SEOUL, South Korea - Relations on the divided Korean peninsula plunged to their lowest point in a decade Tuesday when the North declared it was cutting all ties to Seoul as punishment for blaming the communists for the sinking of a South Korean warship.

The announcement came a day after South Korea took steps that were seen as among the strongest it could take short of military action. Seoul said it would slash trade with the North and deny permission to its cargo ships to pass through South Korean waters. It also resumed a propaganda offensive - including blaring Western music into the North and dropping leaflets by balloon.

North Korea said it was cutting all ties with the South until President Lee Myung-bak leaves office in early 2013, the official Korean Central News Agency said in a dispatch monitored in Seoul late Tuesday.

The North's Committee for the Peaceful Reunification said it would expel all South Korean government officials working at a joint industrial park in the northern border town of Kaesong, and South Korean ships and airliners would be banned from passing through its territory.

The North's committee said it would start "all-out counterattacks" against the South's psychological warfare, and called its moves "the first phase" of punitive measures against Seoul, suggesting more action could follow.

Earlier Tuesday, one Seoul-based monitoring agency reported that North Korea's leader ordered its 1.2 million-member military to get ready for combat. South Korean officials could not immediately confirm the report, and its military said it had no indication of unusual activity by North Korea's military. North Korea often issues fiery rhetoric and regularly vows to wage war against South Korea and the U.S.

South Korea wants to bring North Korea before the U.N. Security Council over the sinking, and has U.S. support. U.S. Secretary of State Hillary Rodham Clinton was to visit South Korea today.

Clinton was in Beijing on Tuesday, wrapping up two days of intense strategic and economic talks with China, which responded coolly to U.S. appeals that it support international action against North Korea over the warship sinking.

The North and South have technically remained at war since the 1950-53 Korean War ended with an armistice rather than a peace treaty.

Tensions have risen since last week, when a team of international investigators concluded that a torpedo from a North Korean submarine tore apart the Cheonan warship on March 26, killing 46 South Korean sailors.

The North flatly denies involvement in the sinking of the Cheonan, one of the South's worst military disasters since the Korean War, and has warned that retaliation would mean war.

South Korea's Unification Ministry said it had no immediate comment on the North Korean statement on cutting ties.

However, spokeswoman Lee Jong-joo that although the North was expelling eight South Korean officials from the Kaesong complex, some 800 South Korean company managers and workers will remain. Yonhap news agency said that suggested the North had no intention of completely shutting down the Kaesong park, as South Korea also decided to keep the complex intact.

The U.S. and South Korea are planning two major military exercises off the Korean peninsula in a display of force intended to deter future aggression by North Korea, the White House said. The U.S. has 28,500 troops in South Korea.

In Washington, State Department spokesman P.J. Crowley said it was "odd" that North Korea would sever ties to the South, given the precarious state of the North Korean economy.

"I can't imagine a step that is less in the long-term interest of the North Korean people than cutting off further ties with South Korea," he said.

U.N. Secretary-General Ban Ki-moon said Monday he expects the Security Council to take action against North Korea, but China - North Korea's main ally and a veto-wielding council member - has so far done little but urge calm. North Korea is already subject to various U.N.-backed sanctions following earlier nuclear and missile tests.

Susan Rice, the U.S. ambassador to the United Nations, said Tuesday that the U.S. was waiting for Seoul to decide when and how it will bring the issue to the council.

South Korea is not expected to go to the council until after visits to Seoul by Clinton on Wednesday and Chinese Prime Minister Wen Jiabao on Friday, a U.N. diplomat familiar with the issue said Tuesday, speaking on condition of anonymity because of the sensitivity of the contacts.

In Beijing, Clinton said she had "very productive and very detailed" discussions with Chinese officials but could not say if any progress had been made in convincing the Chinese to back U.N. action.

"We know this is a shared responsibility, and in the days ahead we will work with the international community and our Chinese colleagues to fashion an effective, appropriate response," she told reporters.

Her Chinese counterpart in the discussions merely repeated his government's standard line.

"Relevant parties should calmly and appropriately handle the issue and avoid escalation of the situation," Chinese State Counselor Dai Bingguo said.

As part of its propaganda offensive, South Korea's military resumed radio broadcasts airing Western music, news and comparisons between the South and North Korean political and economic situation late Monday, according to the Joint Chiefs of Staff. The military also planned to launch propaganda leaflets by balloon and other methods on Tuesday night to inform North Koreans about the ship sinking.

South Korea also will install dozens of loudspeakers and towering electronic billboards along the heavily armed land border to urge communist soldiers to defect.

On Tuesday, North Korean state media cited the powerful National Defense Commission as saying the North's soldiers and reservists were bracing to launch a "sacred war" against South Korea.

The North's military also claimed Tuesday that dozens of South Korean navy ships violated the countries' disputed western sea border this month and threatened to take "practical" military measures in response.

North Korea put its army on high alert following a November sea battle with South Korea near where the Cheonan went down in March. The Koreas also fought bloody maritime skirmishes in the disputed area in 1999 and 2002.

Relations are at their lowest point since a decade ago, when South Korea began reaching out to the North with unconditional aid as part of reconciliation efforts. Lee has taken a harder line since taking office in 2008, and the South has suspended aid.

Seoul-based North Korea Intellectuals Solidarity said Tuesday that North Korean leader Kim Jong Il last week ordered his military to get ready for combat.

The group, citing unidentified sources in North Korea, said the order was broadcast last Thursday on speakers installed in each house and at major public sites throughout the country.

Associated Press writers Sangwon Yoon in Seoul, Matthew Lee in Beijing, and Edith M. Lederer at the United Nations, and AP photographer Jin-man Lee in Seoul contributed to this report.