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North Korean Leader Kim Jong-il Dead; Son, Kim Jong-un, Expected to Take Power; South Korean Military on Heightened Alert

Aired December 19, 2011 - 00:00   ET





JOHN VAUSE, CNN INTERNATIONAL ANCHOR: An indication there of the cult of personality which Kim Jong-il built up around himself inside that country. It was one way which he maintained absolute control.

It is impossible now, though, to say what North Korea will be like without Kim Jong-il. As we gather international reaction and perspective, let's take a look at what might be written about the self-proclaimed Dear Leader in the history books.

Here's Dan Rivers.


DAN RIVERS, CNN INTERNATIONAL CORRESPONDENT (voice-over): Kim Jong-il always cuts a slightly bizarre figure. His diminutive stature and characteristic hair was parodied by some in the west. But for the citizens of the Democratic Peoples Republic of Korea, Kim was the embodiment of this reclusive state.

Feared, loved, worshipped, obeyed, his cult of personality was deeply entrenched.

His father was Kim Il-Sung, who founded North Korea with Soviet backing after World War II. Kim Jong-il was just a little boy when the Korean War broke out in 1950, with the Soviet-backed north invading the American backed south. After fighting ended, Kim Jong-il became steeped in his father's philosophy of Juche, or self-reliance. And the North became ever more reclusive.

The North and South never formally signed a peace treaty, and remain technically at war, separated by a tense demilitarized zone. Gradually, Kim Jong-il was groomed for the top, making public appearances in front of cheering crowds.

When Kim Il-sung died in 1994, he was declared eternal president. So his son instead became general secretary of the Ruling Workers Party of Korea. And by 1998, as head of the Army, he consolidated his position of absolute power. UNIDENTIFIED MALE: He will be remembered as a person who was responsible for awful things, for the existence of one of the worst dictatorships in probably not only Korean history, but in the world history, at least in the 21st century. Yet, he did not create the dictatorship. It was father's But he took responsibility and he made sure it continued for many year years.

RIVERS: He was known for his love of fine wines, at odds in a country where food shortages and privation were common. While the Dear Leader, as he became known, is said to have indulged in these appetite for the finer things, his people were literally starving to death.

The collapse of the Soviet Union hit North Korea hard, suddenly ending guaranteed trade deals. And then devastating floods compounded the famine. Estimates vary for the number that died, but even the regime itself admitted that almost a quarter of a million perished between 1995 and 1998. Some say it was more like ten times that figure.

But in the capital of Pyongyang, the artifice of a successful state was maintained. An opulent subway proof, the dear leader would say, that the DPRK's progressed under his and his father's leadership.

Kim Jong-il was well known as a film buff, here visiting the set of a North Korean production. His personal video library was said to include 20,000 titles, with "Rambo" and "Friday the 13th" supposedly topping the Dear Leader's favorite flicks.

In 2000, there appeared to be a thaw in North/South relations, the first-ever summit between Kim Jong-il and his then-counterpart from the South, President Kim Dae-Jung. The south's so-called sunshine policy of engagement seemed to be bearing fruit.

But Kim Jong-il pressed ahead with his nuclear weapons program. The U.S. labeled it as part of the axis of evil in 2002. A year later, North Korea withdrew from the Nuclear Nonproliferation Treaty.

In 2006, the North conducted a nuclear test and test fired missiles. It added extra urgency to the six-party talks designed to deal with North Korea's nuclear program.

A breakthrough came in 2007 when Kim Jong-il finally agreed to disable the nuclear reactor at Yongbyon, in return for fuel and better relations with the U.S.

But despite dramatically blowing up the cooling tower, North Korea seemed to backtrack afterwards. The deal appeared to be in jeopardy. The capture of two U..S journalists, Laura Ling and Euna Lee, on the North Korean border sparked another crisis in 2009.

It ended when former President Bill Clinton flew in and successfully negotiated their release, prompting hopes there would be further engagement.

Observers say Kim Jong-il will be remembered as a nearly impossible man to bargain with, stubborn and fickle in equal measure, a man who kept 23 million people in a totalitarian nightmare, in one of the most repressive, reclusive regimes in the world.

Dan Rivers, CNN.


VAUSE: Of course, now all eyes are on the man who is likely to take his place. That will be his son, Kim Jong-un, his youngest son. There's very little known about him. He's believed to be in his late 20s. He is understood to be a very polite, quiet young man. He is also a man of very little experience in how to run a dynastic, hereditary, Stalinistic regime, that he is now -- being handed to him by the death of his father.

And many questions are being asked, is this an opportunity or will this bring more chaos and conflict on the Korean Peninsula? Elise Labott is our senior producer at the State Department. She joins us on the line once again.

Elise, as far as the State Department is concerned, how are they viewing this moment in time?

ELISE LABOTT, CNN SENIOR STATE DEPARTMENT PRODUCER: Well, I think they're a little shocked, John. I think it happened a little bit sooner than they thought it would. And they really don't know who is on the -- as we've been saying, is Kim Jong-un making this decisions at this point? Or are these so-called regents, his aunt, his uncle, the sister of Kim Jong-il and her husband, are they the ones making decisions?

