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CNN BREAKING NEWS

Kim Jong-il Dead

Aired December 19, 2011 - 01:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


KRISTIE LU STOUT, CNN INTERNATIONAL ANCHOR: Welcome to our viewers in the U.S. and around the world. As we continue our breaking news coverage. I'm Kristie Lu Stout.

Now the death of North Korean leader, Kim Jong-il, Has rattled the nation. Put the region on edge, and has the world watching intently to see what happens next in the isolated country. A very emotional presenter on North Korean state TV made the official announcement.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I'm announcing in the most woeful mind that our great leader Kim Jong-il passed away due to a sudden illness on his way to a field guidance on December 17, 2011.

(END VIDEO CLIP)

STOUT: The state TV reports the 69-year-old leader died Saturday morning of a heart attack while on a train trip. The report also said that doctors used every possible first aid measure, but Mr. Kim could not be saved. A funeral will be held on December the 28th in Pyongyang.

Well, Kim Jong-il was only the second leader the people of this reclusive communist nation had ever known.

Our senior international correspondent, Dan Rivers, looks back at the enigmatic Kim Jong-il.

(BEGIN VIDEOTAPE)

DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): Kim Jong-il always cut a slightly bizarre figure. His diminutive stature and characteristic hair were parodied by some in the West, but for the citizens of the Democratic People's Republic of Korea, Kim was the embodiment of this reclusive state. Feared, loved, worshipped, obeyed, his cult of personality was deeply entrenched.

His father was Kim Il-Sung who founded North Korea with Soviet backing off the World War II. Kim Jong-il was just a little boy when the Korean War broke out in 1950, but the Soviet-backed North invading the American-backed South. After fighting ended, Kim Jong-il became steeped in his father's philosophy of juche or self-reliance and the North became ever more reclusive. The North and South never formally signed a peace treaty and remained technically at war separated by a tense demilitarized zone. Gradually, Kim Jong-il was groomed for the top, making public appearances in front of cheering crowds. When Kim Il-Sung died in 1994, he was declared eternal president. So his son instead became general secretary of the Ruling Worker's Party of Korea. And by 1998, as head of the army, he consolidated his position of absolute power.

ANDRE LARKOV, NORTH KOREA ANALYST: He will be remembered as a person who was responsible for awful things, for the existence of one of the worst dictatorships in probably not only Korean history, but in the world history. At least in the 21st century. Yes, he did not create this dictatorship, it was his father's, but he took responsibility and he made sure that it continued for many more years.

RIVERS: He was known for his love of fine wines, at odds in a country where food shortages and privation were common. While the dear leader, as he became known, is said to have indulged in his appetite for the finer things, his people were literally starving to death. The collapse of the Soviet Union hit North Korea hard. Suddenly ending guaranteed trade deals.

And then devastating floods compounded the famine. Estimates vary for the number that died. But even the regime itself admitted that almost a quarter of a million perished between 1995 and 1998. Some say it was more like 10 times that figure.

But in the capital, Pyongyang, the artifice of a success state was maintained. An opulence subway, proof, the dear leader would say, of the DPRK's progress under his and his father's leadership.

Kim Jong-il was well known as a film buff. Here, visiting the set of a North Korean production. His personal video library was said to include 20,000 titles with "Rambo" and "Friday the 13th" supposedly topping the dear leader's favorite flicks.

In 2000, there appeared to be a thaw in North-South relations, the first-ever summit meeting between Kim Jong-il and his then counterpart from the South, President Kim Dae-Jung. The South's so- called "Sunshine Policy of Engagement" seemed to be bearing fruit.

But Kim Jong-il pressed ahead with his nuclear weapons program. The U.S. labeled it part of the Axis of Evil in 2002, a year later North Korea withdrew from the Nuclear Nonproliferation Treaty. In 2006, the North conducted a nuclear test and test fired missiles. It added extra urgency to the six-party talks designed to deal with North Korea's nuclear program.

A breakthrough came in 2007 when Kim Jong-il finally agreed to disable the nuclear reactor at Yongbyon in return for fuel and better relations with the U.S. But despite dramatically blowing up the cooling tower, North Korea seemed to back track afterwards. The deal appeared to be in jeopardy.

The capture of two U.S. journalists, Laura Ling and Euna Lee, on the North Korean border, sparked another crisis in 2009. It ended when former president, Bill Clinton, flew in and successfully negotiated their release, prompting hopes there would be further engagement.

Observers say Kim Jong-il will be remembered as a nearly impossible man to bargain with. Stubborn and fickle in equal measure. A man who kept 23 million people in a totalitarian nightmare in one of the most repressive, reclusive regimes in the world.

Dan Rivers, CNN.

