SEOUL - The two Koreas exchanged artillery shots on Wednesday in a brief firefight that resulted in no damage but stoked tension on the peninsula.
The fight comes as North Korea appears ready to ease security concerns in economically vibrant North Asia by ending its boycott of international nuclear disarmament talks. It has said first it must have talks with the United States on a peace deal to replace an armistice that ended the 1950-53 Korean War.
Here are some questions and answers about the reasons behind North Korea's tactics:
DOES IT WANT WAR OR PEACE?
North Korea wants a little of both. It is trying to signal it is ready to return to the stalled nuclear talks, but on terms set by Pyongyang. The threats against the South, a U.S. military ally that hosts about 28,000 U.S. troops, serve as a reminder to global powers to pay attention to its demands because the North has enough military might to wreck the region's economy, which is equal to about one-sixth of the global economy. Wednesday's artillery exchange may have been meant to underline the North's insistence that a permanent peace accord is needed to replace the fraying truce that ended the 1950-53 Korean War.
WHAT WILL IT TAKE FOR NORTH KOREA RETURN TO NUCLEAR TALKS?
The United States and the other four countries in the long-running nuclear negotiations with the North will have to address Pyongyang's demands for a peace deal, an end to U.N. sanctions imposed after its nuclear test in May 2009 and aid to prop up its broken economy.
Washington has said it will not bend, but analysts say it may allow a face-saving gesture such as raising the priority of the North's demands in the six-country disarmament-for-aid talks if they resume.
WHY DOES NORTH KOREA KEEPING BRINGING UP A PEACE DEAL?
The heavily sanctioned state would be able to seek aid from global financial institutions including the World Bank by reaching a peace deal. It would also put pressure on Washington to meet the North's long-standing demand to remove the U.S. troops from South Korean soil.
The North also hopes to delay any disarmament commitments it is required to make by saying peace talks must come first.
In the long run, North Korean leader Kim Jong-il's military-first rule would probably be undermined by a peace deal.
A state of war is essential for Kim. He has asked the people in his impoverished state for years to accept sacrifices in order to help him buy weapons and build a nuclear arms program to prevent a U.S. invasion. Kim would put his paranoid nationalist rule at risk by losing enemies.
WHAT IS THE IMPACT ON MARKETS?
Short-lived military moves that result in little to no damage, such as the exchange of artillery fire on Wednesday, usually lead to quick blips in foreign exchange and stock trading that have no lasting impact. They dampen sentiment and serve as a reminder of the risks of investing in the troubled peninsula. Financial analysts say markets would only really worry if there were signs of serious armed confrontation.
HOW WILL THIS PLAY OUT?
Regional powers are hoping economic pressure forces the destitute North back to pick up where it left off a year ago in the dormant nuclear deal. This means taking apart its plant that produces arms-grade plutonium and allowing in international nuclear inspectors.
North Korea will likely keep using military intimidation to better its bargaining position. Its upper limit would be another nuclear test but it will not spark an all-out fight with South Korea and the United States. This would be a suicidal move for leader Kim, because his obsolete armed forces may be able to damage the South and Japan in a quick strike but would fall in short time in a war.
(Editing by Jonathan Thatcher and Bill Tarrant)