Is the military making decisions? I think there's going to be a real period of uncertainty for the United States. They have seen some progress in engagement with the North over the last six months or so. I think they're going to put on the brakes a little bit, trying to decide what they're going to try to do.

They're going to have to very carefully calibrate the messages over the next 24 to 48 hours. Are they going to offer condolences? Are they going to anoint, so to speak, the so-called new leader that the -- we all expect him to be. It hasn't been announced obviously yet.

I think the U.S. is going to really tread very carefully. There is certainly not going to be some wholesale engagement. Overnight the U.S. isn't going to embrace this young, untested leader.

But I don't think they want to close the door to the -- to what we have been talking about all evening, that this could be an opportunity. Could he be a more benevolent leader than his father? It's certainly possible. But he could also be a much more unpredictable leader.

And he's untested. Obviously, the North Koreans are going to want to portray him as in command. Could that mean an overture towards the west or could that mean some provocative behavior towards the south? They really don't know. I think they're going to be watching and waiting to see the signals from Pyongyang as they closely, closely coordinate with South Korea, as we have been discussing, John.

VAUSE: OK. Elise on the line there for us from the State Department. Thank you for that, Elise. One of the big questions, of course, is what happens next with the six-party denuclearization talks, which have been going on and off for the best part of a decade now. They are in the deep freeze at the moment, but that is not because of North Korea.

It is because Washington and Seoul have been holding off. Although, as Elise has been reporting throughout the evening, there has been some move towards getting those talks back on track, some back channel unofficial talks underway between the parties involved.

But still no real movement there. China is the main moving force behind the six-party talks. It is also the only ally to North Korea. Our Stan Grant is live in Beijing for us.

Stan, the question obviously the six-party nuclear talks will be on hold for quite some time. And many people still wondering what will happen now with North Korea's nuclear program?

STAN GRANT, CNN BEIJING CORRESPONDENT: Yeah, it was only just last week that Glen Davies, who is the U.S. envoy who had been traveling to North Korea, was expressing some hope, some optimism about a return to the six party negotiations.

They've been a really unique framework. Interesting as well that China had taken such a lead role in being able to bring this together. What was fascinating about the six-party talks was that you brought so many enemies, if you like, certainly rivals to the table.

We know that North Korea has had its problems with Japan, South Korea and the United States. China and Japan, of course, have had their ongoing tensions, historically based tensions. China and the United States as emerging superpower rivals throughout the region.

It was a framework that allowed all of those contending, competing interests to sit down around a table. But really what was crucial in all of this, what North Korea had stressed that it wanted all along was not a six-party framework. It really wanted a two-party framework.

North Korea wanted to be able to speak directly to the United States. It wanted to be able to negotiate a full peace treaty, not just the armistice that existed at the end of the Korean War, but a full peace treaty to put an end totally to that conflict, and also to negotiate one-on-one with the U.S. about the future of its nuclear programs, about full diplomatic recognition, about the ongoing role of aid, about the ongoing role of U.S. troops in South Korea.

That's what it wanted. The U.S. wouldn't come at those direct talks, but the six-party framework at least provided an opportunity for all of those very contending and competing interests to be able to sit down and have that negotiation.

And crucial to that, of course, was the role of China in being able to bring North Korea to the table. John?

VAUSE: And Stan, while you have been talking, we just had some -- a wire move from the Agence France Press, Japan expressing condolences on the death of Kim Jong-il. The reason why that's significant is because something which we have been looking for over the course of the last few hours is how countries in the region react to the death of Kim Jong-il.

Do they express condolences, as Japan appears to have just done then? Or do they ignore the death? Or do they speak in harsh terms about the North Koreans? Clearly Japan taking a view that it is better to try to calm the situation by expressing condolences. What, though, will be probably more crucial than what Japan says will be what the South Koreans say.

GRANT: Yeah. Indeed. Of course, in South Korea, potentially -- although when they have talked about the implosion of North Korea, of course, that would have enormous consequences for South Korea. We're getting a little bit ahead of ourselves to start looking at that scenario.

But even a potential reunification of the Korean Peninsula -- you saw in Germany, with the reunification of East and West Germany how much of a load it placed on West Germany to be able to financially broker that deal, to be able to bring in a country that had fallen so far behind the eight ball economically.

The same problem would present itself to South Korea. What is really fascinating here, John -- I think you may have touched on this a little bit earlier -- is it wasn't always thus. North Korea, up until the '80s, was actually growing much more strongly than South Korea. It was the dominant economic party there.

Its GDP was stronger than South Korea. Of course, we have seen since then, South Korea really emerge as a global powerhouse in the region economically, establish its brands around the world. So that response from South Korea, of course, is going to be really crucial.

The Japanese/North Korea relationship is fascinating too, John, because while Japan was negotiating as part of the six-party talks, the nuclear issue, there's another issue here. That is the number of Japanese people, particularly women, who have been kidnapped from Japan and taken to North Korea.