(END VIDEOTAPE)

STOUT: South Korea's Defense Ministry has raised its national alert to the second of three levels. And President Lee Myung-bak, he asked that the people of South Korea concentrate on economy activities and remain calm. South Korea, much of the region, is concerned about what might next in North Korea's secretive leadership ranks and we asked the former South Korean ambassador to the U.S., Han Sung Joo, about that.

(BEGIN VIDEO CLIP)

HAN SUNG JOO, FORMER SOUTH KOREAN AMBASSADOR TO THE U.S.: I was the foreign minister when his father, Kim Il-Sung, died in 1994. And we had then, and I'm sure right now, we had plans to make our military and security ready for any unforeseen and untoward provocations or events, and also we have to see what's going on.

Another very important part of the preparation would be to have very close consultation with the other countries, particularly the allies, the United States, Japan, China, Russia and so on.

JOHN VAUSE, CNN SENIOR INTERNATIONAL CORRESPONDENT: And so what do you think is happening inside Pyongyang right now?

SUNG JOO: Well, Pyongyang took two days to announce the death of Kim Jong-il and also announce the makeup of the -- what they call the funeral committee, which consists of 232 members headed by Kim Jong- un, the third son. And so they are trying to put up a face that is both orderly and united.

We are not sure whether that's what's natural or whether there was any foul play, but regardless, they are trying to put up the best face under the circumstances.

(END VIDEO CLIP)

STOUT: Now China is North Korea's closest ally, of course, and now this video just in. It shows the flag being lowered at North Korea's embassy in Beijing. And people watch as the flag is raised and lowered again to half-staff. Again, this in Beijing. All in mourning for Kim Jong-il.

Our Stan Grant joins us live from the Chinese capital.

Stan, China has so much on the line. How is Beijing, which is of course Pyongyang's closest ally, weighing the news of the death of Kim Jong-il?

STAN GRANT, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, as you'd expect in China, no rush to any comment at this point. We're expected to get some official comment later in the afternoon. Exactly what China's position is. But we do know that China has been in constant contact with North Korea. An envoy was there as early as October.

This has been a constant process of the back and forth in this relationship. A relationship that's been described in the past as being as close as lips and teeth. We see North Korea often described as a client state of China and certainly China bank rolls North Korea. So much of the economic -- of the economy of North Korea is dependent on China.

Now, interesting, too, that Kim Jong-il who brought his son, Kim Jong-un, to China recently to meet China's leaders, to almost get their stamp of approval for any succession. So when it comes to the ongoing role of the relationship, the stability of North Korea, trying to smooth the way of this transition, China does have a lot at stake.

And to that extent this wouldn't come as a huge surprise. China would have rehearsed contingencies just for this event. In North Korea as well. I mean we know that Kim Jong-il had been in poor health for some time. He'd appointed his son, his son decided to take a much more prominent role just for this day when the leadership would be thrust upon him.

What we really don't know is how this is going to play out in the coming days. What is the impact going to be in the hinter land of North Korea? Away from Pyongyang where people have to live in horrendous circumstances? As this news comes and filters down, what will their reaction be?

Along the border as well, there are about 30,000 North Korean refugees in China. China's big concern has been what would happen if there was an implosion, if people made a run for the borders. China right now has the emphasis on stability and hoping that all those plans they've put in place in the lead up to this event will in fact -- will in fact be able to play their way through -- Kristie.

STOUT: You described the relationship, quote, "as close as lips and teeth," between Pyongyang and Beijing. And outside looking in, many people have wondered why has Beijing been such a close ally to Pyongyang, hosting Kim Jung-Il and his many train trips to mainland China? Former Chinese president, Jiang Zemin, giving a bear hug to Kim Jong-il.

How do you explain this close relationship over the years between these two countries?

GRANT: It's a relationship that's rooted in history. We know that in the Korean War, China was able to send over thousands of so- called volunteers, members of their army who were out of uniform, to fight alongside North Korea who are responsible for helping to drive back the U.S. and South Korean forces. U.N. forces in North Korea as well.

So it's a relationship that is founded in blood, it's founded in history. That China has had an ongoing interest in trying to continue the stability of the regime. It certainly came a lot more to the fore with the collapse of other communist regimes throughout the world. We know that the collapse of Russia led to the end of lucrative trade deals between North Korea and Russia, and then again has put more of a spotlight on this relationship between China and North Korea.

What's really going to be crucial here, Kristie, is just how the various parties are able to play this out. One of the really crucial elements, the genius if you like of the six-party talks was that rivals, enemies, were able to sit down at that table, that China could speak to Japan, that China could speak to the United States. North Korea could speak to Japan. The U.S. could speak to Russia.

This was the real -- the benefit and the genius of those talks. How these parties played out now is going to be absolutely crucial and right front and center there is the relationship between the United States and China. The U.S., if you like, South Korea's corner, and China in North Korea's corner. They all have an interest in stability. That relationship is going to be crucial -- Kristie.

