N. Korea ups stakes in its nuclear card game

North Korea now admits for the first time something not even Iraq's Saddam Hussein can or will admit to - that it possesses nuclear weapons.

Stating it has "powerful military countermeasures, including nuclear weapons," North Korea's state radio Sunday demanded the US sign a nonaggression pact with the North, and added that it will not "sit with its arms folded" while the US "slanders" it and escalates tensions on the Korean Peninsula.

An increasingly palpable alarm is spreading on the peninsula and in the region. Analysts say North Korean President Kim Jong Il is playing a card game with Washington and will not take drastic measures - but is escalating tensions to a crisis point that will require negotiations that will help his regime survive.

Pyongyang's statement comes days after a consortium of the US, South Korea, Japan, and the European Union said it would cut off oil aid to the North in December unless Mr. Kim gave "credible" evidence of scuppering his secret uranium-enrichment program. "North Korea's nuclear-weapons program is a shared challenge to all responsible states," stated the Korean Peninsula Development Organization [KEDO].

The announcement followed Pyongyang's statement last week that it would end a missile-testing moratorium if Japan does not stop "giving priority to abductees" in security talks between Tokyo and Pyongyang and focus instead on Japanese crimes during its 50-plus year occupation of Korea. Japan has refused to return five Japanese kidnapped by the North decades ago.

KEDO met in New York last week to coordinate strategy toward the North. KEDO is building two light-water reactors there in exchange for a nuclear freeze by the North. But since Kim's officials told US envoy James Kelly in October that the country has a secret nuclear program, Washington has questioned a 1994 treaty with the North.

The tone and manner with which the US handles the issue is crucial, some analysts say. The North has steadily escalated its rhetoric and threats. Last month it demanded a nonaggression pact and negotiations with the US, and stated its right to have nuclear weapons.

The White House so far says talks are not forthcoming - even as Japan and South Korea hope the US will not push hard to isolate Kim.

"We are still in a pre-crisis phase," says Scott Snyder of the Asia Foundation in Seoul. "But it is an important phase that could be leading to a ... crisis situation. The North Koreans will be looking very carefully at whether this is the end of the KEDO consortium. The modus operandi of the North is to escalate to a crisis."

North Korea is a broken state with nuclear weapons whose main livelihood comes from the creation of crises that other nations must solve - usually with payments of cash, energy, or food.

For an isolated regime, it has a surprising number of cards to play. Its threats to Japan to restart missile tests tend to frighten Japanese. North officials told Assistant Secretary Kelly it will pull out of the 1994 treaty. Last week, Pyongyang accused South Korea of dangerous tank movements in the demilitarized zone, and said a halt on oil delivery would spur expulsion of international inspectors monitoring spent plutonium at its Yongbyon facility.

Yet until Sunday, Kim had not admitted possessing nuclear weapons.

Korea rates a distant second to Iraq on Bush's foreign agenda. But some analysts say the US must talk with the North. "What's important is that both the US and the North clearly signal that there are openings," says David Steinberg of Georgetown University. "Nobody says we have to like North Korea. We can make a deal because it is in the US national interest to do so."