South Korea's president-elect criticized a possible U.S. plan to use economic sanctions to force North Korea to abandon nuclear weapons development, asserting his country's role in resolving the looming nuclear crisis on the Korean Peninsula.

Later Tuesday, President Bush said he was confident a diplomatic solution can be reached. In his first public remarks on the crisis in two weeks, Bush said "all options are on the table" -- but he also suggested that military conflict is not being considered.

"I do not believe this is a military showdown. It is a diplomatic showdown," Bush told reporters in Crawford, Texas, where he is vacationing. He said he thought the crisis could be resolved peacefully, and that the United States is working with its allies to help persuade North Korea to abandon its nuclear program.

However, the South Korean president-elect, Roh Moo-hyun, warned against "blindly following U.S. policy," echoing the kind of anti-American rhetoric that helped him win election Dec. 19. South Korean anger was evident in Seoul, where 22,000 protesters staged the latest in a string of rallies against U.S. foreign policy they see as overbearing.

U.S. and South Korean officials regularly reconfirm their alliance, and deny that a rift is developing between the two close allies over handling the North's recent moves to reactivate its nuclear facilities and to hinder U.N. nuclear arms monitoring.

But in the past two days, both Roh and South Korean President Kim Dae-jung expressed concern that Washington might impose heavy economic pressure on Pyongyang to give up its nuclear ambitions and that this could backfire and harden the North's stance.

On Wednesday, the North Korean government issued a New Year's message urging its people to build a military-based powerful nation.

"The new year ... is a year of bold offensive and great change when a general advance should be made toward the high peak of building a powerful nation under the banner of the army-based policy," said the message, carried on the country's foreign news outlet, Korean Central News Agency.

It made no mention of a rising international fury over the country's decision to reactivate its nuclear facilities, but accused the United States of plotting an invasion.

The New Year's Eve protest outside the U.S. Embassy in Seoul on Tuesday was only the latest over the deaths of two teenage girls killed by a U.S. military vehicle in a June road accident. But protesters also referred to American policy they see as an obstacle to reconciliation between the two Koreas.

"We oppose U.S. policy that spawns tension on the Korean peninsula," read some of the slogans on signs at the rally.

Tensions over North Korea's nuclear ambitions, which had been building for several weeks, intensified Tuesday when Pyongyang expelled two U.N. International Atomic Energy Agency inspectors who had monitored nuclear facilities that were mothballed under a 1994 agreement with Washington.

"We were the eyes of the world," said Melissa Fleming, spokeswoman for the Vienna-based International Atomic Energy Agency. "Now we virtually have no possibility to monitor North Korea's nuclear activities nor to provide any assurances to the international community that they are not producing a nuclear weapon."

Hours after the U.N. inspectors arrived in Beijing, North Korea's ambassador to Moscow, Pak Ui Chun, told Russian news media that his country intends to free itself from its last legal obligations not to develop nuclear weapons.

"Pyongyang today cannot secure the continuation of guarantees of its special situation, according to which North Korea temporarily suspended its decision to withdraw from the Nuclear Nonproliferation Treaty," the ITAR-Tass news agency quoted Pak as saying.

It was the clearest sign yet that North Korea was planning to pull out of the 1968 treaty, which seeks to confine nuclear weapons to the United States, Russia, Britain, France and China. North Korea joined in 1985, and IAEA spokeswoman Fleming said that Pyongyang has yet to inform the agency that it was abandoning the pact.

North Korea announced in 1993 that it was withdrawing from the treaty, but suspended its decision when Washington began negotiations that produced the 1994 agreement.

Asked for his view on a possible U.S. strategy to contain North Korea through economic sanctions, South Korea's president-elect said he was "skeptical that it will ever contain North Korea or make it surrender."

"The United States should consult fully with South Korea, rather than making a decision unilaterally and then expecting South Korea to follow it," said Roh, who begins a five-year term in February.

Roh supports outgoing President Kim's "sunshine" policy of engaging North Korea. They believe that dialogue is the only viable way to resolve the North's nuclear issue peacefully.

Roh and many other South Korean officials fear a confrontation with the United States could trigger armed conflict on the Korean peninsula, the world's last Cold War frontier. More than 2 million troops are massed on both sides of the Korean border.

"Success or failure of a U.S. policy toward North Korea isn't too big a deal to the American people, but it is a life-or-death matter for South Koreans," Roh told reporters. "Therefore, any U.S. move should fully consider South Korea's opinion."

U.S. State Department spokesman Philip T. Reeker said Washington does not have any rift with Seoul, "neither with the current president nor with the president-elect."

"I don't think anybody has suggested at this point imposing sanctions," Reeker said Monday. "What we have talked about ... is that the international community can continue to bring pressure on North Korea by telling them that they've put themselves in this position, they're in serious violation of their international commitments."

North Korea accused the United States on Tuesday of plotting a war against it.

"If the enemy invades even an inch of the inviolable territory of [North Korea], the people's army and people of [North Korea] will wipe out the aggressors to the last man," said a commentary in North Korea's main newspaper, Rodong Sinmun.

In recent weeks, North Korea removed monitoring seals and cameras from its nuclear facilities at Yongbyon that were frozen under a deal with the United States in 1994. It says it is willing to resolve concerns over its nuclear program if the United States signs a nonaggression treaty, but Washington rules out any talks before the North changes course.

The Koreas were divided in 1945. The 1950-53 Korean War ended in an armistice, not a peace treaty.