SEOUL North Korea refused on Thursday to back down on its threat to strip a South Korean company of its assets to run tours to a joint resort as talks broke down over a three-year row amid security tensions between the rivals.
The dispute over the Mount Kumgang resort on the isolated North's east coast is the latest of a list of issues underscoring the depth of soured relations on the peninsula that involved the sinking of a South Korean navy ship last year and bombing of a populated island by the North.
A team headed by South Korean Unification Ministry officials crossed the military border into the mountain resort to try to stop Pyongyang from seizing the assets of a South Korean tour operator at the resort.
North Korea gave a new deadline of July 29 for the South Korean tour operator Hyundai Asan to pull out or have their assets seized and disposed of, South Korea's Unification Ministry said after the meeting ended in a deadlock.
Last month the North said it had revised a law overseeing the joint tourism project, effectively ending Hyundai Asan's contract to exclusively run all cross-border tours to the resort.
The North wants to redevelop the resort, which has been shuttered since 2008 after Seoul suspended tours following the fatal shooting of a South Korean tourist there.
Mount Kumgang had been a lucrative source of hard currency for the destitute North under two liberal governments in the South before President Lee Myung-bak took office in 2008.
A South Korean tourist who wandered into a restricted zone while on a early morning stroll was shot to death by a North Korean guard that year, leading to the suspension of tours.
Earlier this month, the North gave investors from the South until July 13 to come to the resort to sort out their assets or risk Pyongyang taking steps to seize and dispose of them.
An expert on the North, Stephan Haggard of the University of California, said the North has pushed its threat on Kumgang too far and the South is unlikely to separate it from the rest of the rivals' bitter ties.
"I think it will be very difficult for the government to sanction or reopen it," he said.
A North Korean Olympic official said on Wednesday the isolated state would like to co-host the 2018 Winter Olympics with the South as a way to improve ties between the rivals.
Jang Ung, a North Korean member of the International Olympic Committee, said it was "positive" for Asia to host the Games but said if the political climate remains tense, it might have an impact on the event, without elaborating.
South Korea was cool in response to those comments, saying it had not considered the possibility of co-hosting the Games.
Unification Ministry deputy spokeswoman Lee Jong-ju told a briefing that it remained a top priority for the South to have a systematic and fail-proof guarantee from the North of the safety of South Koreans when they travel north of the border before there can be any discussions about cooperation.
Tensions have risen on the peninsula since conservative Lee Myung-bak became South Korean president in 2008, ending a decade of Seoul's "Sunshine Policy" of engagement with the North.
Relations hit their lowest level in years last year, with the killing of 50 South Koreans in two separate attacks. The North denies it was behind one of the attacks, and said it was provoked into the second.
(Reporting by Jack Kim; Editing by Sugita Katyal)