Cautious optimism is growing for enhanced inter-Korean ties as both sides hope for a breakthrough in the relations that have long been deadlocked due to Pyongyang’s nuclear ambitions and relentless saber-rattling.

Although the North continues to churn out hostile statements against the South, it wants to improve relations with Seoul as part of efforts to forge a “peaceful external environment” necessary to shore up its debilitated economy, analysts said.

The Seoul government is expected to push for a major turnaround in the relationship in the latter half of this year as its trust-building drive could lose traction with only a few years left before the end of its five-year term.

“The Park Geun-hye administration may have to forge momentum to break the deadlock in the bilateral relations this year given that the relationship has remained at a standstill for nearly seven years including the five years under the former conservative government,” said Koh Yoo-hwan, a professor at Dongguk University.

“As the North has repeatedly expressed its will to mend fences with the South, I believe that relations could take a turn for the better later this year.”

In recent months, there have been signs of improvement in the bilateral relations.

The communist state has shown a strong intention to join the Asian Games to be held in Incheon from Sept. 19 to Oct. 4 although the two Koreas have been squabbling over the scale of North Korean participants and supporting staff for the sporting event.

“We would like to enhance our national prestige by scoring more gold medals in the Asian games and making the event a crucial opportunity to improve inter-Korean relations and achieve inter-Korean reconciliation and unity,” said a member of the North’s Olympic committee in a contribution to “Uriminjokkiri,” a propaganda website run by the North’s Committee for the Peaceful Reunification of the Fatherland.

To set the mood for a thaw in relations, Seoul has recently decided to offer 3 billion won ($2.93 million) to civilian groups, which will provide agricultural and medical support to North Korean citizens. It marked the first time since 2010 that Seoul has decided to take money from state coffers to help the North.

Observers say that Seoul may step up its efforts to engage Pyongyang after the by-elections slated for next Wednesday, because in the post-election period, the government would be relieved of worries that its policy decisions could influence voter sentiment.

“After the by-elections, the Seoul government may push for a new policy drive as it needs to improve cross-border relations as a way to enhance public support for it and emerge from the repercussions of the April ferry disaster,” said Ahn Chan-il, the head of the World North Korea Research Center.

“North Korea, for its part, is expected to soften its stance toward South Korea, as it maintained a tough, provocative stance in the first half of this year, which might have enervated the North given that it had to use much energy and money to keep its military on alert.”

Analysts say that President Park Geun-hye might take advantage of her Liberation Day address on Aug. 15 to make fresh proposals to North Korea and resume high-level inter-Korean dialogue.

The proposals could include the gradual lifting of the so-called May 24 measures that cut off all government economic exchanges and cooperation with Pyongyang after the North’s torpedo sunk the South Korean corvette Cheonan in March 2010.

Seoul could also agree to the resumption of the tours to the Mount Geumgangsan resort, once an important source of hard foreign currency for the cash-strapped North, observers said.

While optimism grows for the bilateral relationship, skeptics say that any improvement in the relations would only be limited unless Pyongyang takes sincere steps toward its denuclearization.

In the short-term, the upcoming South Korea-U.S. military exercise slated for next month could also hamper the mood for inter-Korean rapprochement. Sources said that the North was preparing for a large-scale amphibious landing exercise apparently to protest the annual allied drills, which it has called a “rehearsal for a nuclear war of invasion.”

“The North has not yet retracted its card of the fourth nuclear test, and there is still a chance of the North testing an intercontinental ballistic missile,” said Ahn. “But if the North refrains from making further provocations, the prospects for cross-border relations aren’t that bad.”

Last Sunday, the North warned of strong military retaliation, criticizing the South and the U.S. for their criticism of the North’s recent missile and rocket launches.

In a statement by the North’s powerful National Defense Commission, Pyongyang argued that the only thing left at present was a “final choice” as it had done everything it could do to improve relations with the South. The statement raised the prospect of additional military provocations.

By Song Sang-ho (sshluck@heraldcorp.com)