North Korea threatened Sunday to retaliate against the US and South Korea over sanctions imposed on the communist regime, a day after South Korea's president renewed his offer of conditional aid for the impoverished country. The US is moving to enforce UN as well as its own sanctions against North Korea to punish it for conducting a second nuclear test in May, as well as a spate of missile tests. The UN sanctions strengthened an arms embargo and authorized ship searches on the high seas to try to rein in Pyongyang's nuclear program. The council also ordered an asset freeze and travel ban on companies and individuals allegedly involved. If the US and South Korea "tighten 'sanctions' and push 'confrontation' to an extreme phase, the [North] will react to them with merciless retaliation... and an all-out war of justice," said a North Korean military statement reported Sunday by the country's official Korean Central News Agency. "Should the US imperialists and the Lee Myung-bak group threaten the [North] with nukes, it will retaliate against them with nukes," it said, referring to South Korea's president by name. The North's latest warning came in response to an annual computer-simulated war game Seoul and Washington will kick off Monday. North Korea routinely condemns joint military exercises between the US and South Korea, calling them preparations for an invasion. The US and South Korea say the maneuvers are purely defensive. On Saturday, Lee called for a "candid dialogue" with North Korea about dismantling its atomic programs so the communist nation can prosper economically. It was unclear if Seoul's proposed aid offer - which still has strings attached - would prod North Korea to back down from its promise to restart its nuclear program. Lee has made similar aid offers in the past, but the North has rejected them. For years, South Korea had been one of Pyongyang's biggest benefactors, but since taking office early last year, Lee suspended unconditional aid to the impoverished North as part of a new hard-line approach. The North responded by cutting most ties and curtailing key joint projects. Lee also offered talks on reducing conventional arms and troops along the mine-strewn demilitarized zone, 4 km. wide buffer bisecting the Korean peninsula. About 28,500 US troops are stationed in South Korea as a legacy of the 1950-53 Korean War, which ended in a cease-fire, not a peace treaty, leaving the two Koreas technically at war. South and North Korea have hundreds of thousands of combat-ready troops and heavy artillery along the 250 km. long border. Meanwhile, Hyundai Group chairwoman Hyun Jung-eun, who traveled to Pyongyang last Monday to secure the release of a Hyundai employee held there, extended her stay for another day - the fourth time since arriving, according to Seoul's Unification Ministry.