Chuseok, or the Full-Moon Harvest Festival, also dubbed the Korean Thanksgiving is one of the country’s biggest traditional holidays. Nearly 30 million out of South Korea’s population of 50 million will visit their hometown during the three-day holiday which ended October 1.

The Imjingak pavilion, a well-known tourist destination, is located just south of the demilitarized zone which divides the Korean peninsula into the capitalist South and communist North. It is the closest point to the inter-Korean border, where visitors are allowed to observe the North’s territory from the South without any specific government approval. The northern tip of the Paju city which the Imjingak area belongs to is only 130 miles south of the North Korean capital of Pyongyang.

South Koreans who were born in North Korea before the fratricidal 1950-53 Korean War, which ended with a truce pact, not a peace treaty, come to the Imjingak pavilion to remember and pay tribute to their ancestors as they are banned from crossing the inter-Korean border freely to visit their hometowns in the North.

The number of South Koreans registered with the government as separated families was more than 80,000 as of September 2012. North Korean defectors who recently arrived in the South also visit the pavilion to pay homage to their deceased ancestors. The number of North Korean defectors living in South Korea now exceeds 24,000.

In June, 2000, then South Korean President Kim Dae-Jung and North Korean leader Kim Jong-Il held a historic inter-Korean summit in the North Korean capital of Pyongyang. The two Koreas have held more than twelve rounds of family reunions since that summit. Nearly 22,000 separated family members from both Koreas, who had not seen each other since the Korean War, have met through the reunion sessions their governments organized mainly around traditional holiday seasons.

However, the yearly family reunion event was halted after South Korean President Lee Myung-Bak’s government framed a hard-line policy toward the North and Pyongyang harshly denounced it.

Ko Ju-Rak, former teacher in North Korea

Ko was born in the Kabsan county, South Hamkyong Province, North Korea in 1928. He was a middle school teacher before and during the Korean War. He was being carried by a North Korean military truck retreating toward the north in late 1950 but jumped off the truck at night. He later joined a group of refugees moving to the South, leaving his parents and nine siblings in the North. He then joined the South Korean army to take part in the war. Ko has not applied for the inter-Korean family reunion. He wishes to meet his North Korean family members but says he is afraid that his application could be against the interests of his family members still living in the North.

Kim Byong-Jo, former soldier of the Korean People’s Army

Kim was born in 1937 in the Yongkang county, South Pyongan Province in North Korea. He was a teenage recruit with the North Korean army when he finished his daily sentry duty at night in Kosong, Gangwon Province, near the inter-Korean border, and crossed the demilitarized zone into the South. The date was August 26, 1953. It was just a month after the U.S.-led United Nations and North Korea agreed on a cease-fire on July 27, 1953. He had brothers, who had joined the North Korean army and died during the Korean War, a sister and parents before he escaped the North. He later joined the South Korean army. He has not applied for the inter-Korean family reunion programme because he realised that North Korea would never allow him, a deserter, to meet his family members living in the North.

Ko Yong-Yeon, former North Korean farmer and driver.

Ko Yong-Yeon was born in 1922 in the Taedong county, South Pyongan Province in North Korea. He was a farmer and driver in Pyongyang before he and his younger brother came to South Korea in late 1950, leaving their parents and other brothers in the North. They at that time thought their separation would not be so long but they could not return to their home after the Korean War. Ko settled in the South’s second largest city of Busan, but passed away recently. Ko’s son In-soo, who was born in South Korea, visited Imjingak marking Chuseok with his father’s portrait to show him the northern soil he missed so much.

The Koreans, who were separated with their family members and could not see each other during and after the Korean War, are getting aged. Many of them have passed away without seeing their loved ones during the last six decades since the outbreak of the Korean War.

South Korea is surrounded by the sea on all sides but one. The country is virtually an island as it is bordered to the north by reclusive North Korea.

There is only one place, called a truce village, where South Koreans and visitors can see the border and soldiers from the secretive state.

Panmunjom, about 55 km (34 miles) north of Seoul, is considered one of the last vestiges of the Cold War. It is located in the Demilitarised Zone (DMZ), the 4-km (2.5 mile) wide buffer that runs along the heavily armed military border.

The border was framed by a truce signed at Panmunjom that suspended the 1950-53 Korea War, which pitted U.S.-led U.N. forces and South Korea against North Korean and Chinese troops.

The truce village of Panmunjom has been used as the venue for the return of remains of U.S. soldiers killed during the Korean War. Nearly 8,000 U.S. personnel are listed as missing from the war, the remains of more than half of which are thought to be buried in the North.

South Korea also returned to the north via Panmunjom the remains of North Korean soldiers or civilians who had drowned and whose bodies had drifted into the south during floods in North Korea. Sometimes the North Koreans drifted alive into the south and were returned home if they wanted repatriation.

It used to be almost every Wednesday that photographers from international news agencies based in South Korea visited the truce village of Panmunjom to cover events there. Now we only go to the border village around once a month.

Usually closed circuit television cameras from both Koreas monitor the area. However soldiers from the North and South face off, sometimes very closely, when there are tourists, visiting state leaders or media representatives at the truce village. Military talks and Red Cross talks have been held there. Thousands of tourists a year visit the village to see the Cold War’s last frontier.

It takes only 45 minutes to drive from central Seoul to the truce village. Activists from anti-North Korean civic groups sometimes gather to send balloons carrying anti-Pyongyang leaflets toward North Korea from just south of the restricted border area, only a few miles away from Panmunjom.

Pictures of soldiers from both Koreas standing guard at Panmunjom are used frequently by media clients, especially when there are stories on tension between the two Koreas. North Korea is believed to have produced about 50 kg (110 lb) of plutonium, which experts say would be enough for six to eight nuclear weapons. It has conducted nuclear tests twice. South Korea, while a major user of nuclear power, does not have a nuclear arms program. Its U.S. ally has promised protection under its “nuclear umbrella”.

