"I don't think sanctions work as a penalty," Mohamed ElBaradei said after a meeting with Secretary of State Condoleezza Rice.
"They feel they are isolated; they feel they are not getting the security they need," said the Egyptian diplomat, who has run the U.N. agency for nearly a decade.
The U.N. Security Council, largely at the urging of the United States, has imposed controls on trade in dangerous goods with North Korea. Rice returned Sunday from a trip to Asia and Russia designed to encourage enforcement of the sanctions and to offer assurances of U.S. security support to anxious allies.
The export controls imposed by the U.N. Security Council "are not sufficient" to turn North Korea away from building nuclear weapons and other dangerous weapons, he said.
"Penalizing them is not the solution," he said.
ElBaradei's tenure as director general of the IAEA — during which he won the 2005 Nobel Peace Prize — was challenged unsuccessfully two years ago by the Bush administration, which clashed with him over his doubts that prewar Iraq possessed weapons of mass destruction and also considers him too soft on Iran.
Rice made no public statement earlier in a picture-taking session with him in her office.
ElBaradei said it did not matter whether the United States talks to North Korea in a six-nation negotiations format that has failed to deter a nuclear test, or one-on-one.
"At the end of the day, we have to bite the bullet and talk to North Korea and Iran," he said at Georgetown University's foreign service school.
The administration counters that it is willing to talk to North Korea in the six-nation framework, saying having other nations — China, Japan, South Korea and Russia — in the negotiations reinforces the anti-nuclear message.
A growing number of members of Congress and former high-level U.S. government officials are urging the Bush administration to open talks with both North Korea and Iran, which also has a nuclear program.
The administration has said it would consider talking to Iran if it suspended enrichment of uranium that the United States and European allies contend is part of a program to develop nuclear weapons. Iran says its programs are designed to increase civilian energy output.
ElBaradei said Iran has the knowledge to make nuclear weapons, but is years away from building them. "The jury is still out on whether they are developing a nuclear weapon," he said.
Meanwhile, in Vienna, Austria, diplomats speaking on condition of anonymity told The Associated Press on Monday that Iran is expanding its uranium enrichment program and that within the past few weeks Iranian nuclear experts had started up a second pilot enrichment facility. Iran had produced a small batch of low-enriched uranium — suitable as nuclear fuel but not weapons grade — in February.