NKorea threatens to fight, cuts ties with South

SEOUL, (Reuters) – North Korea said yesterday it  was cutting all ties with the South and threatened its wealthy  neighbor with military action over alleged violations of its  waters off the west coast.

The comments marked 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 communist North.

The increasingly war-like rhetoric hit Seoul’s financial  markets, prompting policymakers to call an emergency meeting today 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.     North Korea will also expel personnel from the Kaesong  industrial park, a joint North-South venture just inside its  border. It was not immediately clear what impact that would  have on factories there.

The industrial estate, in which South Korean firms employ  cheap North Korean labor, is an important source of revenue for  the Pyongyang leadership.

North Korea earlier said if the South continued to cross  into its side of the 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 North referred to the South’s government as “military  gangsters, seized by fever for a war”.

A report by international investigators last week accused  the communist North, already under international pressure over  its nuclear program, of torpedoing the Cheonan corvette in  March, killing 46 sailors.      On Monday, South Korean President Lee Myung-bak cut trade  with his impoverished neighbor and blocked its commercial ships  from sailing through the South’s waters.

He also plans to take the issue to the U.N. Security  Council. U.S. 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, which Washington condemned.      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.”

In Washington, State Department spokesman P.J. Crowley  called Pyongyang’s approach “odd.” “I can’t imagine a step that  is less in the long term interest of the North Korean people  than cutting off further ties with South Korea,” he said.