STOUT: And how will six-party talks continue to play out if they're restarted again under a North Korea -- under Kim Jong-un? Is Kim Jong-un expected to be more of a modern leader, a reformer or more of the same, in line with his father?

GRANT: Well, we talked about Kim Jong-un, it's a question mark. What do we know about him? No one even really know his age. There are rumors that he'd had some education in Switzerland, a couple of years at a Swiss boarding school. That he's someone who speaks several languages. He's the media with the West, more exposed to the West. But we still don't know a lot about him.

We don't know how much authority he will carry within his own country, what his relationship will be with the aging generals who you always see flanking Kim Jong-il. Those generals of course have a -- have a real stake in that country and they are the ones with the fingers on the triggers if you like.

They're the people who really hold power in that country. So his own relationship is going to be crucial. A return to the six-party talks, well, Glenn Davies the U.S. envoy recently just last week was talking about visiting North Korea, but he was optimistic, he was relatively hopeful about a return to those talks. All bets I would say now are off and exactly how it would play if they came back to the negotiating table.

One of the real hallmarks of Kim Jong-il, one of the reasons he was able to survive and his regime was able to survive, was his ability to play one off against the other. Despite the buffoonish image, if you like, the image that was widely lampooned, those who spoke to him, those who got close to him, say this was a shrewd man, an articulate man, and someone, if you look at the development of those six-party talks, was able to achieve what he wanted, take something with one hand, and give something with the other.

So with him gone, Kim Jong-un in the picture, if they return to talks, how will he impose his own authority and how will he impose his authority inside his own country? Those questions yet to be answered -- Kristie.

STOUT: And your thoughts about the power transfer that has already been underway. Kim Jong-un was named as the heir apparent, a successor, quite a while ago. Pyongyang waited a few days after the death of Kim Jong-il to report his death officially today. Do you think the process will be smooth?

GRANT: Well, this is customary, isn't it, in these types of countries where information is so very tightly controlled? Where survival of the regime is paramount to be able to orchestrate something like this. To be able to orchestrate and control the news of his death, to hold the state funeral, to try to get some indication of how countries throughout the region might react.

You know, listening earlier to some of the guests that we've had on, in particular, Mike Chinoy, a former CNN correspondent, a fount of all wisdom when it comes to North Korea. He was talking about a very stable picture, about a country that is not going to want to appear to be weakened by this, but a country that's wanting -- going to want to try to orchestrate a very stable handover. That's certainly going to be in China's interests as well.

What's going to be really crucial here, Kristie, is the potential for misunderstanding. That's where problems can occur. That's when situations can really get out of control. I cast my mind back to the Yeonpyeong Island attack just last year. A lot of that seemed to stem from misunderstanding, war games carried out by South Korea rough around the border, North Korea warning to stop, South Korea continuing and then North Korea saying that's why they attacked.

Any chink in the armor, any misunderstanding, could lead to problems. But at the moment what we're trying to see is some form of stability. But the big question mark is what happens in the hermit kingdom. We don't know. It's very opaque. How much authority Kim Jong-un has. What the role the generals would be? How the people will react? The jury is still out on those questions -- Kristie.

STOUT: All right. Stan Grant, joining us live from Beijing, thank you very much for that insight there.

Now, Japan has called an emergency national security meeting on news of Kim Jong-il's death. The statement has since been issued offering condolences and Japan's chief government spokesman went on to say this. Quote, "We wish the sudden news would not affect North Korea negatively."

Now, meanwhile in Washington, D.C., an official says the death of Kim Jong-il brings extraordinary change and uncertainty to North Korea and that an insecure North Korea could well be an even more dangerous North Korea. Earlier the White House press secretary issued a statement saying, "Now we are closely monitoring reports that Kim Jong-il is dead. The president has been notified and we are in close touch with our allies in South Korea and Japan. We remain committed to stability on the Korean Peninsula and to the freedom and security of our allies."

Now how is the U.S. State Department dealing with this news? Well, our senior State Department producer Elise Labott spoke to us earlier from Washington.

(BEGIN VIDEO CLIP)

ELISE LABOTT, CNN SENIOR STATE DEPARTMENT PRODUCER: I think they're a little (INAUDIBLE) on it. I think it happened a little bit sooner than they thought it would. And they really don't know who is running (INAUDIBLE), as we've been saying. Is Kim Jong-un making decisions at this point? Or so-called regents, his aunt, his uncle, the sister of Kim Jong-il and her husband -- are they making the decisions? Is the military making decisions?

I think there's going to be a real period of uncertainty for the United States. They have seen some progress in engagement with the North over the last six months or so. I think they're going to put on the brakes a little bit, trying to decide what they want to do. Going to have to very carefully calibrate the messages over the next 24 to 48 hours.

