South Korean officials held rare talks Thursday in North Korea on the fate of a joint industrial complex amid rising tensions over Pyongyang's recent nuclear test and the likelihood of new U.N. sanctions against the communist state.

South Korea also was expected to demand the release of one of its citizens detained at the complex since late March for allegedly denouncing the North's political system. Pyongyang has rejected Seoul's repeated requests for his release, and details of his status remained unclear.

The talks at the factory park in the North Korean border town of Kaesong are only the second meeting between civilian officials from the two sides in more than a year, a reflection of the deeply frayed relations and mistrust between the nations struggling to push ahead reconciliation efforts. The South Korean Unification Ministry said the talks had begun, but did not immediately give any further details.

Bilateral relations worsened after a pro-U.S., conservative government took office in Seoul last year, advocating a tougher policy on the North. In retaliation, the reclusive regime cut off ties, halted all major joint projects except the Kaesong complex and significantly restricted border traffic. The North's second nuclear test blast on May 25 further damaged ties.

"One of our employees has been detained for over 70 days and as you all know, the situation in Kaesong Industrial Complex is very difficult," said Kim Young-tak, head of Seoul's 14-member delegation, before leaving on a two-hour road trip to Kaesong. "We are planning to meet with officials from the North and solve the problems with an open heart."

The Kaesong complex, where 106 South Korean companies operate with some 40,000 North Korean workers, is the Koreas' last remaining reconciliation project. It makes everything from electronics and watches to shoes and utensils, providing a major source of revenue for the cash-strapped North.

But the park's fate was thrown into doubt after the North said last month it was canceling what it calls "preferential" contracts for its occupants and writing new rules for them. The North said the South must accept them or pull out.

Despite the problems, "we hope the South-North relationship will improve and develop in the future through this kind of meeting and dialogue. We hope there will be a productive result today," Kim, the delegation head, said.

On Wednesday, Western powers reached agreement with North Korea's allies on a proposal to punish Pyongyang for its latest nuclear test — in defiance of a U.N. ban. The new sanctions would put tough restrictions on Pyongyang's exports and financial dealings, and allow inspections of suspect cargo in ports and on the high seas.

The agreement awaits approval by the U.N. Security Council.

The South Korean government says it is committed to developing the Kaesong industrial complex despite the problems between the two countries.

But some companies appear to be losing patience. Earlier this week, a South Korean fur-garment manufacturer announced that it was pulling out of Kaesong citing security concern for its employees.

Since the inauguration of South Korean President Lee Myung-bak's government in February 2008, the two Koreas have met at a government level only once before, on April 21 at Kaesong. The meeting, however, lasted only 22 minutes following hours of wrangling over procedural issues, with the North refusing to release the detained southern worker, Yu Song-jin.

Experts say Thursday's meeting would not progress much as the North is expected to use the case to show how badly relations between the two sides have frayed because of Seoul's hard-line policy on Pyongyang.

"I think the North is trying to show that it cannot free Yu unless the South drops its hostile policy and turns back toward a reconciliation and cooperation policy," said Paik Hak-soon, a senior analyst at the Sejong Institute, a South Korean think tank.

The North has also been preparing to test-fire an intercontinental ballistic missile capable of reaching the U.S., and appears to be readying for short- and medium-range missile tests. This has prompted South Korea to step up its military preparations.

Intensifying tensions, North Korea handed down 12-year prison terms to two detained American journalists on Monday. Analysts have said Pyongyang is expected to use the reporters as bargaining chips in nuclear and other negotiation with the U.S.

Some experts say the North's recent saber rattling is largely aimed at mustering support for the country's absolute leader Kim Jong Il as he reportedly prepares to announce his successor — his third and youngest son Jong Un.

Kim, 67, is said to have suffered a stroke, and underwent brain surgery last summer.

Little is known about the workings of the insular nation, and most of the information comes out through occasional defectors, South Korea's spy agency and South Korean media sources in the North.