SEOUL - NORTH Korea on Monday clamped down on its border with the South, eliminating tours to a historic city, halting a train service and restricting access to a joint factory park just north of the border.

Below are some questions on the latest move:

Q - Why would destitute North Korea want to clamp down on ties with South Korea, a major aid donor?

A - North Korea has seen the billion of dollars it once received in unrestricted aid cut ever since conservative Lee Myung-bak became president of the South in February. The North, which is used to economic hardship, feels there is little left to lose by cutting ties but perhaps a lot to gain by increasing pressure on Lee, which might force him to give in.

Q - What if South Korea does not give in?

A - Cash-starved and food-short North Korea has already lost out on massive food and fertiliser aid from the South as well as tens of millions of dollars in foreign currency it gained through inter-Korean cooperation projects such as tourism.

But the North has found alternative sources and it could be looking for more.

The United States has stepped in and pledged food aid to North Korea about equal to what the South used to send. The United States has taken the North off its terrorism blacklist as a reward for progress in nuclear disarmament talks, which also brings the removal of some trade sanctions and the chance for more international commerce.

Q - How much political pressure is South Korea facing?

A - Mr Lee is not facing any significant or immediate political pressure at home to change policy towards North Korea.

According to a survey last month, about half of South Koreans said they supported Mr Lee's policies toward the North.

Analysts said that while the public would like to see less conflict with their neighbour, most South Koreans are not interested in sending massive amounts of money across the border while they are battling a financial crisis at home.

Q - How do the nuclear talks fit into this?

A - North Korea may be hoping that progress it makes in nuclear disarmament talks with five regional powers that resume next week will lead to more international commerce flowing its way.

North Korea may also be hoping to isolate South Korea in the discussions and drive a wedge between Seoul and its ally Washington, which may dispense a few more sweeteners to Pyongyang in the waning days of the Bush administration.

Q - How far will North Korea go?

A - The North, which tested a nuclear device in October 2006, could try to ratchet up security concerns on the peninsula through a minor military scuffle with the South, test-firing its missiles or with another nuclear test. The two Koreas have not officially ended their 1950-53 war.

North Korea may be reluctant to pull the plug on Kaesong because it would tell the world that its reputation as a capricious business partner is well founded, which would hurt Pyongyang's recent campaign to seek foreign investment.

Q - What are the risks to investors?

A - South Korean markets, hardened to speculation about the hermit state, have shown little reaction to the border flare up.

But investors have said they serve as reminder of the risks of living next door to the mercurial state, whose proximity keeps the South's credit rating a few levels below where it might normally expect to be. -- REUTERS