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THE SITUATION ROOM

North Korean Crisis; Interview With New York Congressman Peter King; Interview With Jon Huntsman; Huntsman: U.S. Principles on the Line with North Korea; North Korea's History: Speak Loudly, Then Back Down; Korean Crisis May Hurt U.S. Businesses; Kim Jong-un's Shady Money; What Would Happen if North Korea Attacked?; Tourists Share North Korean Experiences

Aired April 8, 2013 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


WOLF BLITZER, CNN ANCHOR: And we want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. This is a CNN SITUATION ROOM special report, "The North Korean Crisis."

Happening now: Defensive missiles are up and armed, waiting for North Korea's next dangerous move that could happen any time. As Kim Jong- un threatens war, how could he afford to test his weapons and the patience of the world? We're following the money.

And Americans on vacation in a crisis zone, they will tell us about their pleasure tour of North Korea.

U.S. officials fear this could, could be the week that North Korea goes ahead with a provocative missile launch or something even worse. Kim Jong-un's regime warns the region is becoming, in the words of the North Korean regime, a hotbed of war. Tensions are only rising now that North Korea is suspending operations at a huge industrial complex near the border jointly owned with South Korea.

Our correspondents are covering this unfolding crisis and the U.S. response with tens of thousands of Americans potentially at risk.

Let's bring in our Pentagon correspondent, Barbara Starr, right now. She's following the renewed concerns about the North's nuclear ambitions.

What's the very latest, Barbara?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, Wolf, at this hour, we can tell you that the U.S. intelligence community, the United States military throwing everything they have, satellites, eavesdropping systems, reconnaissance, surveillance, everything they can at the North Korea problem, trying to figure out what the regime is up to and keeping a very close eye on that nuclear program.

(BEGIN VIDEOTAPE)

STARR (voice-over): All eyes are focused on this missile, the Musudan, with a range of 2,500 miles and the question of if and when North Korea might test-fire them from mobile launchers in eastern North Korea. ASHTON CARTER, U.S. DEPUTY DEFENSE SECRETARY: Our position has been and remains that North Korea should cease its provocative threats immediately.

STARR: But a growing concern may be what's happening here at North Korea's Yongbyon nuclear complex. Look at this commercial satellite photo from early February compared to this one from late March. The North Korea blog 38 North says you can see new construction, a possible effort by North Korea to restart its plutonium reactor weeks before the regime announced it was going to do so.

JOEL WIT, 38 NORTH: It reactivates that part of their program and gives them now two routes to producing material for nuclear bombs.

STARR: Another worry, could North Korea be planning a new nuclear test? South Korean and U.S. officials say there's some activity again at the site where Pyongyang tested the device in February, but they don't believe a nuclear bomb test is imminent.

PATRICK VENTRELL, STATE DEPARTMENT DEPUTY SPOKESMAN: Any future nuclear tests or missile launch would be in direct violence of U.N. Security Council resolutions.

STARR: North Korea has set April 10 for all South Korean workers to leave North Korea's Kaesong Industrial Park and says it can't protect diplomats in the capital Pyongyang after that date.

BRUCE KLINGNER, FORMER CIA INTELLIGENCE ANALYST: That would be the kind of action a country would take before it initiated some kind of highly escalatory or even provocative behavior.

(END VIDEOTAPE)

STARR: And, Wolf, as we are here this evening, U.S. officials tell us they now indeed North Korea could be ready to test-fire those ballistic missiles on its East Coast, literally, at any moment -- Wolf.

BLITZER: Barbara Starr at the Pentagon with the very latest.

Let's go to South Korea right now where disaster plans are in place in case -- this crisis does escalate into some sort of war.

CNN's Kyung Lah is in the South Korean capital of Seoul. She's joining us now with more from there.

What are you seeing, Kyung? What's going on?

KYUNG LAH, CNN CORRESPONDENT: Well, Wolf, many of the preparations that we're seeing are happening very quietly, trying to keep people calm, but all of it with an eye to tomorrow.

It is Wednesday in South Korea tomorrow, the day the South Korean government believes has the highest possibility for a possible missile launch from North Korea. (BEGIN VIDEOTAPE)

LAH (voice-over): Neighbors of the U.S. Osan Air Base are used to the sounds of military drills, but when the American Patriot missile batteries go up and armed pointed north to the sky, they know this is not another ordinary maneuver.

"I feel much more secure with the U.S. Army right next to us," says this Osan business owner, even though North Korea has threatened to attack U.S. bases, the missiles a sign that the region is ready to counter a possible attack, but it's not just in the military town.

