N.Korea says it will suspend nuclear disablement

By Jack Kim SEOUL (Reuters) - North Korea said on Tuesday it will stop disabling its nuclear facilities and consider restoring the Yongbyon reactor that can make material for atomic bombs, accusing the United States of violating a disarmament deal. "We have decided to immediately suspend disabling our nuclear facilities," the North's KCNA news agency quoted a foreign ministry official as saying. "This measure has been effective on August 14 and related parties have been notified of it," the official said. Secretary of State Condoleezza Rice played down the North Korean announcement. "We actually are in discussions with the North Koreans and I think we'll just see where we come out in a few weeks," Rice said, speaking in the West Bank town of Ramallah. Rice said Washington had made it very clear in disarmament talks involving the two Koreas, China, Japan and the United States that it was awaiting a verification mechanism that could assure the accuracy of North Korea's statement. Analysts said that given North Korea's deep reluctance to give up its nuclear weapons program -- the one powerful negotiating card it has with the outside world -- its latest move was no big surprise. "North Korea is trying to muddle through and delay as much as possible," said Lee Dong-bok, a senior associate at the CSIS think tank in Seoul. "At the same time, this is a last-ditch effort trying to somehow influence U.S. presidential politics." The KCNA announcement coincided with the start of the U.S. Democratic Party's convention to formally choose its presidential candidate. It was also made just after Chinese President Hu Jintao, whose government is the nearest the reclusive North has to an ally, flew out of Seoul after two days of talks with South Korean President Lee Myung-bak. Lee came to office earlier this year with a promise to get tough on the North if it did not move towards giving up its nuclear weapons ambitions. "I think the timing of the Hu Jintao visit to South Korea was very depressing to the North Koreans," CSIS's Lee said. Regional powers have been pressing North Korea to accept stringent measures to verify the declaration of its nuclear program. The United States has made clear it will not take the North off its list of state sponsors of terrorism until that happens. "I see it as another card at the negotiation table to urge the U.S. to remove it from the terrorism blacklist as soon as possible," said Koh Yu-hwan, professor of North Korean studies at Seoul's Dongguk University. Shen Dingli, a nuclear security expert at Fudan University in Shanghai, said he did not believe that North Korea ever intended to abandon its nuclear weapons capability. "The United States and China can think that they are drawing North Korea into true nuclear disarmament, but North Korea has continued to nuclearize throughout the six-party process," Shen said. "Their strategic goal remains developing and keeping nuclear weapons." The six-party talks on disarmament comprise the two Koreas, China, Japan, Russia and the United States. MARKETS WORRIED The news gave an extra nudge down to an already falling South Korean won and some analysts said it could hit the country's share market. "Such action by North Korea will surely hurt foreign investor sentiment towards South Korean shares even further ... I expect foreign exchange markets in particular to be vulnerable to the news," said Cho Ik-jae, chief market strategist at CJ Investment & Securities. China did not say whether it knew in advance of Pyongyang's move but called the talks over nuclear disarmament very complex. "We know it won't always be smooth sailing. The more difficult the circumstances, the more we must remember ... the important commitments made by each party, and abide by a spirit of mutual respect in encouraging mutual confidence," Chinese Foreign Ministry spokesman Qin Gang said. South Korea's foreign ministry called the move "regrettable", urging Pyongyang to resume disablement. Japan expressed concern and pledged to work with others to get the process back on track. On Monday, China's Hu and South Korea's Lee issued a joint statement in Seoul urging cooperation in implementing the deal to end North Korea's nuclear weapons program. Disablement work that started in late 2007 at Yongbyon has mostly been completed and it was aimed at making it impossible for the North to resume operations there for at least a year. In late June, North Korea toppled the cooling tower at its plutonium-producing reactor in a symbolic move to show its commitment to the nuclear deal The last remaining stage of the planned disabling of Yongbyon, a plant to make nuclear fuel and another to turn spent fuel into arms-grade plutonium, was the unloading of irradiated rods from its ageing reactor. (Reporting by Jon Herskovitz, Kim Junghyun and Park Jung-youn in Seoul, Chris Buckley in Beijing and Chisa Fujioka in Tokyo; Editing by Jonathan Thatcher and Paul Tait)

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