SEOUL - South Korea will make a small grant of humanitarian aid to North Korea, ending its suspension of handouts after a series of conciliatory gestures from its destitute rival, an official said on Monday.

As well as reaching out to the South, the North has also sent a senior nuclear envoy to the United States for talks that could revive dormant discussions on ending Pyongyang's atomic ambitions in return for massive aid.

Officials said they had no intention at present to fully restore aid, once equal to about five percent of the North's annual economy. Analysts said the aid signals to Pyongyang that more could be coming its way if the North continues reaching out to its neighbor on the heavily armed peninsula.

South Korea will send an aid package valued at about 4.1 billion won ($3.5 million) that includes 10,000 tonnes of corn and 20 tonnes of powdered milk, a Unification Ministry official told reporters.

This aid will be solely prepared by the Red Cross, the official said.

South Korean President Lee Myung-bak, who took office in February 2008, ended years of unconditional handouts to the North and launched a new policy of linking Seoul's largesse to moves the North makes to reduce the security threat it poses to the economically powerful North Asia region.

South Korea once sent up to 500,000 tonnes of rice and 300,000 tonnes of fertilizer a year to North Korea, but the aid was halted after Lee took power.

The last shipment of rice in 2007 was valued at about $152 million and was a part of an aid package from Seoul of more than $1 billion aimed at keeping relations with its mercurial neighbor on an even keel.

CHRONIC FOOD SHORTAGES

North Korea, which battles chronic food shortages due to years of a failed agricultural policies and heavy military spending, made a request to restore rice shipments when it held talks with the South this month on additional reunions of families split after the 1950-53 Korean War.

The North in recent months ended its boycott of discussions with the Lee government imposed in anger at the end of unconditional handouts after he took office.

In a concession to Seoul, it allowed the first reunions since suspending them about two years ago.

We can say the aid is related to the cooperation North Korea has been showing these days, including the family reunions, but at the same time, we cannot attach it to speculation of North-South summit talks, said Kim Seung-hwan, an expert on the North at Myungji University.

Officials in Lee's government have held secret talks with the North on a summit, local media reports say. The presidential Blue House says Lee has always left the door open for a summit as long as it is tied to moves by Pyongyang to reduce the security threat it poses.

Lee has proposed what he calls a grand bargain for the North of major incentives in return for nuclear disarmament.

North Korea appears to be looking for help with its economy suffering blows from fresh U.N. sanctions imposed after its nuclear test in May, a loss of aid from the South and floods that may lead to a smaller harvest this year, analysts said.
During a rare visit this month to the North, Chinese Premier Wen Jiabao gave public support to leader Kim, who in turn signaled his state could return to six-way disarmament-for-aid nuclear talks his government once pronounced dead.

(Editing by Jonathan Hopfner and Ron Popeski)

South Korea