North Korea has said it is willing in principle to return to nuclear disarmament talks after the United Nations did not blame it for an attack on a South Korean warship.
The North denies US and South Korean claims that it torpedoed the ship with the loss of 46 lives in March.
It said it was vindicated by the UN statement, which was watered down under pressure from China.
All parties in the dispute have professed satisfaction with the compromise statement, which condemns the attack without specifying the culprit.
The North said the statement exposes the 'foolish calculation' of the US and South Korea in bringing the issue to the UN.
It warned of 'strong physical retaliation' if they press on with countermeasures over the sinking.
South Korea, the US and several other countries had urged the UN to censure the North for the sinking, but China resisted such a move.
The statement condemns the attack as a threat to regional peace and calls for 'appropriate and peaceful measures' against those responsible.
It expresses deep concern at the findings of a multinational investigation team, which concluded the North was to blame, but 'takes note' of the North's denial of responsibility.
The statement welcomes Seoul's restraint and calls for direct talks to settle disputes on the peninsula peacefully.
US Secretary of State Hillary Clinton, who will visit South Korea this month, said the UN had sent a warning to North Korea 'that such irresponsible and provocative behaviour is a threat to peace and security in the region and will not be tolerated'.
