South Korea rejects North's push for tourism

SEOUL (Reuters) - South Korea has rejected North Korea's attempts to reopen lucrative tourist links, saying Pyongyang must first return its property at a jointly-owned resort before talks on restarting cross-border tours can resume.

The destitute North Korea has reached out to its neighbor in recent months, requesting aid and a resumption of tourism contacts to raise much needed capital to counter the impact of sanctions and severe summer flooding.

It also wants to restart stalled aid-for-disarmament talks.

Analysts say the cash-strapped North's overtures show it is being squeezed by sanctions for last year's nuclear and missile tests, and the sinking of a South Korean warship.

Pyongyang proposed the two countries hold government-level dialogue Friday to discuss resuming South Korean tours to the Mount Kumgang resort, which once served as a symbol of cooperation between the rival states.

But Unification Ministry spokeswoman Lee Jong-joo said that Seoul had sent a message to Pyongyang Wednesday demanding it retract its seizure of the resort which had earned the North tens of millions of dollars in cash a year.

"As long as the unjust measures remain in place, we believe the conditions are not ready for dialogue to take place," Lee told a news conference.

The North locked the buildings at the resort earlier this year, saying it had confiscated them as compensation for the losses due to the South's suspension of tours in July 2008.

Seoul stopped the tours after a North Korean soldier shot dead a South Korean tourist who wandered onto a restricted beach. The resort was built by an affiliate of the South's Hyundai Group and has been visited by more than a million South Koreans.

North Korea's estimated $17 billion a year economy has been dealt a heavy blow by international sanctions over the past two years, and by a botched currency move at the end of last year.

SINCERITY AND APOLOGY

Relations between the two Koreas, still technically at war since their 1950-53 conflict ended with a ceasefire and not a peace treaty, deteriorated to their lowest level in more than a decade with the torpedoing of the South Korean corvette in March.

An international investigation found that a North Korean submarine fired the torpedo. Pyongyang denies it attacked.

Seoul cut off all aid and trade to the North after the Cheonan's sinking, with the exception of a joint factory complex at the border city of Kaesung, and said the North must apologize for the sinking before it will consider bilateral talks.

A senior South Korean official said this month that an apology was necessary to improve North-South ties, but said it was not a precondition for a resumption of six-party talks, stalled for two years.

(Additional reporting by Danbee Moon; Editing by Jonathan Thatcher)