Echoes of KAL 007

If you think China’s effort to control air traffic over the western Pacific Ocean is a harmless bit of diplomatic posturing, you may be too young to remember Korean Air Lines Flight 007.

Just before midnight on Aug. 30, 1983, the flight’s Boeing 747 left New York’s JFK airport, bound for Seoul. After a refueling stop in Anchorage, the plane took off in predawn darkness on a route that should have kept it about 18 miles outside of sensitive airspace along the Soviet Union’s east coast. But KAL 007 veered off course almost immediately after leaving Anchorage – investigators later blamed an incorrectly set autopilot – and penetrated deep into Soviet territory.

The pilots appeared to be oblivious as they crossed the Kamchatka peninsula, where Soviet MiG fighters scrambled to intercept the plane. The MiGs were too late, as the Boeing proceeded across the peninsula and back over international waters in the Sea of Japan. It crossed Soviet frontiers again over Sakhalin Island. Still, the civilian pilots appeared to be unaware of their error, and of the fact that they were being pursued by interceptors armed with air-to-air missiles. Shortly after the plane crossed Sakhalin, Soviet Air Force Maj. Gennadi Osipovich fired two missiles that exploded near the jet, some seven miles above the ocean.

Shrapnel from the exploding missiles pierced the plane’s tail section and its left wing. The cabin depressurized, forcing passengers and crew to don oxygen masks. Three of the aircraft’s four hydraulic systems were damaged or destroyed, but the 747 did not disintegrate or plunge immediately to the sea. For some minutes, it seemed as if the pilots might maintain control long enough for an emergency landing. But the plane eventually settled into a lazy spiral that took it into the Pacific about 45 miles south of Sakhalin and 35 miles north of the Japanese northern island of Hokkaido. None of the 269 passengers and crew (including sitting U.S. Rep. Lawrence McDonald) survived.

The Soviets at first disavowed any knowledge of the plane’s fate. Soon, however, they admitted having shot down the aircraft, which they accused of being on a CIA-sponsored spying mission. (From the Soviet perspective, this seemed plausible, as the area where the plane was downed was already under close U.S. military observation, in part because of a planned Russian missile test.) Soviet military ships repeatedly harassed international rescue and recovery vessels that converged on the area. Those rescue vessels, primarily from Japan, South Korea and the U.S. Navy, were forced to work only in international waters because Moscow denied permission to enter Soviet territory. Investigators later concluded that although Soviet ships made a big show of searching the same international waters, the Russians had already located the major wreckage elsewhere – probably inside their own borders – but did not acknowledge their find. Much of what we know about the crash today comes from wreckage and transcripts that were released about a decade later by Russian President Boris Yeltsin, after the fall of the Soviet Union.

Flight 007 provides a critical backdrop against which we should view China’s surprise declaration last month of an Air Defense Identification Zone, or ADIZ, stretching far off that country’s central Pacific coast. If China tries to aggressively enforce its new claim – and it scrambled its military jets at least once within the first few days after the announcement, making this seem likely – there is a real risk of a miscalculation that could end in armed conflict. There is an even bigger risk of an accident that could cost hundreds of innocent civilian lives.

This is why the Chinese announcement elicited mixed signals from the Obama administration. The Pentagon promptly sent two U.S. B-52 military bombers across the Chinese ADIZ without bothering to inform Beijing, to underscore the American position that China has no right to burden or harass flights across international waters. But the administration also urged American airlines to comply with the Chinese demands for advance notice of flights across the demarcated zone, to reduce the risk to civilians.

Most of the press about the zone has focused on China’s dispute with Japan over a group of tiny, uninhabited islets, called the Senkakus in Japan, which has administered them for over a century, and called the Diaoyus in China. The islets are at the southern end of the ADIZ, but the sprawl of the new zone far to the north – where it overlaps a large swath of Japan’s own ADIZ – is ultimately a much bigger challenge. With its declaration, China has literally and figuratively set itself up as the western Pacific’s traffic cop. It is a direct challenge to the United States, which has a troop presence in South Korea, a defense treaty with Japan, and a historic alliance with the government on Taiwan, whose recovery under mainland rule is China’s biggest long-term goal in the region by far.

China is exploiting an ambiguity in international law, an ambiguity also taken advantage of by the United States and others. Virtually all countries recognize the right of coastal nations to obtain identification from vessels, airborne as well as ocean-going, that approach their shores with the intention of entering national territory. But if a vessel merely plans to traverse international territory outside the national boundaries of the coastal nation, most countries do not recognize any obligation on the part of captains to identify themselves or provide other information to the countries they bypass.

China’s newly announced rules require any vessel entering the ADIZ to identify itself to Chinese authorities and provide information about its intentions. Though we object to the implementation of those rules, our own ADIZ regulations provide similar language. We only accommodate international law through our enforcement policies, because American naval and Coast Guard authorities do not, as a rule, challenge third-country vessels that merely transit our identification zone. (We do, however, vigorously track and sometimes intercept vessels that our authorities believe might be engaged in trafficking people, drugs or other contraband, or that are associated with other countries’ militaries.)

There has been speculation that Beijing made a mistake in announcing its ADIZ, not recognizing how strong a reaction it would provoke in Washington and Tokyo. I doubt that. I suspect that the announcement and its timing partly reflect internal Chinese politics, as a new administration establishes its national security bona fides. But another big reason for the announcement is that Beijing figures, probably correctly, that it can get away with it as long as there is no immediate violence or accidental loss of life.

I think the Chinese have calculated that, despite our professed support for Japan (and, always by extension, Taiwan), a deeply indebted America, run by an administration that clearly has lost its appetite for even small-scale military action (witness the erased red line on Syrian chemical weapons), is no real threat as long as Americans themselves are not directly attacked. The Chinese are well aware that though we once vowed that North Korea would never be a nuclear-armed state, Pyongyang has had nuclear weapons for nearly a decade, and we now stress that our policy toward that government is not one of regime change.

China plays a long game. Seventy years of American dominance in the Pacific does not need to be erased overnight for Beijing to achieve its strategic goals. Our role only needs to be eroded and exposed for the paper tiger that it probably is. China’s neighbors will eventually notice that there is a new traffic cop in their precinct.

About Larry M. Elkin 553 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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