SEOUL, South Korea North Korea said Monday it will recall 51,000 North Korean workers and suspend operations at a factory complex it has jointly run with South Korea, moving closer to severing its last economic link with its rival as tensions escalate.
The statement from Kim Yang Gon, secretary of a key decision-making body, the Central Committee of the Workers' Party of Korea, did not say what would happen to the 475 South Korean managers still at the Kaesong industrial complex.
The statement comes amid weeks of North Korean war threats and other efforts to punish South Korea and the U.S. for ongoing joint military drills. North Korea is also angry over the U.S.-led push for U.N. sanctions over its Feb. 12 nuclear test.
The complex combines cheap North Korean labor and South Korean know-how and technology. It is the last remaining inter-Korean rapprochement project from previous eras of cooperation.
North Korea closed the border to northbound South Korean managers and cargo last week, though managers already there were allowed to stay. About a dozen of the more than 120 South Korean companies at Kaesong have already shut down because they can no longer get needed supplies.
"The zone is now in the grip of a serious crisis," Kim said, according to state media. He said it "has been reduced to a theater of confrontation with fellow countrymen and military provocation, quite contrary to its original nature and mission."
"It is a tragedy that the industrial zone which should serve purposes of national reconciliation, unity, peace and reunification has been reduced to a theater of confrontation between compatriots and war against the North," Kim said in remarks carried by the Korean Central News Agency.
South Korea's finance minister, Hyun Oh-seok, said Monday that it is "quite ridiculous" for North Korea to be closing the border at Kaesong. "North Korea has nothing to gain from this kind of things," he said at a news briefing.
Hyun said the government is looking at ways to help Kaesong firms.
The complex combines cheap North Korean labor and South Korean know-how and technology. Most of the employees at Kaesong are women. The complex is the biggest provider of jobs in Kaesong, the country's third-largest city. Shoes and clothing make up 70 percent of the goods produced; the rest are largely chemical and electrical products.
Kaesong is a rare source of foreign cash for North Korea. South Korea's Unification Ministry estimates that North Korean workers in Kaesong received $80 million in salary in 2012.
North Korea objects to portrayals in the South of the zone being crucial to the impoverished country's finances. Kim said North Korea "gets few economic benefits from the zone while the south side largely benefits from it."
North Korea has unnerved the international community by orchestrating an escalating campaign of bombast in recent weeks. It has threatened to fire nuclear missiles at the U.S. and claiming it had scrapped the 1953 armistice that ended fighting in the Korean War.
The threats against the United States are widely dismissed as hyperbole -- analysts say they've seen no evidence North Korea can build a warhead small enough to put on a missile that could hit the U.S. mainland. A direct attack on the U.S. or its allies would result in retaliation that would threaten the existence of the ruling Kim family in Pyongyang. But there are fears the North could launch a smaller-scale attack. Pyongyang recently suggested that foreign diplomats based there leave the country by April 10.
In the 16 months young leader Kim Jong Un has led the authoritarian nation, he also has conducted a nuclear test and launched two long-range rockets, though only one was successful. North Korea said the rockets were satellite missions, but the U.S., South Korea and others say they were a covert test of banned ballistic missile technology.
Separately, a top South Korean official said Monday he misspoke earlier in the day when he told lawmakers there is an "indication" that North Korea is preparing for a nuclear test. But that doesn't change what Seoul has been saying for months: that Pyongyang has already prepared a tunnel for a nuclear blast and can use it whenever it wants.
When a lawmaker asked whether there was an indication of increased personnel and vehicles at the North's nuclear test site, Unification Minister Ryoo Kihl-jae said, "There is such an indication." He said he couldn't say more because it involved confidential intelligence.
The comments in a parliamentary session were recorded on video, but Ryoo later told lawmakers he couldn't remember making them and didn't mean to say them. He said he was "startled" by reports carrying his earlier comments.
A Unification Ministry official said Ryoo had intended to say that North Korea has long been ready to conduct a nuclear test. She spoke on condition of anonymity because she wasn't authorized to speak publicly about the matter.
After Ryoo's initial comments, South Korean Defense Ministry spokesman Kim Min-seok said there are vehicle and personnel activities at the northeastern test site but they are seen as "usual" activities, not an "indication for a nuclear test." Kim said North Korea can conduct a nuclear test anytime if decides to do so.
