"(We) have no choice but to resolve the problem of dismantling North Korea's nuclear programme diplomatically through the six-party talks," Lee said of the discussions, which began in 2003 and have been stalled for two years.

Lee has taken a tough line with the North since its deadly bombardment last month of a South Korean border island, which caused outrage in Seoul.

His government, along with the United States and Japan, has been cool in response to efforts by Russia and China to resuscitate the six-party forum in an attempt to ease high tensions.

Seoul and its allies say the North must first mend ties with the South and show sincerity about denuclearisation.

The president said the international community is pressed for time because the North has set 2012 -- the centenary of the birth of founder Kim Il-Sung -- as the year to become a "great, powerful and prosperous" nation.

Because of this goal, we "must certainly achieve the dismantlement of its nuclear programme next year", Lee said.

The South also accuses the North of sinking one of its warships in March near the disputed Yellow Sea border, a charge Pyongyang denies.

Since the island shelling, Seoul has staged a series of military drills and vowed to hit back hard using air power against any new attack.

Lee, however, also called for cross-border dialogue.

"We should make efforts to have peace settled through inter-Korean dialogue" while also strengthening defences, he said, adding that reunification of the two Koreas is not "far off".

Foreign Minister Kim Sung-Hwan said the South is open to dialogue if the North agrees to discuss its nuclear programme in bilateral talks -- something it has always been unwilling to do.

"The window of opportunity for various channels of dialogue is open if North Korea acknowledges that the North and the South -- the direct parties concerned -- should discuss the nuclear issue," he told reporters.

Kim said the five nations negotiating with the North have not yet agreed on conditions for resuming the six-party forum.

His ministry, in a report to Lee, said policy in 2011 would focus on winning international support for peaceful reunification.

But it cautioned that the North's ongoing power succession from leader Kim Jong-Il to his youngest son, coupled with military brinkmanship, would continue to fan uncertainty on the peninsula.

Korea JoongAng Daily newspaper said the North had sharply increased its military drills this month, with a 150 percent rise over December 2009.

The North shut down its elderly plutonium-producing reactor in 2007 under a six-nation deal. It quit the forum in April 2009 and staged a second nuclear test a month later.

Last month it disclosed a uranium enrichment plant to visiting US experts. US officials and experts say this could easily be converted to produce weapons-grade uranium, giving the North a second way to build a bomb.

Pyongyang said Wednesday its new plant is designed solely to fuel a light-water reactor being built to produce energy.

"To ensure fuel supply to the reactor, a modern uranium enrichment plant equipped with thousands of centrifuges is in normal operation," ruling communist party newspaper Rodong Sinmun said.

According to US troubleshooter Bill Richardson, who visited Pyongyang this month, the North has offered to permit the return of UN nuclear inspectors and dispose of fuel rods outside the country.

The apparent concessions have not been officially announced.

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