By Ju-min Park and Jack Kim
SEOUL (Reuters) - North Korea said on Monday it had told the United States it will cut the only channel of communication between them, at the United Nations in New York, after Washington blacklisted leader Kim Jong Un last week for human rights abuses.
All matters related to the United States, including the handling of U.S. citizens detained by Pyongyang, will be conducted under its "wartime law," its official KCNA news agency said.
The move was the latest escalation of tension with the isolated nuclear-armed country, which earlier on Monday threatened a "physical response" after the United States and South Korea said they would deploy the THAAD missile defense system in South Korea.
North Korea said last week it was planning its toughest response to what it deemed a U.S. "declaration of war" after Washington announced sanctions on Kim Jong Un.
A U.S.-based North Korea monitoring project, 38 North, said on Monday that satellite images from July 7, a day after the sanctions announcement, showed a high level of activity at North Korea's nuclear test site, but it is unclear whether this was for maintenance or preparation for a fifth nuclear test.
"As the United States will not accept our demand for the immediate withdrawal of the sanctions measure, we will be taking corresponding actions in steps," KCNA said on Monday.
"As the first step, we have notified that the New York contact channel that has been the only existing channel of contact will be completely severed," it said.
"The Republic will handle all matters arising between us and the United States from now on under our wartime laws, and the matters of Americans detained are no exception to this."
U.S. State Department spokesman John Kirby declined to comment specifically on the North Korean statement but said such rhetoric "obviously is not doing anything to ease tensions."
Two Americans are currently known to be detained in North Korea. Otto Warmbier, a University of Virginia student, was sentenced in March to 15 years of hard labor for trying to steal an item with a propaganda slogan and Korean-American Kim Dong Chul is serving a 10-year sentence for espionage, according to North Korean state media.
Kirby repeated a call for North Korea to release the Americans from "improper and unjust detention" and stressed the need for it to adhere to its Vienna Convention commitment to allow consular access.
North Korea has previously indicated that wartime laws would mean detainees will not be released on humanitarian grounds.
This could delay release of the Americans, giving North Korea one of its last bits of leverage in negotiations with the United States, said T. Kumar, Amnesty International USA's international advocacy director.
"The tension is at one of the highest levels now, and one of the areas they have control over is with the detainees," Kumar said. "They will use them as bargaining chips to get some advantages."
Kumar said he did not think the prisoners would be affected in other significant ways.
North Korea and the United States remain technically at war because the 1950-53 Korean War, in which Washington sided with South Korea, ended only with a truce.
The so-called New York channel, via North Korea’s mission to the United Nations, has been an intermittent point of contact between North Korea and the United States, which do not have diplomatic relations.
It has been used in the past to exchange messages and to hold discussions, including over detainees held by North Korea. However, the release of past U.S. detainees has generally come only after visits to Pyongyang by high-profile U.S. leaders, including former Presidents Bill Clinton and Jimmy Carter and Director of National Intelligence James Clapper.
Warmbier's mother, Cynthia, declined to comment when reached by telephone on Monday.
Simon Park, senior minister at the Korean Central Presbyterian Church in Centreville, Virginia, who worked with Kim Dong Chul for several years, said he was concerned for him, and for his wife and their two children who are living in China.
"He is currently on a hard labor sentence and whether this will change or not, we are not sure," Park said, adding that he last spoke with Kim shortly before his imprisonment.
"All we can do is pray for his family," Park said.
'DECLARATION OF WAR'
On Saturday, North Korea test-fired a ballistic missile from a submarine, but it appeared to have failed after launch.
The United States and South Korea said on Friday the Terminal High Altitude Area Defense (THAAD) anti-missile system would be used to counter North Korea's growing nuclear and ballistic missile capabilities.
The announcement was the latest move by the allies against North Korea, which conducted its fourth nuclear test this year and launched a long-range rocket, resulting in tough new U.N. sanctions.
"There will be physical response measures from us as soon as the location and time that the invasionary tool for U.S. world supremacy, THAAD, will be brought into South Korea are confirmed," North Korea's military said early on Monday.
"It is the unwavering will of our army to deal a ruthless retaliatory strike and turn (South Korea) into a sea of fire and a pile of ashes the moment we have an order to carry it out," it said in a statement carried by KCNA.
North Korea frequently threatens to attack South Korea and U.S. interests in Asia and the Pacific.
South Korean Defence Ministry spokesman Moon Sang-gyun warned North Korea not to take "rash and foolish action" or it would face "decisive and strong punishment from our military."
The move to deploy THAAD also drew a swift and sharp protest from China.
Chinese Foreign Minister Wang Yi said on Saturday that THAAD exceeded the Korean peninsula's security needs and suggested there was a "conspiracy behind this move."
South Korean President Park Geun-hye said on Monday THAAD was purely aimed at countering the threat from North Korea.
A South Korean Defence Ministry official said selection of a site for THAAD could come "within weeks," and the allies were working to have it operational by the end of 2017.
(Additional reporting by James Pearson in Seoul, Laila Kearney and Angela Moon in New York and David Brunnstrom in Washington; Editing by Toni Reinhold and James Dalgleish)