U.S. Secretary of State Hillary Rodham Clinton on Thursday challenged the leaders of Burma to continue and expand reforms. She offered the isolated country a small package of rewards for steps it has already taken but made clear that more must be done, including breaking military ties with North Korea.

She said the U.S. was ready to further improve relations with the civilian government in the Southeast Asian nation — also known as Myanmar — but only if it stays on the path of democratization. In a series of modest first steps, she announced that Washington would allow Myanmar's participation in a U.S.-backed grouping of Mekong River countries; no longer block enhanced co-operation between the country and the International Monetary Fund; and support intensified UN health, microfinance and counternarcotics programs.

On a historic visit, Clinton offered the country future incentives, including the prospect of upgraded diplomatic ties, in return for steps that include releasing political prisoners and ending ethnic violence with aggressive efforts at national reconciliation.

"I came to assess whether the time is right for a new chapter in our shared history," Clinton told reporters after meeting Burmese President Thein Sein and other senior government officials in the capital of Naypyidaw.

"The United States is prepared to walk the path of reform with you if you keep moving in the right direction," Clinton said. After decades of repressive military rule, she said President Barack Obama was willing to explore improved and expanded ties "to reward reforms with steps to lessen (Burma's) isolation and improve the lives of its citizens."

"Historic milestone"

In an ornate room at Naypidaw's grandiose presidential palace -- a monstrous-sized building with 12-metre to 18-metre ceilings replete with gold gilt, giant teak doors and white marble floors that lies off an enormous but empty 20-lane highway -- Thein Sein appeared eager to embrace the opening with the United States. He told Clinton her visit was a "historic milestone" that would "enhance relations and co-operation."

Burma's President Thein Sein, left, meets with U.S. Secretary of State Hillary Rodham Clinton during a meeting at the President's Office in Naypyidaw on Thursday. (Saul Loeb/Associated Press)

A senior U.S. official said Thein Sein had outlined his government's plans for reform in a 45-minute presentation in which he acknowledged that Burma lacked a recent tradition of democracy and openness. He asked for U.S. help in making the transition from military to full civilian rule, according to the official, who spoke on condition of anonymity to describe the private diplomatic exchange.

Clinton replied that she was visiting because the U.S. was "encouraged by the steps that you and your government have taken to provide for your people."

Yet, she also made clear that those steps must be consolidated and enlarged if the U.S. is to consider easing near-blanket economic sanctions that block almost all American commercial transactions with Burma. "While measures already taken may be unprecedented and certainly welcome, they are just a beginning," she told reporters.

"We're not at the point yet where we can consider lifting sanctions that we have in place because of our ongoing concerns about policies that have to be reversed," Clinton said. "But any steps that the government takes will be carefully considered and will be matched."

Meeting with oppostion leader

She called for the release of political prisoners and an end to brutal ethnic violence that has ravaged the nation for decades. "We believe that any political prisoner anywhere should be released. One political prisoner is one too many in our view," she said. Clinton was meeting later Thursday with opposition leader and Nobel laureate Aung San Suu Kyi, a longtime political prisoner who has said she will run in upcoming elections.

Clinton also warned the country's leadership to break suspected illicit military, nuclear and ballistic missile co-operation with North Korea that may violate UN sanctions. "Better relations with the United States will only be possible if the entire government respects the international consensus against the spread of nuclear weapons ... and we support the government's stated intention to sever military ties with North Korea," she said.

In his presentation, Thein Sein vowed that Burma would uphold its UN obligations with respect to North Korea, according to the senior U.S. official. He also told Clinton that Burma was actively considering signing a new agreement with the UN nuclear watchdog that would allow unfettered inspections of atomic sites in the country, the official said.

Clinton rejected the idea that the U.S. outreach to Burma was partially motivated by the growing influence of China. "We are not viewing this in light of any competition with China," she said. "We are viewing it as an opportunity for us to re-engage here."