Under the accord, North Korea agreed to close and seal its key Yongbyon nuclear facility -- long suspected to be the center of its nuclear program -- within 60 days and admit UN nuclear inspectors in return for 50,000 tonnes of heavy fuel oil.

"I would say there was a sense of optimism from both sides that we get through this 60-day period and we will achieve all of our objectives that are set out in the February 13 agreement," Hill said after the Monday-Tuesday talks.

The agreement required the United States to hold talks to forge bilateral relations with North Korea, which would ease the Stalinist state's passage into international bodies like the IMF, World Bank and the Asian Development Bank and enable it to receive aid for critical infrastructure rebuilding.

Hill made it clear that normalization of ties with North Korea could occur only if the reclusive state completely abandons its nuclear program -- a seemingly difficult demand considering it is the impoverished state's trumpcard.

While Pyongyang is only required to close and seal its key Yongbyon facility with UN verification under the first phase of the agreement, the United States is looking further ahead.

It is keen to see the plutonium-producing plant dismantled and all nuclear material and equipment -- including for manufacturing highly enriched uranium -- accounted for.

"We spent a considerable amount of time looking to the next phase, which will be a more difficult phase because we will be dealing with the disabling of the facilities so that they cannot be brought back to use," Hill said.

US conditions on Pyongyang for its removal from the US list of state sponsors of terrorism as well as North Korea's longstanding wish for a peace treaty with the US over the Korean War could also complicate normalization efforts.

Japan, a key US ally, reportedly wants its dispute over North Korean abductions of Japanese citizens in the 1970s and 1980s to be resolved before Pyongyang could be removed from the terrorism list.

"The big question is whether the US is going to be hostage to Japan and link any action on the removal of North Korea from the terrorism list to a resolution of the abductees' issue between North Korea and Japan," said Selig Harrison of the Washington-based Center for International Policy.

He said North Korea's removal from the terrorism list was essential for it to enter multilateral financial institutions.

"The big infrastructure aid that North Korea needs must come from multilateral agencies such as the World Bank, IMF and Asian Development Bank and removal from the terrorism list is a basic question," Harrison said.

Japan has refused to help fund the February 13 deal -- which also involved China, Russia, South Korea and the United States -- until the abduction issue is resolved.

Hill said the issue over North Korea's removal from the terrorism list was "one of the lengthiest conversations I've had on that matter" with Kim.

Peter Brookes, a former senior Pentagon official, said another sticking point was Pyongyang's demand for a bilateral peace treaty with Washington over the Korean War, both to elevate its own stature and to "dis" South Korea.

Washington generally prefers a North-South peace treaty, he said.

A final Korean War peace pact was never reached, and the conflict languishes under a 1953 armistice.

US officials said the New York meeting was just a small step toward improving relations with the secretive state that US President George W. Bush in 2002 famously included as part of his "axis of evil."

But analysts describe it as a breakthrough in efforts to end more than half a century of enmity since the United States led an international force against the North in the 1950-1953 Korean War.

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