Are they going to offer condolences? Are they going to anoint so to speak the so-called new leader that the -- that we all expect him to be. It hasn't been announced obviously yet. I think the U.S. is going to really tread very carefully. There's certainly not going to be a wholesale engagement.

Over night the U.S. isn't going to embrace this young, untested leader, but I don't think they want to close the door to the -- what we've been talking about all evening, that this could be an opportunity. Could he be a more benevolent leader than his father? It certainly is possible. But he could also be a much more unpredictable leader. And he's untested.

Obviously the North Koreans want to portray him as in command. Could that -- could that mean an overture toward the west or could that mean some provocative behavior towards the South? They don't know. I think they're going to be watching and waiting to (INAUDIBLE) Kim Jong-un as they closely, closely coordinate with South Korea.

(END VIDEO CLIP)

STOUT: And this just in from Reuters News Agency. Now North Korea state news agency is calling Kim Jong-un, quote, "the great successor."

Let's take a closer look now at the heir apparent. The youngest son, Kim Jong-un, he's believed to be 27 or 28 years old. He is the son of the elder's Kim's late third wife and because of his age and lack of his experience he is said to be a political novice.

In 2009 he reportedly took a low-level post at the National Defense Commission, that's North Korea's highest ruling agency led by his father. And last year he was promoted to a four-star general. Seen as a steppingstone to taking over from his father.

And there are few known photographs of Kim Jong-un. He's said to look much like his father. Maybe overweight like his father. May also have diabetes. It is believed that as a boy, he secretly attended boarding school in Switzerland then the Kim Il-Sung Military Academy, named for his grandfather, in Pyongyang. And reportedly is a big fan of basketball and Michael Jordan.

Kim Jong-un, our great successor in North Korea.

Our breaking news coverage to the death of the North Korean leader Kim Jong-il continues in a moment. Stay with us.

(COMMERCIAL BREAK)

STOUT: Welcome back to our viewers in the U.S. and around the world. Let's take a moment to recap our breaking news.

The end of an era in North Korea. State television says the North Korean leader Kim Jong-il has died. Now state TV said the 69- year-old leader suffered a heart attack on Saturday while on a train trip. It also said a funeral will be held December the 28th in Pyongyang. North Korean state media is describing Kim's youngest son, Kim Jong-un, as the great successor. A state media also reports that foreign morning delegations will not be received.

And now for an analyst view, Peter Beck is a senior fellow with the Council on Foreign Relations and a North Korea analyst, and he joins us now from CNN Washington.

And Peter, Kim Jong-il, he had been in poor health for years. He had his first reported stroke back in 2008. So was North Korea entirely prepared for this moment and this transfer of power?

PETER BECK, NORTH KOREA ANALYST: As prepared as they could be. I mean as one of your interviewees mentioned, this does come as a bit of a surprise, but even if half of the rumors about his ailments were true, he should have been dead years ago. So in that sense it's not a surprise.

And as you mentioned he did suffer a stroke in 2008. So we had a -- we had a dress rehearsal if you will for what would happen were he to be incapacitated or die. And nothing happened in Pyongyang.

STOUT: What is the likely reaction inside North Korea where they have been operating under the cult of Kim for decades?

BECK: Well, I think it's fair to say that the outpouring of emotion that we saw with the official announcement is unlikely to be followed by the average North Korean. I mean really in his 17 years in power he did not do much to distinguish himself other than making North Korea a nuclear power. And that doesn't put food on the table for the average North Korean.

So I think as far as the average North Korean is concerned, they're not going to be shedding to many tears for him.

STOUT: Let's talk about the human rights legacy of Kim Jong-il and what happened to North Koreans under his leadership. The famines, the human rights crises. Explain.

BECK: Well, that's right. He took over -- his father died at the outset of the most serious famine that North Korea has experienced in really in its modern times. We don't know even now how many people died. Hundreds of thousands, at least. And we think up to 200,000 are in North Korean gulags. So he has maintained an iron grip on the country over the last 17 years.

What's interesting is that when his father passed away he did not appear in public for several years. Whether it was mourning or consolidating his rule, we don't know. But he was in seclusion for the first several years.

STOUT: Do you think that people of North Korea would ever dare to rise up, even at this point of a power transfer in North Korea?

BECK: I would say no. That the state structure is extremely strong, whether it's intelligence apparatus. Literally citizens are monitoring each other and themselves. So the idea of people rising up, it's really hard to imagine. In North Korea, that would be the hardest place I think on earth for that to happen.

STOUT: And give us an idea of what North Korea will look like under Kim Jong-un now being called, quote, "the great successor," of North Korea. On one hand, could he be perceived as a modern new leader, on the other hand, a political novice who could be subjected to the influence of political hard liners? What are your thoughts?

