At the Cabinet meeting, senior officials stressed the need for stable fuel supplies, grain output and production of coal, metals and other key materials, according to Minju Joson, the newspaper of the North's Cabinet, and cited by China's Xinhua news agency on Wednesday.

"The (Pyongyang) government should have enough funds to purchase more grain from farmers for assuring more foodstuff reserves," the North's state-run daily was quoted as saying.

The meeting was believed to focus on measures to sustain the country's economy during economic and trade sanctions likely to be imposed by the U.N Security Council following the North's alleged nuclear weapon test.

The United States submitted to the Security Council a draft resolution containing tough measures against North Korea under Chapter 7 of the United Nations Charter.

The draft includes the international inspection of all cargo to and from North Korea, financial restrictions targeting Pyongyang's nuclear and missile programs and a ban on exports of goods for military use and sales of luxury items.

The U.N. resolution is likely to be adopted as early as this week as China, North Korea's only remaining communist ally, expressed a readiness to agree on punitive measures against Pyongyang if they exclude military options.

Japan, which is chairing the Security Council for the month of October, is also considering banning all imports from North Korea, refusing new entry of North Korean nationals and prohibiting North Korean ships from making port calls to Japan.

In a furious response to the moves, North Korea said it would regard international sanctions as a declaration of war.

"Sanctions are nonsense. If full-scale sanctions take place, we will regard it as a declaration of war," a North Korean official in Beijing told South Korea's Yonhap News Agency. "The more they press us, the stronger our response will be," the official said.

But may analysts in Seoul remain doubtful that North Korea would bow to the proposed economic and trade sanctions because the communist country has already endured financial sanctions and diplomatic isolation since the 1990s.

"The North has escaped U.S. bank accounts hunt. It is very hard to freeze all the bank accounts held by North Koreans as they are engaged in guerilla-style commercial deals," said Bae Chong-ryel, a senior research fellow at Seoul's Export-Import Bank.

Bae and other analysts say China, which holds the key in the push against the North, is unlikely to impose all-out economic sanctions against its embattled neighbor, as crippling sanctions could cause millions of the North's refugees to cross the border.

"U.S.-led economic and trade sanctions against North Korea can hardly bear fruit without the participation of China and South Korea, which have greater economic stakes in the isolated communist country," said Lee Jung-chul, a senior fellow at South Korea's private Samsung Economic Research Institute.

The United States and Japan have little economic leverage of their own to bring to bear on North Korea as two-way trade remains meager.

Two-way trade between North Korea and China has been rising by an average 30 percent annually since 2000, boosting North Korea's economic growth by 3.5 percentage points every year, according to the central Bank of Korea in Seoul.

North Korea's trade with China increased 14.8 percent from a year ago to $1.58 billion last year. Officials in Seoul said the figure would account for some 50 percent of North Korea's total trade volume.

North Korea's trade with China was $1.39 billion in 2004, 48.5 percent of its total trade volume, up 42.8 percent from a year earlier, when it posted $1.02 billion.

"Some 80 percent of items appearing in North Korea's markets are from China," said Lee Young-hoon, an economist at the BOK-run Institute for Monetary and Economic Research. China has provided 70 to 90 percent of North Korea's oil and more than one-third of its imports and food aid.

South Korea is also reluctant to join crippling sanctions against the North for fear that it would raise tensions on the peninsula and increase geopolitical risks on the South Korean economy.

The South has invested a total of $7.6 billion in inter-Korean economic cooperation projects since 1998.

In 2005 alone, the South provided $162.5 million for a joint industrial complex in the North Korean border city of Kaesong and a joint tour project on the North's Mount Kumgang.

earlier related report
Aid Groups Fear Drop In Support For North Korea
Seoul (AFP) Oct 11 - Aid and rights groups fear dwindling support for appeals to feed North Korea after it shocked the world with its nuclear test and warn that the coming harsh winter could worsen hunger and refugee flows. "North Korea's nuclear weapons programme can have devastating security implications in the region, but suspending food aid could be lethal for ordinary North Koreans," said Sophie Richardson of Human Rights Watch.

"As the international community responds to North Korea's nuclear test, it must distinguish between the North Korean government and ordinary citizens," she said in a statement from London.

A decade after famine killed at least one million people and saw tens of thousands flee the isolated communist country, North Korea again faces food shortages worsened by heavy summer floods, aid and UN agencies have warned.

In South Korea, an aid group and analysts warned of a worsening crisis in the North.

"We are seeing some of the signs that we saw in the mid-1990s," said Erica Kang of local support group Good Friends.

"There are more people eating alternative foods, having to forage rather than having grain for their main meal... Winter is coming shortly and we are very concerned about that."

The UN's top humanitarian official, Jan Egeland, said food and relief aid should not be affected by any sanctions. EU External Relations Commissioner Benita Ferrero-Waldner also urged European countries to keep sending aid.

Peter Beck, Northeast Asia director of the International Crisis Group, said Pyongyang's belligerence may turn some donors off providing aid through non-government organisations and the United Nations.

"Without that assistance, I am very concerned that the North will return to famine this winter and we could see another exodus of refugees into China."

Ken Bacon, president of Refugees International, also warned of the "humanitarian impact" of any new sanctions and said that cuts in food, aid and investment to North Korea could increase refugee flows.

China has already stepped up border patrols and checked family registries in recent weeks to search out North Koreans and "preempt a new wave of North Koreans coming as a result of the flooding," Beck told AFP.

In the mid- to late 1990s at least one million people, or five percent of North Korea's population, died when famine hit the mountainous and dirt-poor country, and thousands more fled for China and beyond to survive.

The suffering was blamed on the regime's disastrous economic policies, severe floods and droughts that destroyed harvests, and a food rationing system that favoured party cadres and top army and police officers.

People were reduced to eating tree bark and insects and emaciated corpses became a common sight in parks and railway stations, refugees later reported.

In the years since, massive food aid eased the worst of the suffering. But late last year Pyongyang again banned the private buying and selling of grain and limited the UN World Food Programme's aid distribution.

North Korea's July missile tests worsened the situation. South Korea suspended regular aid shipments, although the following month it announced a one-off 230 million dollar emergency package for flood relief.

Since Monday's nuclear test, President Roh Moo-Hyun has come under heightened political pressure to end aid flows and the "sunshine" policy that seeks engagement and conciliation with the North.

"The aid to North Korea should be stopped," said one protester at a candlelit vigil in Seoul Tuesday night, reflecting a view held by many here.

"The North Korean people are going through a difficult time, but the food and the aid we give doesn't reach them, it goes to the military," said the protester, librarian Young-sook Lee.

On Wednesday South Korea's top Red Cross official called for a halt to shipments of cement used in flood aid to North Korea, arguing the material could be used for nuclear test facilities.

"North Korea should be given the chance to ponder what they did," said Korea National Red Cross president Han Wan-Sang.

The WFP in Geneva warned it faced a shortfall in the funds it needs to sustain food aid to North Korea and said it may have to suspend the programme from January unless member countries give more.

"Food supplies will be exhausted by January if new contributions are not made now, because it can take months to get food aid from pledges to materialize on the tables of our beneficiaries," said a spokeswoman.

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