South Korea has pulled workers out and suspended operations in an industrial complex it shares with North Korea near the border between the two countries.
According to North Korea, this action is being taken as a dangerous “declaration of war”.
The dispute arose when South Korea indicated it would cut off funds for rocket and nuclear development following North Korea’s recent rocket launch.
The North has said that Pyongyang will deport thousands of South Koreans from Kaesong and that their assets would be frozen.
The government in North Korea inflamed the conflict when it insulted and threatened South Korea’s female president.
This recent dispute puts an end to one of the last lifelines between the two countries, who have been at odds since the creation of the two nations after the Korean War in 1953.