North Korea followed recent conciliatory gestures toward the U.S. and South Korea with a return to threats Sunday, warning them of "merciless retaliation" over sanctions imposed on its government, and nuclear attacks in response to any atomic provocation.

Seoul and Washington will kick off annual computer-simulated war games Monday, which North Korea sees as preparation for an invasion. The U.S. and South Korea say the maneuvers are purely defensive.

"Should the U.S. imperialists and (South Korean government) threaten the (North) with nukes, it will retaliate against them with nukes," North Korea's military said in a statement reported Sunday by the country's official Korean Central News Agency.

Despite North Korea's recent conciliatory gestures of freeing two detained U.S. journalists and a South Korean worker, tensions continue on the divided Korean peninsula mainly over the North's nuclear program.

The U.S. is moving to enforce U.N. as well as its own sanctions against North Korea to punish it for its second nuclear test in May and a series of missile launches.

The U.N. sanctions strengthened an arms embargo and authorized ship searches on the high seas to try to rein in the North's nuclear program. They also ordered an asset freeze and travel ban on companies and individuals linked to the program.

If the U.S. and South Korea "tighten 'sanctions' and push 'confrontation' to an extreme phase, the (North) will react to them with merciless retaliation ... and an all-out war of justice," the North Korean military statement said.

A U.S. special envoy responsible for implementing the sanctions plans to visit Singapore, Thailand, South Korea and Japan this week and could travel to China later this month.

Philip Goldberg told reporters last week the measures against North Korea will continue until it takes irreversible steps to scrap its nuclear program.

On Saturday, South Korean President Lee Myung-bak renewed an offer of aid to North Korea and called for a "candid dialogue" with the North about dismantling its nuclear programs so it can prosper economically.

It was unclear if the aid offer — which has strings attached — would prod North Korea to back down from its promise to restart its nuclear program. Lee has made similar aid offers in the past, but the North has rejected them.

For years, South Korea had been one of North Korea's biggest benefactors, but since taking office early last year, Lee suspended unconditional aid to the impoverished North as part of a new harder-line approach. The North responded by cutting most ties and curtailing key joint projects.

Lee also offered talks on reducing conventional arms and troops along the mine-strewn demilitarized zone, a 2.5-mile-wide buffer bisecting the Korean peninsula.

South and North Korea have hundreds of thousands of combat-ready troops and heavy artillery along the 155-mile border. About 28,500 U.S. troops are stationed in South Korea as a legacy of the 1950-53 Korean War, which ended in a cease-fire, not a peace treaty, leaving the two Koreas technically still at war.

Meanwhile, Hyundai Group Chairwoman Hyun Jung-eun extended her stay in North Korea for an additional day Sunday, the fifth time since arriving in Pyongyang last Monday, her company said, in an apparent bid to try to meet North Korean leader Kim Jong Il to discuss stalled joint projects.

No reason for the extension was given.