The combination of a shadowy nuclear weapons programme and a Communist leadership obsessed with secrecy has made North Korea a byword for crisis.

North Korean leaders rarely talk in depth with visitors, but when they do the result is much-needed new perspective on one of the most pressing security issues confronting the world today.

Based on four days of intensive conversations with senior officials in Pyongyang, it is clear that North Korea is eager to resolve the nuclear weapons crisis - but only by concluding a step-by-step denuclearisation agreement linked with progress towards the normalisation of ties with the US.

Economic pressures, intensified by bold, market-based reforms, make such a deal critical for the stability of Kim Jong-il's regime. But he will not accept the Bush administration's demand for the "complete, verifiable, irreversible dismantling" (CVID) of his nuclear weapons programme all at once, without knowing what he will get in return.

This is the assessment that emerges from interviews in Pyongyang with Kim Yong-nam, number two to Kim Jong-il; Paik Nam-soon, foreign minister; Kim Gye-gwan, vice-foreign minister; Gen Ri Chan-bok, spokesman for the Korean People's Army; and others.

At the start of my two hours with Kim Yong-nam, president of the Supreme People's Assembly, whom I had met four times before, he said he had just come from watching a CNN programme about Bob Woodward's new book, Plan of Attack. "It seems Mr [George W.] Bush is being kept very busy with Iraq," he said.

"We don't think he is at all serious about resolving the nuclear issue with us in a fair way, since we obviously can't accept 'CVID first'. My feeling is he is delaying resolution of the nuclear issue due to Iraq and the presidential election.

"But time is not on his side," he added. "We are going to use this time 100 per cent effectively to strengthen our nuclear deterrent both quantitatively and qualitatively. Why doesn't he accept our proposal to dismantle our programme completely and verifiably through simultaneous steps by both sides?"

In step one, explained Kim Gye-gwan, North Korea would freeze its plutonium programme in exchange for multilateral energy aid, an end to US economic sanctions and the removal of North Korea from the US list of terrorist states, which would open the way for World Bank and Asian Development Bank aid. "This would be the starting point toward complete dismantlement," Kim Gye-gwan said, "if the United States becomes our friend."

Pressed for details, he declared a freeze meant that "we would not enlarge the stockpile. The amount frozen would depend on what the US is prepared to do." Thus, if the payoff in energy aid was big enough, inspectors would be granted the access necessary to confirm how much plutonium had been reprocessed; the plutonium could then be placed under controls and further reprocessing could be prohibited.

Initially, Kim Gye-gwan said the freeze would only ban reprocessing and would not cover the operation of nuclear reactors for civil power generation. Later he indicated that this demand was negotiable.

North Korea has proposed that negotiations on the freeze start immediately, during the meeting of a six-nation working group in Beijing on May 12, but Kim Gye-gwan said the US wanted the agenda restricted to CVID.

Kim Yong-nam has dismissed suggestions that North Korea - or a unified Korea - would refuse to give up nuclear weapons capabilities because neighbouring Russia and China are both nuclear powers and Japan might yet become one.

"No," he said. "We want a nuclear-free Korean peninsula, and we have no intention of getting engaged in a nuclear arms race with neighbouring nations.

"The only reason we are developing nuclear weapons is to deter an American pre-emptive attack. After all, we have been singled out as the target for such an attack and we are the justification for the development of a new generation of US nuclear weapons. We don't want to suffer the fate of Iraq."

Gen Ri Chan-bok said: "We don't mind the possession of nuclear weapons by Russia and China, because they're not a threat to us. Although Japan is not friendly, I don't know whether Japan is developing nuclear weapons or not, but in any case, our nuclear deterrent is not against Japan or anyone else, just against the United States."

On April 13, Richard Cheney, US vice-president, gave a speech in Shanghai branding North Korea a proliferator of nuclear and missile technology. Mr Cheney warned specifically that Pyongyang might sell nuclear material to al-Qaeda.

These allegations evoked categorical denials. "We make a clear distinction between missiles and nuclear material," declared Kim Yong-nam. "We're entitled to sell missiles to earn foreign exchange. But in regard to nuclear material our policy past, present and future is that we would never allow such transfers to al-Qaeda or anyone else. Never."

Paik Nam-soon, the foreign minister, said: "Let me make clear that we denounce al-Qaeda, we oppose all forms of terrorism and we will never transfer our nuclear material to others. Our nuclear programme is solely for our self-defence. We denounce al-Qaeda for the barbaric attack of 9/11, which was a terrible tragedy and inflicted a great shock to America. Bush is using that shock to turn the American people against us, but the truth is that we want and need your friendship."

