South Korea will no longer tolerate North Korea’s provocations and will change its military posture from passive defense to proactive deterrence, President Lee Myung-bak said today, detailing his country’s response to the communist regime’s attack on a patrol boat in March.

“If our territorial waters, airspace or territory are militarily violated, we will immediately exercise our right of self-defense,” Lee said in an address to the nation, televised live Monday morning.

“From this moment, no North Korean ship will be allowed to make passage through any of the shipping lanes in the waters under our control, which has been allowed by the Inter-Korean Agreement on Maritime Transportation,” Lee said. “The sea routes meant for inter-Korean exchanges and cooperation must never again be used for armed provocations.”

“In close consultations with the nations concerned, the government will refer this matter to the UN Security Council, so that the international community can join us in holding the North accountable,” Lee said. “Many countries around the world have expressed their full support for our position.”

“Trade and exchanges between the Republic of Korea and North Korea will also be suspended,” Lee said.

“However, we will continue to provide assistance for infants and children,” he said. “Matters pertaining to the Kaesong Industrial Complex will be duly considered, taking its unique characteristics into consideration.”

The joint industrial site built in the North as a symbol of reconciliation is regarded as the last bastion of the inter-Korean ties. More than 100 South Korean companies employ about 40,000 North Koreans in Kaesong. Shutting the complex will likely anger South Korean businesses that use Kaesong as an Asian exports base.

South Korea's President Lee Myung-bak says North Korea will pay the price for sinking a South Korean naval ship in March.

Mr. Lee told a nationwide television audience Monday that his government will appeal to the United Nations Security Council for sanctions against the North. He also said North Korean commercial ships will no longer be permitted to sail in South Korean waters, and that all trade and exchanges with the North will be frozen, except for a joint industrial park project.

The South Korean leader said his country will invoke its right to defend itself if Pyongyang wages aggression again. But he said Seoul is not looking for a military confrontation.

South Korea has suspended trade with the North and demanded an apology, after a report blamed Pyongyang for sinking a Southern warship.

President Lee Myung-bak said those who carried out the attack on the Cheonan, which killed 46 sailors, must be punished.

He also announced that Northern ships would be banned from Southern waters.

Meanwhile, US Secretary of State Hillary Clinton has urged China to co-operate with the US on North Korea.

Seoul shares slipped to hit a fresh three-month low on Monday amid heightened tensions with North Korea, but firm gains in shipbuilders such as Hyundai Heavy (009540.KS) helped the market.