North Korea has 1.19 million troops in active service, and more than 7.7 million reservists among a population of 23.4 million, making it one of the world’s most militarized countries. South Korea, with a population of 48.7 million, has 650,000 troops on active duty and about 4.5 million reserve forces.

South Korean aid to the North was stopped after conservative President Lee Myung-bak took power in 2008, demanding Pyongyang first give up its nuclear ambitions. It was the start of tense relations between the two rivals after a decade of exchanges and steps toward peace. Pyongyang’s nuclear arms program is believed by activists to be the starving communist country’s last desperate attempt to shelter its regime from the outside world.

South Koreans must seek permission from their government to enter the North as the two Koreas are still technically at war, with the Korean War ending in an armistice rather than a peace treaty. However there is one place people can cross the border without special permissions or visas. This is a blue building called the Military Armistice Commission (MAC) Conference Room, where visitors can briefly step into North Korean territory and see the South from the North.

Kim Jin-Suk, 51, climbed the 35-meter tall crane in the Yeongdo shipyard of Hanjin Heavy Industries and Construction (HHIC) in Busan, the hub of South Korea’s shipbuilding industry on January 6 this year and has been there ever since to protest against what she says are “mass layoffs” at the country’s former biggest shipbuilder.

Her sit-in protest is helping to revive trade unionism in a country that was once a byword for violent clashes between workers and police, but which under conservative President Lee Myung-bak has seen the unions adopt a back seat.

The labor activist is a member of the direction committee for the office of the Korean Confederation of Trade Unions (KCTU) and she was laid off by the shipbuilder in Busan, a city on the southeast end of the Korean peninsula, about 420 km (262 miles) from the capital Seoul.

Kim Jin-suk entered the yard in 1981 as a welder and was laid off in 1986 by the company for distributing pamphlets denouncing a company-sponsored union at a time when South Korea was still a military dictatorship.

The Busan shipyard is no stranger to labor activism. On crane No. 85, Hanjin’s labour union leader, Kim Joo-ik, hanged himself on Oct. 17, 2003 after a 130-day protest on the same crane. He wanted sacked employees to be reinstated as well.

The current action has its roots in 2010 when Hanjin said it would lay off 400 employees as the yard had not won any ship orders for several years. In response, workers striked and Hanjin closed the yard.

228 workers applied for voluntary retirement and 172 workers were laid off. The company laid off 800 workers and 1,200 contract workers early in 2010.

Despite a June 27, 2011 agreement negotiated between the HHIC management and a union leader to go back to work, Kim and other striking workers said they could not accept the terms as they were not involved with the negotiations.

Kim is now a rallying point for labor and the country’s opposition. About 10,000 people from across the country gathered at Busan station on July 30 to attend a rally supporting Kim. Most people came to Busan by bus, so-called “Hope Buses”, a phrase used by the protesters to represent a world without layoffs and temporary workers.

The labor activist, wearing a worker’s uniform, has no shower and uses a bucket as a toilet. She uses a smartphone to communicate and has over 20,000 followers on Twitter. A publishing firm issued in 2007 her collection of essays, “Salt Flower Tree”, the title reflecting the sweating bodies of workers after a day’s work in the yards.

Kim has said she will come down only when the shipbuilder withdraws its plan for lay-offs.

Hanjin itself says Kim and her “Hope Bus” supporters are politicizing the issue and say the worker who was retrenched more than a decade ago has nothing to do with the company and its workers who are “working very hard now to get the company back to normal”.

Hanjin Heavy Industries and Construction’s Chairman Cho Nam-ho left South Korea on June 17 before he was supposed to appear at a parliamentary hearing. The leader of the company has not yet returned. Cho is the CEO of Hanjin Heavy, and the largest shareholder of Hanjin Heavy’s parent firm Hanjin Heavy Industries and Construction Holdings. Cho holds 46.5 percent of the holdings firm.

Having witnessed the 51-year old woman atop her crane on Sunday, it occurred to me that people might see her staying there through the next winter, if she and Hanjin cannot meet for talks to resolve the issue.

Thousands of South Koreans protested for several months to demand then-U.S. President George Bush apologize directly for the incident and hand over the U.S. soldiers involved to South Korean court.

The soldiers left South Korea after they were acquitted in a U.S. military court in the country in November 2002, which inflamed anti-American sentiment.

Angry that no one was found criminally responsible for the deaths, many South Koreans wanted the bilateral Status of Forces Agreement (SOFA) altered to allow local authorities to prosecute cases involving U.S. troops in South Korea.

South Korea and the U.S. have a military alliance dating to the 1950-53 Korean War. Nearly 30,000 U.S. troops are based in South Korea, which is still technically at war with North Korea as the 1950-1953 conflict ended with an armistice and not a peace treaty.

Earlier, in February 2002, South Korean sports fans were outraged after national athlete Kim Dong-sung crossed the line first only to be disqualified in the 1,500 meter short track final at the Winter Olympics in Salt Lake City. American speed skater Apolo Anton Ohno won the gold medal after the chief referee judged that Kim was guilty of cross-tracking, or interfering with Ohno’s path when the American was trying to move up the inside.

The spike in anti-American sentiment at the time was encapsulated in a song called “Fuxxing U.S.A,” written by Yun Min-Seok and performed by group Woorinara. Touching a chord with a frustrated populace, the song enjoyed significant popularity in Seoul.

Singer Baekja from Jaewon Lee on Vimeo.

“Woorinara”, which means “Our Country,” is led by Baekja, 39. He writes most of the group’s music and lyrics, which touch on themes like independence from U.S. influence, Korean reunification, workers’ rights and human rights. The group enjoys a devoted following among college students, workers and activists.