There had been an admission from North Korea during the talks that yes, that did happen. And there were negotiations on the sidelines between Japan and North Korea about the return, the repatriation of those people who had been kidnapped. Indeed, some have been able to go to home.

So it's not just a nuclear issue, but a very personal issue for many Japanese families as well, who have lost people who have been kidnapped and taken to North Korea. VAUSE: And correct me if I'm wrong, but I believe there was even an apology from North Korea for that. I wanted to go back to Kim Jong-un, because there was some hope that this young man, who had been educated I think at a boarding school in Switzerland, who is believed to speak a number of languages, who has traveled the world, likes Michael Jordan and basketball -- was seen as being a bit more well rounded than his father, who very rarely left the country, who traveled everywhere by train if he did leave the country, and only ever really went to China or to Russia.

So there's this hope that because Kim Jong-un has seen a little more of the world, that he may, in fact, be a better leader.

GRANT: Yeah, it's a generational shift, isn't it? We do know that he -- it's rumored that he spent a couple of years at school in Switzerland. You're right there. His interests are more broad. He's interested in basketball. He's been exposed to the western. And it's interesting to see just how that plays out, the impact that the west may have had on him.

It may even have hardened his views. Who's to say? We just don't know that much about him.

He has made trips to China. He's been introduced by his father to the Chinese leadership. It was obviously to get their seal of approval. What's going to be fascinating too here, John, is just how much authority he's able to exert within his own country.

Now, we know his father very much had the seal of his father. But the military is huge there. It is a military state. And how much influence, how much authority he can command over the military is going to be crucial.

But I harken back again to that attack on Yeonpyeong Island around about this time last year. Many were interpreting that as a sign that he was trying to assert his authority, that this was Kim Jong-un saying I won't be pushed around when I take over; this is what I'm capable of doing as well.

So, yes, he's going to have to present himself as a man of steel, someone who can exert that authority. But the unknown is just what an impact that western exposure, that western experience may have had on him and how broad his view may be, John.

VAUSE: OK, Stan, thank you. Stan Grant, live for us in Beijing, as we try and gauge exactly what the world is saying and doing now that Kim Jong-il, the North Korean leader, has been leader since 1994, was never president because that was the position held by his father, who still holds that position as president of the DPRK. He has that position for life and that avoids the need for pesky elections.

Former CNN chief international correspondent Christiane Amanpour traveled to North Korea in 2008. She shared her memories with us a short time ago.

(BEGIN VIDEO CLIP) CHRISTIAN AMANPOUR, FORMER CNN CHIEF INTERNATIONAL CORRESPONDENT: We were there with a team in 2008. First, with the New York Philharmonic. It was around the time when there were negotiations going on between North Korea and the United States. And they came to fruition in June of 2008, when you're right, we saw the nuclear tower -- the water cooling tower at the Yongbyon plant blown up.

But it was a moment of hope then, which rapidly came to an end in the summer of 2008, because apparently, about that time, most people suspect that Kim Jong-il suffered a stroke. As his health deteriorated, negotiations fell apart. And there have basically been none since then, except for there are report that over the last several months, North Koreans and the United States have been talking.

There were reports that potentially a food deal could be announced, a nutrition deal between the United States and North Korea this week, potentially. And there were reports, as yet not completely confirmed, but that there might be some deal, some movement on a nuclear deal with North Korea, again agreeing to suspend their enrichment activity.

Again, this has not yet been announced. But this was something that certainly United States negotiators, who have met several times with North Korean negotiators over the past several months, both in Geneva and in Beijing, had hoped to be able to bring to a fruition.

VAUSE: Christiane, everyone is now looking to the heir apparent, Kim Jong-un, a man who we know very little about. We think he is in his late 20s. And he likes basketball. We heard Mike Chinoy giving us a few more details, that he is a quiet, polite man. But is this the young man, with very little experience, the man who can essentially create the cult of personality as his father and his grandfather did?

AMANPOUR: Well, it is probably unlikely that he will be able to do that. Even Kim Jong-il was not able to maintain the cult of personality that his own father did, Kim Il-sung. And certainly when Kim Jong-il nominated his young son to take over, people are concerned.

He is very young. He hasn't got that much experience that we know of. And he's going to be taking over, we presume, a nuclear nation. We will have to wait and see.

The issue here is whether it will promote more hard line policies from some of the old guard, whether they will, you know, sort of circle the wagons around this young man, and whether it will put a stop to some of these negotiations that were going on with the United States or whether they will be able to go through, nonetheless.


VAUSE: Christiane Amanpour there, giving us some insight about what the new Kim Jong-un may be like. Now a few details to bring you. South Korea's military has raised its alert status. We knew that. But we now that it is to the middle of three levels. That is coming from the Ministry of Defense.

Also, we are told police across South Korea have been ordered to be on emergency work shifts. That's coming from the National Police Agency.