Across South Korea's cities amid the rush of daily life, visible signs of preparation for a potential disaster, 24 underground locations, and that's just in one district in the city of Goyang, says Ligon Il (ph) with the city's civil defense unit. This is the city's latest disaster plan, posted at bus stations and apartment buildings.

(on camera): This sign says shelter in Korean as part of this city's emergency disaster plan. If there is something that happens, the people are supposed to try to get into this and other parking structures in the city. And you can see for yourself, this is several stories deep. It is solid concrete.

This is, essentially, an urban underground bunker. Most commuters ignore the new flyers and instructions, numb to the threats from Pyongyang. North Korea is just 15 miles away from here, but this woman, born during the Korean War, sees it differently.

"We already lived through difficult times, and now we have a better life," she says. "I'm worried about everything that's happening now."

A nation quietly preparing for a just in case, for the unimaginable.

(END VIDEOTAPE)

LAH: Now, this is a population that is used to routine civil defense drills. They happen almost monthly here in Seoul, Wolf, but this time, it's a little bit different. There's a bit of a different worried eye pointed North -- Wolf.

BLITZER: Seems pretty different this time around. And this week could be critical. Kyung Lah in Seoul, we will stay in close touch with you .

It's anyone's guess when North Korea might act or if Kim Jong-un is actually bluffing, but there is real anxiety about what might happen as early as Wednesday. As we reported, North Korea has mentioned that date twice in its most recent warnings and provocations.

And Representative Peter King is joining us right now. He's a member of the Intelligence Committee.

Congressman, thanks very much for coming in.

REP. PETER KING (R), NEW YORK: Thank you, Wolf.

BLITZER: As you know, the North Koreans have told all foreign diplomats in Pyongyang right now -- the North Korean capital -- they should leave by Wednesday, this coming Wednesday. They won't necessarily be able to guarantee their security after that. What's the significance of this?

KING: Well, significant to the extent it just adds more uncertainty and it shows more belligerence and hostility on the part of the North Korean regime. And it's just a whole series of decisions and actions and statements over the last several weeks and months, which is why everyone is in our government, is concerned about this. Not panicking, but certainly concerned and treating it, I would say, more seriously than the incidents in the last several years, which occurred around this time but also seemed to have a way of winding down. In this case, it appears Kim Jong-un might be going out and might not get himself back in.

BLITZER: Are we bracing for something dramatic that the North Koreans might do Wednesday, Thursday, or Friday -- in other words, this week? Could this potentially be a critically important week?

KING: Well, it certainly could be. And the fact, the plant that all of the North and South Korean employees are out, that was a jointly operated plant or plant in the north -- has now been evacuated. The fact the missiles have been moved and are facing east. The fact that threats continue, yes.

Again, I don't want to be spreading panic here, but certainly, we have to be concerned and we have to be, as each day goes by, watching it more and more carefully. Then of course, leading up to April 15th, which is the birthday of the formal leader.

So, all of this has to be monitored and we have to reassure our allies in South Korea, let Japan know that we're standing with them. And also, we have to be sending messages to the Chinese that they have a real role to play here as far as tamping down North Korea. Because there's going to be more and more of a permanent U.S. presence in the Pacific, as a result of what North Korea is doing. And also if a war does break out, God forbid, the last thing China would want is a war on the Korean Peninsula, which ultimately would ultimately have to result in a South Korean victory and a united Korea, which I don't think China wants at this stage.

BLITZER: A lot of analysts think this new, young leader of North Korea is simply bluffing, seeking to extort money, other concessions from South Korea, from the U.S., China, Japan. Do you think he's bluffing?

KING: He could be. We don't know. We have to assume that he's not. We have to operate on the assumption that he's for real, that -- or the fact he could be bluffing but not be able to get himself back in. That he will have built up the war rooms around his people that he'll have to take some action. And that action could be even a modified attack on South Korea. But the new South Korean president, President Park, has said she'll respond to any attack. This won't be like in previous years where there were South Koreans killed, there were attacks made upon South Korean territory, and the South Korean government accepted that. President Park has made it clear she will not. So, that could also cause events to spiral out of control.

BLITZER: Because there are reports, as you know, if the North Koreans do launch some sort of a missile or an attack as they did in 2010 -- they torpedoed South Korean warship, killing several dozen South Korean sailors. They shelled an island, a South Korean island, killing some civilians there. The South Koreans at that time and the U.S. did not retaliate, but what you're saying is this time there could be significant retaliation?

KING: Well, my understanding of President Park's position is that she has made it clear that she will respond, she will retaliate, and it's really only a question of how strong the retaliation will be and then what does North Korea do at that stage? I can't blame South Korea for retaliating. I mean, they are a sovereign nation, if they are attacked by the north, President Park believes she has to respond.