South Korea has said the North prepared two tunnels for a nuclear test, but used only one Feb. 12.
The confusion over a possible nuclear test came a day after another top South Korean official said a North Korean missile test may be in the works around Wednesday.
Either a nuclear test or a missile test would escalate tensions that have been rising for weeks on the Korean Peninsula, and would likely invite a new round of U.N. Security Council sanctions over North Korea's nuclear and rocket activity. The U.S. and South Korea have been raising their defense posture, and foreign diplomats were considering the warning from Pyongyang that their safety in North Korea could not be guaranteed beginning Wednesday.
North Korea's warning to diplomats prompted South Korean President Park Geun-hye's national security director to say that Pyongyang may be planning a missile launch or another provocation around Wednesday, according to presidential spokeswoman Kim Haing.
During a meeting with other South Korean officials, the official, Kim Jang-Soo, also said the notice to diplomats and other recent North Korean actions are an attempt to stoke security concerns and to force South Korea and the U.S. to offer a dialogue. Washington and Seoul want North Korea to resume the six-party nuclear talks -- which also include China, Russia and Japan -- it abandoned in 2009.
The roughly two dozen countries with embassies in North Korea appeared to be staying put, for now at least.
Sweden, which looks after U.S. interests in North Korea because Washington and North Korea lack diplomatic relations, and Brazil have no plans to withdraw any diplomats from Pyongyang at this stage, according to their foreign ministries Sunday. Brazil said it is keeping a close eye on the situation but at this time see no reason to change the decision. There has been no advisory that staff at the Egyptian Embassy will leave or suspend their work.
The Pentagon has strengthened missile defenses and made other decisions to combat the potential threat, and postponed a missile test, scheduled for this week in California, to avoid raising tensions further. U.S. Gen. Martin Dempsey, the Joint Chiefs of Staff chairman, said Sunday he doesn't believe North Korea will engage in military action soon, "but I can't take the chance that it won't."
Dempsey said the U.S. has been preparing for further provocations or action, "considering the risk that they may choose to do something" on one of two nationally important anniversaries -- April 15, the birth of North Korean founder Kim Il Sung, and April 25, the creation of the North Korean army.
Tensions between Seoul and Pyongyang led South Korea's Joint Chiefs of Staff to announce Sunday that its chairman had put off a visit to Washington. The U.S. military said its top commander in South Korea had also canceled a trip to Washington.
The South Korean defense minister said Thursday that North Korea had moved a missile with "considerable range" to its east coast, possibly to conduct a test launch. His description suggests that the missile could be the Musudan missile, capable of striking American bases in Guam with its estimated range of up to 2,490 miles.
Chinese President Xi Jinping said Sunday -- without specifically mentioning North Korea -- that no one country should be allowed to upset world peace.
"The international community should advocate the vision of comprehensive security and cooperative security, so as to turn the global village into a big stage for common development rather than an arena where gladiators fight each other. And no one should be allowed to throw the region, or even the whole world, into chaos for selfish gains," Xi said at the Boao Forum for Asia, a China-sponsored talk shop for the global elite. He said China would work to reduce tensions over regional hotspots.
Seoul and Washington are taking the threats seriously, though they say they have seen no signs that Pyongyang is preparing for a large-scale attack.
Kim Jang-soo, the national security director, said the North would face "several-fold damages" for any hostilities. Since 2010, when attacks Seoul blames on North Korea killed 50 people, South Korea has vowed to aggressively respond to any future attack.
In recent weeks, the U.S. has followed provocations from North Korea with shows of force connected to the joint exercises with South Korea. It has sent nuclear capable B-2 and B-52 bombers and stealth F-22 fighters to participate in the drills.
In addition, the U.S. said last week that two of the Navy's missile-defense ships were moved closer to the Korean Peninsula, and a land-based missile-defense system is being deployed to the Pacific territory of Guam later this month. The Pentagon last month announced longer-term plans to strengthen its U.S.-based missile defenses.
North Korea successfully shot a satellite into space in December and conducted its third nuclear test in February. It has threatened to launch a nuclear attack on the United States, though many analysts say the North hasn't achieved the technology to manufacture a miniaturized nuclear warhead that could fit on a long-range missile capable of hitting the U.S.
© 2013 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.