North Korea on Friday pulled out of a liaison office with the South, in a major setback for Seoul, just hours after the United States imposed the first new sanctions on the North since the second US-North Korea summit broke down last month. North Korea said it was quitting the joint liaison office set up in September in the border city of Kaesong after a historic summit between leader Kim Jong Un and South Korea's President Moon Jae-in early last year. "The North's side pulled out after conveying to us that they are doing so on the instructions from a higher level, during a liaison officials' contact this morning," South Korea's Vice Unification Minister Chun Hae-sung told a briefing. South Korea regrets the decision and urged a swift normalization of the arrangement, Chun said, adding the South would continue to staff the office, set up as a regular channel of communication to ease hostility between the rivals, which technically remain at war. The move came after the United States on Thursday blacklisted two Chinese shipping companies it says helped North Korea evade sanctions over its nuclear program and cited 67 vessels it said engaged in illicit trade helping the North. It was the first such step since a second meeting between President Donald Trump and North Korean leader Kim Jong Un in Hanoi broke down over conflicting demands by the North for relief from sanctions and from the United States for Pyongyang to give up its nuclear weapons. The North's withdrawal from the office was another blow to Moon, who has seen his standing as a mediator between Pyongyang and Washington deteriorate and divisions grow within his government over how to break the impasse. Moon's administration had touted the office as a major feat resulting from his own summit with Kim last year despite US concerns about possible loosening of sanctions. The South's Chun said he would not directly link the North's move to the failed Hanoi summit. But experts saw a pattern in the North lashing out against the South when its crucial strategic position with Washington is in jeopardy. "The North sees its nuclear issue and ties with the United States as a matter of greater strategic importance, so when they try to assert its position, they sacrifice the ties with the South, which is considered inferior," said Shin Beom-chul of the Asan Institute for Policy Studies in Seoul. Moon's office reacted by holding an urgent meeting, headed by his national security adviser, to discuss the withdrawal. The won weakened about 0.4 percent against the dollar in non-deliverable forward (NDF) trade after the news. The US Treasury Department identified two Chinese firms for new sanctions - Dalian Haibo International Freight Co Ltd and Liaoning Danxing International Forwarding Co Ltd — which had helped the North evade US and international sanctions, it said. It also cited 67 vessels for engaging in illicit transfers of refined petroleum with North Korean tankers or facilitating the export of the North's coal. The US sanctions prohibit US dealings with the designated companies and freezes any assets they have in the United States. "The United States and our like-minded partners remain committed to achieving the final, fully verified denuclearization of North Korea and believe that the full implementation of North Korea-related UN Security Council resolutions is crucial to a successful outcome," Treasury Secretary Steven Mnuchin said in a statement. The latest sanctions showed there was some "leakage" in North Korea sanctions enforcement by China, but it was mostly abiding by UN resolutions, a senior US official told reporters on condition of anonymity. — Reuters
