SEOUL (REUTERS) - North and South Korea are in talks to reopen a joint liaison office that Pyongyang demolished last year and to hold a summit as part of efforts to restore relations, three South Korean government sources with knowledge of the matter said.

South Korean President Moon Jae-in and North Korean leader Kim Jong Un have exchanged multiple letters since April to explore ways to improve strained ties, the sources said on condition of anonymity due to diplomatic sensitivity.

The discussions signal an improvement in ties that have deteriorated in the past year after three summits in 2018 promised peace and reconciliation.

Inter-Korea talks could also help restart stalled negotiations between Pyongyang and Washington aimed at dismantling the North's nuclear and missile programmes in return for sanctions relief.

The issue is key for Mr Moon, who is facing declining support in his final year in office. He staked his legacy on improving relations with North Korea and helped set up historic meetings between Mr Kim and then US President Donald Trump in 2018 and 2019.

The two Koreas, still technically at war after their 1950-1953 conflict ended in a ceasefire, on Tuesday (July 27) reconnected hotlines that the North severed in June last year.

Both sides are discussing rebuilding their joint liaison office at the truce village of Panmunjom on the border, two sources said.

Pyongyang spectacularly destroyed the previous office in its border town of Kaesong in 2020.

The two sides are also seeking a summit between Mr Moon and Mr Kim, but no timeframe or other details have been raised due to the coronavirus pandemic, the sources said.

North Korea has not confirmed any Covid-19 cases, but it shut borders and imposed strict prevention measures, seeing the pandemic as a matter of national survival.

"The talks are still ongoing, and Covid-19 should be the biggest factor," one source said. "A face-to-face meeting is the best, but hopefully the situation will get better."

Mr Moon's office declined comment. His press secretary, Park Soo-hyun, said on Tuesday that the issue of restoring the liaison office was to be discussed, and that the leaders have not floated plans for any summit so far.

A second source said a virtual summit could be an option, depending on whether North Korea balks at a meeting in person because of Covid-19. "If we can do that and the North has that capability, it would make a big difference, and open so many windows of opportunity, something to restart talks with the United States."

North Korea, which has not held any meetings with foreign nationals since the pandemic began, restricts outside media access, and its mission to the United Nations was not available for comment.

Mr Moon had called for a revival of the hotlines and offered a video summit with Mr Kim, but Pyongyang responded publicly with scathing criticism, saying it had no intention of talking to Seoul.

The first source said Mr Moon and Mr Kim have exchanged "candid" letters on more than 10 occasions, which led to an opening of a communication channel between Seoul's intelligence authorities and Mr Kim's sister, Ms Kim Yo Jong.

Despite "ups and downs" in the consultations, the two sides agreed at the weekend to reactivate hotlines as a first step.

Mr Kim's move reflected a willingness to respond to US overtures for talks, as the administration of President Joe Biden vowed a practical approach including not naming an envoy for North Korean human rights issues, the source said.

"There were some visible elements, including pursuing a phased, action-for-action approach, instead of a grand bargain, and appointing a nuclear negotiator, instead of a human rights envoy," the source said.

"After all, Washington has unveiled its policy and the North can't just sit idle, so inter-Korea ties came up as a starting point."

The US Embassy in Seoul declined comment, referring queries to the US State Department, which did not immediately respond to requests for comment.

US Secretary of State Antony Blinken said in June that the Biden administration was determined to appoint a North Korea human rights envoy but did not offer a timeline.

Washington supports inter-Korea engagement, and diplomacy is essential to achieving complete denuclearisation and lasting peace on the Korean peninsula, a spokesman said on Tuesday in welcoming the opening of the hotlines.

A third source said the two Koreas announced the hotline reopenings only because little progress was made over other issues, including how the North would apologise for blowing up the liaison office.

Hit by the pandemic and last year's typhoons, North Korea faces the worst economic crisis since a famine in the 1990s that killed as many as three million.

But few deaths have been reported from hunger, helped by Chinese aid and the release of military and emergency reserves, the first source said.

North Korea is expected to resume trade with China as early as August, involving cargo train services, after scrapping plans to do so in April due chiefly to concerns over more contagious Covid-19 variants, the source said.

Beijing's Foreign Ministry did not immediately respond to a request for comment, and calls to the Chinese Embassy in Seoul were unanswered.