So, that is an element that was not present in the past and something we have to be very cognizant of and very aware of.

BLITZER: You're a Republican. You've criticized the Obama administration on several fronts. How are they doing in this crisis?

KING: I think since this crisis has begun, I give them full credit. I think both the president and Ambassador Rice in the United Nations, Secretary Hagel, have all done the right thing, I think, as far as sending the B-2s, the B-52s, the F-22s, sending the missile defense systems, making it clear we're going to stand with South Korea. In effect, saying an attack on South Korea will be an attack on the United States. I think that is the only message that can be sent. That's the clearest way to avoid a war, I believe, with North Korea, is let them know how serious we are.

And also, again, I can't speak to it, but I would believe that there are overtures being made to China behind the scenes. Because that's certainly, to me, is a key element here, is China can tone North Korea down.

But no, up till now, I'm saying this in a bipartisan way, I've been critical of the administration on Benghazi and also on Iraq and Afghanistan in certain aspects. But as far as North Korea is concerned, I give them full credit. I think they are doing what has to be done, and I have absolutely no -- not that what I say matters, but I have no criticism. Let me put it this way: I have nothing but support for what they are doing.

BLITZER: Congressman Peter King of New York, thanks very much for coming in.

KING: Thank you, Wolf. BLITZER: Still ahead, tens of thousands of U.S. troops are in the region right now. The Obama administration, though, says it doesn't know exactly how many Americans may be in North Korea right now.

And the shady ways Kim Jong-un is making money to bankroll his threats against the United States and the world.

(COMMERCIAL BREAK)

BLITZER: There's been a huge debate about the Obama administration's handling of this escalating crisis.

And joining us now, our chief international correspondent, Christiane Amanpour and the former U.S. Ambassador to South Korea Christopher Hill.

Guys, thanks to coming in.

Ambassador Hill, the other day, I was speaking to Christiane. She believes in what we call an assertive U.S. diplomacy effort right now to try to ease this crisis. What, realistically, can be done? Because you used to be a top U.S. diplomat dealing with the North Koreans. They have lied to you in the past and these crises seem to come up every few years.

CHRISTOPHER HILL, FORMER ASSISTANT SECRETARY OF STATE: Well, first of all, this is an annual hissy fit they do over our annual exercises, so we need to get a sense over whether this is going to pass when the exercises end in the next couple of weeks.

But I'm not sure now would be a particularly good time for the U.S. to be approaching the North Koreans. I think the diplomacy ought to be with our two allies, Japan and especially South Korea, but also with China.

And, as you know, Secretary Kerry will be going to China. And I think that's the key area where we need to kind of figure out what the way forward is diplomatically. We have an extremely competent six-party representative, Ambassador Glyn Davies.

And I'm sure if there's a means by which to work with the Chinese to try to help defuse this and perhaps more importantly get this on the right track for the future, we need to get Ambassador Davies working with his counterparts as well.

BLITZER: As you know, Christiane, the North Koreans, including the new leader, Kim Jong-un, they made it clear they want a phone call from the president of the United States. They want to be loved to a certain degree. These are insecure people over there in Pyongyang.

What would be wrong with the U.S. to avert some sort of disaster reaching out and talking to them?

CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Look, Wolf, can we just be clear about what I said on your program before? Never have I intimated that there's any question of any appeasement or any kind of rapprochement in the face of real threats and provocations right now. What I'm talking about is the broader way of how do you deal with North Korea.

I was in North Korea after Chris Hill very successfully negotiated several real sort of game-changing agreements. He brought over the Philharmonic Orchestra, but beyond that, the whole sort of closing down and disabling of the Yongbyon reactor. So one can see the benefits of diplomacy working.

Right now, as we know, what's happening is that the United States is hoping that China will be able to play that critical role and that China is going to, they hope, be able to have the kind of leverage that hasn't yet been exerted on North Korea. They have, obviously, said publicly they regret all this provocation. They have made words. We know that the Chinese public opinion is shifting on the cost of supporting North Korea, but as many diplomats -- I'm sure Ambassador Hill would say the same -- we haven't seen yet whether China is going to exert its economic leverage, in other words, the kind of leverage that might really make a difference on North Korea.

So, I think what, clearly, you know, the U.S. is doing what it has to do right now, but the real question is how do you deal with this in a bigger way for the future so that, as Chris says, not every year around the time of the joint exercises do we have a hissy fit.

