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World News

Q+A: What is behind North Korea's conciliatory moves?

SEOUL (Reuters) - North Korea said on Monday it would reopen its border with the South, ending a self-imposed blockade on a vital source of income for Pyongyang’s leaders as their already ravaged economy is squeezed by tightening U.N. sanctions.

The announcement came on the heels of the state’s release of two U.S. journalists and a South Korean worker it held in separate incidents. The conciliatory gestures mark a change in tone after it raised tension in the region with a nuclear test in May, missile launches and threats to attack the South.

Following are some questions and answers about the moves:

WHY IS NORTH KOREA OPENING UP TO THE SOUTH?

The most obvious reason is money.

Impoverished North Korea’s economy, already broken by years of mismanagement and global sanctions, has taken further hits this year from heavy rains that hurt its crucial farm sector, a loss of aid from the South -- roughly equal to about 5 percent of its estimated $17 billion a year GDP -- caused by political wrangling and new U.N. sanctions for the nuclear test aimed at cutting off its arms trade that is a key source of hard currency.

WHY DOES THE NORTH NEED TO MONEY?

North Korea uses foreign currency to buy items overseas needed for its military and nuclear programs as well as to purchase perks for its ruling elite. North Korean leader Kim Jong-il, 67, has moved forward with his succession plans in recent months after he apparently suffered a stroke a year ago and needs the backing of powerful military and communist party figures to secure a smooth path to power for his designated heir, his youngest son, analysts said.

North Korea may also be looking to rebuild its main nuclear plant that had been disabled under a six-way nuclear deal.

WILL KIM BE SEEN AS BUCKLING?

Quite the contrary. The releases have been a propaganda coup for Kim. The visit of Bill Clinton this month to secure the freedom of the American journalists was portrayed by the North’s media as proof that the country’s recent nuclear test and missile launches were a stunning victory for Kim and that resulted in the former U.S. president coming to Pyongyang to pay tribute and negotiate. Kim’s meeting with the chairwoman of the powerful Hyundai Group on Sunday will also be trumpeted as a tribute that shows one of South Korea’s leading conglomerates has great respect for Kim and wants to do business with him.

WILL THE MOVES HAVE ANY IMPACT ON STALLED NUCLEAR TALKS?

The North’s recent moves likely indicate Pyongyang may be finished with its recent round of provocations and signal that Pyongyang is ready to try diplomacy. This will likely ease concerns among investors who were worried about troubles spinning out of control, which could lead to heavy damage to the globally vital economies of North Asia.

HOW MUCH COULD NORTH KOREA EARN?

By allowing tourism to resume at the Mount Kumgang resort, located in North Korea and run a Hyundai affiliate, Pyongyang can receive tens of millions of dollars by the end of the year.

The North was also seeking to increase wages and rents paid at a joint factory park in the North Korean border city of Kaesong, run by the same Hyundai affiliate, which could again earn its leaders tens of millions of dollars by year’s end. There has been no indication a deal was reached to increase payments when Kim met Hyundai Chairwoman Hyun Jeong-eun.

By improving ties with South Korea, the North may be hoping to see a resumption of food and fertilizer aid. The South used to send about 400,000 to 500,000 tons of rice and about 300,000 tons of fertilizer to the North each year but that aid was suspended as ties worsened after President Lee Myung-bak took office in February 2008 and angered Pyongyang by cutting off unconditional handouts. North Korea typically falls about 1 million tons short of producing enough food its people.

Editing by Jonathan Thatcher

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