By Jeremy Laurence and Paul Eckert
SEOUL/WASHINGTON (Reuters) - North and South Korea traded blame on Thursday for the breakdown of military talks, while in Washington the U.S. spy chief said nuclear-armed North Korea poses a serious threat to security in East Asia.
U.S. Director of National Intelligence James Clapper said Pyongyang's nuclear programs, and the military attacks in 2010 that are at the centre of a North-South stalemate, showed that North Korea's military may imperil regional stability.
"As demonstrated by North Korean attacks on the South Korean ship Cheonan in March 2010 and Yeonpyeong Island in November, North Korea is capable of conducting military operations that could potentially threaten regional stability," he said, linking the attacks to succession in North Korea.
"Kim Jong-il may feel the need to conduct further provocations to achieve strategic goals and portray (Kim) Jong-un as a strong, bold leader, especially if he judges elite loyalty and support are in question," Clapper told a U.S. congressional hearing, referring to leader Kim Jong-il's plans to hand power to his third son.
North Korean state media blasted what it said was South Korea's "impudent approach" to talks between the two nations, saying it would not enter any more talks until Seoul showed it wanted to improve ties and discuss security issues concerning both sides.
South Korea said its offer for senior-level talks with North Korea still stands, but demanded that dialogue focus on the two attacks, which killed 50 people, and that Pyongyang bear responsibility.
China, the isolated North's main ally and main benefactor, called on the two sides to maintain contact and dialogue.
The first inter-Korean meeting since the North's attack on Yeonpyeong in November broke down over procedural issues, including the agenda and the rank of participants at their next meeting.
The United States, which has nearly 30,000 troops in South Korea, said it hopes the rivals could work out their differences and resume talks as soon as possible to reduce tensions on the divided peninsula.
NUCLEAR WEAPONS
Clapper said "persistent food shortages, poor economic conditions, inability to replace ageing weapons inventories and reduced training" had weakened the North's conventional forces and prompted Pyongyang to rely more on its nuclear weapons.
"The Intelligence Community assesses Pyongyang views its nuclear capabilities as intended for deterrence, international prestige and coercive diplomacy," he told the House of Representatives Intelligence Committee.
North Korea and South Korea accused each other of walking out on the talks.
"In a situation where (they) do not wish for improvement of North-South relations and are refusing dialogue itself, our military and people no longer feel the need to be associated with the South," the KCNA state news agency said.
South Korea said the North's delegates stood by their stance that Pyongyang had nothing to do with the sinking of the warship Cheonan and that it shelled Yeonpyeong out of self-defence.
North Korea insisted that discussions about the attacks should be taken up only at the senior level, KCNA said. It added that any talks should also address its concerns about the South's "provocations," including military drills.
The process will now return to the drawing board, with both sides likely to exchange statements before any resumption of talks.
Tensions had eased on the peninsula since the start of the year, with both sides calling for dialogue, raising hopes the neighbours could rebuild relations shattered over the past two years by the deadly attacks and failed nuclear talks.
There had been hope that the bilateral talks might lead to a return to six-party negotiations, which offer North Korea aid and diplomatic recognition in return for scrapping its nuclear arms programs.
North Korea and China want to restart the six-way talks, which also include Japan and Russia. South Korea and the United States question North Korea's sincerity about denuclearizing after its revelations last year about a uranium-enrichment program.
Underscoring U.S. suspicions, Clapper said North Korea is seeking nuclear talks to "mitigate international sanctions, regain international economic aid, bolster its ties with China, restart bilateral negotiations with South Korea and the United States, and try to gain tacit international acceptance for its status as a nuclear weapons power."
North Korea quit the six-way talks in 2009, declaring the process dead, in protest against U.N. sanctions for conducting nuclear and missile tests.
(Additional reporting by Danbee Moon and Yoo Choonsik in Seoul, and Andrew Quinn in Washington, and Ben Blanchard in Beijing; Editing by Will Dunham)
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