Baekja was an ordinary high school student who liked writing poetry until he witnessed the arrest of his teachers by the military government in 1989 for participating in the effort to organize a nationwide teachers’ union, which led to a government crackdown on supposed “leftist elements.” Baekja shaved his head and joined a student protest in support of the academics.

He learned how to play the guitar which his brother had bought for him after entering university, and began writing music about social issues, founding Woorinara in 1999.

Because of the sometimes controversial content of his work, Baekja and the group have been investigated by South Korea’s spy agency, and were even tracked when they travelled to Japan to perform a concert for Korean residents there.

American Mary Collins was an English professor at Baekja’s alma mater, Hankuk University of Foreign Studies, and says she appreciates her former student’s work.

“The United States is not perfect. Even though I am an American citizen, I can say that…people need to think about it and talk about it,” she told Reuters in an interview.

“I have always liked Baekja’s songs…I’m hoping that he has a chance to sing in the United States for people to get to know him”, Collins said.

The folk musician has been performing over two years at venues near Seoul’s Hongik University, a district home to various clubs where many talented indie bands stage concerts.

Baekja wrote the songs on his first solo folk album, “Street Light,” released last December, over the last decade when he was active with his group. Rather than politics, they focus on themes like loss, loneliness, yearning and love separated.

One of the songs, “Without Exception,” or “Oegimupsi, 어김없이” is about a spring day coming again despite the absence of a lover. It was inspired by a Japanese animation film, “5 Centimeters Per Second,” directed by Makoto Shinkai.

“I want to sing both songs that console people and songs about social issues. I think both kinds of songs can soothe the hearts of people. I want to sing people’ songs until I die”, Baekja said in a recent interview with Reuters.

The golden age of acoustic guitars and folk music in South Korea was the 1970s and 1980s, but the genre is enjoying a resurgence of popularity among fans in their 40s and 50s and also among a younger generation after a recent TV program featuring legendary folk musicians, who until then were largely overshadowed by flashy boy bands and girl groups.

Bakja will give his first major concert at local theater, Hakchon Blue in mid-April. The title of the show is “Spring Day”.

Lee made his first address to the nation since Tuesday’s attack as U.S. and South Korean warships took part in military maneuvers, prompting concern in regional power China and threats of all-out war from North Korea.

He also visited U.S. forces in Korea to thank them for the show of force.

“North Korea will pay the price in the event of further provocations,” Lee said. “Attacking civilians militarily is an inhumane crime that is strictly forbidden in a time of war… Now is the time to show action, not a hundred words.”

Clashes in disputed waters off the west coast are not uncommon, with dozens of sailors killed and warships sunk over the past 11 years, but Tuesday’s attack on Yeonpyeong was the first time a residential area had suffered a direct hit. Of the four killed, two were civilians.

The attack raised tensions on the peninsula to their highest level in at least two decades, but experts say they are unlikely to tip over into war.

Anger at the attack is growing in South Korea, putting pressure on the conservative government to get tough. In Seoul, about 500 former soldiers and police burned North Korean flags and effigies of North Korean leader Kim Jong-il.

Moody’s Investors Service said uncertainty over confrontations have already been factored into South Korean credit ratings. But the agency said it was still determining whether the recent attack marked a fundamentally more reckless stance by North Korea.

Markets in Seoul mirrored the broader region on Monday, as players judged the latest spat as being no worse than previous between the Koreas, who are still technically at war having only signed a truce to stop fighting in the 1950-53 war.

China has proposed emergency talks amid global pressure on Beijing to be more aggressive in helping resolve the standoff between the rival Koreas and try to rein in ally Pyongyang which depends on China for aid.

Washington and Tokyo were non-committal, saying they would consult with Seoul, which was skeptical of the proposal to sit down with North Korea, effectively rewarding it for bad behavior.

The reclusive North was previously offered massive aid in return for disarmament pledges that went unmet.

A senior North Korean official also expressed skepticism about the Chinese call, Japan’s Kyodo news agency said. North Korea has yet to issue an official response but the official, speaking on condition of anonymity, said countries “responsible for (the latest standoff)” should first hold talks.

Beijing is wary of the collapse of North Korea, which could send millions of refugees across its border and strengthen the U.S.-South Korea alliance in a possibly combined Korea.

The whistle-blowing WikiLeaks website, revealing a cache of U.S. diplomatic cables, said there had been talks between U.S. and South Korean officials about the prospects of a unified Korea, according to the New York Times.

South Korea considered commercial inducements to China to “help salve” Chinese concerns about living with a reunified Korea, according to the American ambassador to Seoul, the newspaper said.

U.S. and South Korean forces staged a second day of maneuvers in the waters off Taean province, 100 km (60 miles) south of Yeongpyeong and out of range of North Korean artillery.

The third in a series of joint large scale drills since the sinking of the South’s Cheonan warship in March, the U.S. military said the exercise was defensive in nature and demonstrated U.S. commitment to regional security.

In the South Korean capital Seoul, dusted in snow, life and business went on as normal. Authorities lifted a ban on South Korean travel to the joint Kaesung industrial complex in North Korea for the day.

“It feels a little more strained than previous occasions, but we’ve been here before,” said Tom Brown, 42, a Briton working for the Tesco supermarket chain in Seoul. “It’s just saber-rattling … there’s not much point in worrying too much.”

(Additional reporting by Kim Miyoung, Yoo Choonsik, Jack Kim and Jeremy Laurence in Seoul, Chris Buckley in Beijing and Yoko Kubota in Tokyo; Writing by Nick Macfie; Editing by Andrew Marshall)

U.S. President Barack Obama, woken up in the early hours to be told of the artillery strike on a South Korean island, said he was outraged but declined to speculate on possible U.S. military action.

