North Korea warned of “stern punishment” on Sunday, accusing the South of failing to forge “even the basic mood” for dialogue and of belittling its peace offensive.

The accusation came as the two Koreas were caught in a war of nerves over the resumption of dialogue: Seoul has offered to hold talks unconditionally to discuss pending bilateral issues, while Pyongyang has demanded the lifting of economic sanctions against it.

“South Korea should not haphazardly and thoughtlessly interpret our historic measures (for dialogue),” said the North’s powerful National Defense Commission in a statement carried by the North’s Korean Central News Agency.

“The South is deprecating our offer (of dialogue) as a choice to escape international isolation and economic sanctions, and a peace offensive aimed at stirring an (ideological) conflict within the South. Don’t distort or make a fool of our sincerity and intentions.”

Pyongyang resumed its harsh rhetoric after South Korean and U.S. activists launched balloons of anti-Pyongyang leaflets last Monday and Seoul rejected its calls to cancel the South Korea-U.S. military drills slated for next month. The North had refrained from slandering the South since its leader Kim Jong-un expressed his desire for inter-Korean dialogue in his New Year’s speech.

The North has recently been seen to be striving to improve relations with the outside world through conditional offers for dialogue, moves that the international community has taken with a grain of salt due to the regime’s unpredictability and insincerity.

The North has called on the U.S. to cancel its military drills with South Korea next month in return for a moratorium on nuclear tests. Its leader Kim has also stressed his desire for inter-Korean talks including at the highest level, namely a bilateral summit.

But Pyongyang’s peace offensive was seen by the media to be part of its efforts to ease international isolation caused by its development of nuclear arms and long-range missiles, human rights violations, and cyberattacks, most recently against Sony Pictures Entertainment.

The mood for inter-Korean dialogue has been dampened by the North, which demanded last Friday that Seoul lift its so-called May 24 economic sanctions should it want to hold talks to discuss a range of bilateral issues including the reunions of separated families.

Seoul has expressed regrets, stressing that the issue of family reunions should not be linked to the sanctions, which were put in place after the North was found to have carried out a torpedo attack on a South Korean warship in March 2010 that killed 46 sailors.

With the two Koreas failing to find a way to break the impasse, Seoul’s Unification Minister Ryoo Kihl-jae maintained a cautious stance, saying that the government was waiting for Pyongyang’s reply to its initial offer of talks.

“Rather than talking about what the Seoul government can do (for dialogue) ... I think it is North Korea’s turn to give us its reply (to our offer late last year for talks),” said the minister in an interview with Yonhap.

During the interview, Ryoo hinted that Seoul could resume the long-stalled tours to Mount Geumgangsan. But he stressed the first step was to fix the problems that caused them to be stopped. The tours were suspended after a South Korean tourist was shot dead by a North Korean soldier in July 2008 after she strayed into an off-limits area.

The prospects of inter-Korean dialogue could be further darkened as South Korea and the U.S. are to begin their annual joint Key Resolve/Foal Eagle exercises next month. The North said the drills were a rehearsal of a “nuclear war of invasion” against it, while the allies stressed the drills were defensive in nature.

Meanwhile, the tension between Washington and Pyongyang escalated after U.S. President Barack Obama mentioned the possibility of the North collapsing last week, calling it “the most isolated, the most sanctioned, the most cut-off nation on Earth.”

“The kind of authoritarianism that exists there, you almost can’t duplicate anywhere else. It’s brutal and it’s oppressive and as a consequence, the country can’t really even feed its own people,” Obama said during an interview on YouTube. “Over time, you will see a regime like this collapse.”

Pyongyang said in response that Obama’s remarks were “complaints of a defeatist who is cornered in a confrontation with North Korea.”

“We cannot help but be shocked at Obama, (who is) full of hostility against a sovereign state,” said an unnamed spokesperson of the North’s Foreign Ministry in an interview with the KCNA on Sunday.

“As the U.S. was defeated again and again in its efforts to militarily crush our republic (North Korea), it is now attempting to dismantle us through a flow of outside information via Internet. It is a foolish delusion.”

A day earlier, the North called for a change in what it calls a U.S. hostile policy toward it.

By Song Sang-ho (sshluck@heraldcorp.com)