The United States and Spain said they have intercepted a load of Scud missiles believed to be North Korean hidden on a freighter in the Arabian Sea near Yemen, a known center of terrorist activity.A senior State Department official said on condition of anonymity that the destination of the shipment "may well have been Yemen" but there was no evidence to support speculation that the missiles were headed to Iraq.

US investigators are inspecting the shipment, US officials said late on Tuesday.

A merchant ship was intercepted in the Arabian Sea, said State Department spokeswoman Amy Black. "During a search by a multinational team, Scuds were found, believed to be from North Korea," she added.

"We are working with other governments on next steps. There is no final determination of the intended destination of the shipment," the spokeswoman said.

The Scud was used by Iraq during the 1991 Gulf War for attacks on Israel and Saudi Arabia.

Two Spanish frigates in collaboration with US forces intercepted the North Korean Vessel off the coast of Yemen, government sources announced in Madrid on Tuesday.

Spanish government sources said the ship was carrying 12 Scuds which were hidden under a consignment of cement.

Spanish Defence Minister Federico Trillo was to give a press conference on Wednesday to give details.

The seizure on Monday came two days after the United States launched a new, international anti-terrorism drive, Spanish sources said.

CNN television, quoting US Defence Department officials, said the ship did not have a flag of nationality, but had started its voyage in North Korea.

The ship may have been heading to Yemen, the birthplace of the family of September 11 mastermind Osama bin Laden and a reported hiding place for cells of the Islamic extremist group al-Qaeda.

US military advisers are in Yemen under a bilateral agreement with the country's government.

The vessel, named the So San, had been under surveillance by US intelligence since it left North Korea, according to the report. CNN quoted a Spanish official who said the navy had to fire shots to get the freighter to stop on Monday.

US President George W. Bush has described North Korea as part of an "axis of evil", along with Iran and Iraq.

Washington has long accused the Stalinist state of being the world's top exporter of missile technology and this latest incident is certain to further damage relations.

Bush's tough stance towards Pyongyang hardened in October when North Korea officials admitted to US envoy James Kelly that they were pursuing a nuclear programme based on enriched uranium.

US Defense Secretary Donald Rumsfeld is visiting the Horn of Africa to deepen US ties with Eritrea, Ethiopia and Djibouti, which have emerged as important allies in the US war against terrorism.

Warships and military supplies, oil and trade that flow through the Bab el Mandeb strait linking the Red Sea and the Arabian Sea make the poor and lawless region of particular importance to the West.

The vulnerability of the sea lanes was demonstrated October 6 when activists believed to be from al-Qaeda attacked a French tanker off Yemen.

In 2000, 17 US sailors were killed in a similar suicide attack on the USS Cole in Aden.

The Pentagon late Tuesday refused to provide details of the interception of the So San.

PHOTO CAPTION

A Scud missile launcher