North Korea Warns of Military Response Against South Over Leaflet Air Drop

North Korea threatened to take military action if the South continues to drop leaflets and other propaganda encouraging revolt, threatening a return of tension on the peninsula that roiled markets last year.

North Korea will fire at South Korean locations, including the Imjin Pavilion tourist lookout near the border, used to launch balloons carrying leaflets and animation clips saved on memory sticks and DVDs, along with U.S. one dollar bills, state- run Korean Central News Agency reported yesterday. It also threatened “all-out war” if there is an attack during annual U.S.-South Korean military drills that began today.

South Korea has dropped leaflets that detail pro-democracy revolts in the Middle East and argue that “a dictatorial regime is destined to collapse.” North Korean leader Kim Jong Il is grappling with food shortages and trade sanctions that are stifling the economy at the same time as he seeks to lay the foundations for a succession of power to his youngest son.

“North Korea is most fundamentally sensitive to what’s happening in the Middle East,” Kim Yong Hyun, a professor of North Korean studies at Seoul-based Dongguk University said by telephone. “South Korea’s psychological warfare at this point could be pretty burdensome for the North.”

Photographer: Park Ji-Hwan/AFP/Getty Images

South Korean activists launch balloons to send leaflets into North Korea at Imjingak. Close

South Korean activists launch balloons to send leaflets into North Korea at Imjingak.

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Photographer: Park Ji-Hwan/AFP/Getty Images

South Korean activists launch balloons to send leaflets into North Korea at Imjingak.

The cost of insuring five-year South Korean government debt jumped 17 percent on Nov. 23 and the currency weakened after North Korea shelled Yeonpyeong Island, the first bombardment of the South’s soil since the 1950-1953 Korean War. The attack, which killed two soldiers and two civilians, was in retaliation for South Korean live-firing exercises that breached the North’s territory, KCNA said at the time.

Facing Off

South Korean Defense Minister Kim Kwan Jin has pledged to use all military means, including air strikes, if the North attacks again. The two countries are technically still at war, facing off across the world’s most heavily armed border.

The first talks between the two Koreas since the shelling ended without an agreement on Feb. 10.

North Korea’s million-person army remains capable of inflicting “catastrophic destruction” through hundreds of missiles aimed at Seoul, according to the U.S. military. Under the North’s “military first” policy, Kim maintained loyalty by diverting resources to the armed forces.

Shortages may have reached the point where even the military is beginning to suffer, Free North Korea Radio reported last week. Korea has been collecting ammunition from its soldiers to preempt possible revolt amid growing animosity toward the leadership, the Seoul-based defector group reported, citing a person it didn’t identify.

Photographer: Lee Hoon-Goo/AFP/Getty Images

South Korean activists release balloons carrying anti-North Korea leaflets at Imjingak peace park in Paju near the frontier. Close

South Korean activists release balloons carrying anti-North Korea leaflets at Imjingak... Read More

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Photographer: Lee Hoon-Goo/AFP/Getty Images

South Korean activists release balloons carrying anti-North Korea leaflets at Imjingak peace park in Paju near the frontier.

Growing Anger

Food shortages have led to growing anger toward the North Korean leadership among soldiers and an increasing number of deserters, the report cited the person as saying. The station is run by North Korean defectors in Seoul who say they are in contact with people in the North. The information it provides cannot be verified.

The North recently set up a special police squad to stamp out unrest, South Korea’s Dong A Ilbo newspaper reported last week, citing Daily NK, another Seoul-based group that opposes Kim’s regime. Tens of North Koreans rallied to demand rice and electricity on Feb. 14, the Chosun Ilbo paper reported, citing a source in the country.

Rice prices at markets in Pyongyang have surged since North Korea revalued its currency at the end of 2009 to curb inflation, according to data collected by Daily NK.

North Korea continued to face food shortages even after a “relatively good harvest” because the government planned to buy less grain than needed, a situation affecting about 5 million people in the country the United Nation’s Food and Agricultural Organization said in November.

Fund Flow

Sanctions aimed at forcing North Korea to abandon its nuclear weapons program are cutting off the flow of funds to Kim’s regime. North Korea’s $22 billion economy shrank 0.9 percent in 2009 after trade fell 10.7 percent, according to the Bank of Korea in Seoul. North Korea doesn’t release figures.

There is a “serious” imbalance between global food production of grain and demand, KCNA reported on Feb. 21, citing analysts. A week earlier, it said abnormal weather was boosting grain prices. KCNA said on Feb. 24 that U.S. use of corn to produce fuel is decried globally for “its criminal nature and danger” as it raises food prices.

Scattering leaflets is an “unpardonable crime” to undermine the regime’s socialist system, KCNA said.

The leaflets tell North Koreans of uprisings that toppled Egypt’s government and sparked a revolt in Libya that resulted in a United Nations Security Council demand for a war crimes investigation into the regime of Muammar Qaddafi.

The leaflets travel in balloons that distribute their cargo when they burst, Song Yong Sun, a member of South Korea’s National Assembly’s defense committee, said in an e-mailed statement on Feb. 25. South Korea has sent more than 3 million leaflets across the border in renewed “psychological warfare” since the North’s shelling of Yeonpyeong, the statement said.

KCNA hasn’t reported on demonstrations in the Middle East.

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Ben Richardson at brichardson8@bloomberg.net

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