But he stressed that his gesture would barely dent global pressure over the secretive communist regime's atomic ambitions and warned it must still come clean on its suspected arsenal and any sharing of nuclear know-how overseas.

"Our ultimate goal remains clear: a stable and peaceful Korean Peninsula, where people are free from oppression, free from hunger and disease, and free from nuclear weapons. The journey toward that goal remains long, but today we have taken an important step in the right direction," he said.

Bush announced he was partly lifting some Trading With The Enemy Act sanctions and notified the US Congress he was removing North Korea from the US list of state sponsors of terrorism, effective after a 45-day review period.

"During this period, the United States will carefully observe North Korea's actions and act accordingly," he said, warning of further punishment for "wrong choices" if Pyongyang breaks its pledges to fully disclose its activities.

Bush's comments at the White House came shortly after North Korea gave China a partial nuclear accounting, six months late, as agreed to in six-country talks that also group Russia, Japan, South Korea, and the United States.

"We will trust you only to the extent that you fulfill your promises," Bush told Pyongyang. "I'm under no illusions that this is the first step; this isn't the end of the process, this is the beginning of the process."

The White House said the declaration did not meet Washington's past demands for a full accounting of past uranium enrichment activities or alleged proliferation, and left doubts about how many bombs it may have produced.

US National Security Adviser Stephen Hadley said the new report also did not answer US allegations that North Korea helped Syria build a suspect nuclear site, which Israel destroyed in September. Damascus denies the charge.

"We're in a situation of not quite admitting, not denying, but opening the door for us to be able to try and get greater clarity," Hadley said.

The tit-for-tat moves met with conservative anger, but Democrats who control the US Congress were mostly supportive, meaning that legislative attempts to keep North Korea on the terrorism list were all-but-certain to fail.

So with just six months before he leaves office in January, the US president walked a tightrope between declaring a much-desired diplomatic victory and denying any softening of his hard line on the Stalinist state.

"We remain deeply concerned about North Korea's human rights abuses, uranium enrichment activities, nuclear testing and proliferation, ballistic missile programs and the threat it continues to pose to South Korea and its neighbors," he said.

Bush also had a message for staunch ally Japan, which had urged no softening of the US hard line until Pyongyang satisfies Tokyo's demands to fully account for the abductions of Japanese citizens by North Korean agents.

"The United States will never forget the abduction of Japanese citizens by the North Koreans," he declared. "We expect the North Koreans to solve this issue in a positive way for the Japanese."

The declaration was part of a series of measures aimed at getting North Korea, which tested an atomic weapon in October 2006, to agree to nuclear disarmament in exchange for aid and security guarantees.

On Friday, North Korea planned to blow up the cooling tower at its disabled Yongbyon nuclear reactor in front of a worldwide TV audience, dismantling the facility as a symbol of its commitment to the process.

And envoys from the six parties to the talks planned to meet Monday to discuss verification arrangements.

US officials played down the economic impact of removing the terrorism label, which had prevented the impoverished state from receiving US economic aid and blocks loans from the World Bank and other multilateral organizations.

Remaining US sanctions on North Korea include those affecting trade in military, dual-use and missile-related items, and a ban on most forms of US economic assistance, other than purely humanitarian aid.

There are also UN sanctions against North Korea.

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