However, in a telephone call with South Korean President Lee Myung-bak, Obama agreed to hold join military exercises and pressed the North to stop its provocative actions.

The U.S.-led United Nations command said it had asked North Korea for talks to try to reduce tension on the divided peninsula after the attack, the heaviest on the South since the end of the Korean War in 1953.

“We’re in a semi state of war,” South Korean coastguard Kim Dong-jin told Reuters in the port city of Incheon where many residents of Yeonpyeong island fled in panic as the bombardment triggered a fire storm.

The bombardment nagged at global markets, already unsettled by worries over Ireland’s debt problem and looking to invest in less risky markets.

But South Korea’s markets, after sharp falls, later started to rebound.

“If you look back at the last five years when we’ve had scares, they were all seen as buying opportunities. The rule among hedge funds and long-only funds is that you let the market sell off and watch for your entry point to get involved,” Todd Martin, Asia equity strategist with Societe Generale in Hong Kong, said.

Despite the furious rhetoric, regional powers made clear they were looking for a diplomatic way to calm things down.

South Korea, its armed forces technically superior though about half the size of the North’s one-million-plus army, warned of “massive retaliation” if its neighbour attacked again.

But it was careful to avoid any immediate threat of retaliation which might spark an escalation of fighting across the Cold War’s last frontier.

Two South Korean soldiers were killed in Tuesday’s attack, which North Korea said Seoul had started. Another 17 soldiers and three civilians were injured.

South Korea was conducting military drills in the area at the time but said it had not been firing at the North. It later said it would resume those drills once the situation stabilised.

Japanese Prime Minister Naoto Kan called on China, the impoverished North’s only powerful ally, to help rein in the hermit state.

China has long propped up the Pyongyang leadership, worried that a collapse of the North could bring instability to its own borders and also wary of a unified Korea that would be dominated by the United States, the key ally of the South.

In a clear prod to Beijing during a visit to the Chinese capital, U.S. North Korea envoy Stephen Bosworth said: “We call on all members of the international community to condemn the DPRKs (North Korea’s) acts and to make clear that they expect the DPRK to cease all provocations and implement its denuclearisation commitments.”

On Tuesday, Obama said he would urge China to tell Pyongyang “there are a set of international rules they must abide by.”

Beijing said it had agreed with the United States to try to restart talks among regional powers over North Korea’s nuclear weapons programme.

A number of analysts suspect that Tuesday’s attack may have been an attempt by North Korean leader Kim jong-il to raise his bargaining position ahead of disarmament talks which he has used in the past to win concessions and aid from the outside world, in particular the United States.

“It’s Mr Kim’s old game to get some attention and some economic goodies. I can imagine what Beijing leaders are saying to themselves this morning: ‘naughty kid.’ … I think Washington and Beijing will cooperate on this. It’s Japan that’s nervous,” said Lin Chong-pin, strategic studies professor, Tamkang University in Taipei.

Japan said it may strengthen sanctions on North Korea after the attack. The North already faces a wide range of economic sanctions, which some analysts say are causing it enough pain to force it to go to the negotiating table.

The incident followed revelations last weekend that Pyongyang was fast developing another source of material to make atomic bombs, and analysts said the North may again be pursuing a strategy of calculated provocations to wrest diplomatic and economic concessions from the international community. Several analysts believe the attacks may also have been driven by domestic politics, with the ailing Kim desperate to give a lift to his youngest son, named as heir apparent to the family dynasty in September but who has little clear support in the military.

“North Korea appears to be a failing state, attempting a questionable leadership succession. The apparently designated successor, Kim Jong-un, needs to purge the military and bring his supporters to the front. But if the purges are too visible, he could see rebellion from the military,” RAND think-tank senior defense analyst Bruce Bennet wrote.

He said the shellings and the sinking earlier this year of a South Korean navy ship “appear designed to give Kim Jong-un credibility with the military, demonstrate the empowerment of the regime, and divert the attention of the military to external enemies while the regime purges the military.”

(Reporting by Seoul bureau, Michael Martina, Aileen Wang and Benjamin Kang Lim in Beijing, Kaori Kaneko and Yoko Kubota in Tokyo, Alister Bull, Paul Eckert, Phil Stewart and Arshad Mohammed in Washington; Writing by Jonathan Thatcher; Editing by John Chalmers)

The South fired back after Tuesday’s attack and sent fighter jets to the area, close to a disputed maritime border on the west of the divided Korean peninsula and the scene of deadly clashes between the two rivals in the past.

South Korea was conducting military drills in the area at the time but said it had not been firing at the North. Pyongyang blamed Seoul for starting the fight, which killed two South Korean soldiers and wounded 17 others along with three civilians and razed scores of houses.

Calling the incident “an invasion of South Korean territory”, South Korean President Lee Myung-bak warned that future provocations could be met with a strong response, although there was no indication of immediate retaliation.

“I think enormous retaliation is going to be necessary to make North Korea incapable of provoking us again,” Lee, who has taken a tough line on North Korea, told reporters during a visit to military headquarters in Seoul.

The United States, which has 28,000 troops in South Korea, condemned the attack, but said it was too soon to discuss ways the U.S. military might deter the reclusive communist state from another strike.

U.N. Secretary General Ban Ki-moon also condemned the attack, which he called “one of the gravest incidents since the Korean War,” but urged restraint and said the two sides should resolve differences through dialogue.

ADDING TO TENSION

The incident followed revelations over the weekend that Pyongyang is fast developing another source of material to make atomic bombs, and analysts said the North may again be pursuing a strategy of calculated provocations to wrest diplomatic and economic concessions from the international community.

It also follows moves by leader Kim Jong-il to make his youngest, but unproven, son his heir apparent, leading some analysts to suggest the bombardment might in part have been an attempt to burnish the ruling family’s image with the military.

