the costs and benefits from their respective national interests, that they might each decide to support this fund and join together to create a new era of political and economic stability in East Asia. Not only does the Moscow Model allow everyone to walk away without injury, it also gives everyone something they want.