The biggest change in North Korea since my last visit three years ago is the social ferment resulting from economic reforms initiated by Kim Jong-il in mid-2002. North Korea is slowly moving toward a mixed economy.

The showcase of this change is the Tong-Il market in central Pyongyang, where about 2,200 vendors sell everything from farm produce to television sets. Twenty similar indoor markets are now under construction throughout Pyongyang and more are planned.

Some of the food sold in these markets comes from rural co-operatives that are now permitted to sell any surplus they produce over the government procurement quota, and some is grown in private plots. But much of the food and some of the consumer goods are imported from neighboring Manchuria by a network of officially-sanctioned Korean and Chinese middlemen.

State-owned factories no longer receive subsidies to cover their losses and are encouraged to find their own markets for their products, trade with each other and keep and reinvest any profits.

The jury is still out on the economic impact of price and wage reforms that have rewarded farmers with higher prices and given higher wages to groups critical to the regime's power - notably miners, some industrial workers and the armed forces.

Politically, the higher prices for farmers have stabilised Kim Jong-il's support in the countryside. In the more populous urban areas, however, the wages of white collar workers have not been increased enough to keep pace with inflation, including government bureaucrats.

Many resident diplomats and aid officials say that unless North Korea can attract large-scale foreign aid to rebuild its infrastructure, especially its electricity, water and transport systems, its economic problems will remain serious. The economic potential of the reforms will not be realised and their net social and political effects could be destabilising. Kim Jong-il needs a nuclear deal with the US in order to open up an influx of aid, trade and investment.

At the same time, hardliners will go along with such a deal only if it includes significant aid commitments, and if it removes the threat of a US pre-emptive strike, which has led to the escalation of the North Korea nuclear effort during the past two years.

Could the US and its allies ever be sure that a closed society such as North Korea lives up to a denuclearisation agreement?

I told my interlocutors that no US president would give Pyongyang the binding security guarantee that it had sought in the nuclear negotiations. The Pentagon would insist that the US retained the option of a retaliatory second strike in the event that North Korea should attack South Korea, Japan or the US.

Surprisingly, one of my North Korean interlocutors said Pyongyang might reconsider its demand for a security guarantee if a new administration proved less hostile than the current one. The presence of US diplomats and businessmen in Pyongyang after the normalisation of the US-North Korea relationship might be a better guarantee against a pre-emptive strike, he said, than a paper security assurance.

But the window of opportunity for a nuclear deal could quickly close when - or if - Pyongyang conducts another long-range missile test or a nuclear test.

Asked how long North Korea could wait before conducting such tests, Kim Yong-nam replied: "There is no deadline in the negotiations. We're patient. But if the United States doesn't alter its position, we can't foresee what will happen and we'll have to decide about testing when the time comes."

Despite insistent probing, it was not possible to penetrate the mysteries still surrounding Pyongyang's nuclear effort: has it mastered the miniaturisation techniques necessary to equip missiles with nuclear warheads? Does it possess nuclear bombs deliverable from aircraft, and if so, how many? Or is it still at the stage of experimenting with nuclear "devices" that are not yet militarily operational? In short, is there more bluff than reality to the North Korea nuclear alarm?

During his recent visit to North Korea, Siegfried S. Hecker, former director of the Los Alamos Nuclear Laboratory, saw evidence that North Korean scientists knew how to reprocess plutonium, but he did not see evidence that they knew how to implode a plutonium-based nuclear weapon.

Calculated ambiguity greeted questions about the nature of the "nuclear deterrent" Pyongyang says it possesses.

"That's a confidential military issue," said Kim Gye-gwan. "But remember that the bomb dropped by the US at Nagasaki was made after four months of preparation. It's now a half century later, and we have more up-to-date technologies, so you can come to your own conclusions on this matter."

Paik Nam-soon said: "I don't think mere devices and the possession of nuclear material constitute a genuine deterrent. When we say deterrent, we mean a capability that can deter an attack."

Gen Ri Chan-bok's reply about testing suggested that there might indeed be an element of bluff in what North Korea says. At first, he replied: "When we can't develop without a test, we'll test." But then he added: "Even without a test, we can develop, complete and manufacture nuclear weapons."

Selig Harrison, director of the Asia programme at the Center for International Policy in Washington, has had high-level access to North Korean leaders since 1972, when he became the first American to visit Pyongyang after the Korean war and first US journalist to interview the late Kim Il-sung. His second meeting with Kim in 1994 set the stage for the nuclear freeze agreement that was negotiated a week later by then-US president Jimmy Carter; it was the breakdown of this agreement in December 2002 that led to the current nuclear crisis.

This was Mr Harrison's eighth visit to North Korea. He is author of Korean Endgame: a Strategy for Reunification and US Disengagement (Princeton University Press).