South Korean officials and ruling party lawmakers have accused the United Sates of imposing financial sanctions on the North, saying the stance could upset hard-won dialogue to defuse the nuclear standoff.

The United States says activities such as counterfeiting and drug trafficking have helped finance Pyongyang's nuclear weapons programs. The Bush administration is also stepping up pressure on North Korea over its human rights record, but the Roh Moo-hyun government in Seoul is reluctant to join forces with its ally for fear of creating friction with Pyongyang.

On Thursday, South Korea's National Assembly speaker called recent remarks on North Korea by Washington's top envoy to Seoul "lamentable."

The envoy, Alexander Vershbow, last week called North Korea a "criminal regime," citing illegal activities its alleged money laundering and counterfeiting activities. He also said North Korea was the first government to take part in counterfeiting since Adolf Hitler's Germany and defended Washington's financial sanctions on Pyongyang, saying his country would not negotiate on the issue of economic sanctions.

In an angry response, North Korea said it would not return to the nuclear talks until Washington lifts the sanctions.

The dispute made South Korea nervous. Seoul is hoping for an early resolution of the crisis caused by Pyongyang's nuclear weapons drive.

"Regrettably, the ambassador seems to be going too far," he said. Kim, the speaker, told a local radio program. He is a member of Roh's ruling Uri Party.

Earlier this week, senior ruling lawmaker Kim Wong-wung said he would submit a resolution urging the Seoul government to request that the U.S. envoy be recalled if he continues to follow his stance against North Korea.

"Ambassador Vershbow's remarks are due to either his lack of expertise on the Korean Peninsula or his intention to damage peace on the peninsula," he said.

Government officials also expressed regret about the U.S. envoy's criticism of North Korea. Kim Sook, director of North American affairs at the Foreign Ministry, said the remarks would complicate multinational efforts to resolve the nuclear issue.

"The six-party (nuclear) talks are at a crucial juncture and North Korea is extremely sensitive to remarks from outside," he said.

Last week, Foreign Minister Ban Ki-moon called on the United States to refrain from using provocative language against North Korea, saying Seoul was working to resume the six-nation nuclear talks in mid-January.

"The countries involved (in the six-party talks) need to have the wisdom to exercise restraint in their expressions directed against the other countries," he said.

Cho Tae-yong, chief of the Foreign Ministry's task force on the nuclear issue, called reporters to express uneasiness about the U.S. criticism.

"It is not desirable to make such comments provoking a dialogue partner at a time when the six-way talks are at critical juncture," he said.

North Korea urged the South to expel the envoy, calling him "the worst ambassador in history."

Vershbow is "the most bitchy and malignant ambassador in history," the Minju Joson, the North's Cabinet newspaper, said in a commentary.

Rodong Sinmun, a daily of the North's ruling Workers' Party, said: "Vershbow is a rogue and tyrant bereft of reason (who acts) out of hostility."

The Committee for the Peaceful Reunification of the Fatherland, the North's main office handling inter-Korean relations, said it would consider Vershbow's comments a declaration of war.

Pyongyang on Thursday denied U.S. claims it produced and spread counterfeit U.S. dollars, describing it as an "intolerable insult" to the communist state. But the U.S. ambassador refused to withdraw his comments in which he described the North as a criminal regime.

Concerned about the deepening dispute, South Korea reached out to the North to persuade it to return to the six-nation talks.

During inter-Korean Cabinet-level talks this week, Seoul's chief delegate, Unification Minister Chung Dong-young, stressed a peaceful resolution of the dispute was directly linked to the peace and co-prosperity of the Koreas, according to his spokesman.

Chung leaves for Washington Sunday to meet U.S. officials and is expected to call on Washington to ease its stance against the North to break the impasse.

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