North Korea dismisses reports leader Kim is ill

By Jon Herskovitz and Jack Kim

SEOUL (Reuters) - North Korea on Wednesday dismissed reports that leader Kim Jong-il might be seriously ill, a development that could trigger a power shift in Asia's only communist dynasty.

Speculation grew after the reclusive 66-year-old leader, widely believed to suffer from debilitating illnesses, failed to appear at a parade on Tuesday to mark the country's 60th anniversary since its founding. A U.S. intelligence official said he might have suffered a stroke.

"(There is) no problem," North Korea's nominal number two leader, Kim Yong-nam, told Japan's Kyodo news agency in Pyongyang.

Senior North Korean diplomat Song Il-ho told Kyodo earlier: "We see such reports as not only worthless, but rather as a conspiracy plot."

The health concerns come just as the North appears to be going back on a deal with major powers to scrap a program to develop nuclear weapons in return for massive financial aid and a chance to be accepted into the rest of the world.

But South Korean MPs said after a briefing by the country's spy chief that Kim had suffered a stroke but his condition was under control.

"He is not gravely ill," one ruling party lawmaker was quoted as saying by Yonhap news agency.

The death of Kim would create huge uncertainty over leadership in a country whose deep distrust of the outside world is backed by one of the globe's largest standing armies and probably has atomic weapons.

The North has threatened to turn its wealthy neighbor in the south to dust and considers Japan and the United States as mortal enemies.

Kim's health and possible successor are two of the most closely guarded secrets in the paranoid state.

South Korea said in a 2006 intelligence report that when Kim died, it expected the North Korean government to lapse into a brief coma and then hunker down with top military officials later battling for power, perhaps in partnership with one of Kim's three known sons.

NUCLEAR CONCERNS

Kim, whom state media calls the Dear Leader, was groomed for years to succeed his father and the North's founding president Kim Il-sung, who died in 1994.

But this time there is no clear heir and many analysts say the ruling hierarchy is riven by factionalism and debate between those who want to continue to take a hard line against the West and others who see even a little reform as the only way to drag the country out of abject poverty.

It also leaves a frightening question mark for South Korea, for which a worst-case scenario would be the collapse of the North, leaving it facing social chaos that could wreck Asia's fourth largest economy.