After making moves to restart a nuclear reactor that U.S. officials believe was used to make atomic weapons, North Korea's actions amount to "nuclear brinkmanship" and are "very worrying," according to the U.N. nuclear watchdog.
North Korea continues to maintain its position as "peace-loving" and claims to have no plans of weapon development.
Across the fortified border from North Korea, South Korean President Kim Dae-jung said his nation will never tolerate its neighbor's nuclear development. But he said the South seeks a peaceful end to a dispute that resembles a 1994 crisis over the same reactor that some say nearly led to war.
The White House, which is considering a war against Iraq, also wants a diplomatic solution on the Korean Peninsula. A prominent Republican senator said U.S. military action against the North would invite a "devastating" reprisal against South Korea.
"Our strategy now has to be one of multilateral engagement," involving nations such as Japan, China and Russia, Sen. Richard Lugar, incoming chairman of the Senate Foreign Relations Committee, said on NBC's Today.
Australia recently ditched plans to open an embassy in North Korea, due to the rising tensions in relation to Pyongyang's moves to reactivate its nuclear weapons program.
Foreign Affairs Minister Alexander Downer said Australia has told North Korea that restoring full diplomatic links could not proceed while it violates nuclear nonproliferation obligations.
North Korean workers have moved 1,000 fresh fuel rods to a storage site near the Soviet-designed, 5-megawatt reactor at Yongbyon that was frozen in a deal with Washington that ended the 1994 crisis, the U.N. International Atomic Energy Agency said. A total of 8,000 such rods is needed to start the reactor.
"Moving towards restarting its nuclear facilities without appropriate safeguards, and towards producing plutonium raises serious nonproliferation concerns and is tantamount to nuclear brinkmanship," Dr. Mohamed ElBaradei, director of the Vienna-based agency, said in a statement.
IAEA spokesman Mark Gwozdecky called the situation "very worrying."
Since the weekend, North Koreans have removed U.N. seals and impeded the functioning of surveillance cameras at the nuclear facilities north of Pyongyang, despite international appeals for restraint.
The IAEA has called its board of governors to an extraordinary meeting tentatively planned for Jan. 6. ElBaradei said he plans to tell the board that North Korea's actions have left the agency unable to verify "that there has been no diversion of nuclear material to nuclear weapons or other nuclear devices."
The board could refer the matter to the U.N. Security Council.
North Korea is believed to be pushing the dispute to the brink of crisis in order to extract concessions at the negotiating table. The North has repeatedly called for a nonaggression treaty with the United States, though economic benefits are also a priority for the destitute country.
However, the United States has ruled out talks unless North Korea, labeled part of an "axis of evil" by President Bush, abandons nuclear development.
IAEA officials estimate it would take at least one month for North Korea to restart the reactor, which produces plutonium, the material used to make nuclear bombs, as a residue.
The U.N. agency, which has two inspectors at the site, is especially worried about a storage area holding 8,000 spent fuel rods and a laboratory used to reprocess the rods to get plutonium.
Intelligence experts say plutonium in the spent fuel rods could yield four or five nuclear weapons within months, and that North Korea already has one or two. However, the IAEA said there was no sign of North Korea activity at those two key facilities.
U.S. officials have said the reactor itself would provide a negligible amount of electricity.
In Seoul, President Kim told a special Cabinet meeting that the standoff should be resolved through dialogue.
"We can never go along with North Korea's nuclear weapons development," Kim said. "We must closely cooperate with the United States, Japan and other friendly countries to prevent the situation from further deteriorating into a crisis."
Kim's successor, Roh Moo-hyun, has also advocated dialogue to ease nuclear tensions since he was elected to the presidency last week.
In the deal with the United States in 1994, North Korea froze its suspected plutonium-based nuclear weapons program. Earlier this month, it decided to restart it after Washington and U.S. allies halted fuel oil supplies as punishment for revelations in October that it had moved forward with a second nuclear weapons program that used enriched uranium.
On Thursday, Germany joined nations urging North Korea to immediately halt its activities at Yongbyon, calling the moves a "blatant violation" of its international obligations.
North Korea said it was restarting the reactor in order to provide electricity because Washington had reneged on a promise to provide energy sources.
"Our republic constantly maintains an anti-nuclear, peace-loving position," state-run Radio Pyongyang said.
ElBaradei disputed the North Korean claim, saying the reprocessing facility at Yongbyon was "irrelevant" to electricity production, and that North Korea had "no current legitimate peaceful use for plutonium."