S&P: Korea ratings unaffected

Standard & Poor's said that the statement of principles hammered out in six-party talks on North Korea's nuclear program should help regional stability but does not directly affect its sovereign ratings on South Korea (foreign currency A/stable/A-1; local currency A+/stable/A-1).

On Sept. 19, China, Japan, Russia, the United States and the two Koreas announced a wide-ranging agreement that included North Korea's pledge to abandon its nuclear weapons and power program in return for economic aid and normalization of its relationships with the United States and Japan.

"The six-party agreement is a good development for regional stability as it could reduce the risk of the use of nuclear weapons in the region. It is also good economically as it could limit the risk of an economic collapse in North Korea, which would be a huge burden for South Korea," said S&P credit analyst and Sovereign Director, Takahira Ogawa.

But, although the agreement is a breakthrough in the talks, which had appeared to have stalled, fixing terms of the agreement in detail will be a very difficult task. This is because of the vaguely worded agreement itself and the unpredictability of North Korea's policy on future negotiations. And even if talks proceed smoothly, whether the agreement can be effectively implemented and the solution monitored is a major uncertainty, the agency said.

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