And while nobody thinks the North Koreans are going to launch a nuclear weapon, certainly not nuclear on any kind of missile, they might do something that could -- like launch a missile, whether it's in anger or as a test, that could then, depending on how it's handled, you know, pave the way to some kind of miscalculation and there might be sort of a general and bigger war breaking out. Nobody wants to see that.

BLITZER: Although, I will say, and I'm anxious for your thoughts, Ambassador Hill, the South Korean, the new South Korean government of President Park, they have made it clear if there is any attack on any installation in South Korea, unlike the past, they'd retaliate almost tit for tat.

And think could escalate. That could result in a pretty dangerous situation if you think of all those artillery shells and rockets the North Korea has just north of the demilitarized zone.

HILL: That's right.

There are an estimated 14,000 artillery tubes just north of the DMZ, all ranged in on Seoul. So, you're quite right. But what President Park Geun-hye is saying is the same thing her predecessor said immediately after the incidents in which the North Koreans sunk a South Korean naval vessel and shelled an offshore island.

I think she is simply reiterating that position, and that position has held for some time and the North Koreans have not engaged in that kind of provocation since the South Korean government laid down this red line.

So, the question, again, is in the next couple of weeks, are the North Koreans going to kind of slow this down or are they going to continue to go right up to the line here with a lot of nerves being frayed? Certainly, the South Koreans are just sick of this exercise -- or sick of this approach by the North Koreans. And so I think there is a real danger of serious retaliation and with the key question being what would the North Koreans do in retaliation of the retaliation.

BLITZER: One final question to you, Christiane.

This April 15, the anniversary of the birth of the founder, the leader of North Korea, a lot of people are anticipating something dramatic could happen between now and then for this new young leader, the grandson, in effect, to go ahead and prove his credentials. Are you fearful of that?

AMANPOUR: Well, look, I think both the United States and South Korea have made it quite plain that they would not be surprised if some kind of military activity takes place.

Obviously, there's that date, April 15. The North Koreans have talked about anything might be possible after April 10, and as Ambassador Hill was saying, anything could be possible throughout these joint military exercises. I think that one of the things that -- I was just talking to Gary Seymour, who was President Obama's nuclear negotiation, nuclear point man until just recently, and said, look, over the years we developed a kind of relationship with Kim Jong Il.

There was provocation and retreat and provocation and retreat. And when he would ratchet it too far, Kim Jong Il would sort of ratchet it back a little bit to make sure it didn't go completely out of control. What's new now is that they don't know what motivates Kim Jong-un.

Nobody really knows, certainly not the United States, has had face-to- face meetings with Kim Jong-un. What is he trying to prove, if anything, what would he do, who's pulling the strings, what is his aim, does he know when to hold them and when to fold them, so to speak?

BLITZER: We will soon find out. This could be a critically important week.

Christiane Amanpour, thanks very much. Ambassador Chris Hill, thanks to you as well.

HILL: Thank you.

AMANPOUR: Thank you.

BLITZER: In a minute, I will speak with the former United States Ambassador to China Jon Huntsman and I will ask whether a new harder line from China will do any good in this crisis unfolding.

(COMMERCIAL BREAK) BLITZER: Happening now, North Korea strong men may have crossed the line with a crucial ally. We will talk about the China factor with a former U.S. ambassador to China, Jon Huntsman.

North Korea brazenly threatens the United States. We will take a closer at the history of action vs. bluster.

And with a possible missile launch looming in the coming days, North Korea finds some shady ways to bankroll its muscle-flexing.

I'm Wolf Blitzer, and this is a SITUATION ROOM special report: "The North Korean Crisis."

China suddenly taking a new and tougher line against North Korea right now. Over the weekend, China's president pointedly complained that no country should be allowed to throw the region into chaos for what he called selfish gain.

CNN's David McKenzie is in Beijing and he is joining us now.

David, does China have the leverage that everyone seems to be talking about when it comes to North Korea?

DAVID MCKENZIE, CNN CORRESPONDENT: Well, Wolf, they have the leverage, but in many ways, they don't want to use it. That leverage includes cutting off fuel to North Korea, cutting off food supplies, even conventional military ties.

But China doesn't want to see a collapse of this regime, so unlikely they are going to really take it to that step, but that unprecedented rhetoric from China's leader, Xi Jinping, really hinting at the fact that China's frustrated, had enough of Kim Jong-un and his leadership pushing the rhetoric to the breaking point.

Now, one thing that is also a factor, Wolf, is that this young leader doesn't have the relationship with China's leaders. In the past, Kim Il-Sung, Kim Jong Il, previous dictators in North Korea, were able and talk man-to-man, as it were, with China's presidents. Now it's an unknown quantity.

