If he chooses to return to the long-stalled multilateral talks designed to resolve the nuclear standoff through diplomatic means, his country could get massive economic and political benefits, they say.

But if Kim opts for a nuclear test, he is sure to face grave consequences that could determine the fate of his country, as the United States has already intensified financial crackdowns on impoverished North Korea.

"From North Korea's point of view, it is now in a critical moment. It is facing a choice between engagement and isolation with mounting U.S. pressure," said a senior South Korean official.

The official referred to Washington's tough measures aimed at choking the North's cash flow that may be related to its alleged financial illegalities, such as the counterfeiting of U.S. bills and money-laundering.

U.S. nuclear envoy Christopher Hill is traveling to Seoul, Tokyo and Beijing this week to inform them of Washington's decision to take additional economic sanctions on the North, according to diplomatic sources here.

The Bush administration is expected to announce a package of economic sanctions against the North after the planned summit between U.S. President George W. Bush and South Korean President Roh Moo-hyun on Sept. 14 in Washington, they said.

Under the new package, the United States would reimpose the economic sanctions it lifted in 2000, including a travel ban, a broad trade ban and restrictions on investment and remittances.

In return for Pyongyang's self-imposed moratorium of missile tests in 1999, the Clinton administration in July 2000 allowed North Korea to export raw materials and goods to the United States and to open air and shipping routes between the two countries.

However, when the North fired a set of missiles on July 5, violating its missile moratorium, the United States said it would restore the sanctions, according to sources.

The United States has already frozen North Korean-held accounts in financial institutions overseas allegedly set up to fund the proliferation of weapons of mass destruction and other illicit activities.

Many countries have joined the U.S.-led campaign against the North's financial illegalities.

Stuart Levey, U.S. Treasury undersecretary for terrorism and financial intelligence, said banks in Singapore, Vietnam, China, Hong Kong and Mongolia were beginning to stop business relations with the North.

In an effort to escape the U.S. bank account closures, the North has opened about 10 bank accounts at Russian financial institutions, according to a reported published in Japan's Sankei Shimbun newspaper Sunday.

But Russia, believed to be the only place where North Koreans hold bank accounts, is also facing U.S. pressure to suspend transactions with the communist country, it said.

In September last year, the United States slapped restrictions on Banco Delta Asia, a Macau-based bank accused of laundering money for North Korea. Under the U.S. measure, BDA has cut off transactions with North Korea, which is believed to have choked Pyongyang's cash flow.

The financial sanctions have most likely delivered a blow to Kim Jong Il's personal consumption and that of the North Korean economy, which relies on illicit activities for at least 40 percent of its gross domestic product.

U.S. officials have vowed to tighten economic sanctions against North Korea. They are pushing to raise the North's financial illegalities as a main agenda item during this week's meeting of Asia-Pacific finance ministers in Vietnam.

Hill, who was in Tokyo on the first leg of a regional tour Tuesday, called for "concrete action" from the international community to press North Korea to give up its nuclear drive.

"We are interested in trying to resolve this problem to protect both our countries against the possibility of further developments of North Korea's weapons programs," Hill said. He is scheduled to stop in Seoul on Sept. 11, after visiting China.

In an angry protest against the U.S.-led sanctions, the North has warned of "all necessary countermeasures" while preparing for an underground nuclear test.

"Now that the Bush administration is escalating its pressure upon the DPRK (North Korea) through the tightened financial sanctions in a bid to keep itself politically alive, the DPRK is left with no other option but to take all necessary countermeasures to protect its ideology, system, sovereignty and dignity," the North's Foreign Ministry said in a recent statement.

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