South Korea to send aid for children in North

South Korea approved two shipments of baby formula for North Korean infants on Wednesday despite rising tensions between the neighbours after Seoul accused the North of sinking one of its naval vessels.

South Korea widened sanctions against the North last month, banning trade, travel and aid in response to the findings by an international team of investigators that Pyongyang was behind the torpedoing of the South Korean ship that killed 46 sailors.

Under the new sanctions, humanitarian aid was also suspended, with the exception of assistance intended for children.

By banning commercial trade across the border, the South has sought to squeeze the flow of cash to its destitute neighbour in the hope of extracting an admission of guilt over the ship sinking and a pledge not to attack it.

North Korea relies on China, its key ally, for most of its trade, but has seen movement of goods to the South grow in recent years, bringing about $300 million to its coffers.

The unification ministry, which oversees ties with North Korea, said it has issued permission for the two shipments of baby formula to arrive at day care centres in its northern region and near Pyongyang later in June.

South Korea has referred the case of the ship sinking to the UN Security Council, asking it to take action to deter further provocation by the North.

Pyongyang has denied any involvement in the sinking.

North Korea drove tensions to new heights in recent weeks by threatening war if Seoul imposed sanctions, denying any role in the sinking of the corvette Cheonan and accusing South Korean President Lee Myung-bak of using the incident for political gain.

The mounting antagonism between the two Koreas has unnerved investors, worried about armed conflict breaking out in the region.

Many analysts say neither side is ready to go to war, but see the possibility of more skirmishes in a disputed sea border off the west coast or along their heavily armed border buffer.