Q+A: Why is North Korea scrapping deals with South?

By Jon Herskovitz

SEOUL (Reuters) - North Korea said on Friday it was scrapping all political and military deals it has struck with the South in anger at Seoul's policy of ending unconditional aid to its destitute neighbor.

Here are questions and answers on why North Korea has made the threat and the risks to regional security:

WHY IS THE NORTH TAKING THIS ACTION?

North Korea wants to pressure South Korean President Lee Myung-bak and drum up political support at home. But it particularly wants to attract the attention of Washington, which it has long tried to win over.

The North may still be trying to figure out its approach with new U.S. President Barack Obama, making it easier for Pyongyang to focus its saber-rattling on U.S. allies, including Seoul, rather than directly confront Washington.

WHAT CHANGES WITH THE END OF THESE ACCORDS?

Very little. The statement itself does not carry much weight because North Korea has cut off almost all contacts with the South over the past year in anger at Lee's tough stance. The North, which doesn't like to be ignored, has been lashing out at Lee for months, only to find its vitriolic barbs mostly ignored by Seoul. The latest statement may reflect its frustration. An armistice that marked the end of hostilities of the 1950-53 Korean War is not affected because South Korea was not a signatory.

WHAT IS LEFT TO CUT OFF?

On the economic front, the one remaining significant contact with the South is a joint industrial park located in the North Korean city of Kaesong where some 90 South Korean factories employ about 33,000 low-wage North Koreans.

To close it would cut off one of the few sources of foreign currency for the isolated state and scare off any potential investors. As so many North Koreans in the Kaesong area earn a living through the factory park, the loss of jobs could lead to instability in the tightly controlled state.

WHAT MIGHT NORTH KOREA DO TO RAISE TENSION?

The North has threatened military action over a disputed sea border off the west coast of the peninsula that has been the scene of deadly naval clashes in the past. But the North may be hesitant to spark another battle after its navy was badly outgunned by a superior South Korean force in the last firefight in 2002. Since then, the North's Soviet-era navy has only become more obsolete while the South's has increased its firepower and technology.

What has changed is the North's deployment of more short-range missiles into the region. The North could raise tension by firing missiles into waters claimed by the South or at one of its ships.

The North can raise regional tension by testing its ballistic missiles, which have ranges long enough to hit all of South Korea and most of Japan. And, in an extreme case, it could conduct a second nuclear test, after holding its first in October 2006.

HOW DO THE NUCLEAR NEGOTIATIONS FIT INTO ALL THIS?

The floundering six-way nuclear talks have been snagged for months because Pyongyang has not agreed to a system to check claims it made about its nuclear program.

There is little momentum for resuming the talks with Obama and North Korea still figuring out how to approach each other. North Korea may try to increase its leverage by taking steps to restart its nuclear plant that makes arms-grade plutonium. It was being disabled under the disarmament-for-aid deal.

The North's military threat is the only real bargaining power leader Kim Jong-il has, without risking his control, to wring concessions from the world, and he is unlikely to dare give up nuclear weapons no matter what Obama does, analysts said.

But the North, through its brinkmanship, runs the risk of losing out on aid its faltering economy needs. It could also force Obama to put the reclusive state back on a U.S. terrorism blacklist and restore trade sanctions.

(Additional reporting by Jack Kim, editing by Jonathan Thatcher and Dean Yates)