UPDATE 5-South Korea boosts surveillance after North launches spy satellite

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North Korea leader Kim briefed on satellite operations - KCNA

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Launch condemned by US and allies, G7 urges UN response

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South suspends part of a military pact with the North

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US submarine, aircraft carrier in South Korea in show of force

(Adds report of failed North Korea launch, G7 statement, context, paragraph 1 & 5-8)

By Hyunsu Yim and Soo-hyang Choi

SEOUL, Nov 22 (Reuters) - South Korea on Wednesday suspended part of a 2018 military agreement with North Korea after Pyongyang defied warnings from the United States and drew Western condemnation by launching a spy satellite.

The suspension of a clause in the agreement will see South Korea step up military surveillance along the heavily fortified border with North Korea.

Pyongyang said it placed its first spy satellite in orbit on Tuesday. Photographs in state media showed leader Kim Jong Un watching the launch of a rocket from a base.

Kim was later briefed on the satellite's operations at the control centre of the space agency in Pyongyang and viewed images taken above the U.S. Pacific territory of Guam of U.S. military installations, including the Andersen Air Force Base, North Korea's KCNA state news agency said.

North Korea followed the satellite launch by firing an unspecified ballistic missile toward the sea east of the Korean peninsula late on Wednesday, but that appeared to have failed, South Korea's Yonhap news agency reported, citing the South Korean military.

The G7 foreign ministers of Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and the EU condemned the satellite launch and called for a "swift, united, and robust" international response, particularly by the U.N. Security Council.

A G7 statement reiterated condemnation of alleged North Korean arms transfers to Russia and expressed deep concern about the potential for any transfer of nuclear- or ballistic missile-related technology to North Korea.

U.S.-led efforts to boost U.N. sanctions on North Korea have failed in recent years due to opposition from veto-wielding China and Russia.

KCNA said Kim stressed the need for more reconnaissance satellites on different orbits to give his armed forces "abundant valuable real-time information about the enemy and further promote their responsive posture."

The satellite would begin its reconnaissance mission on Dec. 1, after adjustments, KCNA said.

South Korea's military said the satellite was believed to have entered orbit, but it would take time to assess whether it was operating normally. The Pentagon has said the U.S. military was assessing whether the launch was a success.