North Korea on Wednesday accused the UN atomic agency of aggravating a dispute over its nuclear programme by siding with the United States.

The International Atomic Energy Agency (IAEA) "aggravated the nuclear issue on the Korean peninsula pursuant to the US hostile policy towards the DPRK (North Korea)," the North's foreign ministry said.

"This deprived the IAEA of the qualifications to intervene in (North Korea's) nuclear activities," it said in a statement carried by the official Korean Central News Agency.

IAEA last week called the North's nuclear programme a "serious concern", pointing to significant progress in recent months in building a new light-water reactor.

The North says the reactor is necessary to meet its energy needs.

The ministry also questioned IAEA's role in resolving a dispute over the North's nuclear programme.

"The DPRK, which legitimately accessed nukes to cope with the US persistent hostile policy, has its own standard on which IAEA's function is not workable as the function mainly deals with non nuclear states," it said.

The ministry said the IAEA had not voiced concerns over any other nuclear states, indicating its attitude towards Pyongyang.

The North has been developing nuclear weapons for decades. Its official position has been that it needs them for self-defence against a US nuclear threat.

Pyongyang disclosed in November 2010 an apparently operational uranium enrichment plant, in addition to its plutonium stockpile.

N. Korea launches rare attack on Chinese company
Seoul (AFP) Sept 5, 2012 - North Korea on Wednesday launched a rare attack on a Chinese company which had denounced the communist state over a troubled joint venture deal.

It is highly unusual for North Korea to issue any criticism involving Beijing, the sole major ally and economic lifeline for the impoverished country, which is a major recipient of Chinese food and fuel aid.

But Pyongyang was apparently goaded into reacting after the Xiyang Group, a Chinese mining company, posted a statement on its website describing its "nightmare" experience investing in a joint venture iron ore facility in North Korea.

Xiyang said it had invested more than $37 million in the project, which was eventually suspended after what the Chinese company said were impossible demands by the Koreans for significant changes to the original contract.

The iron ore plant was put into operation in April 2011, but production stopped six months later, after the North had arbitrarily raised land, power, water and labour costs, the company said.

The Xiyang statement was picked up by the Chinese and international media, including newspapers in South Korea.

North Korea hit back Wednesday in a statement carried on the official Korean Central News Agency (KCNA), insisting that Xiyang was "chiefly" to blame for the project's collapse.

"It has carried out only 50 percent of its investment obligations though almost four years have past since the contract took effect," the North's Commission for Joint Venture and Investment said.

The row comes as North Korea is seeking to expand trade ties with China in order to boost its moribund economy.

Jang Song-Thaek, the uncle of North Korea's new leader Kim Jong-Un, visited Beijing last month for high-level talks, which were seen as a precursor to a visit by Pyongyang's young ruler.

During Jang's trip the two nations signed agreements aimed at pushing forward the development of special North Korean economic zones near the Chinese border.

The North's reliance on China has increased as international sanctions over its missile and nuclear programmes have strangled its ability to secure international credit and foreign trade.

In Beijing, the Chinese government Wednesday refused to be drawn into the row over the Xiyang joint venture, saying only that such contractual problems should be resolved by both sides as they arise.

"The Chinese government always encourages Chinese companies to invest and do business in the DPRK (Democratic People's Republic of Korea) and contribute to China-DPRK economic cooperation and trade," Foreign Ministry spokesman Hong Lei said.

"We hope that the two sides will properly handle problems that arise in this process."