SEOUL: South Korea warned North Korea Wednesday it would not tolerate provocations during an upcoming naval exercise in the Yellow Sea, after Pyongyang threatened "strong physical retaliation" for the drill.

"Our military will keep a close eye on our enemy, be ready under any circumstances during the training and will not tolerate any type of provocation," Rear Admiral Kim Kyung-Sik told a briefing.

A spokesman for the Joint Chiefs of Staff told AFP separately that if the North fires at the South, "we will stage an immediate counter-attack".

The five-day anti-submarine drill starting Thursday is a response to the North`s alleged torpedo attack in March on a South Korean warship, the Cheonan, which killed 46 sailors.

Military officials said 29 ships including a submarine and a destroyer, 50 fixed-wing aircraft and 4,500 army, navy, air force, marine and coastguard personnel would take part.

They said marines stationed on islands near the disputed Yellow Sea border with the North would stage live-fire exercises, but naval ships would stay far south of the line.

Kim said the exercise would be a legitimate defensive drill in the South`s waters. Its aim was "to warn North Korea, and show our military capability to them, that future provocations will not be tolerated".

In a joint show of strength, the US and South Korean military last week staged one of their largest-ever joint naval and air drills on the other side of the peninsula.

The allies plan more joint drills this year but this week`s exercise will only involve South Korea.

The United States has also announced new sanctions on the North to punish it for the alleged ship attack and push it to scrap its nuclear weapons programme.

The North disputes the maritime borderline in the Yellow Sea, which has been the scene of several naval clashes, saying it should run further to the south. The Cheonan went down near the border and a multinational investigation concluded it had been torpedoed by one of the North`s submarines.

The North`s military Tuesday dubbed the upcoming exercise a "direct military invasion".

It said "reckless naval firing" by the South would be countered "with strong physical retaliation".

The North routinely denounces US-South Korean war games as a rehearsal for war, while the allies say they are purely defensive.

Pyongyang threatened nuclear retaliation for last week`s joint drill, which ended without incident.

A South Korean newspaper said Wednesday the North had moved long-range anti-aircraft missiles close to the border with the South as tensions rose over the sunken warship.

Chosun Ilbo quoted a military source as saying the North moved some SA-5 missiles to areas near the border, where they pose a potential threat to South Korean jets.

A separate media report said the United States was expected to blacklist three key North Korean figures suspected of handling secret funds for leader Kim Jong-Il as part of its new sanctions.

Yonhap news agency, quoting a South Korean government source, said one of the three is Kim Tong-Myong, head of the North`s Tanchon Commercial Bank.

"The US is paying special attention to three people, including Kim Tong-Myong, who operate North Korea`s secret funds abroad," the source was quoted as saying.

"If they are included in the new sanctions, it could deal a blow to North Korea`s leadership."

The foreign ministry had no comment on the report.

BDST: 10:29 HRS, August 04, 2010