The RAND Corp. has published a highly sobering assessment of the threat posed to East Asia and U.S. forces there by the nuclear arsenal of North Korea as the isolated Stalinist state grapples with economic failure, growing popular discontent and the failing health of dictator Kim Jong-Il.

"North Korea is a failing state that is increasingly dependent on its nuclear weapons for deterrence of outside intervention, forth both internal and external leverage in peacetime, and for overcoming its conventional inferiority in a time of war," says the report.

Noting how little is known about the North Korean nuclear arsenal or the political dynamics within the ruling elite, the assessment poses a number of possible scenarios, including an internal coup that divides the regime and ignites a civil war that spills into northern China and South Korea and sees opposing factions use nuclear weapons.

Another possibility foresees a splintering North Korean regime having to "chose between a diversionary war against common external foes to unify North Koreans or risk internal overthrow and regime collapse."

North Korea, the report says, would likely use its nuclear weapons to threaten and target cities in South Korea and Japan in the event of a war because they would wreak greater casualties and destruction than employing them against ground forces.

One 10-kiloton warhead that hit Seoul could cause more than 400,000 casualties and devastate the South Korean economy, with the financial cost amounting to nearly $1.5 trillion.

The report comes amid serious tensions over South Korea's charges that one of its warships was sunk, with the loss of more than 40 crewmen, by a North Korean torpedo in March.