North korea steps up threats, cuts south ties

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North Korea said on Tuesday it was severing all ties with the South and threatened its wealthy neighbour with military action if it continued to violate its waters off the west coast.
The comments mark a new high in tensions on the divided peninsula after the March sinking of a South Korean warship, which Seoul blames on a torpedo fired by the North. The increasingly war-like rhetoric earlier hit Seoul’s financial markets, prompting policymakers to call an emergency meeting on Wednesday to look for ways to calm investors.
“The Committee for the Peaceful Reunification of Korea .... formally declares that from now on it will put into force the resolute measures to totally freeze the inter-Korean relations, totally abrogate the agreement on non-aggression between the north and the south and completely halt the inter-Korean cooperation,” the North’s KCNA news agency reported. It will also expel personnel from the Kaesong industrial park, a joint North-South venture just inside its border. But it was not immediately clear what impact that would have on factories operating there. The industrial estate, in which South Korean firms employ cheap North Korean labour, has long been an important source of revenue for the Pyongyang leadership. North Korea earlier warned the South that if it continued to cross into its side of their disputed sea border — the scene of deadly clashes in the past — the North would “put into force practical military measures to defend its waters”.
The furious war of words — the North referred to the South’s government as “military gangsters, seized by fever for a war” — follows a report by international investigators last week which accused the hermit North of torpedoing the Cheonan corvette in March, killing 46 sailors.
On Monday, South Korean President Lee Myung-bak cut trade with his impoverished neighbour and blocked its commercial ships from sailing through the South’s waters. He also plans to take the issue to the UN Security Council. US secretary of state Hillary Clinton said in China on Tuesday that Washington and Beijing would work together to come up with an “effective, appropriate” response to the sinking.
Ms Clinton said both sides should examine the issue over time, suggesting quick Security Council action was unlikely. “(China) shares with us the goal of a denuclearised Korean Peninsula and a period of careful consideration in order to determine the best way forward in dealing with North Korea.” But while Washington has condemned the sinking, China has refused to publicly castigate its volatile ally. Russia, which like China and the US holds a veto in the Security Council, urged restraint. China, the North’s only major ally and which effectively bankrolls its economy, has studiously tried to keep out of the fray, urging calm and refusing to voice support for the international report on the Cheonan sinking. It means that South Korea has almost no chance of winning further UN sanctions against its neighbour. The issue is certain to dominate talks in Seoul on Wednesday with Ms Clinton, who is arriving from Beijing. Most analysts doubt either side would risk a war, which would be suicidal for the North and economy-ruining for the South.
Key economic and financial authorities will meet on Wednesday to discuss ways to stabilise local financial markets.