John Nilsson-Wright
Head, Asia Programme

News of North Korea's artillery shelling of the South Korean island of Yeonpyeong and the death of two South Korean marines, has sharply raised fears both regionally and worldwide that the peninsula may be on the edge of a full-blown military exchange. For once the hyperbole does not seem unjustified.

What explains the actions of the North? The official line from Pyongyang is that the South fired first. Although the evidence for this is questionable, Monday saw the start of a series of routine military manoeuvres - the Hoguk exercises - between the South Korean navy and its US partner which the North has claimed represents preparations for a full-scale attack on the North. To most dispassionate observers this seems like political rhetoric, although typical of the sense of vulnerability that is characteristic of the North Korean leadership.

More plausibly, at a time when the North has been grappling with weak economic conditions, food shortages brought about by flooding, and the uncertainty surrounding the succession process for the young heir apparent Kim Jong-un, the government may be looking to a foreign crisis as a means of shoring up support at home. Conflict abroad can mobilize domestic opinion, reinforcing the position of the military and legitimizing a leadership in transition.

Equally relevant, Pyongyang's leaders may have calculated that, in anticipation of a re-start of the Six Party Talks process to address the North's nuclear weapons programme, tough action on the ground might translate into a stronger position at the negotiating table.

The difficulty for South Korea's President Lee is that anything short of decisiveness now will look like weakness, if not appeasement of the North. However, threatening a military response is a high-wire gambit that could prove disastrous. If the North chooses to attack again, the South will be forced to act and the risk of military action escalating into full-blown war rises sharply.

What can be done to move the parties back from the brink of a mutually devastating conflict? A calibrated military response from the South and its allies is overly risky and threatens loss of civilian and military life on a huge scale, as well as massive economic dislocation, the ripple effects of which would be felt throughout the region and the world. Formal sanctions have been tried many times before, via the United Nations, and there is little evidence that this would have any meaningful impact on the leadership in Pyongyang, particularly since China - the main source of support to the North in terms of food and energy provision - remains reluctant to turn the screws on its Korean ally for fear of provoking even more instability on the peninsula.

This leaves diplomacy as the only creditable option and a long-term process of engagement between the international community and North Korea. The evidence of provocation, not to mention the risk of escalation in Monday's attack, may be sufficiently acute to encourage a more decisive and unambiguous response from the UN Security Council. In all of this, clarity of language and unity of purpose will be key.

The national leaders involved should keep in mind the stakes involved for both North and South Korea - two countries with a combined population of some 70 million people, both heavily armed and in such close proximity to one another that the consequences of military action would be catastrophic.