SEOUL, South Korea -- The U.N. nuclear watchdog decided Saturday to pull its inspectors out of North Korea by New Year's Eve, a step demanded by the North that will leave the world without an eye into the secretive nation's nuclear program.
Trying to stave off the escalating tensions, South Korea said Saturday it would appeal to China and Russia -- North Korea's longtime allies -- to pressure the North to back down.
U.S. officials said Saturday the Bush administration is prepared to dramatically intensify economic pressure on the North through its Asian neighbors and the United Nations unless Pyongyang stops its nuclear weapons programs.
Meanwhile, in the North Korean capital of Pyonyang, 10,000 people rallied against U.S. policy, the North's official news agency said.
North Korea's demand for the inspectors' expulsion stepped up the challenge to the United States, which has taken a hard line toward North Korea, refusing to negotiate unless the North abandons its nuclear ambitions.
In an interview with The Associated Press, Mohamed ElBaradei, director of the U.N. International Atomic Energy Agency, said the North Koreans were "still pursuing their policy of defiance. They continue to escalate a crisis situation."
But he held out hope that diplomatic efforts would push North Korea's leadership to reverse course.
The IAEA's board of governors will meet at the agency's Vienna headquarters on Jan. 6 to consider whether to refer the matter to the Security Council -- a grave diplomatic maneuver that could lead to sanctions or other punitive actions against North Korea.
"The emerging consensus is that the board would like to give diplomacy -- and North Korea -- another chance to comply with its international obligations," ElBaradei told the AP by telephone from Sri Lanka, where he is vacationing.
U.N. Secretary-General Kofi Annan urged North Korea to cooperate with the IAEA "and not to undertake actions that could further complicate matters," according to a Saturday statement by his spokesman.
The IAEA has three inspectors monitoring North Korea's main nuclear complex at Yongbyon north of Pyongyang, which has been frozen since 1994 under an agreement with the United States that fell apart this year.
On Friday, North Korea said the inspectors no longer were welcome. ElBaradei responded by sending a letter of protest to the North Korean government. North Korea did not reply but on Saturday, North Korean officials told the monitors directly "they should leave the country immediately," IAEA spokeswoman Melissa Fleming said.
The inspectors were preparing to leave by Tuesday, she said.
ElBaradei told the AP the inspectors would begin making their way to Pyongyang on Sunday and would leave North Korea altogether by Tuesday.
After announcing Dec. 12 it would revive the Yongbyon complex, North Korea removed IAEA monitoring seals and cameras from the site. The inspectors are the body's last means to monitor the situation there.
"This is a country that with impunity is trying to walk away from its international obligations," ElBaradei said. "They think by putting as much pressure on the international community as possible, they'll get its attention and get it to negotiate. What they don't understand is that no country is ready to negotiate under duress."
The IAEA has been monitoring the complex since the North closed it in 1994 under an agreement aimed to ensure that the isolated state does not divert nuclear materials to make weapons.
North Korea disclosed in October it has a secret nuclear weapons program. In response, the United States and its allies halted vital oil shipments promised under the 1994 deal. Pyongyang says it is reactivating the Yongbyon reactor to generate electricity.
It has begun moving fresh fuel rods to the reactor and has announced it will reactivate a reprocessing laboratory where plutonium can be extracted from spent fuel rods. Plutonium can be used to make nuclear bombs.
There are 8,000 spent fuel rods in storage at the lab, and U.S. officials say those rods contain enough plutonium to make several bombs.
The developments renewed fears that the Korean Peninsula was spiraling into a crisis similar to the one in 1994, in which the U.S. military drew up plans to bomb the same nuclear site at Yongbyon.
Huge armies, including 37,000 U.S. soldiers in the South, face each other across a border laced with fences, tank traps and mines.
Russia and China both urged Washington to seek dialogue rather than confrontation with North Korea. The Bush administration has said military action was not being contemplated.
"We seek a peaceful resolution," White House spokesman Scott McClellan said Friday. "I think for now we need to let the discussions happen with our friends and allies about the next steps that we take."
If North Korea does not change course, the Bush administration could find it necessary to encourage the North's neighbors to reduce economic ties with Pyongyang, U.S. officials said Saturday on condition of anonymity.
They said the administration even may ask South Korea to break all ties to the North if the situation does not improve.
A senior South Korean Foreign Ministry official said Seoul will send special envoys to Russia and China "at the earliest possible date" to seek assistance defusing the crisis.
South Korean Foreign Minister Choi Sung-hong called his Chinese counterpart, Tang Jiaxuan, on Saturday. Tang said Beijing "hopes the United States and North Korea will resolve the issue through dialogue," said South Korean Assistant Foreign Minister Lee Tae-shik.
Russian Deputy Foreign Minister Alexander Losyukov also urged restraint.
"You cannot achieve anything through accusations, pressure or tight demands, not to mention threats," Losyukov told the Interfax news agency.