BECK: He's only been in the -- in the public eye for about the last 14, 15 months. We still know very little about him. I would -- I would see him as a younger version of Bashar al-Assad, more internationalized than his father. Having spent time and gone to school in Europe, but still very much committed to maintaining this iron grip on the country.

The most outrageous -- one of the most outrageous provocations that North Korea ever committed -- shelling a civilian island in South Korea -- happened after Kim Jong-un had been introduced to the public. Nothing's happened this past year, but certainly he got off to a big bang of a start in 2010. So I don't think we can expect much in the way of enlightened leadership from Kim Jong-un.

STOUT: And so you mentioned the sinking of the Cheonan incident in 2010, it happened right after Kim Jong-un was named a four-star general.

BECK: Actually that happens before. STOUT: Do you think he played -- sorry. It happened before. But nonetheless, do you believe that Kim Jong-un had a hand in that, that he was asserting himself to say that he was being groomed to become a leader who would be able to take over his father's shoes?

BECK: Well, we may never know if he actually had a hand in making these events happen, but it's clear that both the Cheonan -- before he was introduced to the public but had already been chosen internally and the island shelling which happened after, it's fair to say that they are closely associated with him. That the regime wants him to be seen as a strong and vigorous leader that will maintain North Korea's power on the world stage.

STOUT: The funeral, the date has been set, December the 28th. Kim Jong-un will make a very public appearance there. What should we expect -- and also looking back at the funeral of Kim Il-Sung in mid- 1990s, could we see a repeat of what happened then happen this year?

BECK: Yes, I think there will be a lot of similarities. It's interesting that North Korea is not going to be accepting foreign funeral delegations because if they had been doing that, it would have placed Washington and particularly Seoul in a very difficult position. Do you send -- do you send a condolence mission, thereby offending many for paying respects to a dictator, but on the other hand, getting off on the wrong foot with the new leader?

So that issue doesn't seem like it's going to play out. But we'll be paying close attention not only to the list of how people are listed on the funeral delegation but who actually appears where and who's standing next to who and standing next to who at the funeral.

STOUT: And one broad-brush question for you. Do you think the world is a safer place after the death of Kim Jong-il?

BECK: I'm not -- I don't think safer, but at least in the short term I don't think the world has gotten more dangerous. I think the regime is going to hunker down and focus on who's in and who's out. Kim Jong-il did create a transitional structure, what I call a gang of four. His sister, his brother in law and his most trusted general who he grew up with, (INAUDIBLE), along with his son, Kim Jong-un.

And I think they are -- they're foster parents, if you will. His aunt -- his sister and brother-in-law are foster parents now for Kim Jong-un. So I think things will be stable but I think they'll be inward oriented in sorting out who's in and who's out.

Kim Jong-il also surrounded himself with very elderly generals. The average age of the inner circle is over 80, if you exclude the family members and this one general. And 80-year-olds don't make very good revolutionaries or coup leaders. So I think things will be stable but there'll still be a period where they're sorting out who's in and who's out.

STOUT: Peter Beck of the Council on Foreign Relations, thank you very much for joining us here on CNN.

BECK: Thank you.

STOUT: Now former CNN chief international correspondent, Christiane Amanpour, she traveled to North Korea in 2008 and she shared her memories with us just a short time ago.

(BEGIN VIDEO CLIP)

CHRISTIANE AMANPOUR, FORMER CNN CHIEF INTERNATIONAL CORRESPONDENT: : We were there with a team in 2008, first with the New York Philharmonic. And it was around the time when there were negotiations going on between North Korea and the United States, and they came to fruition in June of 2008 when, you're right, we saw the nuclear tower, the water cooling tower at the Yongbyon plant blown up.

But it was a moment of hope then which rapidly came to an end in the summer of 2008 because apparently at about that time, most people suspect that Kim Jong-il suffered a stroke. As his health deteriorated, negotiations fell apart and had basically been none since then, except for there are reports that over the last several months the North Koreans and the United States have been talking.

There were reports that potentially a food deal could be announced. A nutrition deal between the United States and North Korea this week potentially, and there were reports, as yet not completely confirmed, but that there might be some deal, some movement on a nuclear deal with North Korea again agreeing to suspend their enrichment activities.

But again this has not yet been announced, but that was something that certainly United States negotiators who had met several times with North Korean negotiators over the past several months, both in Geneva and in Beijing, had hoped to be able to bring to a fruition.

VAUSE: And Christiane, everyone is now looking to the heir apparent, Kim Jong-un, a man who we know very little about. We think he is in his late 20s. That he likes basketball. We heard Mike Chinoy giving us a few more details, that he is a quiet, polite man.

But is this the young man with very little experience the man who can essentially create the cult of personality as his father and his grandfather did?

AMANPOUR: Well, it's probably unlikely that he will be able to do that. Even Kim Jong-il was not able to maintain the cult of personality that his own father did, Kim Il-Sung. And certainly when Kim Jong-il nominated his young son to take over, people are concerned. He's very young. He hasn't got that much experience that we know of. And he's going to be taking over we presume a nuclear nation.