“Houses and mountains are on fire and people are evacuating. You can’t see very well because of plumes of smoke,” a witness on the island told YTN Television.

The South Korean military estimated some 100 shells landed on and near Yeonpyeong island, which lies off the west coast of the peninsula. It returned fire with 80 of its own shells.

Photographs from the island, 120 km (75 miles) west of Seoul, showed smoke rising from buildings. Two soldiers were killed and 17 wounded. Three civilians were hurt, while the rest were evacuated from the island after the attack.

The attack rattled global markets, already unsettled by Ireland’s debt woes and a shift to less risky assets.

Experts say North Korea’s Kim has for decades played a carefully calibrated game of provocation to squeeze concessions from the international community and impress his own military. The risk is that the leadership transition has upset this balance and that events spin out of control.

South Korea’s Lee said attacking civilians was unforgivable and any further aggression by Pyongyang would be severely punished.

“Our military should show this through action rather than an administrative response” such as statements or talks, said Lee, who was due to speak to U.S. President Barack Obama by phone about the incident.

But Lee made no suggestion the South would retaliate further, suggesting Seoul was taking a measured response.

North Korea, for its part, kept up the bellicose rhetoric, warning in a military communique of “merciless counter-actions” if South Korean forces violate any of its territory.

UNRESOLVED WAR

The North has a huge array of artillery pointed at Seoul that could decimate an urban area home to around 25 million people and cause major damage to its trillion-dollar economy.

The two Koreas are still technically at war — the Korean War ended only with a truce — and tension rose sharply early this year after Seoul accused the North of torpedoing one of its navy vessels, killing 46 sailors.

North Korea, which has frequently protested joint U.S.-South Korean military exercises, said its wealthy neighbor was to blame.

“Despite our repeated warnings, South Korea fired dozens of shells from 1 p.m. … and we’ve taken strong military action immediately,” its KCNA news agency said in a brief statement.

South Korea said it had been conducting military drills in the area beforehand but had fired west, not north.

The White House said Obama was “outraged” by the incident, which looked likely to complicate Washington’s campaign to persuade Pyongyang to drop its nuclear program.

“North Korea has a pattern of doing things that are provocative. This is a particularly outrageous act,” said White House spokesman Bill Burton.

But while the United States reiterated its commitment to defending the South, the Pentagon said no immediate action was planned.

“I wouldn’t say we’re looking at anything in particular at this point,” said Colonel Dave Lapan, a Pentagon spokesman.

The attack highlighted the limits of U.S. leverage with North Korea and its main ally China, with some Republican lawmakers calling for more forceful response.

“Maybe this attack will wake up American diplomats addicted to soft-line diplomacy,” Republican Congressman Ed Royce said in a statement.

With about 28,000 U.S. troops in South Korea, the two nations’ combined forces face an estimated 1 million North Korean soldiers in one of the world’s biggest standing armies.

Stephen Bosworth, the U.S. envoy on North Korea who was in Beijing for talks, said all sides agreed restraint was needed. “We both share a view that such conflict is very undesirable, and I expressed to them the desire that restraint be exercised on all sides and I think we agree on that,” he said.

China was careful to avoid taking sides, calling on both Koreas to “do more to contribute to peace.”

At the United Nations, Security Council diplomats said discussions were under way over how to take up the issue, but North Korea’s envoy said council had no business discussing the incident.

Russian Foreign Minister Sergei Lavrov called the escalation in tensions a “colossal danger.”

WON TUMBLES

News of the exchange of fire sent the won tumbling in offshore markets with the 1-month won down about four percent at one stage in NDF trading. U.S. 10-year Treasury futures rose and the Japanese yen fell.

Korean stocks traded in New York fell 4 percent, led lower by a sharp sell-off in shares of companies like Korea Electric Power and steel producer Posco.

Overall, major U.S. stock market indexes fell more than 1 percent as the rising tensions on the Korean peninsula added to worries about global economic conditions. The U.S. dollar was up 1 percent against a basket of currencies as investors sought the safety of the greenback.

The South Korean central bank, after an emergency meeting, said it planned to cooperate with the government to take measures to stabilize markets if necessary. Many traders expect South Korea’s financial markets to fall further when trading opens on Wednesday.

But analysts said the attack was not likely to escalate into a more serious military confrontation and so any market losses would be temporary. Past provocations by Pyongyang have had only a fleeting negative effect on South Korean markets.

Washington has branded the North a danger to the region and expressed concern Pyongyang would sell nuclear weapons technology to other states. It has said it was ready to return to negotiations with North Korea but wants to see more commitment to denuclearization first.

The South fired back after Tuesday’s attack and sent
fighter jets to the area, near a disputed maritime border on
the west of the divided Korean peninsula and the scene of
deadly clashes between the two rivals in the past.

South Korea was conducting military drills in the area at
the time but said it had not been firing at the North, which
recently revealed a major new aspect to its nuclear program.

Pyongyang said Seoul started the fight, which killed two
South Korean soldiers and wounded 17 others and three civilians
while sending tremors through world markets already unsettled
by Ireland’s debt woes and a shift to less risky assets.

Calling the incident “an invasion of South Korean
territory,” South Korean President Lee Myung-bak warned that
future provocations could be met with a strong response,
although there was no indication of immediate retaliation.

“I think enormous retaliation is going to be necessary to
make North Korea incapable of provoking us again,” Lee said in
a visit to military headquarters in Seoul. In another gesture,
he met with security officials in a bunker at the presidential
complex.

