North Korea Severs Ties With South Over Ship Sinking Accusation

North Korea said it will sever all ties with South Korea and expel the South’s workers from a joint industrial zone as “punishment” for accusing it of sinking a warship and killing 46 South Korean sailors.

“There is no need to show any mercy or patience for such confrontation maniacs,” the official Korean Central News Agency reported late yesterday, citing the Committee for the Peaceful Reunification of Korea. North Korea will “abrogate the agreement on non-aggression” and handle all issues with South Korea under wartime law, the group said.

North Korea will cut off all communication links, ban passage of South Korean ships and airlines through its territories and resume propaganda broadcasts across the border, KCNA said. The communist country earlier yesterday warned of military action in the disputed maritime area off the peninsula’s west coast after accusing the South of violating its territory in the zone.

North Korea’s statement added to perceptions of increased tension on the Korean peninsula following the March 26 sinking of the 1,200-ton Cheonan, which a multinational team concluded on May 20 was caused by a North Korean torpedo.

North Korean leader Kim Jong Il told the military to be combat-ready in a message that coincided with the announcement, a Seoul-based dissident group reported, prompting the Korean won to weaken 3 percent against the dollar and the Kospi stock index to fall to the lowest in more than three months yesterday. In the U.S., the Standard & Poor’s 500 Index dropped to its lowest level since November.

Source: Yonhap News via Bloomberg

South Korean soldiers check fences during a patrol at the demilitarized zone between South and North Korea, in Yanggu, South Korea. Close

South Korean soldiers check fences during a patrol at the demilitarized zone between... Read More

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Source: Yonhap News via Bloomberg

South Korean soldiers check fences during a patrol at the demilitarized zone between South and North Korea, in Yanggu, South Korea.

White House Message

President Barack Obama’s administration urged North Korea to address the root of the crisis. “North Korea should come forward with the facts regarding the Cheonan attack and stop its belligerent and threatening behavior,” Michael Hammer, a spokesman for the White House National Security Council, said in an e-mail.

The North Korean crisis comes as Obama is already dealing with a crowded international security agenda and is pursuing a strategic goal in Asia of deepening ties with China as its economic and military power expands.

Obama is intensifying the war in Afghanistan, managing the pullout of troops in Iraq and pushing international efforts to pressure Iran over its suspected nuclear arms development program. The European debt crisis and an oil spill in the Gulf of Mexico are also occupying his attention.

Clinton to Seoul

U.S. Secretary of State Hillary Clinton will arrive in Seoul today to meet with the South Korean leadership. Clinton said yesterday in Beijing that she will consult with China on her Seoul visit and will discuss with the Chinese the results of the planned visit later this week to South Korea by Chinese Premier Wen Jiabao.

In response to the sinking, the U.S. military is preparing exercises with South Korea in anti-submarine maneuvers and interdicting vessels. The U.S. has about 28,500 troops in South Korea, a legacy of its Korean War involvement in the 1950s.

“With all the talk about military drills, this is an opportunity for the U.S. to increase its influence in the region,” Abraham Kim, Asia analyst for the Eurasia Group, a New York-based political-risk analysis firm, said in an interview. “China would consider that problematic, so they may feel forced to take some kind of measures to stabilize the situation.”

May 20 Message

Kim’s military order was broadcast on May 20 by O Kuk Ryol, vice chairman of the National Defense Commission, according to the website of North Korea Intellectuals Solidarity, a group run by defectors from the communist country.

“For Kim Jong Il to be giving such an order is pretty serious,” said Kim Yong Hyun, professor of North Korean studies at Seoul-based Dongguk University, adding that he doubted that such a direct order was given.

Clinton said China understands the gravity of escalating tensions with North Korea.

“We expect to be working together with China in responding to North Korea’s provocative action and promoting stability in the region,” Clinton told reporters in Beijing at the end of two days of talks with Chinese leaders.

Clinton said her discussions in Beijing about North Korea had been “very frank and detailed.” China has yet to publicly accept the finding of an international panel on North Korea’s role in the warship’s sinking.

“We do not agree on every issue, we don’t agree even sometimes on the perception of an issue, but that is partly what this dialogue is about,” Clinton said, adding that this enabled the discussion to include areas of discord including missile sales to Taiwan and human rights.

North Korean Stance

While Kim doesn’t want war, North Korea is ready to counter any attacks, O said in the message, according to the dissident group, which cited an unidentified person in the country. The organization was among the first in South Korea to report on North Korea’s botched currency revaluation late last year.

Defectors formed North Korea Intellectuals Solidarity in 2008. It has about 250 members and is led by a former computer- science teacher in the communist country.

Threats of war by North Korea carried by the state-run Korean Central News Agency are common. A March 26 report warned of “unprecedented nuclear strikes” against enemies while a June 9, 2009, bulletin warned of “merciless strikes” using the country’s nuclear deterrent.

Closed Circuit

Lee Jong Joo, a spokeswoman at the Unification Ministry in Seoul, said she couldn’t confirm the defectors’ report as the closed-circuit radio, on which the message was said to be delivered, cannot be monitored by South Korea’s government. A spokesman at the South Korean Defense Ministry, who declined to be identified, said the government can’t comment on North Korea’s military status.

The won fell 3 percent to 1,251.1 per dollar as of the 3 p.m. close in Seoul, the biggest drop since March 30, 2009, according to data compiled by Bloomberg. The Kospi index sank 2.8 percent to 1,560.83. The S&P 500 dropped 1.5 percent to 1,057.95 at 12:20 p.m. in New York. It fell to 1,040.78 earlier, the weakest intraday level since Nov. 3.

South Korean defense-related stocks rallied. Speco Co., a construction company that supplies the military, rose 14.9 percent to 5,520 won. Victek Co., which makes electronic warfare equipment, gained 4.9 percent to 4,300 won.

To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net; Nicole Gaouette in Beijing at ngaouette@bloomberg.net.

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