China is NOrth Korea's closest ally. We had the new video just in. The flag being lowered at North Korea's embassy in Beijing. Many watched as the flag is raised and then lowered again to half-staff. Of course, this is a sign of mourning for Kim Jong-il.

And we are now hearing from Japan, at least according to Agence France Press, that that country -- that Tokyo is expressing condolences for the passing of Kim Jong-il. That will be seen as diplomatically significant.

Elise Labott is on the line from the U.S. State Department to talk more about that. A sign perhaps that Japan wants to calm the waters, Elise?

LABOTT: Yes. Relationships between Japan and North Korea really have been tense. And Japan really being one of the most hard-line countries in these six-party talks. And mainly that's been the issue of Japanese abductees by North Korea.

There have been talks over the years about how to return some of these abductees, they've always really wanted the United States to take this issue into account. I think they would have hoped that that would be more of an issue in those six-party talks. Certainly the U.S. continues to mention it. But it hasn't been one of those big issues.

I think that Japan might also, as the United States, as South Korea, see this as an opportunity to reach out to North Korea and see what the options are, John. I mean, as we have been talking about, we really don't know about the supposed leader, Kim Jong-un, whether he's making the decisions, what kind of leader he's going to be.

And to pick up on a point that Stan was making earlier, I think that the United States has been wondering, was the shelling of the South Korean island -- was that a move by Kim Jong-un to assert himself? This unpredictability has always been present in North Korean leadership. Kim Jong-il seen as a very unpredictable leader.

But this is even more unpredictability. And senior officials are telling us -- a senior U.S. officials telling our Cam Benson (ph), our national security senior producer who covers intelligence for us, a very uncertain time, that South Korea has reason to be concerned. Everybody has a reason to be concerned because an unpredictable North Korea is an unpredictable region.

VAUSE: Yes. and we have been looking at some photographs, some still photographs of Kim Jong-un, the youngest of Kim Jong-il's three sons. We is, as we can see in those photographs, overweight. There were some reports earlier, I recall, that he may, in fact, have some kind of diabetes problem. He is said to look like his father when his father was in his mid to late 20s. He is also said, according once again to some reports, that he shares his father's temper.

But, Elise, if I stay with you, to ask a really obvious question, why is it that so little is known about this young man and so little is ever gained from an intelligence point of view from North Korea?

LABOTT: Well, to be -- the most obvious reason that not a lot is known from the United States on North Korea is because they don't have relations. I mean, there's very few talks. We talked about low-level discussions between the U.S. envoys in Washington and officials at the North Korean Mission to the United nations.

That's the typical what we call the New York channel. That's really the most common channel. They pass messages. the United States and North Korea, but there's no real relations. The U.S. doesn't have a presence on the ground there.

So the intelligence is very slim. And North Korea is known as -- they call it the Hermit Kingdom, one of the most reclusive countries in the world. Why isn't there a lot known about Kim Jong-un? Because North Korea's always been a cult of one. Kim Jong-il has had a cult of personality of himself, the Dear Leader, and not really is known about the party. Not really much is known about the military.

Obviously, we have been hearing from a lot of experts on our air that study North Korea and know a little bit more. But North Korea makes a deliberate choice for everybody to know about this personality of one, the Dear Leader.

VAUSE: OK. Elise, thank you. Please stay with us. We'd like to go now to ambassador Han Sung Joo, who is the former South Korean ambassador to the United States. He's on the line.

Ambassador Han, thank you for being with us. Could you just tell us right now what is the reaction inside South Korea? Exactly what will be happening within the military and within the government?

HAN SUNG JOO, FORMER SOUTH KOREAN AMBASSADOR TO THE U.S.: Well, the government has put on the military and all government officials on ready bases and alert. The people, of course, are very much interested in what is going on. And interestingly, the stock market is getting a beating. It's going down. I don't know why. People think that this is not conducive to a peaceful situation.

VAUSE: So Ambassador Han, you were also South Korea's foreign minister for a time. Could you tell me -- what can you share with me about the plans that were in place? Obviously had been put in place for quite some time in the event of Kim Jong-il's death?

JOO: Well, I don't know. I can't talk about the detailed plan. But I was the foreign minister when his father, Kim Il-sung, died in 1994. And we had then and I'm sure right now, we had plans to make our military and security ready for any unforeseen and untoward provocations and events. And also we had to see what's going on. A very important part of the preparation would be to have very close consultation with other countries, particularly allies, the United States, Japan, China, Russia and so on.

VAUSE: And sir, what do you think is happening inside Pyongyang right now?

JOO: Well, Pyongyang took two days to announce the death of Kim Jong-il and also announced a makeup of the -- what they call the funeral committee, which consists of 232 members, headed by Kim Jong- un, the third son.

And so they are trying to put up a face that is both orderly and united. We are not sure whether that's natural or there was any foul play. But regardless, they are trying to put up a best face under the circumstances.

VAUSE: And the statement, which came out by state media from Pyongyang, said that he died on a train while inspecting a garrison. I think -- do you believe that?

