S&P: Korea downgrade uncertain

Standard & Poor's Ratings Services said the repercussions of an as-yet unconfirmed nuclear test by North Korea could be severe, but a lowering of the ratings on the Republic of Korea (A/stable/A-1) would not be certain, according to an article published by S&P titled "Nuclear Test By North Korea To Further Escalate Geopolitical Risks In Korea."

"A successful nuclear test would not by itself result in a downward revision of the sovereign ratings on Korea or negatively affect the stable outlook attached to the country's ratings," credit analyst Takahira Ogawa of the Sovereign Ratings group said.

The agency said this is because the prospect of a nuclear test leading to economic sanctions severe enough to hasten a collapse of the North Korean regime, or worse, spark a full-scale military conflict, are still remote.

"The goal is not to expose the regime to the risk of military reprisals," Ogawa added. "Indeed, it is, ultimately, not in North Korea's interests to raise the level of brinkmanship too far too quickly, as the more it escalates existing tensions the fewer bargaining cards it holds."

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