Markets calm despite North Korean nuclear boast

SEOUL - Regional powers and South Korean financial markets reacted calmly on Thursday to North Korea's declaration it had taken fuel from a nuclear reactor, a process that could give it more material for atomic weapons.

But Seoul was also showing growing irritation with what it sees as its northern communist neighbour's bargaining amid efforts to restart formal talks involving the North and five regional powers that have been stalled since June last year.

North Korea said on Wednesday it had "successfully finished the unloading of 8000 spent fuel rods" and that it was "taking necessary measures to bolster its nuclear arsenal".

"Making the announcement like that might be a negotiating tactic in order to prod or press for talks," Foreign Minister Ban Ki-moon was quoted as saying by Yonhap news agency.

"It is troubling, but it's the government's position that we will respond calmly," he said in Tashkent, the capital of Uzbekistan, where he is accompanying President Roh Moo-hyun on a trip that also took him to Moscow for talks with regional leaders on the North's nuclear tactics.

The White House focused on the need to return to talks, while financial markets in Seoul were unmoved.

"Unless something serious happens, the North Korean factor remains neutral to the market," said Shin Dong-jun, a fund manager and strategist at Samsung Investment Trust Management.

A nuclear test would represent a further escalation of the crisis that could make a tangible impact on markets, financial analysts said. US and other officials are concerned the North may be preparing for a test.

Pyongyang did not say whether reprocessing of the fuel from the Yongbyon reactor north of the capital had begun. Reprocessing converts the fuel into weapons-grade plutonium -- that might be needed in a test -- and can typically take several months.

The White House declined to comment directly on the latest North Korean report, saying Washington was focused on having Pyongyang return to six-party talks to curb its nuclear plans.

"All parties that are participants in the six-party talks are concerned about North Korea's behaviour and that's why we want to get them back to the six-party talks," White House spokesman Scott McClellan told reporters.

In Seoul, Lee Jihyun, the spokeswoman for the South's National Security Council, declined to confirm reports the president's top advisory panel was scheduled to meet. Washington's pointman on North Korea, Christopher Hill, will visit Seoul this weekend for talks.

Senior South Korean officials said the North's announcement was probably intended more to boost its negotiating potential than to describe efforts to push ahead with plans which outside experts believe have given Pyongyang up to eight atomic weapons.

South Korean officials have said it was the possibility of harvesting more nuclear materials, not a nuclear weapons test, that was a more likely escalation of the crisis by the North. South Korea has tended to seek a conciliatory approach to the North but officials in Seoul say their patience is wearing thin.

Talks by South and North Korea, the United States, China, Japan and Russia have stalled since the third round last June.

Pyongyang has refused to return to the table, saying Washington must first drop what it called a hostile policy.

US officials played down the significance of the North's statement because it only backed up long-held suspicions.

"The provocative statements and actions by North Korea only further isolate it from the international community," McClellan said.

- REUTERS