JOO: Well, he looked quite well in the picture that was taken only two days ago -- two days before his supposed death. And so, of course, sudden deaths can happen, but this was certainly unexpected. There was expectation that he might pass away within a few years, but I don't think North Korea itself was prepared for this early happening of the death.

VAUSE: Right. I don't want to put words in your mouth, but are you suspecting that there may have been something else responsible for his death other than natural causes?

JOO: Well, I don't think we can rule out anything. But under the circumstances, I don't think it's wise to, well, put anything into words as such.

VAUSE: And as far as the South Korean government is concerned, sir, do you see this as -- from this chaos which could come possible opportunity?

JOO: Well, from the point of view of all the governments concerned, I think always predictability and orderliness is better than chaos. And that right now it seems that North Korea -- the leadership, in particular is trying to demonstrate that they have an orderly succession process.

It was not the same as when Kim Jong-il took over from Kim Il- sung, because Kim Jong-il had 20 years to prepare, whereas Kim Jong-un only had two or three years.

And so he will not be as easy or orderly as it was before. But even then, it was not very soon after Kim Jong-il surfaced. He waited for three years before he was officially the successor to Kim Il-sung, his father. VAUSE: OK. Ambassador Han Sung Joo, the former South Korean ambassador to the United States, also the former foreign minister there for South Korea, joining us on the line, giving us some perspective, and raising some new questions too about the death of Kim Jong-il, the leader of North Korea.

Just to recap and bring you up to date with everything that we know right now about Kim Jong-il's death; state media announced that he had in fact died on Saturday. They made the announcement within the last few hours, that he had, in fact, passed away from a massive heart attack whilst traveling on a train, that an autopsy the following day did, in fact, confirm the cause of death.

It did take two days for that announcement to come out. We have also been told that his son, Kim Jong-un, will head a funeral committee of 232 people. The ambassador just told us that.

Also, we know the stock market in South Korea is taking a beating right now because of the uncertainty which this means on the Korean Peninsula and also for the region. There will be a funeral for Kim Jong-il on December 28th and a period of mourning in North Korea from December 20 to December 27.

Right now though, it is impossible to say what North Korea will be like without Kim Jong-il. But as we gather international reaction and perspective, let's take a look at what might be written about the self-proclaimed Dear Leader in the history books.


VAUSE (voice-over): With the Bouffant hair, platform shoes, oversized sunglasses and trademark jumpsuit, Kim Jong-il looked every bit the nutty tyrant.

RICHARD BUSH, BROOKINGS INSTITUTE: The appearance made it a little bit more difficult to treat him seriously, at least at first.

VAUSE: He was the diminutive dictator with a reputation for indulging in fine wine, cognac, and foreign prostitutes, who held total power over a failing state, developed nuclear weapon and forced the U.S. to negotiate.

DAVID SATTERWHITE, FULBRIGHT ASIA ANALYST: That is not necessarily the work of a womanizing, booze swilling individual, drunk during the day.

VAUSE: Inside North Korea, it was all about Kim portrayed by his propaganda machine as a political, military, technological, artistic and cinematic genius, a renaissance man who's flown fighter jets, written operas, and shot 11 holes in one at his first try at golf.

His public appearances were breathlessly reported on state media. He was hailed as the central brain and the morning star.

He was a crazed ruler who loved to make people dance, a million of them all at once and all in step. He presided over a nation more cult than country.

"You chased away fierce storms and give us faith," they sing. His official biography said he was born in a log cabin on a sacred Korean mountain under rainbows and stars. Western scholars say it was probably in Siberia at a Soviet camp where his father was training to fight.

He loved movies. James Bond was apparently among his favorites. But he reportedly was unhappy with North Korea's portrayal in "Die Another Day." No word on what he thought about "Team America."

In the late 1970s, it's believed he personally ordered the kidnapping of a South Korean actress and her director husband, and for eight years until they escaped, forced them to make propaganda films. Kim did apologize for North Korea's kidnapping of 13 Japanese, and allegedly approved the bombing of a Korean Airlines flight which killed more than 100 people.

The apparent motive was to disrupt the 1988 Olympic Games in Seoul, where U.S. officials dubbed North Korea the Soprano state for its role in organized crime, including the production and distribution of heroin and methamphetamines.

BUSH: His legacy will be that he actually made some pretty bad choices for his country.

VAUSE: He was the man who every day, it seemed, had a bad hair day, who starved his people, threatened South Korea with the fourth largest military in the world, and built missiles that could reach Japan and possibly beyond.

The certainty of his brutality is gone. In its place, the terrifying uncertainty of what comes next.


VAUSE: We are finding out right now what, in fact. is coming next. And the South Korean president, according to Reuters news agency, is calling for calm, asking South Koreans to carry on with their daily life after the death of Kim Jong-il. But there has been immediate reaction on the South Korean stock market. We have reported that from the very opening, it was down almost five percent.

Let's go to Pauline Chiou now. She's following the market reaction in Hong Kong. Pauline, what are the numbers?

