Officials attending the World Economic Forum here agreed that negotiations to wean North Korea off its ambitions to join the nuclear weapons club were at a critical phase but no-one would predict the outcome.

"The North Korea issue is the most dangerous non-proliferation issue we are facing today," Mohamed ElBaradei, director general of the United Nation's International Atomic Energy Agency (IAEA), told reporters.

"The good news is that North Korea would like to sit and have a diplomatic settlement to solve that problem. But whether we would have a breakthrough soon depends on the outcome of these six-party talks."

His comments came a day after a US scientist who toured a secretive North Korean nuclear complex said in Washington he saw no proof Pyongyang had or could develop a nuclear bomb, but likely could make weapons-grade plutonium.

The Stalinist state is due to join a second round of talks this year with China, Japan, Russia, South Korea and the United States aimed at resolving its nuclear crisis.

Maurice Strong, adviser to UN Secretary General Kofi Annan on North Korea, said Pyongyang was ready for a deal "but they are not going to abandon their nuclear program unless there is a significant security and economic component."

"I believe the crunch will come this year," Strong told a seminar here, adding that without a resolution, "North Korea will have achieved what they want -- a de facto acceptance of their position."

But ElBaradei told the same seminar, "What is important is to make them (the North Koreans) understand that nuclear blackmail does not pay. That would be a very bad message."

The IAEA chief was pessimistic about an imminent settlement, telling reporters, "There is no other way to resolve this issue than through a dialogue and we must encourage all the parties to find a solution."

Earlier this month, North Korea offered to freeze its nuclear weapons programme in return for concessions, including an end to US sanctions and a resumption of energy aid.

But Jim Leach, a Republican US congressman and chairman of the House subcommittee on Asian affairs, told the seminar that Washington wanted to see verifiable moves toward disarmament before making any concessions.

North Korea kicked out IAEA inspectors and withdrew from the non-proliferation treaty last January after the United States suspended fuel shipments to the energy-starved country.

The dispute flared in October 2002 when US officials said North Korea had admitted to operating a clandestine nuclear weapons programme in violation of its international commitments.

Asked when he thought the IAEA inspectors would return to the country, ElBaradei said: "As soon as we are allowed to go, which means as soon as North Korea agrees to accept the non-proliferation treaty and accept their non-proliferation obligations."

But David Kim, chairman of the South Korean energy group Daesung, told the seminar that the business community in Seoul was not all that concerned about the possibilty North Korea would use nuclear weapons.

For Pyongyang, he said, a nuclear bomb was "just a symbol, a symbol of self-respect, self-defense. It is actually unrealistic to think they will attack America with that primitive device."

He said tensions were easing between the two countries with initiatives on industrial cooperation, trade and tourism, "and there is an optimistic sentiment that war might not break out."

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