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For a Take A Look on Korea situation [ID:nKOREA]

Risks to watch on the Korean peninsula [ID:nRISKKR]

Reuters Insider link.reuters.com/vyr76q

Map locating Yeonpyeong: r.reuters.com/wyh76q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The United States, which has 28,000 troops in South Korea,
condemned the attack, but said it was too soon to discuss how
the U.S. military might seek to deter the impoverished,
reclusive communist state from another strike and stressed that
it was looking for a measured response. [ID:nN23180419]

The U.S. and South Korean defense chiefs agreed to
coordinate any response to the shelling, the Pentagon said.
[ID:nN23170414]

U.N. Secretary General Ban Ki-moon, a former South Korean
foreign minister, also condemned the attack but urged restraint
and dialogue between the two sides. [ID:nN23140417].

China, North Korea’s main ally, was careful to avoid taking
sides, calling on both Koreas to “do more to contribute to
peace.” [ID:nBJB004000]

ADDING TO TENSION

Analysts said they saw little chance of the United States
rushing to resume so-called six-party talks on North Korea’s
nuclear programs.

The incident followed revelations over the weekend that
Pyongyang is fast developing another source of material to make
atomic bombs, and analysts said the North may again be pursuing
a strategy of calculated provocations to wrest diplomatic and
economic concessions from the international community.

It also follows moves by leader Kim Jong-il to make his
untested youngest son his heir apparent, leading some analysts
to suggest the shelling may partly have been aimed at
burnishing the ruling family’s image with the military.

The South Korean military estimated some 100 shells landed
on and near Yeonpyeong island, which lies off the west coast of
the peninsula. It returned fire with 80 of its own shells.

Photographs from the island, 120 km (75 miles) west of
Seoul, showed smoke rising from buildings.

“Houses and mountains are on fire and people are
evacuating. You can’t see very well because of plumes of
smoke,” a witness on the island told YTN Television.

Experts say North Korea’s Kim has for decades played a
carefully calibrated game of provocation to squeeze concessions
from the international community and impress his own military.
The risk is that the leadership transition has upset this
balance and that events spin out of control.

South Korea’s Lee said attacking civilians was unforgivable
and further aggression would be severely punished.

“Our military should show this through action rather than
an administrative response,” said Lee, who was due to discuss
the incident with U.S. President Barack Obama by telephone.

But Lee made no suggestion the South would retaliate
further, suggesting Seoul was taking a measured response.

North Korea, for its part, kept up the bellicose rhetoric,
warning in a military communique of “merciless counter-actions”
if South Korean forces violate any of its territory.

UNRESOLVED WAR

The North has a huge array of artillery pointed at Seoul
that could decimate an urban area home to around 25 million
people and cause major damage to its trillion-dollar economy.

The two Koreas are still technically at war — the Korean
War ended only with a truce — and tension rose sharply early
this year after Seoul accused the North of torpedoing one of
its navy vessels, killing 46 sailors.

North Korea, which has often decried joint U.S.-South
Korean military exercises, blamed its wealthy neighbor.

“Despite our repeated warnings, South Korea fired dozens of
shells from 1 p.m. … and we’ve taken strong military action
immediately,” its KCNA news agency said in a brief statement.

South Korea said it had been conducting military drills in
the area beforehand but had fired west, not north.

The White House said Obama was “outraged” by the incident,
which looked likely to complicate Washington’s campaign to
persuade Pyongyang to abandon its nuclear programs.

“North Korea has a pattern of doing things that are
provocative. This is a particularly outrageous act,” said White
House spokesman Bill Burton.

But while Washington reiterated its commitment to defending
the South, the Pentagon said no immediate action was planned.

“I wouldn’t say we’re looking at anything in particular at
this point,” said Colonel Dave Lapan, a Pentagon spokesman.

The attack highlighted the limits of U.S. leverage with
North Korea and China, with some Republican lawmakers calling
for more forceful response.

“Maybe this attack will wake up American diplomats addicted
to soft-line diplomacy,” Republican Congressman Ed Royce said
in a statement. [ID:nN23127542]

With about 28,000 U.S. troops in South Korea, the two
nations’ combined forces face an estimated 1 million North
Korean soldiers in one of the world’s biggest standing armies.

At the United Nations, Security Council diplomats said
discussions were under way over how to take up the issue, but
North Korea’s envoy said council had no business discussing
what he called an “inter-Korean” matter. [ID:nN23144926].

Russian Foreign Minister Sergei Lavrov called the
escalation in tensions a “colossal danger.” [ID:nLDE6AM0YH]

MARKETS SHUDDER

News of the exchange of fire depressed the won in offshore
markets with the 1-month won KRW1MNDFOR= down about four
percent at one stage in NDF trading. U.S. 10-year Treasury
yields USYT10=RR fell and gold rose as investors shifted to
safe-haven assets.

Korean stocks traded in New York fell 5.4 percent, led
lower by a sharp sell-off in shares of companies like Korea
Electric Power (KEP.N: Quote, Profile, Research, Stock Buzz) and steel producer Posco (PKX.N: Quote, Profile, Research, Stock Buzz).

Overall, major U.S. stock market indexes closed more than 1
percent lower as the tensions on the Korean peninsula added to
worries about global economic conditions. [ID:nN23161256]

Many traders expect South Korea’s financial markets to fall
further when trading opens on Wednesday. [ID:nSEV000234]

Senior South Korean finance officials plan to meet before
trading opens on Wednesday to consider steps to stabilize the
market if needed, but were unlikely to take specific measures
like cash injection or changes to trading hours.
(Reporting by Seoul bureau, Michael Martina in Beijing,
Andrei Makhovsky in Minsk, and Alister Bull, Paul Eckert, Phil
Stewart and Arshad Mohammed in Washington; Writing by Andrew
Quinn; Editing by Doina Chiacu)

The South fired back after Tuesday’s attack and sent
fighter jets to the area, close to a disputed maritime border
on the west of the divided Korean peninsula and the scene of
deadly clashes between the two rivals in the past.

