North Korea said it will suspend operations at a jointly run industrial complex, as South Korea warned the totalitarian regime may be ready to conduct a nuclear test or missile launch as early as this week.
Workers are being recalled from the Gaeseong industrial park and operations will be suspended indefinitely, the official Korean Central News Agency said today, citing Workers’ Party Secretary Kim Yang Gon. South Korea sees no unusual North Korean troop movements near the complex, said a Defense Ministry official who declined to be named, citing ministry policy.
Suspending work at the complex would eliminate a source of hard currency for Kim Jong Un’s impoverished regime as well as the last link of exchange between the two countries. Removing the workers would be an unprecedented move that indicates North Korea feels it has nothing left to lose given tightened international sanctions, said Koh Yu Hwan, a North Korean studies professor at Dongguk University in Seoul.
“The value of Gaeseong is not in the value of the products made there, but as a deterrent against war,” Koh said. “This is the most serious the situation there’s ever been since Gaeseong started operating” in 2005, he said.
North Korea is also ready to conduct a fourth underground atomic weapon test at its Punggye-ri site, after carrying out its third Feb. 12, according to South Korean Defense Ministry spokesman Kim Min Seok. National security chief Kim Jang Soo said yesterday the North may stage a provocation including a ballistic missile test around April 10.
North Korea’s threats to carry out pre-emptive nuclear strikes against the U.S. and South Korea have escalated tensions and prompted calls for dialogue. Chinese President Xi Jinping said yesterday no country should be allowed to instigate regional chaos and the U.S. postponed a missile test to avoid making the situation worse.
U.S. Ambassador to China Gary Locke said “China and the United States and the world community are very concerned about the provocative acts and statements” made by North Korea.
South Korea’s won slid to its weakest level in eight months as the heightened risk of conflict spurred foreign fund outflows. The currency closed down 0.8 percent at 1,140.15 per dollar. The benchmark Kospi index of shares declined 0.4 percent after dropping more than 3 percent last week.
North Korea last week told countries including Russia and the U.K. to consider evacuating embassy staff from the capital by April 10, warning that they can’t be protected, and told South Korean companies at Gaeseong to leave by the same date.
Currently 475 South Koreans remain in the complex after 39 left today, Unification Ministry spokesman Kim Hyung Suk said in a text message. About 120 South Korean companies employ more than 53,000 North Korean workers at Gaeseong, located about 10 miles (16 kilometers) north of the demilitarized zone.
While Kim Jong Un’s regime has blocked South Koreans from entering the complex since last week, removing its workers would be unprecedented, Koh said. The North generates $100 million in profits annually from the joint project and South Korea makes quadruple that amount, according to Yang Moo Jin, a professor at the University of North Korean Studies in Seoul.
North Korea’s decision last week to restart production of weapons-grade plutonium is credit negative for South Korea as it has increased “the chance of a serious military clash,” Moody’s Investors Service analysts David Erickson and Thomas Byrne wrote in a report today.
American politicians stepped up their appeals for China, North Korea’s biggest trading partner, to use its economic and political clout to rein in Kim Jong Un and prevent an armed conflict. U.S. Secretary of State John Kerry travels to Asia this week to meet leaders from South Korea, China and Japan.
“China does hold the key to this problem,” Arizona Senator John McCain said yesterday on CBS’s “Face the Nation” program. “China can cut off their economy if they want to.”
Negotiations are “the only effective solution,” Chinese Foreign Ministry spokesman Hong Lei told reporters today in Beijing, adding his government wants to see tensions ease.
Xi said in a speech yesterday that no country “should be allowed to throw a region and even the whole world into chaos for selfish gains.” While he didn’t mention North Korea, analysts including Fang Xiuyu, a professor of Korean studies at Fudan University in Shanghai, said “it is fair” to interpret the comments as referring to the situation.
In a bid to defuse the tensions, U.S. Defense Secretary Chuck Hagel postponed the April 9 test of a Minuteman III intercontinental missile from California’s Vandenberg Air Force Base, according to a Defense Department official who asked not to be identified.
The Obama administration was concerned Kim might misinterpret the test as a sign the U.S. and South Korea were preparing an attack to destroy North Korea’s nuclear weapons facilities, said the official, who spoke on condition of anonymity because of having access to classified intelligence.
Still, North Korea is unlikely to launch a missile or detonate a nuclear device while the U.S. and South Korea hold joint military drills on the Korean peninsula until April 30, Dongguk University’s Koh said. That may explain the decision to suspend operations at Gaeseong, he said.
“North Korea doesn’t have any other measures it can take right now and sees this as the most damaging for the South,” Koh said. “It’s trying to deal a new hand through Gaeseong.”
© Copyright 2015 Bloomberg News. All rights reserved.