Whether they have the leverage point, it's clear they can do it, but they probably won't.

BLITZER: How much coverage, David, is this crisis with North Korea getting in China right now, how are they playing it?

MCKENZIE: Well, it's getting a lot of coverage here. Certainly, a little bit jittery here in China. It's obviously a large border with North Korea. North Korea has always been the close ally, but somewhat unruly cousin, as it were, of China since the Korean War.

In state media it's getting a lot of front page and middle of the page coverage. One thing very interesting, Wolf, is there hasn't been much open criticism of the military buildup of the United States. We would have seen that in the past. It's clearly tacit approval, in a way, that the United States is getting into the region in a bigger way. Very interestingly, also possibly pointing the finger at North Korea saying we're not going to criticize the United States, so you might not have the friend that you used to have in these issues -- Wolf.

BLITZER: David McKenzie joining us from Beijing, thanks, David, very much.

And the former U.S. Ambassador to China Jon Huntsman is joining us right now, former Republican presidential candidate as well.

Thanks very much, Mr. Ambassador, for coming in.

JON HUNTSMAN, FORMER UNITED STATES AMBASSADOR TO CHINA: Thanks, Wolf.

BLITZER: I don't know whether to call you governor or ambassador. But we can call you both.

China, a subject you know well. You speak the language. You spent years there. Are they going to use their influence to really tone down, dampen this crisis, which seems to be escalating on a daily basis?

HUNTSMAN: Well, of course they will use their influence, and they have crisis after crisis in years past. This is music we have heard before.

The question becomes, will North Korea listen to their admonition? And the answer is...

BLITZER: Because China has a lot of influence on North Korea.

HUNTSMAN: Well, they have influence, but they've been lied to, and they've been cheated by North Korea. And they know that, and they're feeling the sting of it. I must say that, after the sinking of The Cheonan a couple of years ago and the island shelling which followed...

BLITZER: The South Korean ship.

HUNTSMAN: The South Korean ship, they delivered some very, very hard- hitting messages to the North. I've have to say that they brought the level of hostility down through their shuttle diplomacy behind the scenes.

But I think they have less and less clout. But one of the reasons they have less and less clout is because, you know, business is done by people. They have less of a personal rapport at their senior levels with North Korean leadership than they did in years past.

BLITZER: So I don't understand. Without the support in food and other assistance that China gives North Korea, that country is a total basket -- basket case already, but it even collapses further.

HUNTSMAN: Therefore, the blackmail. So, we're in the cycle of -- North Korea rattling the region, and they do this periodically. A, because you've got a political leader internally who's trying to shore up his credentials, in this case, Kim Jong-un. Secondly, they're rewarded for this kind of behavior. They're rewarded sometimes by the South. They're rewarded by China. They know how far to take out the extreme measures, the saber rattling of the region.

And sadly, every time this happens, they get rewarded in some way, shape, or form. To them, it's beneficial.

BLITZER: The concern that I've heard that the Chinese have is, one, a reunified Korean Peninsula, one Korea. They don't like that -- the notion, the Chinese, do they?

HUNTSMAN: Well, let me tell you what frightens them just as much. They have a real economy to protect. In the old days, China didn't have an economy to protect. They could play along with it. Today they've got the second largest economy in the world, and Manchuria, which is just across the Yalu River from North Korea, is a thriving manufacturing zone.

Every time they have a disruption politically on the peninsula, investment is halted, decisions are made to move out of China, the trade patterns, and this is 50 percent of our trade flows, Wolf. You know, 50 percent flow through the East China Sea and around through the Pacific Ocean. So for us, for the United States, the stakes are extremely high. For China...

BLITZER: If there's a collapse of the North Korean regime, and there are thousands, if not millions of refugees flowing into the China, that's the nightmare scenario in China.

HUNTSMAN: Nightmare scenario, it puts a damper on their economic performance. But even just the talk of war puts a major damper on their economic performance. That's the economic piece.

And China is concerned increasingly about the economics, because the party has legitimacy only so long as the economy performs. Once it gets weak, the political -- the Communist Party of China begins to lose its relevancy (ph).

The second part of it is nuclear proliferation. The thought of Japan even beginning a discussion about...

BLITZER: Or South Korea, for that matter.

HUNTSMAN: Or South Korea is a nightmare scenario for the Chinese.

BLITZER: They'll both be thinking about that, if -- if this thing escalates.

Here's some polls, new CNN/ORC poll that just came out today. We asked the American public, "Do you think North Korea is an immediate threat to the United States?" Right now, 41 percent of the American public says yes. Back in March, 28 percent.