PAULINE CHIOU, CNN MARKET ANALYST: Well, they're all in negative territory, John. And the Kospi, as you mentioned was down close to five percent, but it's recovered a little bit. Right now, the Kospi is down by about 3.4 percent, the Nikkei down by just under one percent, and the Hiang Seng and the Shanghai Composite also in negative territory. The composite has actually gained within the hour.

Let's take a look at the time line of the Kospi from earlier today. When you look at the timeline, you can see that the Kospi plummeted right when the news came out that Kim Jong-il had died. Then it gained a little bit and then went down again.

Right now, it's gaining a little bit, as I mentioned. So it's gaining some traction here. Let's take a look also at the Nikkei. Now, traders in Japan, they were on lunch break when the news came out. And take a look at what happened in the Nikkei earlier today.

Their lunch break was from 11:30 to 12:30 here. As soon as the traders came back, you can see that the Nikkei went down quite dramatically. But it's regained since then.

Then let's take a look at how the Korean Yuan has done against the U.S. dollar. I want to show you what happened right when the news came out. You can see that as the news came out, there was a big sell-off of the Korean Yuan. And you see the graph go up here. And that means that the Yuan weakened. And at its highest point, it was trading at 1179 to the dollar there.

Let's take a look at the other currencies, how the U.S. dollar is performing against the Yen and also the Euro today. If we can pull up that graph. OK. We don't that have that graph, but I do have some notes from earlier.

The U.S. Dollar has strengthened because of this news of Kim Jong-il having passed away. Keep in mind that the U.S. dollar has strengthened anyway against the Euro because of the Eurozone debt crisis. Now, earlier, the U.S. dollar was trading against the Yen at around 77 Yen to the dollar. So that means that the Yen is weakening. And it was trading against the Euro at about 1.29.

So very interesting movements today, John, that the markets are down. But this news about the passing away of Kim Jong-il is not the main issue here for the markets. It's also those ongoing worries coming ought of Europe.

VAUSE: Yeah, it just seems to be another factor on top of what has been a very tumultuous times for the market. If I remember, when the islands were shelled, the Yeonpyeong Islands were shelled by North Korea, the stock market took a dive. Same with the Changan (ph).

But a lot of questions now about what kind of economy is left behind in the wake of the ruler, Kim Jong-il. I mean, he kept the place sealed up. They have been under sanctions for years. What shape is the economy in?

CHU: Well, it's still a little bit of a mystery of exactly what happens inside North Korea. But we do know that the economy is very fragile. Many, many people don't have enough food to eat. And the currency, at one point, there was a re-evaluation of the currency in North Korea. That turned out to be a disaster, where a lot of people lost their savings.

And the North Korean economy very much relies on trade with China; eighty percent of their economy is made up of trade with China. So China very much a huge influence there.

And many North Koreans actually rely on the private markets, really the black market to try to make it day to day. But it is an impoverished society if you go outside of Pyongyang. That will be the big question, of whether or not the successor to Kim Jong-il will be able to make any sort of improvements, whether relations with China will continue -- will get better.

But that's the big question mark, what will happen within the economy of North Korea and what will up to the people in their daily lives there.

VAUSE: One of the many big question marks which we're working our way through steadily here in the hours after Kim Jong-il's death. Pauline, thank you. Pauline Chu live for us, keeping her eye on the markets from Hong Kong.

One other bit of news coming to us; we're hearing from North Korea in response to Kim Jong-il's death -- North Korea's National Funeral Committee said on Monday, quote, "we should increase the country's military capability in every way to reliably safeguard the Korean Socialist System and the gains of the revolutions."

However, the reports that we are getting from South Korea, who closely monitor North Korea's military activity, is that so far there's no increased military activity on the North Korean side of the border, even though the South Koreans have raised their level of alert.

We will take a short break in our ongoing coverage here of the death of Kim Jong-il. We'll be right back.


VAUSE: Welcome back to our continuing breaking news coverage of the death of Kim Jong-il. The North Korean leader died on Saturday, according to North Korean state media. He died of a massive heart attack. It took them two days to make the announcement that he had, in fact, died whilst on a train. An autopsy has later confirmed the cause of death.

We do know the funeral will be held December 28th. A period of mourning has been declared from December 20 to December 27. This is being felt around the region and around the world. The South Korean president, Lee Myung-bak, is calling for calm in South Korea, asking South Koreans to continue on with their daily life, while at the same time, the government in Seoul has raised the alert -- the military alert to the second level of three levels, as well as placing all government workers on an emergency footing.

South Korea continues to monitor the North. But according to wire reports, they say there is no evidence of increased North Korean military activity in the light of Kim Jong-il's death.

Calling for calm too is China, a close ally of North Korea. They too will be keeping a very close eye on the situation inside North Korea, fearful of any implosion of the regime which obviously is still just a wild card, if you like, at this stage, shear speculation. It does seem to be business as usual while they plan the funeral for Kim Jong-il and while they plan the hand over of power to Kim Jong-il's youngest son, Kim Jong-un.

