The capacity of the little pesky failed state to cause endless worry and annoyance to its neighbours, and particularly the US, is not of course to be measured by GDP. It is regarded as a rogue state which supplies arms and other assistance to active enemies of the US, a constant threat to the peace in its own immediate region. Concerns are much increased by the unpredictability, even irrationality, of its rulers, and the fear that miscalculation in dealing with it could cause a massive slaughter. Its borders with South Korea are in easy artillery range of Seoul, and there are thousands of artillery pieces along the border pointed just there, capable of a Hiroshima (in conventional materials) an hour. It has been exporting useful medium-range missiles to other countries (including Iraq and Iran) for years, and recently tested missiles which seem well capable of reaching Japan. A rocket launch, described as an attempt to orbit a satellite, but regarded by intelligence agencies as designed to test a warhead (which could, down the track, be an atomic warhead) shows it is reaching for an intercontinental missile, with the capacity to reach the US. Or, should we annoy them enough, the ACT.

The West's seeming inability to reach any form of understanding with North Korea has actually made the risk of conflagration worse over the past 20 years. For nearly 30 years after the Korean war, North Korea was a bristling, cranky, highly armed neighbour, with thousands of troops massed close to the demilitarised zone. There were incidents aplenty, many seemingly calculated to demonstrate that its reactions to events were not predictable, but there was little real risk of attacking the south, given the substantial presence of US soldiers, and its capacity to respond with sustained massive force, even possibly (for the US never foreswore them) tactical nuclear weapons. Nor much risk of attack by the US or South Korea, given the knowledge, in Cold War days at least, that North Korea had security guarantees from the then USSR and China.

Judging what was happening in the North Korean body politics was so much the more difficult for outsiders because it was a closed and highly authoritarian society, notionally Marxist but in fact subject to some sort of Confucian hereditary personality cult. It was difficult even to work out the state's institutions, or the way power was exercised, let alone by whom. Trying to find out what was really going on, as with China-watching in the 1960s, became a brand of theology dependent on interpreting slight changes of emphases in poetry praising the Great Leader, Kim Il-sung. Right now those seeking meanings from recent North Korean belligerence are wondering if it is connected to the indifferent health of the Dear Leader, Kim Jong-il, a possible tussle in his family for his throne, and where the military stands in such an argument.

American policymakers have operated not only with the firm belief that North Korea is unpredictable and essentially irrational but that it is also sound policy not to reward bad behaviour. As they see it, most North Korean behaviour is bad. Make concessions and they make promises. But they then violate them. Punish them, and refuse them any concessions, and they behave badly. The North Koreans lied to Bill Clinton, who made concessions, and stood up to George W. Bush, who for a long time wouldn't (and who enraged them by his Axis of Evil tag) and thus ratcheting up the bad behaviour. Ultimately, Bush made some concessions and won some concessions, but in recent times, North Korea seems to have reneged again, perhaps in an effort to get the attention of Barak Obama, who has talked generally of a new diplomatic style, but not paid much attention.

On paper, over the past decade the US has been much more exercised about the prospects of Iran getting nuclear weapons, in part with much the same technology and slippages (via Pakistan) as North Korea. It has tried charm and aid, denouncement and sanctions, in an effort to stop North Korean nuclear power, at all stages rightly fearing that it would be diverting some fuel to weapons production. At times North Korea has gone along, particularly in exchange for oil and for food aid for an economy in parlous straits. Any other country not so tightly controlled in almost every way would long ago have collapsed from famine, and shortages.

An ostensible aim of the North Korean approach has been to get into formal bilateral talks and security guarantees with the US, but this the US has refused for more than a decade, even as it has insisted that it has no intention of overpowering the state or its rulers. Rather it has insisted that dialogue be confined to six-party talks embracing China, Russia, Japan and South Korea, and has come, in particular, to rely on China to exert as much leverage as it can on North Korea.

But China's power is fairly limited. It has its own fears of a belligerent North Korea and of its capacity, unilaterally, to plunge the region into war. It also fears that a steady flow of starving refugees could become a flood if the situation is not resolved. On the other hand, it has no particular desire to see North Korea absorbed by South Korea to become, ultimately, a competing (and capitalist) neighbour, probably militarily aligned, or inclined to, with potential enemies such as the US and Japan. North Korea may be an irritant to China, but not an itch that must be scratched.

Yet someone who closely examines North Korean behaviour can see a certain logic, independent of any internal power struggle, both in its general behaviour and its determination to possess nuclear weapons. And even a rational argument for its waxing hot and cold, sometimes seemingly at random. These prevent its being taken for granted, and virtually guarantee that no one will act too irrationally against it. If it has been, in most senses, dishonourable in not keeping its promises, its strategy has generally served it well in extracting more concessions. Even now, as the world vacillates between what can or should be done to punish it and what needs be done to appease it from any further apparent acts of madness, further concessions are the likely outcome. If only because the cost of squashing it is too great. It's a bit like the stalemate of mutually assured destruction during the Cold War. Even ignoring it, another option sometimes advocated, is highly dangerous.

Jack Waterford is Editor-at-Large.