President Roh Moo-Hyun said friction could develop between the two allies over moves by Washington hawks to put pressure on North Korea.

At the same time the foreign ministry accused Washington of misleading the public regarding talks between the two sides in Seoul earlier this week about US sanctions on North Korea.

"There are no differences with the United States," South Korea's progressive leader Roh told a press conference.

"But the South Korean government does not agree with some forces in the United States that raise issues about North Korea's regime, put pressure on it and apparently desire to see its collapse.

"If the US government tries to resolve problems through this kind of method, there will be friction, differences of opinion, between South Korea and the United States."

The president was addressing an annual Lunar New Year press conference just after the foreign ministry said Washington had issued an "inappropriate" statement about talks earlier in the week.

The statement released on Tuesday said US Treasury officials visiting South Korea had urged Seoul to take steps against North Korea's alleged illicit financial activities, and also to join US-led efforts aimed at combating weapons proliferation by rogue states including North Korea.

The US team "has neither officially nor unofficially urged our government to take specific steps," said foreign ministry spokesman Choo Kyu-Ho.

The US side stood by the statement released by the US embassy.

"We stand by the press release issued yesterday and we have nothing further to add," said embassy spokesman Robert Ogburn.

The Treasury officials visited Seoul to try to convince skeptical South Korean officials that North Korea was guilty of counterfeiting US currency and money-laundering.

In September the US Treasury Department imposed financial sanctions on the North for allegedly using a Macau bank, Banco Delta Asia, as a front for counterfeiting and other illicit financial activities.

North Korea on Wednesday demanded the lifting of the sanctions and said it would boycott six-party talks aimed at scrapping its nuclear programme until Washington complied.

"If the US truly wants the resumption of the six-party talks and their progress, it had better opt for lifting its financial sanctions against the DPRK (North Korea) and co-existing with it," said the Korean Central News Agency, North Korea's official mouthpiece.

The South Korean government has maintained that it needs to see evidence before taking steps against Pyongyang. President Roh declined to say whether the visiting US officials had successfully made their case.

"It is too early for me to comment on the alleged illegal activities by North Korea," Roh said.

"We need to ascertain the full truth regarding whether the North has committed any illicit activity, whether it is related to the North Korean nuclear dispute and whether there are any intentions to press the North Korean regime."

Relations between Seoul and Washington have been tense at times under Roh, a progressive elected on a wave of anti-Americanism in December 2002 after he vowed never to kowtow to the United States.

Roh said in his press conference that outstanding issues between the long-time allies would be resolved through negotiations, including the issue of wartime command of South Korean troops.

Currently South Korean forces come under the command of the US military at such times but Roh said he wants Seoul to retain charge. The US has 37,000 troops in the South.

In a renewed attempt to drive a wedge in the US-South Korean alliance, Pyongyang's ruling communist party newspaper Rodong Sinmun on Wednesday called for national unity among South Koreans to pull out the troops.

"All the Koreans in the North and the South and overseas should turn out as one to foil the US war provocation moves ... through the nation-wide struggle to drive the US troops out of South Korea," Rodong said.

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