Let's go to Stan Grant in Beijing. He's live for us once again. Stan, obviously for Beijing, for China, a period of calm and trying to keep the situation as normal as possible in these very abnormal times will be of paramount.

GRANT: Yes, a lot at stake here, you know. Let's just have a look at what China has on the line. China, of course, is the major economic benefactor to North Korea. It is responsible for about 50 percent of exports from North Korea, about 50 percent of imports as well, around about 70 to 80 percent of all North Korea's fuel comes directly from China.

The economic situation is going to be absolutely crucial. You know, we're doing a lot of talking here about what this is going to mean for South Korea, for the United States, potential implosion. Let's just look at the realities as they are right now on the ground in North Korea, the dire economic circumstances.

You know, the economy there contracted by about 50 percent during the 1990s. North Korea was increasingly isolated with the collapse of other communist regimes around the world who had relationships with North Korea. North Korea all the while mired in debt, continued to spend more and more money on its defense. Around about 20 percent of its gross national product in the '90s was actually put into its defense forces, military shield to keep out the rest of the world.

The consequence of that was widespread famine across the country. There's speculation that the numbers of dead reaches into the millions. We have seen and heard horrendous stories about people risking all to flee the country, to defect, both into China, into South Korea, anywhere else they were able to get, to try to find a better life.

There are around about 30,000 North Korean refugees living in China at the moment. The big concern in China is that any collapse, any uncertainty within the regime there may see more people living in these dire circumstances make a run for the border, try to get across into China. And that's something that China really needs to guard against, both for its own stability and also the impact it would have on North Korea.

VAUSE: Stan, stay with us, because there's some slight development from the U.S. perspective, at least. Elise Labott is our senior producer at the State Department. Elise, I understand that at least according to some reports, President Obama and President Lee have spoken.

LABOTT: We don't know that for sure, John, but obviously I know -- we do know that South Korean and U.S. officials have been on the phone. I understand that the White House has reached out to the Blue House, which is the South Korean president's office.

So we don't know -- I don't know specifically that they spoke, but I do know that the two governments have been in touch at the highest levels. And the relationship between South Korea and the United States, as we have been discussing, is really the most critical relationship in all this.

The U.S. and South Korea really locked step for the last year or so. since the sinking of that South Korean submarine by North Korea and then the shelling of Yongbyon island. The U.S. and South Korea really lock step in every -- in every case here.

The U.S.. as it has been engaging with North Korea, has only been doing it as far as the South has been comfortable with it, as far as the south has been ready to have the United States engage. And all the while, the United States has been saying that the U.S. would not be engaging North Korea on the so-called six-party talks on the nuclear issue unless relations between the North and south would improve.

So the U.S. not doing anything unless the South Koreans were comfortable with it. It did seem that the U.S. has had to kind of push and prod the South Koreans a little bit in recent months, to say, listen, we're going to engage, we'd really like you to move a little closer to North Korea.

VAUSE: So I want to bring Stan back in. Stan, because when we see the relationship between South Korea and the United States -- and that tends to box China into a corner a bit, doesn't it? And it tends to really push them into North Korea's corner.

So then you get this standoff, with China backing North Korea, the Americans backing the South Koreans. And in a situation like this, it makes for a very tense time.

GRANT: Yeah, it does. You know, I'd actually argue that the critical relationship here is really the relationship between the United States and China. The genius of the six-party talks was that it brought various foes together, to sit around the table.

The United States could speak directly to Russia, could speak directly to China. China could speak to Japan. North Korea could speak to the U.S. and to Japan and South Korea.

But really what's emerging out of this is this ongoing rivalry, the superpower rivalry in the region between China and the United States. The last thing I think many observers would want to see is both retreat to their neutral corners, to see the United States side with South Korea and China side with North Korea.

This is really going to be a test about how these two powers are able to work together, their willingness to work together. Just in recent months, we have seen the U.S. refocus throughout the Asia Pacific, saying that the Asia Pacific is -- that the U.S. is here and is going to remain here, with the draw down of troops in Iraq, the draw down of troops in Afghanistan. They're actually putting more troops into the region, even boots in the ground in Australia.

Many have interpreted that as a continuing effort by the U.S. to try to contain China's rise. On the Chinese side, China's stated ambition is to become the preponderant power throughout Asia. It wants to do that peacefully, but we already know that there are disputes between China and other countries in the region about territory, about disputed islands and so on.

This is really going to be the critical relationship, how China and the U.S. are able to work together to try to bring stability. And it will also see a real ratcheting up or much more of a focus on that key relationship, a real defining period here.

VAUSE: One thing which strikes me about this, Stan, is that after Kim Jong-il had his stroke back in August of 2008, he did look frail. He did look weak. But he seemed to have got better. He seemed to -- he had lost weight. He seemed to be a little bit more vibrant, certainly on the images that north Korean state television had allowed the world to see.

