North Korea warns South it will pay for clash

SEOUL (Reuters) - North Korea said the South will pay "an expensive price" for firing at Pyongyang's retreating patrol boat on Tuesday, keeping up its saber rattling two days after a naval gunfight raised tension between the rivals.

The threat, published in the North's official Rodong Sinmun daily, comes amid reports officials from the two Koreas met recently to discuss a possible summit between their leaders but failed to reach agreement.

The navies from the two sides exchanged gunfire on Tuesday for the first time in seven years, reminding financial market players of the security threat the North poses to the region, which accounts for one-sixth of the global economy.

"Warmongers who like to play with fire will be certain to pay an expensive price," Rodong Sinmun daily said in an editorial.

The communist daily said the North had been taking action to relieve tension and forge cooperation with the South, "with the overall situation on the Korean peninsula heading for the resolution of the problems through dialogue."

"The armed clash on the West (Yellow) Sea was not an accident but was a premeditated act of aggression by the South's military seeking intensifying of tensions on the Korean peninsula."

The clash came as regional powers try to bring the North back to stalled six-way talks on ending its nuclear arms program in return for aid and diplomatic rewards.

U.S. Secretary of State Hillary Clinton has said the gunfight would not derail a plan to send a senior envoy to Pyongyang to help revise those multilateral talks.

North Korea has often used military action to force its way onto the agenda of major diplomatic events, and recently caused alarm by announcing more production of arms-grade plutonium. At the same time, it has been seeking direct talks with Washington.

South Korea denounced what it said was an incursion by a North Korean patrol vessel into its territorial waters in the Yellow Sea that sparked a brief firefight near the spot where the two Koreas have had two deadly conflicts in the past decade.

There were no casualties on the South Korean side in the incident, which left one of its vessels pockmarked with about a dozen gunshots and a North Korean patrol vessel apparently heavily damaged, military officials said.

North Korea in the past year has threatened to attack the South's ships if they come near the Northern Limit Line, a Yellow Sea border set unilaterally by U.S-led U.N. forces at the end of the 1950-53 Korean War which the North sees as invalid.

The two Koreas are technically still at war because their conflict ended with a ceasefire and not a peace treaty.

(Editing by Jonathan Thatcher and Jerry Norton.)