Another question, "If North Korea attacks South Korea, should U.S. -- U.S. send troops?" Sixty-one percent say yes, 36 percent said no. You -- you read American public opinion. If this crisis were to escalate, what do you think the Obama administration would do? How committed, in other words, is the U.S. to the protection of South Korea?

HUNTSMAN: We have allies, and when you have allies, you have principles on the line. And if we're not willing to protect our basic principles -- in this case, our relationship with South Korea; 30,000 troops we have there, a lot of American interests, and by extension, Japan -- then I don't know how good our foreign policy is, any other way.

BLITZER: So the U.S. has to stand by those treaty obligations?

HUNTSMAN: No question about it. We have no legitimacy otherwise.

BLITZER: Ambassador, thanks very much for coming in.

HUNTSMAN: Great to see you. Thank you.

BLITZER: And coming up here, a history of threats. Is Kim Jong-un more likely to follow through or back down?

And we're tracking the money. His country is strapped, so how is he paying for his dangerous game of chicken?

(COMMERCIAL BREAK)

BLITZER: The North Koreans have a long history of speaking loudly, then backing down. CNN's Tom Foreman has been taking a look at that history.

Tom, what are you seeing?

TOM FOREMAN, CNN CORRESPONDENT: Wolf, as your guests have been saying throughout this entire program, this goes back a long time, this pattern.

In 1993 is when they tested their first midrange missile that could go as far as Japan, and it really excited the world community with concern, because they didn't know that this was where they stood.

Over the next few years, things kept improving, and then by 1995, they were testing more missiles. These missiles included cruise missiles capable of going 100 miles out to strike ships at sea. They flew a missile all the way over Japan, and they were backing away from the world's nuclear agencies that keep track of nuclear programs. That also excited concern.

And then, of course, by 2003, by this point, more developments. And we found out, in fact, that they did have a nuclear program, which they denied for a period of time. And on and on it progressed, Wolf.

And here's the thing: just as your guests pointed out, throughout that process, there was a constant push-pull. There would be fears; there would be alarm around the world; and often what followed were deals, concessions, that gave them food or gave them fuel or gave them new technology -- Wolf.

BLITZER: But in the past few years, it seems to have entered a whole new phase, hasn't it?

FOREMAN: Yes, it is. It's as if these negotiations and the results just keep moving up to a more dangerous level. By 2009, look at this. We're talking about these border tensions where they shelled those islands off the coast of South Korea. They sank that ship out there.

And mind you, this is not everything that's happened. A lot more has gone on and, of course, now we're where we are today, where we're talking about programs that are much more advanced. We're talking about missiles that are capable of flying in stages into space. We've had a lot more talk about their nuclear weapons program. It is as if the negotiations in this great big game of poker have just gone higher and higher and higher, Wolf.

And your guests are absolutely right. Even though we've had 20 years of this bluff and reward process, the wild card right now is this new young leader and whether or not he is being guided through this process the same way. It's not a great process anyway, but it's certainly not good if you have somebody at the table who is intent on carrying out one of these bluffs and actually making something terrible happen -- Wolf.

BLITZER: Very unpredictable situation. All right, thanks very much, Tom Foreman.

Coming up here on our special report, U.S. businesses in South Korea right now -- and there are a lot of them -- they are deeply concerned about their employees' safety. We'll have a report.

And we're going to show you how Kim Jong-un's threats could lead to a full-fledged war, inside our virtual studio. That's coming up, as well.

(COMMERCIAL BREAK)

BLITZER: Dozens of U.S. firms, including companies with brands you will recognize, do business in South Korea. And as our Brian Todd discovered, U.S. businesses stand to lose billions of dollars if -- if -- things get worse.

(BEGIN VIDEOTAPE)

BRIAN TODD, CNN CORRESPONDENT (voice-over): North Korea's tide of threats against the U.S. and its allies has at least one American company thinking what's next. Dan Akerson, head of General Motors, is responsible of 17,000 workers at five plants in South Korea. Asked by CNBC recently if GM might move production or make other contingencies if tensions on the peninsula get worse...

DAN AKERSON, HEAD OF GENERAL MOTORS: You've got to start to think about where you have the continuity, supply, and safety of your assets and your employees. So it's a concern to, I think, everybody.

TODD: Contacted by CNN, a spokesman for GM declined to say what specific contingency plans the company is making.

Tami Overby, head of the U.S.-South Korea Business Council, was there when North Korea, under Kim Jong-un's grandfather, threatened war with the U.S. and South Korea. She told us what American companies did then.

TAMI OVERBY, U.S.-SOUTH KOREA BUSINESS COUNCIL: Companies wanted to make sure that they had latest e-mails of all their employees. They wanted to have latest addresses of where everyone lived, and then started looking at supply chains.