We will have to wait and see. The issue here is whether it will promote more hard-line policies from some of the old guard, whether they will sort of, you know, circle the wagons around this young man. And whether it will put a stop to some of these negotiations that were going on with the United States or whether they would be able to go through nonetheless. (END VIDEO CLIP)

STOUT: Christiane Amanpour there.

Now there have been nears about chaos in the wake of Kim's death. And Mike Chinoy reported extensively from the region and he told us how on a recent visit he was struck by the stability of the regime.

(BEGIN VIDEO CLIP)

MIKE CHINOY, CNN SENIOR ASIA CORRESPONDENT: I had not been in Pyongyang in six years and I went back in August. And I was struck by the sense of political stability across the board. The diplomats, the aid workers, people I spoke with seemed very convinced that the secession was on track. That there was not a lot of internal discord about it. Moreover there was some very intriguing signs in Pyongyang of sort of inklings of movement towards opening up a little bit.

North Korea now has over half a million people using cell phones with an internal cell phone system that was set up by an Egyptian company. There are more private restaurants than I had seen before. There was even of the first joint venture pizza parlor in Pyongyang. They were moving ahead with economic zones with the Chinese. While I was there Kim Jong-il went to Russia and talked with Vladimir Putin about North Korea and Russia and South Korea jointly setting up a gas pipeline to send natural gas from the Russian far east through North Korea to South Korea.

And at the same time, North Korea's First Vice Foreign Minister Kim Kye-Gwan was in Washington meeting with the United States. So I came away, not with the sense that the North Koreans were embracing Chinese-style market reforms, but that the focus was on securing a more tranquil external atmosphere and trying to crank up the economy. And that fits into the critical importance of the year 2012 and the North Korean calendar.

The North Koreans call it Juche 100. Juche is the national ideology of self-reliance invented by Kim Il-Sung. And April of 2012 is his 100th birthday and the North Korean official mantra has been that the country should be a powerful and prosperous country, and the powerful they've got because they've got nukes. And so the emphasis was on the prosperous. And so you had these indications of focusing on the economy.

So I actually came away with a sense that it was a little bit more relaxed and a little bit more open to being open than it had been before. And I -- it's very hard to interpret what that means, and it may well be in this period of, you know, national tragedy and crisis that the North Koreans will tighten things up again which is a natural response.

But there were these very interesting vibes that were significantly different from the conventional picture of North Korea that a lot of people have.

(END VIDEO CLIP) STOUT: Well, fascinating insight there from Mike Chinoy about North Korea's desire for economic stability next year in 2012.

Now journalists and documentary film maker Shannon (INAUDIBLE) has spent several weeks filming North Korean refugees as they escaped through China. This flow of refugees is a major concern for Beijing if there was instability in North Korea.

Now Shannon Van Sant joins us now live from Beijing.

And I just want to get your thoughts on this breaking news story. The death of Kim Jong-il, the power transfer being managed right now. Your thoughts on whether or not there will be instability and could Beijing see an influx of refugees?

SHANNON VAN SANT, JOURNALIST AND DOCUMENTARY FILMMAKER: That's exactly what Beijing fears most. That part of the reason why these refugees have such a lot of trouble escaping through China is there's a bounty price placed on their heads by the Chinese government.

So Chinese citizens and Chinese policemen are in some cases awarded several hundred dollars for turning in North Korean refugees. And China has stepped up security along the North Korean border. It has, to some extent, succeeded in stemming this flow of refugees and I think the top concern for China over the next few months is trying to stabilize that situation and trying to prevent any massive influx of North Koreans across the border.

STOUT: Have you been able to contact those you interviewed for your documentary film, the North Korean defectors, to gauge their thoughts and reaction to the death of Kim Jong-il?

VAN SANT: I have spoken with the missionary this morning who helped them escape, and they said that the refugees in China, they have not spoken to these specific refugees that I followed and I filmed. One of those refugees is still in hiding in Bangkok while he's applying for asylum to the United States.

But the two that made it to Seoul, they have -- since they were in prostitution, they were sold into sexual slavery in China, they've returned to prostitution in Seoul and I've lost touched with them. But the missionaries that I've spoken with and that I was -- that I was following and filming, they said that many of these refugees are reluctant and will be reluctant to speak out or have an opinion on this.

Because they still, even after they've escaped to South Korea or the United States, they still are very scared. They're scared for the safety of their family members back in North Korea. They'll be reluctant to say anything that's negative about the regime. But judging from my interviews and my experiences with them, I think that they hope desperately that North Korea will change to the extent that people have enough food to eat, that their families are not dying of starvation, that people do not face public executions for watching banned television shows. That they are not in such hard labor. These are all experiences the refugees described to me. STOUT: Yes. And I want to hear more about that. Just the reasons why they risk their lives to leave the country. You know, what kind of conditions they were facing to force them to make this harrowing journey from North Korea through China and to their ultimate destination?

