North Korea said on Saturday it was willing in principle to return to nuclear disarmament talks after the United Nations failed to blame it for a deadly attack on a South Korean warship.
The North, which denies US and South Korean claims that it torpedoed the ship with the loss of 46 lives, said it was vindicated by the UN statement which was watered down under pressure from Pyongyang's ally China.
All parties in the dispute which has sharply raised regional tensions professed satisfaction with the compromise statement adopted on Friday, which condemns the attack without specifying the culprit.
The North said the statement exposes the "foolish calculation" of the United States 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.
If hostile forces persist in "demonstration of forces and sanctions", they would not escape "strong physical retaliation" or evade responsibility for escalating the conflict, a foreign ministry spokesman said on official media.
The South Korean and US navies are planning a joint exercise to deter North Korean "provocation". Seoul has announced reprisals including a partial trade cut-off.
Repeating its earlier stance, the North said it would make "consistent efforts for the conclusion of a peace treaty and the denuclearisation through the six-party talks conducted on equal footing".
The North abandoned the six-party talks in April 2009. It calls for talks on a formal peace treaty with the United States, and an end to sanctions, before returning to the nuclear dialogue.
South Korea, its ally the United States and several other countries had urged the UN to censure the North for the sinking, but China resisted such a move.
The presidential 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.
The North's ambassador to the UN, Sin Son-ho, hailed the statement as "our great diplomatic victory". The foreign ministry spokesman was less triumphal but noted the call for dialogue.
The spokesman complained that the UN "hastily tabled and handled the case before the truth of the case has been probed" and said the issue should have been handled between the two Koreas.
The North "remains unchanged in its stand to probe the truth about the case to the last", it said, describing the allegations against it as a "conspiratorial farce".
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".
The White House issued a similar statement, noting that the UN action came after the Security Council imposed tough sanctions on North Korea over last year's nuclear and missile tests.
The latest statement "increases North Korea's international isolation... as the international community continues to make clear the cost that comes with North Korea's provocative behaviour", it said.
South Korea's foreign ministry said the international community "condemned North Korea's attack on the Cheonan with a united voice and emphasised the importance of preventing additional provocations".
Japan described the test as "a clear message of the international community about a North Korean attack" while China merely said it was time to move on.
"We hope the involved parties continue to maintain calm and restraint, and take this opportunity to flip over the page of the Cheonan incident as soon as possible," a foreign ministry spokesman said.
"We call for an early resumption of the six-party talks and joint efforts to maintain peace and stability on the Korean peninsula."