TODD: Experts say some Americans were evacuated to Japan then. Most analysts don't think that will happen now, but GM and many other American companies have a lot to lose if tensions escalate or if conflict breaks out between North and South Korea.

(on camera): At its five plants in South Korea, two of them just outside Seoul, GM produces about a million and a half each year for domestic sale inside South Korea and for export to other countries.

And according to the U.S.-South Korea Business Council, at least 50 American companies either have a presence in South Korea or business interests there.

There was about $100 billion in two-way trade between the U.S. and South Korea last year, and at any given time, there are about 120,000 Americans living, working, and traveling in South Korea.

(voice-over): But analysts say these are all people who, like the South Koreans themselves, are used to threats being made from North Korea.

MARCUS NOLAND, SENIOR FELLOW, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: The main concern of Americans or other foreigners doing business in South Korea is the South Korean government and its regulations or their South Korean competitors or their South Korean partners, not things the North Koreans are doing.

(END VIDEOTAPE)

TODD: But Marcus Noland also says it was not helpful for GM's chairman to state publicly that his company is looking at contingency plans. Nolan says that plays into North Korea's game of brinksmanship and puts more pressure on the South Koreans to make concessions.

When I ran that by a spokesman at GM, he said good companies plan for a variety of contingencies and to suggest anything more is an overreach -- Wolf.

BLITZER: Watching this very, very closely. Obviously, in South Korea they have a lot at stake, Brian, so thanks very much for that report.

Up next, the shady money that's bankrolling Kim Jong-un's military threats.

And get this: there are American tourists on vacation in North Korea. (COMMERCIAL BREAK)

BLITZER: When I was in North Korea some two years ago, I saw firsthand how poor the country is. And yet Kim Jong-un has the cash to test weapons and to threaten the world. So where is the money coming from? Here's our Pentagon correspondent, Chris Lawrence.

(BEGIN VIDEOTAPE)

CHRIS LAWRENCE, CNN CORRESPONDENT (voice-over): When it comes to selling technology...

(SOUND EFFECT: CASH REGISTER)

LAWRENCE: ... the launch pad is Kim Jong-un's showroom. And the missile test, doubles as a marketing tool.

JOE DETRANI, FORMER U.S. INTELLIGENCE OFFICIAL: He's telling other countries, "Look what you could have also for a price."

LAWRENCE: Libya and Iran have been willing clients. But former U.S. intelligence official Joe Detrani says sanctions have cut into sales.

Kim is profiting off illegal weapons but brings in 20 to $100 million less than his father.

(on camera): How important is money to Kim Jong-un?

DETRANI: Money is key. He's got to keep the elites happy.

LAWRENCE (voice-over): North Korea has its own version of the 1 percent. Kim needs that money stream to keep them on his side. Fortunately for Kim, North Korea has legal goods and a willing trade partner right next door.

(on camera): Who is Kim's link to China?

DETRANI: It has to be Jang Song Taek.

LAWRENCE (voice-over): And Jang is part of the family. Kim elevated his uncle to No. 2. Jang Song Taek oversees some of the state-run trading companies which mine reserves like coal and iron ore. Jang uses his connections to sell those minerals to China, and the profits come back to Kim.

DETRANI: This is a man who can cut the deal with China. He has a lot of credibility with the Chinese.

LAWRENCE: Thanks, in part, to Kim's uncle, trade with China is booming: from $1 billion a few years ago to $5 billion now.

(on camera): If you account for the weapons and the minerals, how else is he getting money?

DETRANI: He's getting it through illicit transactions. LAWRENCE (voice-over): U.S. officials say North Korea is exporting illegal drugs like meth, producing knockoffs of popular cigarettes and pharmaceutical drugs, even counterfeiting good old Ben Franklin.

(END VIDEOTAPE)

LAWRENCE: In fact that U.S. official says the illicit stuff is still pretty small scale. The North gets a bit more from tourism and foreign investment from places like South Korea and China.

But, Wolf, he says in a country that doesn't get any taxes from its citizens and really is not connected to the international world trading market, it is the minerals and the weapons that are the cash cows keeping Kim in power.

BLITZER: Yes. They've got global sanctions against him from the U.S. Security Council, but apparently, he's getting some cash that he needs. Chris Lawrence, good report. Thanks very much.

U.S. officials warn one miscalculation could lead to disaster. CNN's Tom Foreman is here and the contributor Spider Marks. They'll break it all down for us in our virtual studio right now.

