"The two sides have shared the view that military guarantees are necessary to economic cooperation and exchanges," said a joint statement issued at the end of the four-day military talks held at the truce village of Panmunjom.

"The two sides have decided to discuss the issue of adopting a statement of agreement on military security for the operations of railways and roads," it said.

The general-level military discussion, which had been set to finish Thursday, extended to Friday because of haggling over Pyongyang's demand of a new maritime border line in the western sea.

In the joint statement, the two Koreas agreed to continue talks on ways to "prevent military conflict and create a joint fishing zone in the West Sea," citing it as "an issue to be urgently resolved in the course of easing military tension and establishing peace."

The next meeting to push the agreement will be held in July.

Under the agreement, the two Koreas are set to conduct trial runs of railways across the heavily fortified border next week, which would be a highly symbolic event to ease their decades-long Cold War hostilities.

In the test-runs on May 17, two trains are scheduled to run on short stretches of the relinked tracks across the western and eastern border of the peninsula. Seoul's officials said the reconnection of the cross-border railway would speed up the inter-Korean reconciliation process, saying it will reconnect the two Koreas' capitals and proceed on to Sinuiju, a major industrial city on North Korea's border with China.

The trial runs of trains have been long delayed due to a lack of military guarantees, though work was completed long before on laying tracks to reconnect the two railways under the landmark summit agreement in 2000.

The North's military had been reluctant to make security guarantees for the safety of inter-Korean travelers using the cross-border railways, apparently due to concern that it would expose sensitive and secret installations near the border.

A year ago, the North aborted a planned rail test at the last minute after the South rebuffed Pyongyang's demand for redrawing the western sea border.

Seoul hopes the inter-Korean railways would link the country up to China, Mongolia and eventually Russia's trans-Siberian railway, through which South Korea could deliver products to Europe, a major export market. South Korea and the European Union launched talks this week on a free trade deal aimed at tearing down trade barriers between the two sides. The 27-member European economic bloc is South Korea's second-largest trading partner after China.

President Roh Moo-hyun recently sent a personal letter to his Russian counterpart Vladimir Putin to visit Seoul to discuss linking the inter-Korean railroad to the trans-Siberian railway.

However, North and South Korea have a long way to go to end their military hostilities. The North used this week's military talks to revive its call for redrawing the inter-Korean western sea border named the Northern Limit Line.

The NLL, the U.N.-imposed inter-Korean maritime border established after the 1950-53 Korean War, has served as a neutral zone to avoid possible armed clashes. But North Korea says that it does not recognize the border, insisting on its own sea border far south of the NLL to include lucrative blue crab beds in its territorial waters.

The territorial sovereignty contest triggered an armed clash in 1999 and again in 2002 when the two Koreas traded naval gunfire which left dozens of casualties on both sides. Any other such skirmish could complicate international efforts to disarm the North, analysts say. Tensions have risen sharply in the border waters for May-June and October-November crab seasons, when North Korean fishing boats often move south in search of crab beds.

On Thursday, the North's navy warned that there may be a third naval clash on the contested waters, accusing South Korea of building up its military stance near the border.

The situation in the waters is "so unpredictable and serious that the third West Sea skirmish can occur there anytime due to the arrogant moves of the South Korean warlike forces," the Navy Command of the North Korea's People's Army said in a statement.

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