But General Thomas Schwartz, Commander in Chief US Forces, Korea, said there was no evidence that the Stalinist North was engaged in international terrorism. He also said Pyongyang had lived up to its missile test moratorium.

"They are the number one proliferator of missiles and they are also of conventional weapons," Schwartz told the Senate Armed Services committee.

"That's where they get their money, that's how they have kept their economy alive."

"Just as of late, the last couple of months, it has increased."

Schwartz said North Korea was exporting various types of missile technology as well as artillery and tank systems. He warned that the country was the world's largest supplier of basic submarines.

Bush branded North Korea as part of an "axis of evil" along with Iraq and Iran during his State of the Union address in January. He renewed his offer to talk to the Stalinist state during his Asia trip last month but it was rebuffed by Pyongyang.

US officials say that North Korea's exports of missile and other weapons technology endangers US security, a concern that has multiplied since the September 11 terror attacks.

Schwartz told the committee there was no evidence that North Korea was engaged in supporting international terrorism.

"We are watching them carefully to see if they are participating in any kind of terrorist activities, to support terrorism around the world.

"I can report to you that we have had no indicators that they are doing that," Schwartz said.

The United States has refused to take North Korea's name off a list of states it believes support terrorism. Pyongyang sees the blacklist as the most serious obstacle in its efforts to fix a shattered economy by attracting foreign capital.

Schwartz also praised the 1994 Agreed Framework, a deal which halted North Korea's nuclear weapons program, as a "stepping stone" of future US-North Korean relations.

"It's the roadmap to the future in my opinion. It is serving us well at this time. It stopped their nuke development, there is no doubt about it."

Under a 1994 accord with the United States, the North froze its suspected nuclear arms program in exchange for receiving two nuclear energy reactors that would produce less weapons-grade plutonium.

The 4.6-billion-dollar project was due to be completed by 2003, but delays have pushed back completion until at least 2008.

There have been calls from some conservative opinion leaders in Washington for the deal to be scrapped.

That position was bolstered last month when hawkish US Under Secretary of State for Arms Control John Bolton called on North Korea to live up to its international non proliferation commitments.

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