N. Korea seizes S. Korean assets, warns of war

North Korea seized South Korean-owned assets at a mountain resort yesterday, warning that the two countries were on the brink of war over the sinking of a warship on their disputed border.

The communist state also declared that highly symbolic cross-border tours to the scenic Mount Kumgang resort had been halted for good, accusing South Korean President Lee Myung-Bak of pursuing "confrontation" with the North.

The action comes after a South Korean warship sank after a mysterious explosion last month, killing 46 sailors, with South Korea's media reporting that their country's military suspects North Korea is to blame.

The tensions prompted US Secretary of State Hillary Clinton to say yesterday she hoped there would be "no miscalculation" that could spark a new war between the Koreas.

"I hope that there is no talk of war, there is no action or miscalculation that could provoke a response that might lead to conflict that is not in anyone's interests," the chief US diplomat told reporters in the Estonian capital Tallinn, where she is attending a meeting of NATO foreign ministers.

"We have said time and time again that North Koreans should not engage in provocative actions and that they should return to the six-party talks," she said, referring to talks for the denuclearisation of the Korean peninsula.

Earlier, a North Korean state agency warned: "The situation has reached such extreme phase that it is at the crossroads of a war or peace, much less thinking of the resumption of the (cross-border) tour.

"It is quite natural that we can no longer show generosity and tolerance to the south side under this situation."

North Korea last week expelled staff and sealed five buildings at the Kumgang resort owned by the Seoul government, in protest at Seoul's refusal to restart the tours. It said yesterday it was seizing the five buildings while freezing "all the remaining real estates" at the resort and expelling all management personnel.

South Korea said the North's latest action at Kumgang violated contracts between the neighbours.

"It is an unjust step that undermines the very foundation of relations," the unification ministry said in a statement.

The move came hard on the heels of a report by the South's Yonhap news agency Thursday which quoted a senior military source as saying it was suspected that North Korean submarines attacked the ship with a torpedo.

Pyongyang, which has denied responsibility, accused Seoul of linking it to the blast "deliberately," describing Lee as a "traitor."

"The puppet group went the lengths of crying out for the total severance of the North-South relations and trumpeting about 'not ruling out a war' while deliberately linking the sinking of its warship to the DPRK (North Korea)," it said.

The Cheonan, a 1,200-tonne corvette, broke in two and sank on March 26 near South Korea's disputed maritime border with the North in the Yellow Sea.