North Korea has said it will immediately reactivate a mothballed nuclear power plant, frozen under a 1994 agreement with the US.

We have to see if the North is actually about to implement this or if it is using it as a negotiation tactic

South Korean official

The North Korean foreign ministry said it was responding to a US-led decision to suspend oil aid to Pyongyang as a punishment for a separate, alleged nuclear weapons programme.

North Korea said it was reactivating the plant to make up for the electricity shortfall caused by the ending of the heavy oil shipments.

North Korea's threat represents a major escalation in tensions between Pyongyang and Washington.

The US and its regional allies - South Korea and Japan - are worried that the plant could also be used as part of a wider nuclear weapons programme, which North Korea has regularly stated the "right" to possess.

US White House spokesman Ari Fleischer described the move as "regrettable".

He said it "flies in the face of international consensus that the North Korean regime must fulfill all its commitments, in particular dismantle its nuclear weapons programme".

Mr Fleischer said the United States sought a peaceful resolution to the North Korean dispute and would not enter into dialogue with the North Koreans "in response to threats or broken commitments".

Pyongyang's announcement follows the seizure and subsequent release of a ship on Wednesday carrying what US officials said were North Korean missiles bound for Yemen.

Both developments, says the BBC's Rob Watson in Washington, represent a very low point in US - North Korean relations in just one week.

'No choice'

The North Korean foreign ministry, in a statement carried by state news agency KCNA, said the frozen nuclear reactor was needed for power generation, following the US halt on heavy fuel oil shipments to Pyongyang.

"A spokesman for the Democratic People's Republic of Korea (DPRK) Foreign Ministry in a statement today said that the prevailing situation compelled the DPRK government to lift its measure for nuclear freeze taken on the premise that 500,000 tons of heavy oil would be annually supplied to the DPRK," said the statement.

North Korea would "immediately resume the operation and construction of its nuclear facilities to generate electricity," the statement added.

If you read the North Korean announcement carefully, their consistent stance is to seek a peaceful resolution

Junichiro Koizumi, Japanese Prime Minister

Pyongyang's move threatens to kill off the 1994 Agreed Framework, under which North Korea agreed to close down a nuclear reactor suspected of producing weapons-grade plutonium in return for two light-water reactors and US oil supplies.

But the US and its allies decided to halt oil shipments last month after Washington's envoy, James Kelly, reported that Kim Jong-il's secretive regime had admitted to pursuing an alternative, enriched uranium programme.

US President George W Bush has maintained a much harder line towards North Korea than his predecessor, Bill Clinton.

The US has been slow to respond to North Korean overtures to improve relations. US officials have cited North Korea's nuclear ambitions and its exporting of long range missiles as reasons to keep the country in its "axis of evil".

North Korea's neighbours have reacted cautiously. South Korea's National Security Council convened in emergency session to express "strong regret and grave concern" over the development.

North Korea badly needs foreign aid

A South Korean unification ministry spokesman said: "North Korea-US relations are heading toward the end of a cliff, but we have to see if the North is actually about to implement this or if it is using it as a negotiation tactic."

The BBC's Caroline Gluck, in Seoul, says the government will come under renewed pressure to rethink its "sunshine policy" of engagement and exchanges with the North.

Japan described the threat as "deplorable" - but Prime Minister Junichiro Koizumi urged caution, noting the "consistent stance ... to seek a peaceful resolution".

Korea analyst Aidan Foster-Carter, recalling Pyongyang's frequent brinkmanship, told the BBC: "What they say is one thing, we have to see what they do".

Mr Foster-Carter, senior research fellow in modern Korea at Leeds University, said that proof of action would be the expulsion of two International Atomic Energy Agency monitors who are based at the defunct nuclear reactor at Yongbyon.

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	Yongbyon: Site includes a 5-MWe experimental nuclear power reactor and a partially completed plutonium extraction facility. The US believes the reactor and extraction plant have been used to produce plutonium - possibly enough for 1 or 2 nuclear weapons. Activities at site frozen under 1994 Agreed Framework Taechon: 200-MWe nuclear power reactor - construction halted under Agreed Framework Pyongyang: Laboratory-scale "hot cells" that may have been used to extract small quantities of plutonium Kumho: Site of two 1,000-MWe light water reactors under construction by Kedo

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