North Korea seized South Korean machinery and manufactured goods Thursday at a jointly run industrial park on their border in a riposte to the South's decision to order all its citizens home from the site.
Along with a North Korean decision to switch off both its high-level telephone hotlines to the South, the closure of their main point of business exchange reflects the bitterness between the two governments since a nuclear test and a long-range rocket test by Pyongyang.
First, South Korea announced it was withdrawing its staff as a protest. Then North Korea's KCNA news agency reported Pyongyang was putting the complex under military control and giving its South Korean staff until 5 pm Thursday to get out.
Within hours, all the South Korean staff at the Kaesong joint industrial complex, which lies in the communist North, had left, the government in Seoul said.
The Kaesong factory estate, only a few kilometres from the heavily militarized border, served as a window to the outside world for the reclusive North and earned scarce foreign currency for Pyongyang.
Some 54,000 low-paid North Koreans work in more than 124 factories, which produce textiles, clothes, household appliances and parts for machines, cars and semiconductors. Their wages were paid directly to the North's government. Construction of the site began in 2004.
A statement by Pyongyang's agency for dealings with the south, the Committee for the Peaceful Reunification of Korea (CPRK), said: "It will completely freeze all assets including equipment, materials and products of the South Korean enterprises ... The persons to be expelled are not allowed to take things out of the zone, except for their personal belongings."
Once they had left, the North's military communication and Panmunjom hotlines to the south were to be cut off, the agency said.
On January 6, North Korea carried out its fourth nuclear test since 2006. It launched a satellite into orbit on Sunday using a rocket that could also serve as a long-range ballistic missile.
Using its usual heightened language, the CPRK said Seoul's pullout was "an end to the last lifeline of north-south relations" and "a dangerous declaration of war" which would cost the south and its businesses dearly.
Western countries and the UN Security Council have condemned the launch as a test of nuclear-capable technology and a violation of previous agreements, and threatened tighter sanctions against the regime.
In New York, British ambassador Matthew Rycroft said the Security Council was working on passing a resolution to strengthen sanctions on North Korea "as soon as possible."
"We are working with our colleagues on the Security Council to secure as tough a possible strengthening of sanctions regime that will go beyond traditional non-proliferation areas in order to demonstrate the seriousness of the test," Rycroft said.
The US Senate late Wednesday approved legislation for stricter measures by US authorities against efforts to help North Korea's nuclear programme or other violations of the sanctions. The US House must still pass the same measure.