UPDATE 4: Global Security gives a rundown of the steps the DPRK is already taking:
North Korea has begun to freeze ties with the South, which already halted most trade with Pyongyang in retaliation for the sinking of a South Korean warship. The North has denied responsibility for the attack on the vessel and is accusing the South of launching a “smear campaign” against it.
Pyongyang has expelled eight South Korean government officials from a joint factory park in the North. And, it is threatening to block what little cross-border traffic exists.
The Unification Ministry in Seoul says hundreds of South Korean managers and other workers from the South were allowed to enter the industrial complex in the west coast Kaesong border city, Wednesday.
But ministry spokesman Chun Hae Sung tells reporters North Korea quickly acted on other aspects of its threat to cut all communications ties with the South.
He says Pyongyang Wednesday halted contact between the Red Cross delegations in the truce village, Panmunjom, and the North Korean Navy contacted the South to inform it that all marine communications between the two Korea’s are now cut.
Relations between the two Koreas have deteriorated steadily since the Cheonan, a South Korean naval vessel in the Yellow Sea, exploded a month ago, killing 46 crew members. An international investigation concluded last week that the coastal patrol warship was hit by a North Korean torpedo.
South Korea’s defense ministry tells VOA News that plans to send tens of thousands of leaflets northward by ballon have been delayed because of wind conditions, but they could go aloft as early as Thursday. Officials say the leaflets are intended to inform North Koreans about the sinking of the South Korean naval vessel. The North views Southern pamphleteering as hostile propaganda.
South Korea’s military is using loudspeakers along the border, silenced for six years, and re-instituting FM broadcasting to the North.
North Korea’s state television newscaster announced such propaganda will not be tolerated.
The North Korean newscaster says it will open fire on the South Korean loudspeakers and destroy them.
Pyongyang says a resumption of the propaganda campaign will also compel it to totally shut down the Kaesong industrial complex, where more than 100 South Korean firms employ about 42,000 North Korean workers.
The two countries have no diplomatic relations and technically remain at war following a 1953 truce which ended the three-year Korean War.
The United States, which has 28,000 troops in South Korea, has hurriedly announced plans for several joint military exercises in the coming month. In the past, Pyongyang has strongly condemned U.S.-South Korean drills, claiming they are preparations for an invasion of the North.
UPDATE 3: Pyongyang confirms it wants to keep running the Kaesong Zone. According to Yonhap:
North Korea has said it wants to keep a joint industrial complex with South Korea going and will ban southern firms from taking factory equipment out of the zone, a Unification Ministry official said Monday.
An unidentified North Korean official made the remark Sunday to a South Korean staffer at a joint commission handling the operation of the factory park in the North’s border town of Kaesong, the official said on condition of anonymity.
The remark represents a softening of Pyongyang’s stance on the project as it contrasts with a threat to shut a cross-border route leading to the zone in anger over a series of steps South Korea announced in retaliation to the North’s sinking of a southern warship.
It also appears to reflect the North’s concern that the park’s closure would leave tens of thousands of its workers there without jobs and the regime without a key source of hard currency that has helped prop up the North’s moribund economy.
UPDATE 2: Pyongyang has scrapped a joint-Korean agreement which ensures the safety of South Koreans crossing the Military Demarcation Line and threatened to close the Kaesong Zone if Seoul resumes propaganda broadcasts. According to the Korea Times:
“Seoul will take stern measures if Pyongyang harms South Korean workers staying at the Gaeseong Industrial Complex, even by a tiny amount,” Lee Jong-joo, a spokeswoman at the Ministry of Unification, said.
The remark came a day after the communist North issued a statement that it would scrap an inter-Korean pact to ensure the safety of South Koreans crossing the Military Demarcation Line (MDL), which separates the two Koreas.
On Wednesday, Pyongyang also threatened to close the industrial park if Seoul begins broadcasting anti-North Korea propaganda through loudspeakers along the Demilitarized Zone (DMZ).
“We can neither let North Korea harm our citizens in retaliation to the resumption of psychological warfare against it, nor tolerate such rationale,” the spokeswoman said.
UPDATE 1: According to the Washington Post work is continuing at the Kaesong Industrial Zone:
There was a semi-hopeful signal Wednesday that rising animosity over the sinking of a South Korean warship may not shatter all economic ties between the two Koreas.
Production continued at the Kaesong Industrial Complex, a six-year-old factory park just north of the heavily armed border that separates North and South Korea.
At the last remaining symbol of economic cooperation between the two countries, about 45,000 North Koreans went to work as usual for 121 South Korean companies located in the complex.
