South Korea defends "strong response" to North

South Korean President Lee Myung-bak (2nd L) presides over a cabinet meeting at the presidential Blue House in Seoul December 21, 2010.

SEOUL (Reuters) - South Korea on Tuesday defended its live artillery drill near the disputed border with the North, which triggered fears of all-out war, saying it was determined to stand up to provocations from its reclusive neighbour.

North Korea stepped back from confrontation over the "reckless" military drills and reportedly issued a new offer on nuclear inspections, drawing a cautious response from Seoul and Washington.

Air-raid bunkers on the South Korean island of Yeonpyeong shook during South Korea's exercise, which the North had vowed to repay in kind. North Korea shelled the island last month, killing two Marines and two civilians, in response to a similar exercise.

"We will make the greatest efforts to create strong military-like armed forces that can assure victory over all enemies and be prepared for North Korean provocations," Defence Minister Kim Kwan-jin said in defence of a drill that many observers had feared could lead to a wider conflict.

"The army will make a strong response to all provocations."

South Korean President Lee Myung-bak was due to hold a national security council meeting at 11:40 a.m. (0240 GMT) on Tuesday, a spokesman said, giving no further details.

Tuesday's edition of the Korea Joonang Daily said that South Korea's drill showed Seoul's resolve to stand up to North Korea, after a perceived weak response to last month's shelling and the sinking of a naval vessel in March which the South has blamed on the North.

"The (routine) drill is absolutely necessary to preempt malicious moves by the North, especially after two Marines and two civilians were killed by the North's latest bombardment of Yeonpyeong Island," it said.

"The South Korean government had to send a strong message to North Korea and the international community that if Pyongyang provokes us again, it will pay a hefty price. We believe the exercise successfully accomplished that goal by demonstrating our unflinching resolve to protect our own territory no matter what."

A key South Korean government official said the recent aggression by the North was closely linked to the succession from ailing leader Kim Jong-il to his youngest son, Kim Jong-un, and was intended for its domestic audience as much as for anybody.

"We don't want to give them the misperception that their provocations will help their national interest," he said.

North Korea, which had said it would strike again if the South went ahead with the drill, said it did not feel the need to retaliate against "every despicable military provocation".

The U.N. Security Council remained deadlocked in its efforts to ease tensions on the Korean peninsula, but North Korea's refraining from retaliation and the nuclear offer reportedly made to U.S. trouble-shooter Bill Richardson offered some breathing space.

Richardson, speaking to CNN from Pyongyang, said he sensed a greater flexibility among North Korean officials.

"Their tone was more positive, as if they realized they'd gone into the precipice with their very negative actions," said Richardson, who has had extensive past contacts with North Korea.

"They seemed to realize that they had maybe gone too far and now was a time to reach out," Richardson said, according to a transcript released by CNN.

But others remained worried.

"The situation is very tense," Russian Foreign Minister Sergei Lavrov said in Moscow. "There can be no optimism in this situation."

The United States said North Korea's decision not to retaliate simply showed it was behaving "the way countries are supposed to act." It reacted cautiously to word of the nuclear offer, saying it would wait for concrete evidence of North Korea's intentions.

North Korea conducted nuclear tests in 2006 and 2009. It expelled inspectors in April 2009 after ripping up a previous disarmament-for-aid agreement. Last month Pyongyang unveiled major technical progress in uranium enrichment.

(Writing by Nick Macfie; Editing by John Chalmers)

(Additional reporting by Kim Miyoung and Kim Do-gyun; Writing by Nick Macfie)