SEOUL North and South Korean officials held talks on Thursday to salvage a joint factory park in the communist state that has become a key source of foreign cash for Pyongyang, hit by U.N. sanctions for its nuclear test.
The talks come as North Korea looks ready to launch medium or short range missiles from its east coast within days, a South Korean newspaper reported, which could further stoke tensions already high due to the North's May 25 nuclear test.
Washington said this week it has tightened its crackdown on firms linked to the North's lucrative proliferation of missiles, a major source of cash for the destitute state, and has sent the U.S. point man for sanctions to Asia for discussions.
The talks over the Kaesong industrial park, where about 100 South Korean companies pay $70 a month per person to employ about 40,000 North Koreans, have hit snags in previous rounds over the North's demands for sharp raises in wages and land lease fees.
Analysts said North Korea was trying to squeeze more money out of the South Korean companies in Kaesong as U.N. sanctions imposed for its missile and nuclear tests begin to grip the state that produces few goods other than arms it can export.
North Korea has ignored the South's demand for the release of a South Korean worker who has been held at the park located just inside North Korea for more than three months for supposedly insulting the North's political system.
The North said in May it was cancelling all wage, rent and tax agreements for the park, once hailed as a model of future economic cooperation between the rival states technically still at war who share one of the world most militarized borders.
The North was likely to fire medium or short range missiles from its east coast in early July that could include Scuds with a range of about 340 kilometers (210 miles) or Rodong missiles with a range of up to 1,000 kilometers, the daily JoongAng Ilbo quoted an intelligence source as saying.
Japan's coast guard has said it had monitored no-sail warnings by the North for 10 nautical areas around the Korean peninsula for military firing exercises.
On Tuesday, the United States said it was cracking down on companies involved in North Korea's suspected missile proliferation and in the purchase of equipment that could be used in a nuclear weapons program.
The U.S. Treasury and State Departments moved to freeze the assets of an Iranian and a North Korean firm under an executive order and also barred U.S. firms from dealing with them.
Philip Goldberg, the U.S. envoy who coordinates sanctions against the North, went to China in a bid to get tough with North Korea. China is the North's biggest benefactor whose cooperation could determine the success of any sanctions regime, analysts said.
He will be in Malaysia on Sunday before heading back to Washington on Monday. It was not immediately clear why he was visiting Malaysia.
A North Korean ship being tracked by the U.S. Navy on suspicion of carrying a banned arms cargo has turned around and is headed in the direction of the North after it was seen sailing to Myanmar.
Officials said the North's military grandstanding is likely related to moves by its leadership to begin readying leader Kim Jong-il's youngest son as a future heir by consolidating the 67-year-old leader's power base.
(Editing by Jon Herskovitz and Valerie Lee)