(BEGIN VIDEOTAPE)

FOREMAN: Wolf, all eyes remain on the east coast of North Korea and on these, these mobile-launch Musudan missiles. Because if one of these takes off, everything changes very, very quickly.

General, come on over here. And let's bring in the map and talk about this some. If there is a launch, you say the very first thing would be some action by a satellite. Why?

GEN. SPIDER MARKS (RET.), CNN CONTRIBUTOR: Tom, this satellite is going to pick up the infrared, the IR signature of the missile coming off the mobile launcher. Instantaneously, it will then send messages to the tracking system so we can track the telemetry of that missile.

FOREMAN: The tracking systems involve units at sea, in the air, on the land, everywhere trying to hone in on this thing, right?

MARKS: Exactly correct. From the ground, from the sea, from the air. Totally integrated. Tracking the missile. And the key objective there is to make sure it's not threatening a U.S. or an ally resource in the region.

FOREMAN: It's worth noting this is not an easy task. A missile like this could be traveled at thousands a mile an hour. It's nothing at all like an airplane.

MARKS: No, it's not. This technology has been in place for a while. It's been highly refined. And we know how to make this happen.

FOREMAN: So if we see this moving toward a target, something that we care about, something we want to protect, if the computers see that happening, they will automatically do what? MARKS: They will take that missile out. But that's just the start.

FOREMAN: How do they take it out?

MARKS: They will launch from one of the platforms, either at sea or on the ground, that will be able to track it, and it will be a missile...

FOREMAN: So counter missiles that will go up and blow it apart in the air?

MARKS: Yes.

FOREMAN: But then comes the hard part. Because then there is the human equation. Humans have to say, "How do we respond to the fact that they've tried to hit an asset or maybe didn't?"

MARKS: This is a political, strategic decision. And those that are acting most closely to all of this is the United Nations command which is in South Korea.

And the objective there is to maintain the armistice. We might in, fact, go after the exact launch location where that missile came from. But the objective is to maintain the armistice. That is a cease-fire that we signed in 1953.

FOREMAN: Maintain, North Korea, South Korea...

MARKS: A North and a South. That's our objective.

FOREMAN: Well, it could be some very tense moments along the way to maintaining that objective -- Wolf.

(END VIDEOTAPE)

BLITZER: Hey, guys, thanks very much.

North Korea might be the last place you'd want to go on vacation right now. But get this: some American tourists were just there. We'll speak with them.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

MCKENZIE: North Korea's propaganda target is pretty clear. On state TV, a nation on a war footing, ready to smash the United States. So North Korea is probably not where you'd plan your next trip. But this group of Americans did just that.

PATRICK SYLER CLARK, U.S. TOURIST WHO VISITED NORTH KOREA: Now it's not a place to go on vacation. And while my mom was very supportive, my girlfriend broke up with me over it.

MCKENZIE: I caught up with Patrick Syler Clark and Josh Thomas, two American tourists who just braved a trip to Pyongyang. JOSH THOMAS, U.S. TOURIST WHO VISITED NORTH KOREA: My parents actually didn't know. They still don't know. They'll find out tomorrow.

MCKENZIE: And instead of mass rallies in Kim Il Sung Square, the reality they witnessed, rollerblading. Apparently, it's the latest fad.

CLARK: Out in the large square, a lot of kids out there rollerblading. I mean, that's super popular right now. North Korea is not just military two-stepping across their main square.

MCKENZIE: For these Americans it was tasting traditional tea, posing with extras in a war film, attending a North Korean wedding.

JOSEPH FERRIS, U.S. TOURIST WHO VISITED NORTH KOREA: I've been around the world about 100 countries. And as an American, North Korea has been one of the forbidden countries.

MCKENZIE: Joseph Ferris guided the group. When North Korea opened up for American tourists in 2010, he rushed in, posting his experiences and photos on a popular blog, "An American in North Korea."

(on camera): The tension that's been talked about around the world is not felt when you're there?

FERRIS: Not on a personal level. I mean, the guys that we work with are good friends of mine. And I've worked with them before. And they're lovely people.

MCKENZIE (voice-over): So while thousands of South Korean and U.S. troops guard the DMZ, senior North Korean officers gave a tour of the front line to their American guests, treating them like VIPs.

Josh and Patrick know they only got to see what their government minders let them. But they say it was worth it. They came back with an opinion that will surprise some.

THOMAS: I truly believe at the bottom of my being believe that North Korea was not quite as crazy as the rest of the world seemed to think it was.

MCKENZIE: David McKenzie, CNN, Beijing.

(END VIDEOTAPE)

BLITZER: That's it for this hour. Thanks for watching. The news continues next on CNN.