Now that it's been determined (via physical evidence) that it was a North Korean torpedo that sank a South Korean corvette two months ago, one has to wonder why the North Koreans would do such a thing. Most pundits attribute the attack to North Korea's usual aggressive form of negotiating. For example, North Korea has been demanding, for over half a century, that the maritime border off the west coast be moved south (so the northerners would have sole use of very valuable fishing and crabbing areas). Others say that the attack was revenge for recent naval defeats in the contested waters. These small battles were particularly embarrassing, as they featured more effective, high tech, South Korean warships making short work of low tech, and rather elderly, North Korea patrol boats.
But if you listen to what is being said in North Korea, you get the impression that the attack was an attempt to do two things. One, it was to assure North Koreans that their armed forces still had what it takes to deal with enemies. Second, it was, well, a morale booster. The defeat of North Korean patrol boats in the last year was widely known, even though the government sought to keep it a secret. People were visibly upset at this defeat, which contradicted decades of propaganda about how powerful the North Korean armed forces were.
The bad news got around. North Korea is opening up, even though the Internet and cell phones are tightly controlled, more news gets around faster these days. In the last decade, most of the news up north has been bad. There is another famine looming. The military is falling apart from lack of cash, fuel and new equipment. Government officials, even the secret police, have become increasingly corrupt. Morale is falling, and popular discontent is rising. Blowing up a South Korean ship helps the rulers up north, but only temporarily.
Foreign aid organization anger at how the government diverts donated food to the military, or private markets (to raise cash), has led the government to simply refuse food aid (unless it is allowed to control distribution). Other forms of foreign aid have also been halted, partly in response to North Korean efforts to build nuclear weapons and long range ballistic missiles to deliver them. The world community is also angry at North Korea for selling nuclear weapons and missile technology to whoever will pay cash. Cash terms apply to less sophisticated weapons North Korea produces, and makes them a source for anyone needing weapons, for whatever reason. The world community does not like this.
So this "military victory" is all the talk on the North Korean street. Officially, North Korea denies it had anything to do with it. But North Koreans don't believe that. And the general in charge of such dirty deeds just got an unexpected, and much publicized, promotion. For reasons unspecified. In response, South Korea has cut all trade with and aid for North Korea. Since there is very little of either at the moment, this will have little effect, other than allowing the southerners to feel like they are doing something. But in the north, there is relief in the knowledge that the mighty North Korea armed forces are still lethal.