North Korea's nuclear plans cloud Obama in Seoul

SEOUL (Reuters) - U.S. President Barack Obama arrived in South Korea on Wednesday for talks that will focus on how to tempt North Korea back to nuclear disarmament talks and a delayed trade pact between Seoul and Washington.

North Korea stoked regional tension ahead of Obama's first tour of Asia since taking office by this month, sparking a naval firefight with the South and declaring it had produced a fresh batch of arms-grade plutonium.

South Korean officials said North Korea would top the agenda when Obama meets President Lee Myung-bak on Thursday. Also to be discussed is a trade deal bogged down by U.S. objections that it does not do enough to open the South Korean market to U.S. products, including cars.

"They will be strongly pressing for North Korea to give up its nuclear weapons, but simultaneously letting the state know it has much to gain if it does," said Chung Seong-chang, an analyst at the Sejong Institute think tank near Seoul.

The Obama administration plans to send its first envoy to North Korea in the next few weeks to revive comatose six-way talks on ending the North's nuclear ambitions in return for massive aid to repair its failed economy and better global standing for the largely ostracized state.

Analysts said Obama would not have agreed to the visit unless his government was given some reassurance that Pyongyang would respond by reviving the broader disarmament dialogue.

The United States and South Korea want at a minimum North Korea to return to a six-way agreement struck in 2005, to resume disabling its aging Yongbyon nuclear plant and to allow inspectors to verify claims it made about its atomic arsenal.

THE NORTH'S SHRIVELLED ECONOMY

If the North does not, Obama and Lee might be content to let North Korea stew in its economic malaise.

North Korea's shriveled economy has lost more than $1 billion since the South ended unconditional handouts and the U.N. imposed new sanctions for its nuclear test in May.

In what may be a positive signal, North Korea has tempered its usual strident anti-U.S. rhetoric since Obama started his Asia tour last week.

The overnight visit to South Korea comes at the end of the tour and may be the least problematic for Obama after facing a dispute with Japan over a U.S. military base there and stepping gingerly in China so as not to rile the rising Asian superpower.

One area of conflict may be a trade deal struck two years ago under President George W. Bush and yet to be approved by legislatures in either country. Estimates said it could increase their $83 billion a year in two-way trade by about $20 billion.

South Korea insists it will not renegotiate the deal, the biggest trade pact for the United States since the NAFTA accord of the mid-1990s with its immediate neighbors. But Seoul has left the door open for discussions for side deals on areas such as the auto trade.

South Korea removed a potential source of friction by saying it at the end of October it would dispatch a security contingent of police and troops to Afghanistan to help support the U.S.-led mission there.

(Additional reporting by Caren Bohan and Christine Kim, editing by Jonathan Thatcher and Ron Popeski)