North Korea had threatened Tuesday that it would severe all relations with South Korea. Its move was in retaliation for trade and other sanctions that Seoul imposed Monday on Pyongyang for its apparent role in a stealthy submarine attack that torpedoed a South Korean ship and killed 46 sailors.
The North denies sinking the ship and threatens war if there is any move to punish it. But its actions at Kaesong were nearly not as uncompromising as its rhetoric.
North Korea allowed several hundred South Korean managers and engineers to cross the border Wednesday and go to work.
It did kick out at least eight South Korean government officials and cut North-South phone lines for some manufacturers. But one company official said that North Korean workers were allowed to work and South Korean managers were allowed to manage.
“The situation at Kaesong at this moment is that nothing much has changed,” said Song Ki-suk, former chairman of Korea Micro Filter, a South Korean auto parts company that employees 350 North Koreans.
…
Still, it appears that North Korea wants Kaesong to operate. The industrial park injects more than $60 million a year in rent, fees and worker salaries into the country’s moribund economy.
I would take issue with the last paragraph. I am pretty sure that the vast majority of hard currency transfers from South to North mean very little to the broader North Korean economy. Those revenues are held pretty tight. However, jobs at the Kaesong Zone are among the most desired in the country and there is no doubt that the complex has improved life in the Kaesong Region.
Read the full story here.
ORIGINAL POST: On Monday the South Korean government announced it was severing nearly all trade relationships with the DPRK. One notable exception to this policy was the Kaesong Industrial Zone. Today, however, the DPRK announced that it is reciprocating. According to Reuters:
The following are key points from the text of the report issued by the North’s KCNA news agency.
“The Committee for the Peaceful Reunification of Korea, accordingly, 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.
“In this connection, the following measures will be taken at the first phase:
“1. All relations with the puppet authorities will be severed.
“2. There will be neither dialogue nor contact between the authorities during (South Korean President) Lee Myung Bak’s tenure of office.
“3. The work of the Panmunjom Red Cross liaison representatives will be completely suspended.
“4. All communication links between the north and the south will be cut off.
“5. The Consultative Office for North-South Economic Cooperation in the Kaesong Industrial Zone will be frozen and dismantled and all the personnel concerned of the south side will be expelled without delay.
“6. We will start all-out counterattack against the puppet group’s ‘psychological warfare against the north.’
“7. The passage of south Korean ships and airliners through the territorial waters and air of our side will be totally banned.
“8. All the issues arising in the inter-Korean relations will be handled under a wartime law.
“There is no need to show any mercy or patience for such confrontation maniacs, sycophants and traitors and wicked warmongers as the (South Korean President) Lee Myung Bak group.”
The Choson Ilbo reports on some of the economic implications if the Kaesong complex was closed:
It would cost about US$500 million to shut the joint-Korean Kaesong Industrial Complex in the North, the government estimates.
A government official on Sunday said the estimate includes insurance payouts from the Inter-Korean Economic Cooperation Fund for South Korean businesses operating at the industrial park if the North decides to shut the industrial park or if Seoul decides to pull out South Korean staff for safety reasons.
The North has earned more than $96.81 million in cash from wages from 2004 to March this year. It expects to earn another $40 million this year.
“Some 100 of 121 South Korean firms at the industrial park are insured with the Inter-Korean Economic Cooperation Fund,” a Unification Ministry official said. “The indemnity insurance will compensate for up to W7 billion (US$1=W1,199) or up to 90 percent of their investment.”
But no firm that voluntarily withdraws before the North or the South shuts the industrial park is entitled to insurance payouts. An executive of a firm operating at the industrial park said, “The total investment South Korean firms made in the industrial park probably exceeds W1 trillion.” That means the $500 million estimate by the government is too low, and despite the insurance limit of W7 billion, quite a few firms have invested more than W20 billion, he added.
It is difficult for early starters to withdraw given that they are making profits now and the amount of their indemnity insurance has shrunk due to depreciation of their properties.
But many latecomers are ready to leave if there is an adequate compensation, though the ministry official said none have yet told the government they want to pull out.
The North Korean media have been repeatedly reporting a statement issued last Friday by the North’s Committee for the Peaceful Reunification of the Fatherland saying it considers itself at war and will respond resolutely to any action the South takes over the sinking of the Navy corvette Cheonan on March 26. It also threatened to cut off all ties with South Korea and scrap a bilateral non-aggression pact.
In 2007 the DPRK’s top trading partners were (in order) China, South Korea, Thailand, Russia, India, Brazil, Singapore, Germany, Netherlands, Taiwan, Algeria. In 2008, China and South Korea accounted for more than 80% of the DPRK’s total trade (China 67%). Inter-Korean trade was nearly zero until 1988.
