North Korea to suspend nuclear disablement

[David]

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.

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 choose its presidential candidate.

It also came 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," Lee Dong-bok at CSIS 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 that until that happens it will not take the North off its list of state sponsors of terrorism.

"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, Seoul's Dongguk University professor of North Korean studies.

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.

On Monday, a U.S. envoy for nuclear talks with the communist state said he had had "substantive" talks with his North Korean counterpart.

U.S. State Department spokesman Sean McCormack, traveling with Secretary Condoleezza Rice in Jerusalem, said he had no immediate comment on the KCNA report.

South Korea's presidential Blue House also had no comment.

The previous day, Hu and South Korean President Lee Myung-bak 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 with South Korea, Japan, Russia, China and the United States.

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.

[darrels joy]

I'm Shocked, Shocked I say.

[Boats]

They have done this over and over again with any agreements they make. It's a common practice or ploy used by them all the time. I'm not surprised and they will do this more and more until they get what they want - not what everyone else says. Yep not suprised.