North Korea attacks South Korea--two marines killed; New York Times reports new nuclear facility in North Korea; some experts speculate Kim Jong-Un is trying to win support from the army by showing toughness; Australia to supply Japan with minerals known as 'rare earths'; Iran assembly tries to oust Ahmadinejad; Taliban leader in secret talks was imposter; Cowan responds to calls for snap election in Ireland

Top of the Agenda: North and South Korea Exchange Fire

North Korea fired artillery rockets at a South Korean island (WSJ) near a disputed maritime border Tuesday, killing two South Korean marines and setting several buildings on fire. South Korea returned fire and readied its fighter planes (NYT), which did not take off. The official North Korean news agency said the South had started the fight when it "recklessly fired into our sea area." The attack may have been in response to South Korean military exercises in the vicinity (Telegraph). The White House condemned the attack on Yeonpyeong and demanded North Korea cease action, while China called on both sides to resume the Six Party Talks. The shelling followed revelations of a new nuclear facility (KoreaTimes) in the North. News of the exchange of fire rattled international financial markets (BBC), with both the Korean won and Japanese yen falling.

Analysis:

The Economist says the days when the North responded positively to the "sunshine diplomacy" of the South's Kim Dae-jung have been replaced by a "frighteningly aggressive" posture from the North. The best explanation for this is that Kim Jong-Un--who is being groomed to take over from his father, Kim Jong-Il--needs to win support from the army by "demonstrate[ing] a bit of toughness."

TIME.com's Michael Schuman says North Korea's actions come just as global markets are jittery about Ireland's bailout, making traders and analysts more risk averse, strengthening the dollar, and weakening Asia, the engine of world growth.

Reports of a newly operational nuclear enrichment facility in North Korea highlight the regime's defiance of U.S. policy and UN sanctions as well as China's increasing closeness with North Korea, says CFR's Scott Snyder.

Background:

This timeline outlines recent skirmishes between North and South Korea.

PACIFIC RIM: Australia to Supply Japan with Rare Earths

Australia promised to be a long-term supplier of rare earths to Japan (Reuters) during strategic and trade talks between the two countries, after China suspended shipments of the minerals to Japan.

ELSEWHERE:

- Iran Assembly Pushes to Oust Ahmadinejad
- Taliban Leader in Secret Talks Was Impostor
- Ireland's Cowen Defies Calls for Snap Election

This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org