In recent months, North Korea has put on trial two young American journalists working for former Vice President Al Gore’s Current TV, launched a long-range rocket, and tested its second nuclear device. It has renounced the Beijing Six-Party nuclear talks and the 1953 Korean armistice agreement. It will likely soon fire another long-range rocket and may test a third nuclear device and stage limited military attacks against South Korea.

The regime’s actions are a source of serious concern. North Korea might transfer nuclear weapons technology to rogue states or terrorist groups. It has long sold its missiles to many countries in the troubled Middle East and South Asia, and two years ago the Israelis destroyed a nuclear facility that the North Koreans were building in Syria, possibly in coordination with Iran.

North Korea’s pursuit of reliable nuclear weapons and the long-range missiles with which to launch them constitutes a direct threat not only to the United States but even more so to U.S. allies Japan and South Korea. The Japanese and South Koreans may eventually feel forced to build their own nuclear arsenals, which could destroy the balance of power with China in East Asia.

Pyongyang has often engaged in provocative behavior, but lately the pace and tone of its threats have worsened considerably. After suffering a stroke last fall, North Korean leader Kim Jong-Il seems to have begun the process of naming his 26-year-old third son, Kim Jong-un, as his successor. The nuclear and rocket tests may have been aimed at boosting nationalistic enthusiasm for the move. Even in North Korea there may be those who question the legitimacy of yet another dynastic succession there.

But while extreme and anachronistic, North Korean leaders are not irrational. Fundamentally, they feel they must have a nuclear “deterrent,” as they call it, to re-balance their relationship with South Korea. North Korean leaders believe theirs to be the legitimate Korean regime on the peninsula, but they know that democratic South Korea is decades ahead of them, economically, diplomatically, and in conventional military terms.

Information about North Korea is scarce but two decades of dealing with North Korea have given American policymakers a much better understanding of the regime. The North’s brinkmanship playbook is now well known, and the Obama administration is determined not to play that game anymore. It has made clear it is willing to deal fairly with North Korea but that it will increase diplomatic, financial, and military pressures on the regime until it agrees to abandon its nuclear weapons program.

The United States will need to proceed very carefully. There is no perfect North Korea policy, no silver bullet that will suddenly end all of the challenges the regime poses. Although North Korea is basically a failing country, its artillery arrayed along the Demilitarized Zone just north of Seoul could cause hundreds of thousands of casualties there. Over the past decades, the North Koreans have come to believe that they almost always win when they engage in a game of chicken with the United States and South Korea. They will almost certainly continue their provocations until they think they have won the latest match.

The United States and its allies must game-out the many possible scenarios on the Korean Peninsula and be prepared for continuing North Korean provocations, something previous U.S. administrations have not done well. The aim should be gradually to limit North Korean room for maneuver and eventually force them to abandon their nuclear weapons and long-range missile programs. At the same time, the United States should ignore calls for drastic steps that risk war on the Korean Peninsula. North Korea’s nuclear and rocket programs are still primitive; the regime is weak. There is still time for stronger and smarter diplomacy - including both sticks and carrots - to work.