Relations between the two Koreas reached a new level of tension on Thursday as the North announced it would scrap military agreements signed with its southern neighbour.

The announcement is a response to Seoul's anti-submarine drills staged in disputed border waters.

China, North Korea's main ally and source of economic support, is considering reviewing its ties with the hermit state a week after an international investigation accused North Korea of sinking a Southern warship, killing 46 people.

North Korea accused the South of pushing ten years of improved diplomatic relations into the ground and said it would cancel pacts guaranteeing cross-border exchanges.

The move is seen as a first step that could ultimately result in Pyongyang severing all ties with the South, including a border link providing access to a joint industrial complex in the Northern city of Keasong.

After the South carried out a naval exercise and raised its alert level, the North said it would cancel military agreements designed to prevent confrontations.

The US is trying to prevent the crisis from escalating into war by concentrating all diplomatic efforts on China, with Secretary of State Hillary Clinton asking Beijing to press Pyongyang's regime into changing its ways.

Reports suggest that South Korea will invoke the UN Security Council to take up the issue early next week, Beijing has yet to officially accept the international investigation results.

Seoul officials anticipate some form of progress on Friday as Chinese Premier Wen Jiabao is due to visit the Southern capital for a summit with South Korea's President Lee Myung-bak.