Pyongyang is seizing five South Korean properties at a joint tourism zone in North Korea. Tensions over the zone have been building for nearly two years. The North may confiscate more properties.
North Korea referred to the sinking of a South Korean navy ship as it blamed the South Friday for its decision.
In addition to seizing five properties at the Mount Kumgang resort, Pyongyang said it will freeze all remaining South Korean properties there and will expel the South's management personnel. The North says it will either take possession of the properties, or hand them over to new management from another country.
The South Korean navy corvette "Cheonan" was sunk last month near a disputed North-South maritime border. While it is still under investigation, many officials in the South have speculated a North Korean torpedo or mine may be responsible.
However, the South has not directly accused the North. Despite that, on Friday Pyongyang accused Seoul of "deliberately linking the sinking of its warship" to North Korea.
"Unacceptable" and "unfair" are just two of the adjectives South Korean Unification Ministry spokesman Chun Hae-sung used to describe the North's actions.
He says such "irresponsible, irrational conduct" completely blocks all of South Korea's efforts to guarantee safety at Kumgang. The illegitimate action, he says, fundamentally damages the North-South relationship and will be dealt with sternly.
South Korea built and funded the tourism zone to encourage North-South cooperation after a historic 2000 summit brought the two sides closer.
However, Seoul suspended tours after a North Korean soldier shot a visiting South Korean woman in the back in July of 2008. She apparently had strayed outside the usual tourist areas.
The South refused to resume tours until the North fully apologized for the incident, cooperated in a joint investigation, and put guarantees in place to ensure such a killing never happened again. North Korea says it has done enough to address Seoul's concerns.
Tension over the area rose in recent months as North Korea reeled from what economists describe as a "fiasco" resulting from an attempt at currency reform. Pyongyang became adamant that South Korea resume the tours, which raised millions of dollars a year for the North.
Scott Snyder, director of the Center for U.S.-Korea Policy, warned recently that Pyongyang's stance on Kumgang could make things worse for its cash-strapped economy.
"North Korean threats to pull out of its contract with Hyundai Asan and Mount Kumgang … would send the wrong message about attracting foreign investment from the outside world," said Scott Snyder.
In addition to a spa and a performance center, one of the properties North Korea seized Friday was a Red Cross reunion center for families divided by the 1950s Korean War. That makes prospects all the more bleak that separated relatives - many of whom are more than 70-years-old - will ever see each other again.