So for many people, this came as a very big surprise. I think if he had died a year ago, none of us would have been taken by surprise. But now it has actually really been very unexpected.

GRANT: Yeah, that's a really good point. I remember -- cast my mind back about six years ago now, doing a story about Kim Jong-il coming to China and remarking then that he started to appear to look a little frail.

I think you'd reported on that throughout your time here as well. And you are right. I certainly noticed and others had commented on the improvement in his appearance of recent times.

But, you know, I suppose in any illness, particularly when we don't know the exact cause of the illness -- we know that there has been a stroke that had been spoken of. People can recover from that, can improve some of their physical function.

So perhaps that may have been some indication. We don't know the full extent of all the medical problems. But yes, you're right. Just anecdotally, pure observation, he did appear to really be a little bit more robust in recent months. To that extent, this may come as some sort of a surprise.

His ongoing health issues. though, certainly would have given North Korea, China, an opportunity to rehearse any contingencies. The fact that he'd brought his son further into the spotlight, that he had brought his son to China to introduce him to Chinese leadership, this is another one I think you had any illusions about his own mortality.

Certainly he would have seen the prospect of that and needed to put a succession in place. The timing, just how quick it was, just how sudden it was, that's going to lead to a whole lot of other speculation, John.

VAUSE: What we have not really addressed is the remaining family members, because we know he has three sons. Tell us about the oldest and the second eldest.

GRANT: Yeah. Intriguing intriguing, isn't it? One of them -- I think it was the oldest, just from memory, speaking at the top of my head here. But remember the story about trying to get in to Japan to visit Disneyland -- (CROSS TALK)

GRANT: I mean, that only added -- that only added to the eccentric nature of this regime. I think at one point, he was talked about as a potential successor as well. Kim Jong-un, though. has certainly had a lower profile, has been seen as someone a little bit more sober minded and certainly someone who would carry the mantel of authority a little bit -- with a little more dignity than trying to get into Tokyo Disneyland.

But he's also someone who has been exposed to the west and was rumored to have attended school in Switzerland for a couple of years, certainly had an interest in basketball and Michael Jordan and all the rest of it.

What's also interesting here, John, Kim Jong-Un's uncle -- now, this is the husband of Kim Jong-il's sister, someone who has emerged as a power broker in his own right, has occupied senior military positions. And many looking to him as being the power behind the throne.

His movements are going to be interesting as well. Just what extent he adopts a role of power, whether he steps in as a leader, while young Kim Jong-un serves more of an apprenticeship. That is going to be a really crucial factor in the days ahead, as well.

VAUSE: Yes, the interesting thing too -- while you've been talking, we have been looking at the images of Kim Jong-il. And he's surrounded by these aging generals with chests full of medals. And they look incredibly -- shall we say, old and matured gentlemen of the North Korean military.

The question has to be asked. is how will these old military men take to being ordered around by the inexperienced Kim Jong-un, if in fact that is what happens?

GRANT: Yeah, you mentioned the word mature. I think the word you're looking for are relics.

VAUSE: I was trying to be polite.

GRANT: Relics of the Cold War and relics of the Korean War. But they have been used to a very pampered existence. I think as I said before, the big bulk of the gross national product of North Korea has, in fact, been funneled into the military.

The way to success in North Korea, the way to a comfortable life was to join the military, to reach high rank in the military. They've become very used to that. They are very powerful men. They're a direct link to the Korean War. And their role is going to be crucial.

Whether they respect Kim Jong-un, again, if I cast my mind back to the attack on Yongbyon Island, some at the time were interpreting that as a sign that Kim Jong-un was able to establish his own credentials. Here was something that he could be involved in. There are reports that he had even ordered that attack, to show that, look, I can be a tough guy too. I can run the military.

He's trying to establish his credentials with those aging generals. Again, that comes back to the ongoing role of his uncle, just what sort of role he plays in smoothing the way, just how prominent his own leadership is going to be, and how much sway he holds over those generals bristling with all their medals.

VAUSE: Absolutely. The military first policy in for some interesting times. Stan Grant live for us there in Beijing. We appreciate that, Stan. Thanks so much.

Let's recap our top story. It is the end of an era in North Korea. State television says North Korean Leader Kim Jong-il has died. State TV says the 69-year-old leader suffered a heart attack Saturday while on a train trip. It also said a funeral will be held December 28 in Pyongyang.

Kim Jong-il had been in power since 1994, ever since his father died also of a heart attack. As we said, the news of the Dear Leader's death was announced on North Korean state TV. The anchor gave a very emotional delivery.




VAUSE: And one last piece of news coming to us before we hand over to Christie Lu Stout in Hong Kong, the Reuters news agency quoting state media, once again, from North Korea, saying that the North Korean leader's, Kim Jong-un, is called the Great Successor, an indication that he will, in fact, be taking over from his father as the ultimate ruler of North Korea.

We will take a short break. You are continuing -- while we continue with our breaking news coverage here of the death of Kim Jong-il, the leader of North Korea. Please stay with us. Christie Lu Stout will be after the break.