SEOUL, Sept 26 (Reuters) - International talks on ending North Korea's nuclear arms programme may be heading for a breakdown after Pyongyang said it would restore a plant that makes fissile material, South Korea's foreign minister said on Friday.

The International Atomic Energy Agency said on Wednesday that the North had expelled U.N. monitors from its Soviet-era nuclear plant and plans to start reactivating it next week, rolling back a disarmament-for-aid deal and putting pressure on Washington.

"We are at a difficult situation where we may be going back to square one," Yu Myung-hwan said at an academic seminar.

Yu, who just returned from a trip to the United States where he discussed the North's latest moves with Washington officials, said Pyongyang may be trying to put pressure on the outgoing Bush administration and the next person to occupy the White House.

"It is possible that the North's decision to go back on the disablement steps is a strategy associated with the U.S. presidential election," Yu said.

The Bush team, looking for a foreign policy success with just a few months left in office, may be willing to offer last-ditch concessions and if not, Pyongyang will be in a stronger bargaining position when a new president takes office in January, analysts have said.

Confronted with the apparent unravelling of the administration's rare diplomatic achievement, U.S. Secretary of State Condoleezza Rice this week said North Korea's actions had "by no means" killed off the country's nuclear disarmament.

South Korea has indicated that energy-starved North Korea may see an end to the shipments of heavy fuel oil and other aid it had received for progress it has previously made in the nuclear deal because of its backtracking.

North Korea started to disable its ageing Yongbyon plant that produced arms-grade plutonium last November as a part of the disarmament for aid deal it reached with China, Japan, Russia, South Korea and the United States.

Experts have said most of the disablement steps that were aimed at taking about a year to reverse have been completed and North Korea, which tested a nuclear device in October 2006, cannot easily get back into the plutonium producing business. (Reporting by Jack Kim; Writing by Jon Herskovitz; Editing by David Fox)

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