SEOUL North Korea fired artillery toward a disputed sea border with its southern neighbor for the third straight day on Friday in a move seen by the South's president as a ploy by Pyongyang to put pressure on regional powers.
President Lee Myung-bak also said the North's troubled economy was reeling under U.N. sanctions to punish its nuclear test last year, but he added that the destitute state was nowhere near collapse and leader Kim Jong-il was firmly in charge.
"There was the sound of about 20 artillery rounds above North Korean waters near (the South's) Yeonpyeong island," an official with the military's Joint Chiefs of Staff said by telephone.
The North has fed hundreds of rounds of artillery this week in the direction of a disputed naval border with the South that landed in the North's waters. The firing along the heavily armed border lined with thousands of artillery pieces has not resulted in any injuries or damage.
Markets were spooked when the North began the live-fire artillery exercise on Wednesday and by Seoul's decision to return fire. Shares in Seoul briefly retreated and the won fell against the dollar, but the moves were quickly reversed.
Market players said the subsequent days of artillery shooting have not had any significant impact on trading but served as a reminder of the risks of investing on the troubled peninsula.
Lee said the North may be firing to press its demands for talks on a peace deal with Washington to formally end the Korean War as a condition for it to end its year-long boycott of nuclear disarmament discussions.
"It's being pushed hard to come to the six-way talks, and it could be a strategy to reach a peace treaty," Lee said. "But this is simply not a very good method."
The North has demanded talks with the United States to reach a peace treaty to replace the armistice that halted hostilities in the 1950-53 Korean War, which would then allow it to tap international financial institutions for aid.
ARMS AND PEACE
The United States has said a peace treaty is only possible when the North ends its atomic ambitions, but that it can discuss the deal within the six-way nuclear talks that also include China, Japan, Russia and South Korea.
The U.S.-led United Nations forces signed the armistice at the end of the 1950-53 Korean War with North Korea and China.
"If a peace treaty is concluded through negotiations, confidence will be built between the DPRK (North Korea) and the U.S. to put an end to the hostile relations and give a strong impetus to the denuclearization of the peninsula," the North's ruling party newspaper said in a commentary.
The North's wobbly economy was hit by currency controls its leaders imposed at the end of last year that sparked inflation, greatly decreased the purchasing power of its impoverished people and reportedly sparked unrest.
"Economically the North Korean society is faced with great difficulties, but that's something that's been going on for some time," Lee said in Davos, Switzerland, where he is attending the World Economic Forum.
"So we don't see that the North is in an extreme situation or on the verge of collapse," said Lee, in an interview with the BBC that was made available by Lee's office in Seoul on Friday.
The North's reclusive leader Kim disappeared from public view in late 2008 and resurfaced months later from a suspected stroke, looking gaunt and markedly thinner, but South Korean officials have said his grip on power has remained firm.
Meeting China's premier in October, Kim said his country was willing to return to aid-for-disarmament talks, but only if the conditions were right.
(Additional reporting by Christine Kim and Shin Ji-eun; Editing by Jon Herskovitz and David Fox)