VAN SANT: Sure. Two of the refugees I interviewed were teenagers. One was a 19-year-old girl, she was sold into sexual slavery in China. And she went across the border with human smugglers for a chance of a better life in China but primarily so she could feed her family. Her mom was unable to get out of bed because she didn't have enough food to eat. Her parents were incredibly sick and all she wanted to do was feed her family. And that was her only goal in coming into China.

And that was still her goal when I spoke with her before she made it to Seoul. They desperately want their family members, their parents, to be OK. To have enough food to eat. The two women I interviewed, they had been sold into sexual slavery in China and then deported back to North Korea. They were caught by the police. So then they had spent several months in hard labor camps in North Korea.

The conditions they described in those labor camps were absolutely horrifying. They were -- they had scars on the legs because they were beaten by leaches. They had to live in a place with bugs and leaches and a room -- a very small room with maybe 80 people to a room. They had to do back-breaking work and hard labor. And these were young women, one was 19. So the conditions they described were unimaginable.

And the third refugee I interviewed is a 16-year-old boy. His family was not dying of starvation, but he has said that they basically only had potatoes to eat. And a family would be considered quite wealthy in his village if they could afford a bowl of rice.

STOUT: Shannon Van Sant, thank you for sharing those stories and joining us here on CNN with your reaction to the news, the death of Kim Jong-il, and of course the lives of the people who he had led while he was alive.

Now a check of how the markets are reacting to the breaking news this moment, stay tuned for continuing coverage of the death of North Korean leader, Kim Jong-il. We'll be right back.

(COMMERCIAL BREAK)

STOUT: Welcome back to our breaking news coverage, and take a look at this. This is the last image of Kim Jong-il that the state- run Korea Central News Agency released. We don't know the date it was shot or the location. But Kim Jong-il is said to be inspecting a firing drill of the Korean People's Army.

Well, let's check how markets across the region are reacting to the news of the death of Kim Jong-il.

Pauline Chiou has that for us right now -- Pauline. PAULINE CHIOU, CNN INTERNATIONAL ANCHOR: Well, Kristie, the markets were in negative territory all day today. The Kospi dropped as low as 5 percent at one point and by the end of the session it closed down 3.4 percent.

Let's take a look at the time line and see what happened when the news hit that Kim Jong-il had died. That news came down at around 12:00. And you see the Kospi taking a pretty dramatic dip there. Then it gained a little bit and then dipped again to end the day at 1776.

Now let's take a look at currencies and take a look at how the Korean won did against the U.S. dollar because the won did react dramatically. As you can see, right here, when the news came in, there was a big sell-off of the Korean won, which means that the won weakened, and then it hit to 1179 to the U.S. dollar at one point. So the won was hit pretty dramatically today.

Let's take a look at how the U.S. dollar did against some of the other currencies. The dollar strengthened on the news as investors went to the U.S. dollar as a safe haven. But keep in mind that the euro has been weakening anyway because of the eurozone debt crisis. But there you see, the euro trading at $1.30. The yen -- the pound at $1.50 and the Japanese yen at around 77 to the dollar, and earlier it was trading -- the U.S. dollar-yen exchange was at 78, so the yen was a little bit weaker earlier in the day.

Now these currencies and the markets are mainly reacting to the uncertainty of what will come next from North Korea? Will there be a power vacuum? How will this affect stability in the region?

Now as for stocks, take a look at this. Shares of companies that produce military supplies in South Korea rallied up almost 15 percent. Now there's the stock of Speco there. That's up 14.9 percent. Victek, which makes electronic warfare equipment, that's up by 14 and three quarters of a percent. And Huneed Technologies is a military communications equipment manufacturer, that was up 15 percent.

And Kristie, there is a daily limit of how high these stocks can go and that daily limit is 15 percent. So those defense stocks reached that limit and that's the furthest they could go today -- Kristie.

STOUT: Pauline, that's incredible, seeing that graphic just in the bulls are out when it comes to South Korean military stocks this day. You walked us through equity and market reaction, currency effects, and how that's been changed, how does today's news of the death of Kim Jong-il affect South Korea's credit rating?

CHIOU: We did call Fitch's Ratings Agency here in Hong Kong to ask that question, to see if today's news would actually affect its rating of South Korea, and Fitch said that the death of Kim Jong-il itself doesn't trigger a negative action. And it's still to early to tell the risks for South Korea right now for its credit rating.

But right now, Fitch has a positive outlook on South Korea's A- plus rating which it designated back in November. Just a month ago of this year.

But Kristie, Fitch also said it's going to keep a close watch on the situation like the rest of the world.

