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How will North Korea respond to South Korea's threats?

A third nuclear test and naval confrontations in the Yellow Sea are likely, say analysts, in response to South Korean President Lee Myung-bak's announcement Monday of retaliatory measures against North Korea for torpedoing the navy ship Cheonan.

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“From this time on the capacity of the president is tested,” says Paik Hak Son, North Korea analyst at the Sejong Institute here. “We are dealing with political and security implications, China and North Korea on one side and the U.S., Japan and South Korea on the other side. It will be a serious and difficult task.”

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The question now is how much more China will be willing to do to make up for South Korean economic pressure. North Korea exports to South Korea, including seafood, sand, minerals and clothing items, exceed its imports from the South by about $200 million.

Another issue is whether North Korea will shut South Korean factories in the Kaesong Economic Complex just above the line with South Korea about 40 miles north of Seoul. North Korea makes about $50 million a year from the zone, including pay for about 42,000 workers in the zone that the workers never see. With the cutoff of trade and South Korean investment in the North, the zone remains the only real point of inter-Korean relations.

Analysts disagree, however, on the extent to which North and South Korea will be willing to risk more clashes – or why North Korea staged the attack on the Cheonan. South Korea has a gross domestic product many times that of North Korea but faces massive losses if North Korea ever makes good on threats to turn Seoul into "a sea of fire."

“I think we are going to see something big,” says Brian Myers, a professor at Dongseo University in Pusan and author of “The Cleanest Race,” a critical look at North Korea. “The simple fact of Lee Myung-bak’s standing up to the North Koreans is in itself a threat to them.”

But Andrei Lankov, a professor at Kookmin University in Seoul and author of a number of books on North Korea, adopts a more sanguine view. Lee “looked bellicose and tough without doing anything,” he says. “He knew perfectly well that no revenge is possible. It will scare away investors. The best policy is to wait until emotions calm down.”