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North Korea Cuts Off Economic Ties With South as Tensions Escalate

North Korea announced Monday that it would pull all workers and suspend operations from the joint-Korean Kaesong industrial zone, one of the last relics of cooperation between North and South Korea.

In a statement released by the state-run North Korean News Agency, Kim Yang-gon, secretary of the Central Committee of the Workers' Party of Korea, claimed that South Korea is attempting to turn the industrial zone “into a hotbed of confrontation between compatriots and war against the DPRK, hurting its dignity.”

More than 50,000 North Korean workers will be recalled from the zone. There are currently 475 South Korean managers in the industrial area that is located north of the 38th parallel but their situation is unclear.

The Kaesong industrial zone combines South Korea’s technological prowess with North Korea’s cheap labor and provides Pyongyang with $90 million in annual wages. Around 123 companies operate in the zone and mostly produce cheap clothing and footwear.

The announcement comes after a barrage of nuclear tests by North Korea and escalating tension between the two countries. North Korea’s young leader, Kim Jong-un, has threatened both South Korea and the United States with missiles and other provocative actions over the past weeks.

North Korea’s aggression is particularly difficult to respond to says Paul Carroll, program director of Ploughshares Fund.

“We don’t know, and that’s really the crux of the problem,” he says in an interview with The Daily Ticker. “We just don’t know what it is they want because we don’t have a continuous conversation with them. Everyone is speculating that this is about Kim Jong-un consolidating his power, showing that he’s strong, and getting internal domestic support behind him."

This sudden aggression could also be North Korea’s way of sending a message to China to continue sending monetary and trade support to Pyongyang. Chinese president Xi Jinping said on Sunday that "no one should be allowed to throw a region and even the whole world into chaos for selfish gain," which has been interpreted as a thinly veiled rebuke at North Korea.

Carroll says the U.S. should not fear a nuclear fallout.

“I don’t think we should take the threats about nuclear attack very seriously, but we need to take the situation on the Korean peninsula much more seriously than we have,” he explains. “North Korea really should be getting more respect from Washington and Beijing. Yes they are impoverished, yes they are a dictatorship, but they’ve detonated three nuclear weapons.”

North Korea’s rhetoric may be over the top but their weaponry is becoming more sophisticated and warrants a closer eye, he adds.

Carroll’s sentiment closely follows Ian Bremmer's, president of the Eurasia Group. Bremmer told The Daily Ticker that while most of North Korea’s threats are “classic propaganda,” we shouldn’t discount them entirely.

Secretary of State John Kerry is expected to make a trip to the Korean peninsula next week where he is scheduled to address the rising tensions in the area. “I think sending the Secretary of State to the area is a lot better than sending B2s and B52s,” says Carroll.

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