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* UN sanctions take aim at North's financing, illicit cargo
* Analyst: Iran watching response to North Korea closely
* Refusal to negotiate with Pyongyang unwise, analyst says
By Louis Charbonneau
UNITED NATIONS, March 8 (Reuters) - New U.N. steps against North Korea over its nuclear arms program were designed to bring its sanctions regime more in line with the tough restrictions Iran is facing, but fears remain that the measures will have little impact on Pyongyang's defiant leaders.
U.S. Ambassador to the United Nations Susan Rice - who led the drafting of U.N. Security Council resolution 2094 adopted unanimously on Thursday as well as the bilateral negotiations with China that produced it - said, "These sanctions will bite and bite hard."
North Korea responded with an escalation of its bellicose rhetoric, including a threat to launch a preemptive nuclear strike against the United States. It also repeated previous threats to cancel the armistice that ended the 1950-53 Korean war and moved to cut off a hotline with the South.
But will the sanctions actually bite? And, if they do bite, will they end the cycle of rocket launches and nuclear tests that have resulted in a sustained push by the United States, South Korea and Japan at the U.N. Security Council to condemn and punish Pyongyang?
Only Beijing and Pyongyang can answer those questions. Some analysts question whether North Korea's ally and diplomatic protector China really wants "full implementation" of the U.N. restrictions on trade with North Korea, as its U.N. envoy Li Baodong called for on Thursday. Without China's active support, the measures could be largely symbolic.
George Lopez, a professor at the University of Notre Dame and a former member of a U.N. expert panel that monitors compliance with the North Korean sanctions regime, said the new measures could prove to be more effective than previous rounds of U.N. sanctions have been against Pyongyang.
"This diversity of sanctions measures and other directives in the new resolution have the potential to take a considerable bite out of DPRK (North Korea) money movements and to constrain their access to specialized products critical to missile and centrifuge operations," he said.
Similar to steps the U.N. Security Council approved in June 2010 against Iran over its nuclear program, the council's latest resolution prohibits countries from engaging in any financial transactions with Pyongyang that could in any way be linked to its nuclear and missile programs.
It also makes interdictions of suspicious North Korean cargo coming in and out of the country in violation of U.N. sanctions mandatory. Such raids on North Korean vessels were voluntary prior to Thursday's action by the council.
Combined with unilateral U.S. and European Union sanctions, similar measures in the case of Iran, a much bigger and more open economy than North Korea's with vast oil and gas reserves, have contributed to a severe deterioration of Iranian economic health. Iran's currency has plummeted and inflation skyrocketed.
Some diplomats and analysts say North Korea's effectively closed economy dulls the impact of sanctions.
NEW SANCTIONS OVERHYPED?
But not everyone believes China is ready to get tough on North Korea, even though it clearly dislikes Pyongyang's nuclear weapons program and wants to avoid a new Korean war. As one senior U.N. Security Council diplomat put it recently, if China had to choose between a nuclear North Korea and no North Korea at all, it would choose the former.
Beijing wants to avoid a collapse of its impoverished neighbor. The dissolution of North Korea could mean a flood of economic refugees into China and the creation of a capitalist Korea controlled by Seoul and friendly with the United States.
Bruce Klingner, a retired CIA North Korea analyst at the Heritage Foundation, doubted China was prepared to take the steps needed to make North Korea suffer the way Tehran has.
"Despite excitement by China watchers that internal debate amongst pundits and media organizations indicate the new Chinese leadership will adopt a new, more stringent policy toward its pesky ally, Beijing again shows itself to be an obstruction at the U.N. Security Council," he said.
"The new U.N. resolution is an incremental improvement, but it doesn't live up to Ambassador Rice's hype that it's exceptional and will significantly impede North Korea's nuclear and missile programs," he said.
Pyongyang was hit with U.N. sanctions for its 2006 and 2009 nuclear tests, measures that were subsequently tightened and expanded after several rocket launches. In addition to the luxury goods ban, there is an arms embargo on North Korea, and it is forbidden from trading in nuclear and missile technology.
China has supported all U.N. sanctions against North Korea but only after working to dilute the proposed measures. U.N. diplomats say that Chinese companies have often played a key role in helping North Korean entities bypass the sanctions.
Thursday's resolution expanded the list of nuclear- and missile-related items North Korea is banned from importing. It also called for a crackdown on North Korean diplomatic personnel carrying briefcases bulging with cash in and out of the country.
Taking aim at the lavish lifestyles of North Korea's elite, the council explicitly banned the sale of yachts, racing cars, luxury automobiles and certain types of jewelry to beef up a 2006 ban on the export of luxury goods to Pyongyang.
Robert Joseph, a former U.S. under secretary of state, said getting tougher on Pyongyang was crucial because Iran, which the United States and its allies suspect of developing nuclear weapons, is following the world's responses to North Korea.
"What they (Iran) have seen thus far has not dissuaded them from continuing down their path of nuclear proliferation," he told the Senate Foreign Relations Committee on Thursday.
One reason that sanctions have failed to pressure North Korea to back down, he said, is that the government under late leader Kim Jong-il and his son and successor Kim Jong-un cares little whether the North Korean people starve to death.
"And in part, it is because China has undercut the impact of sanctions and has continued to keep open a lifeline of assistance to the North, no matter how blatant or lethal its actions," Joseph said.
After the new sanctions passed on Thursday, China and Russia called for an immediate resumption of the stalled six-party aid-for-disarmament talks with the two Koreas, the Unite States, China, Japan and Russia. But South Korean Ambassador Kim Sook dismissed the idea: "Today is not the day for talking about dialogue."
Virginie Grzelczyk, a North Korea expert at Britain's Nottingham Trent University, said refusing to talk would not end the "cycle of tit-for-tat" between the Security Council and North Korea - and could make the situation more dangerous.
"Refusing to talk with North Korea will most likely not end the cycle of escalation, and could lead to a potential military clash on the peninsula, with the first target being the South," Grzelczyk said. (Additional reporting by Paul Eckert in Washington; Editing by Cynthia Osterman)