STOUT: Of course. Pauline Chiou, for us, thank you very much indeed for that.

Now Kim Jong-il's death brings a new season of uncertainty for the long struggling communist nation. His son Kim Jong-un has been groomed to take over and everyone wonders whether he would be any different. And we put that question to North Korean expert Han Park.

(BEGIN VIDEO CLIP)

HAN PARK, NORTH KOREA EXPERT: When a country is under security threat as North Koreans have felt at least subjectively and objectively as well, then human rights and imprisonment and much oppressive policy is expected. So as long as North Korea is still -- still in the same security threat situation, I think we can expect the same thing.

Under Kim Jong-un or possibly Kim Jong-il era. However, I think Kim Jong-un would very much be obsessed to develop the economy more than anything else. Because Kim Jong-il kind of wanted his son to become like China's -- China's Dow Ping. So the economic pragmatism is going to be first the choice or first option of foreign policy priority on the part of Kim Jong-un.

If that doesn't work, of course, I think it is -- it is highly unlikely that North Korea will reform and change and become a liberal democratic system.

(END VIDEO CLIP)

STOUT: Han Park speaking to us earlier.

Breaking news coverage on the death of North Korean leader Kim Jong-il continues in a moment. Stay with us.

(COMMERCIAL BREAK)

STOUT: Welcome back to our viewers in the U.S. and around the world. Let's take a moment to recap our breaking news.

The end of an era in North Korea. State television says that North Korean leader Kim Jong-il has died. Now state TV said the 69- year-old leader suffered a heart attack Saturday while on a train trip. It also said a funeral will be held December 28th in Pyongyang.

North Korean state media is describing Kim's youngest son Kim Jong-un as the great successor. The state media also report that foreign mourning delegations will not be received.

Now this extremely rare new video just in from Pyongyang, North Korea, people reacting to news that leader Kim Jong-il is dead.

Incredible glimpse there from inside North Korea. Reaction to the death of Kim Jong-il.

Now, as we mentioned, the state-run news agency is reporting that the funeral for the self-proclaimed dear leader, Kim Jong-il, will be held December the 28th. With the national mourning period extended into the next day.

Now here is John Vause, the look at the dictator's life and legacy.

(BEGIN VIDEOTAPE)

VAUSE (voice-over): With the bouffant hair, platform shoe, oversized sunglasses and trademark jumpsuit, Kim Jong-il looked every bit the nutty tyrant.

RICHARD BUSH, BROOKINGS INSTITUTION: The appearance made it a little bit more difficult to treat him seriously, at least at first.

VAUSE: He was the diminutive dictator with the reputation for indulging in fine wine, cognac and foreign prostitutes who held total power over a failing state, developed nuclear weapons and forced the U.S. to negotiate.

DAVID SATTERWHITE, FULBRIGHT ASIA ANALYST: That is not necessarily the work of a womanizing booze swilling individual, drunk during the day.

VAUSE: Inside North Korea, it was all about Kim. Portrayed by his propaganda machine as a political, military, technological, artistic and cinematic genius. A renaissance man who's flown fighter jets, written operas and shot 11 holes in one at his first try at golf. His public appearances were breathlessly reported on state media. He was hailed as the central brain and the morning star.

He was a crazed ruler who loved to make people dance, a million of them all at once and all in step. He presided over a nation more cult than country.

"He chased away fierce storms and give us faith," they sing. His official biography says he was born in a log cabin on a sacred Korean mountain under rainbows and stars. Western scholars say it was probably in Siberia at a Soviet camp where his father was training to fight.

He loves movies. "James Bond" was apparently among his favorite, but he reportedly was unhappy with the North Korea's portrayal in "Die Another Day." No word on what he thought about "Team America."

In the late 1970s it's believed he personally ordered the kidnapping of a South Korean actress and her director husband. And for eight years until they escaped forced them to make propaganda films. Kim did apologize at North Korea's kidnapping of 13 Japanese and allegedly approved the bombing of a Korean Airlines flight, which killed more than a hundred people.

The apparent motive was to disrupt the 1988 Olympic Games in Seoul where U.S. officials dubbed North Korea the "Soprano" state for its role in organized crime, including the production and distribution of heroin and methamphetamines.

BUSH: His legacy will be that he actually made some pretty bad choices for his country.

VAUSE: He was the man who every day it seemed had a bad hair day. Who starved his people, threatened South Korea with the fourth largest military in the world, and built missiles that could reach Japan and possibly beyond. The certainty of his brutality is gone. In its place, the terrifying uncertainty of what continues next.

John Vause, CNN, Beijing.

(END VIDEOTAPE)

STOUT: I'm Kristie Lu Stout, and our breaking news coverage on the death of North Korean leader Kim Jong-il continues in a moment. Stay with us.

(COMMERCIAL BREAK)