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An image from North Korea’s Korean Central Television on Mar. 9 of KN-08 ballistic missiles

On Mar. 10, North Korea’s Committee for the Peaceful Reunification of the Fatherland, which is in charge of South Korean affairs, released a statement announcing that Pyongyang would be "completing liquidating” all of the assets of South Korean companies and related organizations in North Korea, since the “South Korean puppet regime” had suspended all tourism to Mount Keumkang and all operations at the Kaesong Industrial Complex.

“All of the agreements related to economic cooperation and exchange programs that North and South Korea have adopted and announced are hereby nullified,” the statement went on to say. “The planned special measures will continue to be taken with deadly political, military and economic consequences.”

The statement, which was titled “The silly sanctions spree of the Park Geun-hye clique will only hasten its own demise,” came in response to the sanctions against North Korea that the South Korean government announced on Mar. 8.

There are three measures that North Korea will be taking against the South: invalidating all of the agreements between North and South Korea about economic cooperation and exchange programs, liquidating South Korean assets in the North and implementing additional “planned special measures.”

Since even the Kaesong Industrial Complex has been shut down, such measures are unlikely to be effective or cause much harm to South Korea. Considering that South Korean assets at the Mt. Keumkang tourism zone have been frozen or confiscated since 2010 (tourism there was halted in 2008), the only real matter of consequence is the South Korean assets at the Kaesong Industrial Complex.

On Feb. 11, the day after South Korea completely suspended operations at Kaesong, North Korea announced that it was freezing South Korean assets at the complex. As for the South Korean assets located at Mt. Keumkang, privately owned items are frozen while those owned by the South Korean government and state-owned companies have been confiscated.

In order to gauge what measures North Korea will take in the future, it is important to understand what they mean by “liquidate.” There are two possible interpretations.

The first interpretation focuses on North Korean laws about the Kaesong Industrial Complex and bankruptcy by foreign-invested companies, which define “liquidate” as “settling a credit-debit relationship.” That would require additional deliberation between North and South Korea. It is possible to see a sequential process in which North Korea progressed from “freezing” (Feb. 11) to “liquidating” (Mar. 10), with the ultimate goal of confiscating the assets.

The second interpretation concentrates on the fact that inter-Korean relations are completely severed at present to conclude that “liquidate” is not so much a legal concept as a declaration that North Korea can dispose of South Korean assets however it pleases.

“North Korea’s declaration of a complete liquidation of assets appears to mean confiscation,” said an official at South Korea’s Unification Ministry.

“The precious assets of South Korean citizens must not be harmed, and the North Korean government will be held responsible for everything that happens to them,” Seoul warned in a statement released by the spokesperson of the Unification Ministry.

However, North Korea may not immediately take over the facilities of South companies in the Kaesong Complex or dismantle them to be sold. Given North Korea‘s statement that “the planned special measures will continue to be taken,” it is possible that the Central Special Zone Development Guidance General Bureau and other related North Korean organizations will issue a series of follow-up measures connected with liquidating South Korean assets at Kaesong.

Given that North Korea pressured South Korean businesspeople to visit the North within a certain timeframe before it froze and confiscated South Korean assets at the Mt. Keumkang tourism zone, once again the North could conceivably ask representatives from tenant companies at Kaesong to visit the North in order to deliberate the liquidation process.

This could be a strategic move aimed at sounding out the possibility for additional talks about the Kaesong Complex, along with the political aim of taking advantage of the liquidation process to provoke conflict between the South Korean government and private businesses.

Another point worth noting is that Pyongyang specified the agreements it is nullifying as “all agreements related to economic cooperation and exchange projects.” This could be aimed at creating the legal basis for disposing of South Korean assets at Kaesong.

Whereas tourism at Mt. Keumkang was a private-sector project in which North Korea’s Korean Asia-Pacific Peace Committee (KAPPC) guaranteed exclusive business rights at the zone to Hyundai Asan for 50 years, the Kaesong Complex began with an agreement between KAPPC and Hyundai Asan but soon morphed into a project led by the governments of South and North Korea.

North Korea’s decision not to nullify all inter-Korean agreements could be seen as an exit strategy of sorts that presumes a change in inter-Korean relations.

By Kim Jin-cheol and Lee Je-hun, staff reporters

Please direct questions or comments to [english@hani.co.kr]