North Korea on Monday made good a threat to cut off a Red Cross hotline in the truce village of Panmunjom. The move came as South Korea and the U.S. started their annual joint military drills.

The North's official Rodong Sinmun daily carried pictures of battleships, fighter jets and armored vehicles and said, "The time has come to fight the last decisive battle."

But there were no other provocations, and the joint-Korean Kaesong Industrial Complex, where about 800 South Koreans work, operated normally.

Another military hotline in the western coastal area also remains operative.

The Kaesong industrial park is an important source of hard currency for North Korea as international sanctions are being tightened, though the North has once or twice held staff hostage or told South Korean staff to leave.

A Unification Ministry official said, "The North's attitude has changed since its sinking of the South Korean Navy corvette Cheonan and shelling of Yeonpyeong Island in 2010" after Seoul warned it could close the industrial park as a way to impose sanctions.

Seoul concluded at the time that the US$500 million cost of closing the industrial park was bearable.

Pyongyang pockets some $90 million in cash each year from wages for about 53,500 North Korean workers. The regime cannot afford to lose that amount of hard currency.

If the industrial park stops operating, some 250,000 to 300,000 residents in Kaesong and nearby areas, who depend on it for their livelihood, would suffer great difficulty.

Fighter jets stand ready for joint annual military exercises between South Korean and U.S. troops at Osan Air Base in Pyeongtaek, Gyeonggi Province on Monday.

The regime also left the inter-Korean air traffic control hotline intact. The hotline is used to exchange information needed for the control of foreign civilian airplanes flying between the flight information regions of the two sides.

One security official said the reason is probably also money. Some 30 foreign airplanes a day pass through North Korean airspace with the help of inter-Korean air traffic control and the North is paid an overflight fee of $305 to $890 per aircraft. Per year, it makes $6-$9 million from the fees.

"It doesn't look like the North will take any drastic action any time soon," a senior Defense Ministry official speculated.

"It seems that Pyongyang mainly wants attention by ratcheting up a sense of crisis, but it doesn't want to lose income," said Shin Beom-chul of the Korea Institute for Defense Analyses.

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