Rival Koreas agree to new talks

South Korean chief delegate Rhee Bong-jo, left, and his North Korean counterpart Choi Sung-il toast the gathering at the resort

SEOUL, South Korea (CNN) -- North and South Korea have agreed to restart stalled talks next week in an effort to get the reconciliation process back on track.

Negotiators for the two countries agreed to the talks after three days of meetings at North Korea's Diamond Mountain resort.

A joint statement on Sunday said the cabinet-level talks would take place in Seoul next week, on August 12-14 -- the first between Korean ministers since last November. Next week's meeting will be the seventh since 2000.

It will also be the first time cabinet-level officials have met since U.S. President George W. Bush called North Korea part of an "axis of evil."

In a possible sign of a further thawing of relations, North Korea said it would participate in the 14th Asian Games to be held in the South Korean port city of Busan beginning in September as well as play the South in a friendly football match in Seoul in September.

Significant

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The offer is considered significant because North Korea has continually shunned major sporting events in the South and did not participate in qualifying for the 2002 World Cup or have any role in the staging of the tournament, co-hosted by South Korea and Japan.

The joint statement said next week's talks would focus on more reunions of family members separated by the Korean War, plans for a cross-border rail link and joint inter-Korean projects.

The Diamond Resort working-level discussions followed a surprising expression of regret by Pyongyang over a June 29 naval clash that left five South and an estimated 13 North Korean sailors dead.

Pyongyang had blamed the South for initiating the Yellow Sea clash.

The statement of regret paved the way for this weekend's diplomatic contacts between North and South.

Navy clash overshadows talks

But the naval incident still overshadowed the talks, with Seoul's delegation on Saturday calling for the North to apologize for the incident and to punish those responsible for the sea battle. It is not clear how the North responded to the demand.

South Korean delegates Rhee Bong-jo (L), Seo Myung-kyo (R) and Unification Minister Jung Sae-Hyun (C) pose for the press before leaving for North Korea last week

The North on Sunday repeated its expression of regret but stopped short of an apology, South Korean media reported.

The conciliatory note from North Korea this week came with other moves to improve ties with the United States and Japan.

On the sidelines of the ASEAN regional forum in Brunei this week, U.S. Secretary of State Colin Powell and Japanese Foreign Minister Yoriko Kawaguchi held talks with their North Korean counterpart.

North Korea's Foreign Minister Paek Nam Sun told Powell, that Pyongyang was open to talks with Washington.

U.N. Command talks

On Friday, North Korea also extended an offer for its military to meet with the U.S.-led United Nations Command next week to discuss June's naval clash.

The U.N. Command has twice requested to discuss the issue with North Korea.

Seoul and Pyongyang have been divided since 1945 and remain technically at war because they never signed a peace treaty after their 1950-53 war, which killed millions on each side.

A landmark summit in June 2000 between the two Korean leaders led to a flurry of projects, including restoring railroad links and family exchanges.

But Pyongyang called off planned economic talks early in May, partly because of tension with the United States.

Although U.S. President George Bush labeled North Korea part of an "axis of evil," along with Iran and Iraq in his State of the Union address in January, U.S. officials have insisted they are ready to hold talks with Pyongyang without conditions.