N. Korea Ups Stakes in Its Nuclear Card Game ; Pyongyang Admits It Has Nuclear Weapons. Foreign Oil Aid Is Slated to End Next Month

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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. …