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(LEAD) Haley: Trump demands China cut off oil supply to N. Korea after missile test

China and Russian Federation are among the few states with which North Korea still has good relations.

Russia's U.N. Ambassador Vassily Nebenzia called on North Korea on Wednesday to stop its weapons tests and for the United States and South Korea not to hold military drills in December as it would "inflame an already explosive situation".

Haley said the United States has asked China to cut off oil supply to North Korea, a drastic step that Beijing - the North's neighbor and sole major trading partner - has so far refrained from doing.

Explaining the importance of an oil embargo, she said that when China cut off oil supplies to that country in 2003, Pyongyang came to the negotiating table.

US Secretary of State Rex Tillerson too said that diplomatic options still "remain viable and open" for North Korea, according to CNN.

"The Chinese envoy who has just returned from North Korea seems to have had no impact on Little Rocket Man", Trump tweeted, deploying his favourite insult for Kim.

"We have never sought war with North Korea, and still today we do not seek it".

The North Korean regime launched an Intercontinental Ballistic Missile (ICBM) on Wednesday with Kim Jong-un declaring they had "finally realised the great historic cause of completing the state nuclear force".

Haley's remarks followed Pyongyang's latest ballistic missile test.

Russian Foreign Minister Sergei Lavrov has accused the USA of seeking to provoke North Korea into stepping up its nuclear missile programme.

Responding to the U.S. request for an embargo, the Chinese foreign ministry said merely that the country had "always implemented full, comprehensive, serious and strict resolutions".

"I think the Chinese are doing a lot". What Pyongyang really wants, and increasingly needs, is economic assistance and a lifting of sanctions, so Kim can deliver on his Byungjin promise of nuclear weapons and economic development.

"In addition to implementing all United Nations sanctions, all countries should sever diplomatic relations with North Korea", she said and urged the Security Council to revoke the North's voting rights at the United Nations. China and Russian Federation objected to that idea in the latest United Nations sanctions resolution. The current South Korean government, eager for an opportunity to engage with the North, is also likely to climb on board.

But Beijing fears that taking tougher actions could cause the regime to collapse, triggering a refugee crisis across its border with the North and eliminating a strategic buffer separating China from the U.S. military in South Korea.

There are also concerns in Seoul - which is within range of Pyongyang's artillery - that Trump might be considering military action against the North that could trigger a full-scale war.

China has proposed that the North stop missile and nuclear tests in exchange for a freeze of United States military exercises - a suggestion Washington has repeatedly rejected.

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