South Korea was conducting military drills in the area at
the time but said it had not been firing at the North.
Pyongyang blamed Seoul for starting the fight, which killed two
South Korean soldiers and wounded 17 others along with three
civilians and razed scores of houses.

Calling the incident “an invasion of South Korean
territory”, South Korean President Lee Myung-bak warned that
future provocations could be met with a strong response,
although there was no indication of immediate retaliation.

“I think enormous retaliation is going to be necessary to
make North Korea incapable of provoking us again,” Lee, who has
taken a tough line on North Korea, told reporters during a
visit to military headquarters in Seoul.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a Take A Look on Korea situation [ID:nKOREA]

Risks to watch on the Korean peninsula [ID:nRISKKR]

Reuters Insider link.reuters.com/vyr76q

Map locating Yeonpyeong: r.reuters.com/wyh76q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The United States, which has 28,000 troops in South Korea,
condemned the attack, but said it was too soon to discuss ways
the U.S. military might deter the reclusive communist state
from another strike. [ID:nN23180419]

U.N. Secretary General Ban Ki-moon also condemned the
attack, which he called “one of the gravest incidents since the
Korean War,” but urged restraint and said the two sides should
resolve differences through dialogue. [ID:nN23140417].

ADDING TO TENSION

The incident followed revelations over the weekend that
Pyongyang is fast developing another source of material to make
atomic bombs, and analysts said the North may again be pursuing
a strategy of calculated provocations to wrest diplomatic and
economic concessions from the international community.

It also follows moves by leader Kim Jong-il to make his
youngest, but unproven, son his heir apparent, leading some
analysts to suggest the bombardment might in part have been an
attempt to burnish the ruling family’s image with the military.

“Houses and mountains are on fire and people are
evacuating. You can’t see very well because of plumes of
smoke,” a witness on the island told YTN Television.

The South Korean military estimated some 100 shells landed
on and near Yeonpyeong island, which lies off the west coast of
the peninsula. It returned fire with 80 of its own shells.

Photographs from the island, 120 km (75 miles) west of
Seoul, showed smoke rising from buildings. Two soldiers were
killed and 17 wounded. Three civilians were hurt, while the
rest were evacuated from the island after the attack.

The attack rattled global markets, already unsettled by
Ireland’s debt woes and a shift to less risky assets.

Experts say North Korea’s Kim has for decades played a
carefully calibrated game of provocation to squeeze concessions
from the international community and impress his own military.
The risk is that the leadership transition has upset this
balance and that events spin out of control.

South Korea’s Lee said attacking civilians was unforgivable
and any further aggression by Pyongyang would be severely
punished.

“Our military should show this through action rather than
an administrative response” such as statements or talks, said
Lee, who was due to speak to U.S. President Barack Obama by
phone about the incident.

But Lee made no suggestion the South would retaliate
further, suggesting Seoul was taking a measured response.

North Korea, for its part, kept up the bellicose rhetoric,
warning in a military communique of “merciless counter-actions”
if South Korean forces violate any of its territory.

UNRESOLVED WAR

The North has a huge array of artillery pointed at Seoul
that could decimate an urban area home to around 25 million
people and cause major damage to its trillion-dollar economy.

The two Koreas are still technically at war — the Korean
War ended only with a truce — and tension rose sharply early
this year after Seoul accused the North of torpedoing one of
its navy vessels, killing 46 sailors.

North Korea, which has frequently protested joint
U.S.-South Korean military exercises, said its wealthy neighbor
was to blame.

“Despite our repeated warnings, South Korea fired dozens of
shells from 1 p.m. … and we’ve taken strong military action
immediately,” its KCNA news agency said in a brief statement.

South Korea said it had been conducting military drills in
the area beforehand but had fired west, not north.

The White House said Obama was “outraged” by the incident,
which looked likely to complicate Washington’s campaign to
persuade Pyongyang to drop its nuclear program.

“North Korea has a pattern of doing things that are
provocative. This is a particularly outrageous act,” said White
House spokesman Bill Burton.

But while the United States reiterated its commitment to
defending the South, the Pentagon said no immediate action was
planned.

“I wouldn’t say we’re looking at anything in particular at
this point,” said Colonel Dave Lapan, a Pentagon spokesman.

The attack highlighted the limits of U.S. leverage with
North Korea and its main ally China, with some Republican
lawmakers calling for more forceful response.

“Maybe this attack will wake up American diplomats addicted
to soft-line diplomacy,” Republican Congressman Ed Royce said
in a statement. [ID:nN23127542]

With about 28,000 U.S. troops in South Korea, the two
nations’ combined forces face an estimated 1 million North
Korean soldiers in one of the world’s biggest standing armies.

Stephen Bosworth, the U.S. envoy on North Korea who was in
Beijing for talks, said all sides agreed restraint was needed.
“We both share a view that such conflict is very undesirable,
and I expressed to them the desire that restraint be exercised
on all sides and I think we agree on that,” he said.

China was careful to avoid taking sides, calling on both
Koreas to “do more to contribute to peace.” [ID:nBJB004000]

At the United Nations, Security Council diplomats said
discussions were under way over how to take up the issue, but
North Korea’s envoy said council had no business discussing the
incident. [ID:nN23144926].

Russian Foreign Minister Sergei Lavrov called the
escalation in tensions a “colossal danger.” [ID:nLDE6AM0YH]

WON TUMBLES

News of the exchange of fire sent the won tumbling in
offshore markets with the 1-month won KRW1MNDFOR= down about
four percent at one stage in NDF trading. U.S. 10-year Treasury
futures TYc1 rose and the Japanese yen JPY= fell.

Korean stocks traded in New York fell 4 percent, led lower
by a sharp sell-off in shares of companies like Korea Electric
Power (KEP.N: Quote, Profile, Research, Stock Buzz) and steel producer Posco (PKX.N: Quote, Profile, Research, Stock Buzz).

