A South Korean foreign ministry research report released on Friday says North Korea could carry out a third nuclear test next year.

This comes one day after Pyongyang warned that it would retaliate strongly if provoked by the South. Across the border, South Korea has been conducting major land and sea military exercises.

Its leader has vowed an agressive counter-attack if the North were to launch a strike.
 
Just what is different in the current show of force between the two arch rivals? Is an all-out war a real possibility or are international powers doing enough to secure peace in this voltile region?

Inside Story, with presenter Sohail Rahman, discusses with Donald Kirk, a correspondent for the Christian Science Monitor, Joseph Cheng, a professor of political science at City University in Hong Kong who has written extensively on Chinese foreing policy and asia relations, and Robert Dujarric, the director of the Institute of Contemporary Asian Studies at Temple University in Japan.

This episode of Inside Story aired from Friday, December 24, 2010.