Seoul: South Korea`s point man on North Korea blamed the communist state`s leaders on Thursday for icy cross-border relations, accusing them of blunders both at home and abroad.
Unification Minister Hyun In-Taek said the North has only itself to blame for its international isolation.
Tensions are high after the South accused the North of torpedoing a warship -- an accusation furiously denied by Pyongyang, which has threatened a "do or die" battle in response to any censure at the United Nations over the incident.
A diplomatic source quoted by Yonhap news agency said a UN statement was imminent on the March sinking of the warship, which cost the lives of 46 sailors.
Seoul`s Defence Ministry also announced plans to spend hundreds of millions more dollars strengthening defences against unconventional attacks.
"North Korea argues this (soured relations) happened because of our hardline policy, but the North Korea policy of our government is one based on engagement and embracement," Hyun told business executives in the western city of Incheon.
"Strained relations were not caused by our policy but by their mistakes."
Hyun said "three major mistakes" by the North led to the current situation: rebuffing the South`s offer to rebuild the North`s economy, taking a hardline approach with the new US administration, and failing to understand its own crumbling economy.
The minister said a failed currency revaluation that the North implemented last November demonstrates an inability to feed its people.
The revaluation -- seen as an attempt by the regime to crack down on private business -- worsened food shortages and sparked rare public unrest.
Relations have deteriorated since South Korean President Lee Myung-Bak took office in February 2008. He offered the North massive economic aid if it scrapped its nuclear weapons programme, a condition which infuriated Pyongyang.
The South announced its own non-military reprisals after a multinational investigation team concluded that a North Korean submarine sank the warship in March with the loss of 46 lives.
It also asked the UN Security Council to censure Pyongyang, but permanent council members China and Russia have not publicly accepted the North`s guilt.
The source quoted by Yonhap said negotiations at the United Nations on compromise wording in a statement were in the final stages.
"Negotiations are in the final stage," the source said. "We could have agreement as early as this weekend... at the latest, an agreement will be possible by next week."
The source declined to give details of the statement but suggested it would be weaker than one issued by the Group of Eight nations at last month`s summit in Canada.