N. Korea Says It Will Restart

Work at Three Nuclear Plants

North Korea said it will restart work at three abandoned nuclear power plants that could produce material for nuclear weapons, reviving the threat that brought it to the brink of war with the United States in 1994.

The announcement caused alarm in capitals in the region. Japan's prime minister called for calm, and the South Korean government convened its security chiefs over what it said was a looming "crisis on the Korean Peninsula."

The North Korean Foreign Ministry said the move was prompted by the country's dire need for power since the U.S.-led decision to suspend fuel oil deliveries it was making under a 1994 agreement that required North Korea to freeze work at the three nuclear plants.

If operational, the plants, at Yongbyon and Taechon, north of Pyongyang, would produce spent fuel rods as part of the power generation process. The rods could be reprocessed at Yongbyon into plutonium, the heart of a nuclear weapon.

The White House announced it would cut off funding for fuel deliveries to North Korea this month after saying North Korea admitted in October to having bought equipment to enrich uranium, which can also be used to make an atomic bomb.

The Bush administration, which has been anxious about avoiding a crisis with North Korea that would interfere with U.S. plans for a possible war in Iraq, reacted cautiously to the announcement.

-- Doug Struck

U.S. Releases Ship Carrying

Scud Missiles to Yemen

The United States agreed to release a ship containing North Korean missiles bound for Yemen, after strong protests by the Yemeni government suggested that Monday's seizure of the vessel by Spanish and U.S. forces would affect Yemen's cooperation in the war on terrorism.

The unflagged ship, carrying 15 Scud missiles along with conventional warheads and rocket propellant, had been tracked for weeks by the United States before it was intercepted by Spanish forces at U.S. request in the Arabian Sea 600 miles southeast of Yemen. The delivery appeared to violate a commitment made by Yemen last year, before the Sept. 11 attacks, not to buy any more North Korean missile equipment in exchange for avoiding sanctions for previous suspect deals with North Korea.

But in a flurry of phone calls between Yemeni officials and Secretary of State Colin L. Powell and Vice President Cheney, Yemen successfully argued that the ship was carrying equipment that predated that commitment. The vehement Yemeni response surprised U.S. officials, who had assumed Yemen could plausibly deny knowledge of the shipment, insist it was living up to its previous agreement and would not demand delivery of the missiles.

The sudden reversal by the administration came only one day after it hailed the seizure as a successful example of halting the spread of dangerous weapons.

The reversal underscored the tension between the twin U.S. goals of stemming weapons proliferation and enlisting allies in the fight against terrorism. It also illustrates the difficulty of executing a global policy of preemption against the spread of weapons of mass destruction, which the administration codified in a new national security strategy that was released by the White House on Tuesday, the day the seizure was made public.

-- Thomas E. Ricks and Peter Slevin

U.S. Believes Al Qaeda's Allies

Obtained Iraqi Nerve Agent

The Bush administration has received a credible report that Islamic extremists affiliated with al Qaeda took possession of a chemical weapon in Iraq last month or late in October, according to two officials with firsthand knowledge of the report and its source. They said government analysts suspect that the transaction involved the nerve agent VX and that a courier managed to smuggle it overland through Turkey.

If the report proves true, it would be the first known acquisition of a nonconventional weapon other than cyanide by al Qaeda or a member of its network. It also would be the most concrete evidence to support the charge, long aired by President Bush and his advisers, that al Qaeda terrorists receive material assistance in Iraq.

U.S. analysts are said to have no evidence indicating whether Iraqi President Saddam Hussein knew about or authorized such a transaction.. But officials said they presume it would be difficult to transfer a chemical agent without Hussein's knowledge.

Knowledgeable officials said information about the transfer came from a sensitive and credible source, which they declined to discuss. Like most intelligence, the reported chemical weapon transfer is not backed by definitive evidence. The intended target is unknown.

Meanwhile, according to U.N. sources and documents, Iraq bought more than 3.5 million vials of the drug atropine over the past five years with U.S. approval despite concerns that they could be used to inoculate Iraqi soldiers participating in chemical warfare.

-- Barton Gellman

and Colum Lynch

U.S. Assures Allies on Use

Of Iraqi Weapons Declaration

As U.S. experts began to copy and comb through Iraq's 12,000-page declaration of its weapons of mass destruction program, the Bush administration moved to assure skittish allies that it does not intend to use the document as a trigger to begin military operations against Iraq, U.S. and foreign officials said.

"We're now on common ground with the administration" in a position of "measured skepticism" but no "crazed or precipitative reactions" about Iraq's contentions that it has no chemical, biological or nuclear weapons programs, said a senior diplomat from one of the five permanent members of the U.N. Security Council.

The assurances were accompanied by a substantial softening of recent administration predictions that the document is sure to be riddled with lies constituting a material breach of the U.N. Security Council resolution that was adopted unanimously last month. "We have not made any conclusions about the declaration," White House spokesman Ari Fleischer said.

The Iraqi government contends that it has dismantled its weapons of mass destruction programs.

One of only two copies of the declaration provided by Iraq last Saturday ended up in U.S. hands the following Monday, despite the Security Council's decision the previous Friday that U.N. inspectors should review it before it is distributed to individual governments.

The United States received a copy of the document after it persuaded Colombia's ambassador to the United Nations, the current president of the Security Council, to turn it over. The council's four other permanent members -- Britain, France, Russia and China -- acquiesced.

-- Karen DeYoung

and Colum Lynch

Fed Leaves Key Interest Rate

Untouched as Aid to Growth

Federal Reserve officials, expecting economic growth to accelerate again in a few months, left their key 1.25 percent target for overnight interest rates unchanged.

The low target rate, "coupled with still robust underlying growth in productivity, is providing important ongoing support to economic activity," the central bank's top policymaking group, the Federal Open Market Committee, said in a statement issued after the meeting Tuesday.

While Fed officials said they expect growth to pick up, they didn't say so in a forceful way. "The limited number of incoming economic indicators since the November meeting, taken together, are not inconsistent with the economy working its way through its current soft spot," the statement said.

Many private forecasters predict that growth will be back into the 3.5 to 4 percent range in the second half of 2003 -- without additional interest rate reductions or further income tax cuts, which President Bush is expected to propose next month.

-- John M. Berry