The North's navy detained the squid fishing boat and its seven crew -- four South Koreans and three Chinese -- on August 8 off the east coast of the divided peninsula.

It said the Daeseung 55 was operating in its exclusive economic zone.

"This was an intolerable infringement upon the sovereignty of (North Korea). But it was decided to send the boat and its crew back to South Korea from the compatriotic and humanitarian points of view," the North's official Korean Central News Agency said.

It said it took into consideration a request from the South's Red Cross "to leniently forgive and send them back" and also the fact that the crew admitted the "seriousness of their act and gave assurances that they would never repeat such act".

The South's unification ministry said the North would return the 41-tonne boat and its crew Tuesday afternoon across the east coast sea border.

Analysts said the move was an effort to ease tense relations at a time when South Korean groups are considering the resumption of food aid to the hungry and impoverished state.

It comes on the eve of a major conference of the North's ruling communist party, at which delegates are expected to endorse the youngest son of leader Kim Jong-Il as eventual successor.

Relations have been icy since Seoul accused Pyongyang of torpedoing a South Korean corvette in March with the loss of 46 sailors.

The fishing boat was seized during a major South Korean naval exercise in the Yellow Sea, on the other side of the peninsula, for which the North had threatened retaliation.

It denies involvement in the sinking of the warship and says naval exercises staged in response to the incident are a preparation for war.

The US and South Korean navies postponed a new maritime drill due to start on September 5, citing an approaching typhoon.

"The move signals Pyongyang's effort to ease tense inter-Korean ties at a time when Seoul is mulling a resumption of food aid to the North," Choi Jin-Wook of the Korea Institute for National Unification told AFP.

Last week the South's Red Cross offered the North aid worth 10 billion won (8.3 million dollars) following major floods that devastated the country's northwestern region.

In 2008 South Korea suspended an annual rice shipment to its neighbour. President Lee Myung-Bak has been under pressure from some civic groups and lawmakers to resume the assistance.

Choi said Beijing must have intensified pressure on Kim Jong-Il during his recent trip to China to "make some kind of conciliatory gestures" to Seoul.

"Beijing must have played a role as well, as Kim is seeking to increase economic cooperation with China and to attract more investment from China," he said.

Yang Moo-Jin, a professor at the University of North Korean Studies, said: "The release will help create a good atmosphere for dialogue. It will also positively affect efforts to resume six-party talks."

The March sinking has remained a key obstacle to restarting the nuclear disarmament talks, which invove the two Koreas, China, Japan, Russia and the United States.

Kim has reportedly told Chinese President Hu Jintao that Pyongyang was willing to return to the nuclear forum and reduce regional tensions.

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