U.S. PLANS NEW APPROACH TO NORTH KOREA

WASHINGTON - The Bush administration plans to adjust its policy toward
North Korea by adopting a two-track approach that would combine new talks
with threats to increase pressure on the communist state by targeting its
illegal drug and counterfeiting trade and possibly its missile sales, U.S.
and Asian officials said Tuesday.

The emerging consensus, which will be refined Wednesday at a meeting of
President Bush's top foreign policy advisers, would bridge a gap that has
emerged within the administration since North Korea declared it possesses
nuclear weapons at talks between U.S., North Korean and Chinese
representatives in China last month. Administration officials have sought
to resolve their policy differences, which pit those pushing for
confrontation with the Pyongyang government and those advocating further
talks, in advance of next week's visit to Washington by South Korea's new
president, Roh Moo-hyun.

Adding to the sense of urgency, U.S. sources said Tuesday, intelligence
analysts within the last 48 hours have seen increasing signs that North
Korea has begun reprocessing 8,000 spent fuel rods into weapons-grade
plutonium. North Korea claimed it had begun the processing at the three-way
talks in Beijing last month, but it had not been detected by U.S.
intelligence, apparently until now. The spent fuel would provide North
Korea which enough nuclear material to build two to three additional
nuclear bombs within a few months.

In its developing posture toward North Korea, the administration plans to
insist that any new talks include Japan and South Korea in addition to
China, officials said. They also will hold out the prospect of a policy
that, as two officials put it, would "tighten the screws" against the
North's lucrative illicit trade practices.

The continued talks were sought by the State Department, while increasing
pressure on Pyongyang was a key objective of the Defense Department and
other administration advocates of a tougher approach.

"We signed up for the hard side in order to get the soft side," said one
official who favored further discussions. "Some people only want the hard
side."

Before the meetings in China, the administration had insisted it would only
meet with North Korea in a multilateral forum, while North Korea sought
bilateral talks. The trilateral talks with China were adopted as a
compromise, but U.S. officials said North Korea signaled that it would
accept broader talks including Japan and South Korea at any future meetings.

Asian officials, who earlier had appeared uncomfortable with the
administration's tough line on North Korea, now appear prepared to accept
the idea that more pressure must be placed on Pyongyang particularly in
light of its nuclear claims and its often blatant flouting of international
laws.

Two weeks ago, Australian special forces seized a North Korean freighter
that allegedly delivered $50 million in heroin. The ship, registered in the
North Korean port of Nampo but sailing under a flag of the tiny Pacific
island of Tuvalu, has been cited as evidence of the North Korean
government's involvement in drug running, amphetamine production and
counterfeiting.

"The international community cannot condone the illegal activity the North
Korean government is engaged in," an Asian diplomat said. The North Koreans
"need to understand this. Some things simply can't go on." Officials are
still discussing how forcefully the administration and its allies should
begin to put pressure on North Korea, including whether to threaten actions
or to more subtly begin to tighten the noose around North Korean illegal
actions, officials said. The administration could also outline a
progression of steps, such as targeting illegal activity that finances the
government and then threatening to disrupt its legal and lucrative trade in
missiles.

Secretary of State Colin Powell on Monday cited the need to end North
Korea's drug trafficking, in addition to its nuclear program and its
missile proliferation. "This is the time for us to work with our friends
and allies and try to impress upon North Korea that better opportunities
await them, support awaits them from nations in the region, if they would
simply begin acting in a more responsible way than they have in the past,"
he said.

While North Korea's confrontational announcement at the Beijing talks
dominated the headlines, U.S. officials have concluded that the North
Koreans did lay a proposal on the table, though one completely unacceptable
to the Bush administration. Immediately after the meeting, some officials
had argued that there was likely no reason to hold further talks.

According to U.S. officials, North Korea said it would only give up its
nuclear weapons and missiles after the United States fulfilled a long list
of conditions. The conditions included full diplomatic relations with the
United States and Japan and completion of two light-water nuclear reactors
in North Korea to help alleviate the country's energy shortages. North
Korea offered only to announce its intention to give up its nuclear
programs as the United States began to fulfill its end of the bargain,
officials said.

Assuming North Korea accepts the administration's conditions for more
talks, the United States would likely counter with a proposal equally
unacceptable to Pyongyang, officials said. Depending on the North Korean
response, U.S. officials would then need to assess whether there is a basis
for continuing the meetings.

Many within the administration pushing for a tough approach would
ultimately like to isolate the North Korean government and perhaps force
its collapse. Under the plan Bush's foreign policy advisers will approve
Wednesday, both factions in the administration can carry the debate to
another day, officials said. State can press for more talks in the hopes
they could eventually lead to actual negotiations, while Defense likely
would push to expand the pressure tactics against North Korea to include
sanctions, interdictions and eventually an embargo of North Korea.

The urgency of taking action against North Korea will be heightened if
intelligence officials conclude that North Korea has begun to reprocess
spent nuclear fuel, a threshold that put Pyongyang on the path of acquiring
a sizable nuclear arsenal. "There were some possible indications a few days
ago that perhaps something was up," including increased human activity at
the Yongbyon site, a U.S. intellgence official said Tuesday. But no firm
conclusions have been reached yet, he added.