Overall, major U.S. stock market indexes fell more than 1
percent as the rising tensions on the Korean peninsula added to
worries about global economic conditions. The U.S. dollar was
up 1 percent against a basket of currencies as investors sought
the safety of the greenback. [ID:nN23133869]

The South Korean central bank, after an emergency meeting,
said it planned to cooperate with the government to take
measures to stabilize markets if necessary. Many traders expect
South Korea’s financial markets to fall further when trading
opens on Wednesday. [ID:nSEV000234]

But analysts said the attack was not likely to escalate
into a more serious military confrontation and so any market
losses would be temporary. Past provocations by Pyongyang have
had only a fleeting negative effect on South Korean markets.

Washington has branded the North a danger to the region and
expressed concern Pyongyang would sell nuclear weapons
technology to other states. It has said it was ready to return
to negotiations with North Korea but wants to see more
commitment to denuclearization first.

The North depends heavily on China for economic and
diplomatic support and Kim Jong-il has visited China twice this
year, in part to gain backing for his succession plans.
(Reporting by Seoul bureau, Michael Martina in Beijing, Andrei
Makhovsky in Minsk, and Alister Bull and Phil Stewart in
Washington; Writing by Jonathan Thatcher and Andrew Marshall;
Editing by John Chalmers and Doina Chiacu)

The attack, with South Korea returning fire came as the reclusive state has been pressing regional powers to return to negotiations about its nuclear weapons program, and it follows revelations at the weekend that Pyongyang is fast developing another source of material to make atomic bombs.

It also follows moves by iron leader Kim Jong-il to make his youngest son heir apparent to the family dynasty.

Experts say that for decades the Korean leadership has played a carefully calibrated game of provocations to win concessions from the international community and impress his own military. The risk is that the leadership transition has upset this balance and that events spin out of control.

South Korean President Lee Myung-bak, who has pursued a hard line with the reclusive North since taking office nearly three years ago, said a response had to be firm following the attack on Yeonpyeong island, just 120 km (75 miles) west of Seoul.

The two Koreas are still technically at war — the Korean War ended only with a truce — and tension rose sharply early this year after Seoul accused the North of torpedoing one of its navy vessels, killing 46 sailors.

“Houses and mountains are on fire and people are evacuating. You can’t see very well because of plumes of smoke,” a witness on the island told YTN Television before the shelling ended after about an hour.

News of the attack rattled global markets, already unsettled by Ireland’s debt woes and shifting to less risky assets.

North Korea said its wealthy neighbor started the fight.

“Despite our repeated warnings, South Korea fired dozens of shells from 1 p.m. … and we’ve taken strong military action immediately,” its KCNA news agency said in a brief statement.

South Korea has been conducting military exercises this week but it was not clear whether there had been any drills near the island that could have triggered the incident.

Russian Foreign Minister Sergei Lavrov said the latest rise in tension represented a “colossal danger.”

China, the impoverished North’s only powerful ally, was careful to avoid taking sides, calling on both Koreas to “do more to contribute to peace.”

“China hopes that the relevant parties will do more to contribute to peace and stability in the region … it is imperative now to resume the six-party talks,” a spokesman for the Chinese Foreign Ministry, Hong Lei, told reporters.

Those talks on North Korea’s nuclear weapons program — involving the two Koreas, China, Japan, Russia and the United States — have long been on ice.

However, the reclusive North has recently been pushing to resume the talks, which previously it has used to win massive aid in return for promises to end its weapons program.

AT LEAST 200 SHELLS

YTN said at least 200 North Korean shells hit Yeonpyeong, which lies off the west coast of the divided peninsula near a disputed maritime border. Most landed on a military base there.

South Korea’s military said two soldiers were killed in the attack, 17 were wounded and three civilians were also hurt. South Korean military returned the fire and sent a jet fighter to the area.

YTN showed pictures of plumes of smoke pouring from the island and quoted a witness as saying fires were burning out of control.

WON TUMBLES

News of the exchange of fire sent the won tumbling in offshore markets with the 1-month won down about four percent at one stage in NDF trading. U.S. 10-year Treasury futures rose and the Japanese yen fell.

The South Korean central bank, after an emergency meeting,

said it planned to cooperate with the government to take measures to stabilize markets if necessary. Many traders expect South Korea’s financial markets to fall further when trading opens on Wednesday.

The attack comes just as a U.S. envoy is in Beijing on a tour of the region and is expected to ask China to use its influence to help tame North Korea.

Washington has branded the North a danger to the region and expressed concern Pyongyang would sell nuclear weapons technology to other states. It has said it was ready to return to talks but wants to see more commitment to denuclearization by the North beforehand.

The White House condemned the attack, telling the North to halt its “belligerent action” and saying it was committed to defend the South.

It has about 28,000 troops in South Korea, their combined forces facing an estimated one million North Korean soldiers who make up one of the world’s biggest standing armies.

“UNBELIEVABLE”

“It’s unbelievable,” said Zhu Feng, professor of international relations at Peking University. “Today’s news proves that North Korea, under unprovoked conditions, shot these South Korean islands. It’s reckless provocation. They want to make a big bang and force the negotiations back into their favor. It’s the oldest trick.”

The North depends heavily on China for economic and diplomatic support and its leader, Kim Jong-il, has visited China twice this year, in part to gain backing for the anointment of his son as heir.

Those ties have become a sore point with Washington after reports that North Korea appears to have made big steps toward enriching uranium, possibly using technology that passed through or even originated in China.

China has urged returning to the nuclear disarmament negotiations but has also fended off calls from the U.S. and its regional allies to use its vital food and energy aid to North Korea as a lever.

(Reporting by Seoul bureau and Michael Martina in Beijing; Writing by Jonathan Thatcher, editing by John Chalmers)