North Korea's admission that it is operating a clandestine nuclear arms development programme in violation of a 1994 agreement has stunned the United States and South Korea. The admission has delivered a staggering blow to South Korean President Kim Dae-jung's 'sunshine policy' of reconciliation with the North, prompting opposition critics to review the policy just eight weeks before the South Korean presidential election, to be held on December 19. It also has complicated the Bush administration's war against terror and against weapons of mass destruction held by what Mr Bush called 'axis of evil' countries - North Korea, Iran and Iraq. Pyongyang's admission opens up a new front in the fight to stop dangerous weapons from falling into the hands of rogue states, analysts say. 'The North's revelation knocks down the engagement policy so far pursued by Seoul and Washington,' William Drennan, deputy director of the US Institute of Peace in Washington, said. He said it also breached a 1994 accord under which the US agreed to provide the North with two 'peaceful' nuclear-power facilities in exchange for its desisting from nuclear efforts and meant Pyongyang had defied a 1991 agreement with Seoul to keep the peninsula nuclear-free. According to Seoul officials, the revelation came on October 5 in Pyongyang during talks between US Assistant Secretary of State for East Asian and Pacific Affairs James Kelly and Kang Sok-ju, the North's first vice-foreign minister. Mr Kang was confronted with documented 'evidence' showing the North's weapons programme and later acknowledged the claims. Mr Kang also implied the North was no longer bound to honour the 1994 accord, which was signed with the Clinton administration. Yim Sung-joon, the South's senior secretary for national security affairs, told a media briefing in Seoul yesterday that Mr Kang's admission amounted to the North confirming that it was working on a uranium-enrichment procedure which was one step away from making a bomb. Senior US officials, including Defence Secretary Donald Rumsfeld, earlier claimed the North had enough plutonium to make one or two bombs. Mr Kang suggested the North was ready for a 'bargain deal' under which it could suspend its nuclear, missile and conventional arms deployment in exchange for the US lifting economic sanctions and ending what Mr Kang called 'hostile policy' against Pyongyang, officials in Seoul said. As if trying to reduce the impact from the North's admission, a senior official in Seoul cautioned against reading too much into the statement. The North was acknowledging its nuclear programme more in the hope of triggering talks with the Bush administration than as a form of nuclear blackmail, the official said. Seoul is hopeful of defusing the tension through dialogue. Senior leaders in South Korea have urged Pyongyang to start talks with Washington to avoid a dangerous showdown. 'Under no circumstances can we accept the North developing nuclear weapons,' Mr Kim told senior officials. Unification Minister Jeong Se-hyun would take that message to Pyongyang tomorrow, when he embarked on a new round of cabinet-level talks between the South and North, officials said. The North appeared anxious to cushion the impact of Mr Kang's statement, according to analysts in Seoul. A commentary in the party's official newspaper, Rodong Sinmun, on Tuesday said the North stood ready to resolve differences with the US through talks. The likelihood of Washington responding favourably appears slim at this stage, however, as US officials have made it clear the North will have to abandon nuclear arms efforts before expecting any dialogue. Sources said South Korea was expected to offer a role in bringing the North to the conference table when Mr Kelly visited Seoul tomorrow for further consultation. South Korea, Japan and the US are expected to take up the issue at the Asia Pacific Economic Co-operation summit in Mexico on October 26.