SEOUL (BLOOMBERG) - Both North Korea and left-leaning supporters of South Korean President Moon Jae-in want him to restore economic ties broken by security tensions. But pleasing them would mean angering US President Donald Trump.

On Tuesday (June 9), North Korea said it was closing down communication links set up two years ago between Mr Moon and Mr Kim Jong Un, jeopardising the South Korean leader's 2017 campaign promise to move the heavily armed rivals toward a permanent peace.

It's bad timing for Mr Moon: His ruling bloc secured a historic supermajority in National Assembly elections in April, boosting calls within his Democratic Party to mend ties with North Korea.

The problem for Mr Moon is that he doesn't have much he can offer North Korea without prompting a blowup from the Trump administration, which has repeatedly rejected South Korea's calls for sanctions relief.

The US has refused to relax United Nations penalties and other measures against the regime without greater commitments on arms reduction from Mr Kim.

Mr Woo Won-shik, a senior lawmaker and a former Democratic Party floor leader, said on Tuesday there was an "urgent need" to revive inter-Korean cooperation, arguing that failure to act now could further isolate North Korea and bring about a return to the brinkmanship of three years ago.

Mr Kim earlier this year said he would soon debut a "new strategic weapon" - part of a bid to pressure Mr Trump, who faces an election in November, back to the negotiating table.

"There are many inter-Korean projects that can proceed without breaching the existing UN sanctions regime," Mr Woo said.

The latest dust-up - triggered by South Korean activists who sent anti-Pyongyang messages in balloons across the border - comes ahead of the 20th anniversary of the first meeting between top leaders of the divided Koreas.

The summit beginning on June 13, 2000, was the biggest moment of then-President Kim Dae-jung's reconciliation effort that led to stepped up trade and joint projects and helped earn the South Korean leader the Nobel Peace Prize.

While that "Sunshine Policy" helped cool tensions, it was also criticised for providing Pyongyang's leaders with cash needed to build up its nuclear weapons programme.

Smaller measures that might allow only a trickle of foreign currency back into cash-starved North Korea also risk disappointing Mr Kim Jong Un and Mr Moon's allies, who see their current strength in Parliament as their best chance to secure lasting change.

North Korea's relations with Mr Moon haven't been the same since Mr Trump walked out of a summit with Mr Kim in February 2019 in Hanoi.

The North Korean leader was pushing a plan backed by Seoul to give up his antiquated Yongbyon nuclear facility in exchange for sanctions relief - an offer that came nowhere near the Trump administration's demand for the "final, fully verified denuclearisation of North Korea".

"It is a sense of betrayal and disappointment," said Ms Rachel Minyoung Lee, a former analyst for the US government specialising in North Korea.

"Kim Jong Un feels South Korea has misled him into believing that Yongbyon facilities were going to be enough for a deal with Trump in Hanoi."

After that, North Korea has effectively ignored Mr Moon's requests for talks, shunned his offers for aid and test-launched new ballistic missiles capable of carrying a nuclear payload to all parts of South Korea, where about 28,500 US military personnel are stationed.

North Korea didn't answer South Korea's calls made on the military line on Tuesday for the first time since the inter-Korean communication link was restored in 2018, Defence Ministry spokeswoman Choi Hyun-soo told a briefing in Seoul.

"Inter-Korean communication lines are a basic means for communication and should be kept in line with inter-Korean agreements," South Korea's Unification Ministry said in a text message to reporters.

A State Department spokesperson said the US urges North Korea to return to diplomacy and cooperation.

North Korea says it will abolish liaison office with South Korea"The United States has always supported progress in inter-Korean relations, and we are disappointed in the DPRK's recent actions," the spokesperson said, referring to North Korea by its formal name.

Mr Kim Jong Un may follow up his move to cut communications links with more missile tests, but making sure to avoid the wrath of Mr Trump.

The American President has brushed off shorter-range tests and credited his own diplomacy for stopping Mr Kim from further tests of intercontinental ballistic missiles capable of hitting the US mainland.

"Provocations like missile launches will follow, but nothing as serious as an ICBM test," said Mr Cho Han-bum, a senior research fellow at the Korea Institute for National Unification, a state-run think tank.

Mr Cho added that North Korea also didn't want to push Mr Moon too far: "The South is well aware that ending the inter-Korean relations is not something that the North wants."

Mr Moon's government said in late May said that it wanted to try to again ease travel restrictions and inter-Korean exchanges.

A similar attempt in 2018 led Mr Trump to bluntly tell Seoul that it couldn't do anything regarding sanctions "without our approval".

ALLIANCE AT RISK

Members of the Moon administration have hinted that Seoul could act unilaterally to resuscitate inter-Korean cooperation, but that would come with the enormous risk of cleaving Seoul from its alliance with Washington, said Ms Soo Kim, a Rand Corp. policy analyst who specialises in Korean Peninsula issues.

"President Moon can promise the North Koreans the earth, but realistically, he remains constrained in the way of practical measures South Korea can take - if Seoul were to be conscious of and concerned about its relations with the US," she said.

South Korean proposals blocked by the Trump administration included resuming operations at a joint factory park in the North Korean border city of Kaesong and a separate resort at North Korea's Mount Kumgang.

Both were opened in the spirit of the Sunshine Policy and later shut due to political turmoil.

While South Korea was able to win a UN sanctions waiver that led to the ceremonial sending of trains across the border about two years ago, its humanitarian assistance has dried up under Mr Trump's maximum pressure campaign.

South Korea has sent more US$3 billion (S$4.17 billion) of aid since 1995, but little of it has come under the Moon government, which sent just US$12 million in 2017 and 2018, government data shows.

'BENT OVER BACKWARDS'

Trade between the two nations has dropped to virtually zero from US$2.7 billion in 2015, or about 10 per cent of North Korea's economy.

The regime took a further hit this year when it sealed off its borders in January at the start of the Covid-19 pandemic, which slammed the brakes on other trade with countries like China.

Mr Kim Jong Un believes he doesn't have much of anything to lose by increasing pressure on Mr Moon, according to Mr Duyeon Kim, a senior adviser for North-east Asia and Nuclear Policy at the International Crisis Group.

"North Korea is raising the ante, trying to further punish, scare, and force Seoul to work harder to meet Pyongyang's demands," Mr Kim said.

"Kim Jong Un feels he bent over backwards for Moon, but believes Seoul has not reciprocated, has betrayed North Korea and the Korean race, and has no influence over Washington to deliver on its promises."