SYDNEY - U.S. Assistant Secretary of State Christopher Hill said on Tuesday he believed North Korea would stop its uranium enrichment programme by the end of the year.

Were the reclusive state to take such a step it would go beyond an agreement struck with regional powers to disable its nuclear facilities and reveal its atomic programmes.

Speaking to the Sydney Institute, Hill said that if North Korea agreed to abandon its last 50 kg of plutonium -- already produced at its Yongbyon reactor, which is to be dismantled -- then peace talks on the divided Korean peninsula could start.

But he said shutting down and dismantling nuclear facilities was not the end of the road: Pyongyang must also dispose of any nuclear fuel to ensure facilities cannot be restarted.

"We have been talking to the North Koreans about making sure there is no fuel to put back in the reactor," Hill said in off-the-cuff remarks to the Sydney Institute.

"We have had a lot of discussions with the North Koreans ... I think that by the end of the year we have good reason to believe that whatever uranium enrichment programme they have going, they will not have going by the end of the year."

In 2002, the United States accused the North of seeking to master enrichment as an alternative source of fissile material for nuclear arms. The North has denied pursuing enrichment.

Pyongyang this month agreed to disable the three main nuclear facilities at its Yongbyon site and reveal what atomic programmes it has by the end of the year in return for aid, a deal regional powers hope will eventually lead to complete nuclear disarmament.

South Korea's envoy to the negotiations told Reuters last week the North is ready to declare how much weapons-grade plutonium it has produced and clarify allegations of having a clandestine programme to enrich uranium for weapons.

Pyongyang, which conducted a nuclear test one year ago, is believed to have enough plutonium to make at least eight or nine atomic bombs.

"It is the government's goal to accomplish complete denuclearisation (of North Korea) as early as summer next year, if we can begin dismantlement following disablement," South Korea nuclear envoy Chun Yung-woo told reporters on Tuesday.

PEACE PROCESS PROMISE

Under the deal reached between China, the two Koreas, Japan, Russia and the United States, Pyongyang will get aid equivalent to 950,000 tonnes of heavy fuel oil and Washington will move toward taking it off a U.S. terrorism blacklist.

"Disabling it is not the end of the road, but I think it is an important milestone because it signals to the North Koreans that we are not going back from here," Hill said.

"We have good reason to believe that begining in the new year, '08, we will have a problem in North Korea that is reduced to the presence of 50 kilos of separated plutonium. Plutonium that has already been produced from this 5 megawatt reactor in Yongbyon," Hill said.

"We need to get Korea to abandon that 50 kilos and that will be the toughest sell. If we do get to this point of 50 kilos, one thing we have agreed to start with is the peace process on the Korean peninsula."

President George W. Bush said last month the United States would be willing to consider a peace treaty with North Korea if it gave up its nuclear weapons programme. A peace treaty would replace the truce that ended the 1950-53 Korean War.

Hill said a peace treaty could see North Korea "accepted as part of the landscape on the Korean peninsula" and the demilitarised zone turned into an international border.

But Hill said he remained concerned about North Korea's nuclear proliferation activities, citing a media report of a nuclear link between North Korea and Syria.

The New York Times has said Israel launched an airstrike last month on a Syrian nuclear reactor which was partially built and apparently modelled on one in North Korea used for stockpiling atomic bomb fuel. Syria denies having a nuclear facility.

"We have to be very concerned about North Korean's proliferation activities," Hill said. "We have to view these things with great concern and I have raised them with North Korea and will continue to do that."