North Korea releases South Korean worker held since March

By Jon Herskovitz

SEOUL (Reuters) – North Korea on Thursday released a South Korean worker it had held for nearly five months for allegedly insulting its leaders in a rare conciliatory gesture likely to ease tension between the rival states.

The release could also lead to restored business ties with South Korea's giant Hyundai Group and calm investors worried about troubles spinning out of control.

The worker named Yoo Seong-jin had crossed back into the South, South Korean officials said. He has yet to make a statement.

He had been held since late March at a joint factory enclave in the North Korean border city of Kaesong run by a Hyundai affiliate where South Korean firms use cheap North Korean labor and land to make goods.

Yoo's release comes after former U.S. President Bill Clinton last week visited North Korea where he met leader Kim Jong-il and won the freedom of two U.S. journalists also held since March for suspected illegal entry.

Hyundai Chairwoman Hyun Jeong-eun arrived in Pyongyang on Monday to seek the Yoo's release and the resumption of tourism to the Mount Kumgang resort in North Korea.

Hyundai has invested hundreds of millions of dollars in the resort, whose operations were suspended a year ago, and the factory enclave in the North Korean border city of Kaesong, which is the last major economic project between the two Koreas.

The North has raised tension in recent months with a nuclear test, ballistic missile tests and threats to attack its capitalist neighbor.

The two Koreas are technically still at war after their 1950-53 Korean conflict ended in a truce, not a peace treaty.

PROPAGANDA VICTORIES

Analysts have been eyeing a possible meeting between reclusive leader Kim and the Hyundai chairwoman, saying it could signal the North seeks to defrost ties with the South.

"North Korea is hoping for a monetary link that could mean more cooperation in the Kaesong complex, restarting tourism at the Kumgang resort or stopping South Korea's anti-North movement," said Cho Myung-chul, an expert on the North's economy at the Korea Institute for International Economic Policy.

Hyun, one of the few South Korean executives to hold direct discussions with Kim, extended her planned visit likely in order to arrange another meeting with the North Korean leader.

Pyongyang has been angered at the policies of South Korean President Lee Myung-bak who took office last year and ended unconditional aid. He instead tied handouts to steps the North makes in reducing its security threat.

"Our government will continue with a consistent North Korean policy," a South Korean presidential Blue House official said. "Although it is a bit late, it is a good thing that Mr. Yoo is able to return to his family."

The North's propaganda machine will portray the trips by Clinton and Hyun as leaders paying tribute to Kim, analysts said.

This will help erase doubts at home about his grip on power after Kim, 67, was suspected of suffering a stroke last year. It could also help him press forward with his succession plans.

Repairing ties with Hyundai would bolster the North's state coffers, hit by U.N. sanctions for its nuclear test as well as a cut in aid from the South, which once sent handouts equal in value to about 5 percent of the North's yearly economy.

North Korea's battered economy is just two percent of the size of the South. The U.N. sanctions were aimed at halting its exports of missiles and arms, the few items it can sell abroad to earn hard currency.

North Korea, which makes tens of millions of dollars from the Kaesong factory park, used to receive a steady stream of cash from the Kumgang resort.