Frozen North Korea Funds Holding Up Nuclear Disarmament Pact Finally Moving

SEOUL, South Korea – Money at the heart of a dispute that caused North Korea to delay its nuclear disarmament finally began making its way to the communist nation Thursday after months of delay.

The transfer of funds previously frozen in a Macau bank could lead to Pyongyang starting to shut down its nuclear weapons program. But the North is certain to want to count every last penny of its US$25 million (euro18.8 million) before fulfilling a February pledge to stop making atomic bombs.

The money had been frozen at Macau's Banco Delta Asia since 2005 when the U.S. blacklisted the bank for allegedly helping the Pyongyang regime pass fake US$100 bills and launder money from weapons sales.

The North made the money's release its main condition for disarmament and boycotted international nuclear talks for more than a year, during which it conducted its first-ever bomb test in October.

But to win the North's promise to start dismantling its nuclear program, the U.S. agreed to give its blessing for the money to be freed and said it would happen within 30 days. The transfer has instead taken more than four months as the North insisted that it be sent electronically to another bank, apparently to prove the money is now clean.

Macau's secretary of economy and finance said Thursday the money has been transferred, but it remained unclear if it was the entire amount or whether it had reached its destination.

"Banco Delta Asia transferred more than US$20 million (euro15 million) out of the bank this afternoon in accordance with the client's instruction," Francis Tam told reporters on the sidelines of a business gathering, without saying where the money was sent.

"We have heard reports in foreign media that the money can be wired via the U.S. or Russia, for example. I think these routings are possible," Tam said.

North Korea had US$25 million at the bank in the Chinese territory, but Tam would not say exactly how much was transferred.

"Most of the money in this account has already transferred out. There will probably not be another transfer," he said.

North Korea could seize on any shortage of funds to hold off on disarmament. Since the latest nuclear standoff began in late 2002, Pyongyang has repeatedly displayed its profound lack of trust of the U.S. and blamed any sign of American hostility as a reason to stall arms talks.

Given that Washington failed in its promise to resolve the bank dispute within 30 days, the North can be also expected to delay shutting down its nuclear reactor for at least another 30 days after it confirms receiving the money.

The North did not immediately comment on the transfer. In Seoul, South Korean Foreign Ministry spokesman Cho Hee-yong said the process was "ongoing" until the involved parties say the issue is resolved.

"We just hope things will go well," he said.

The bank dispute paralyzed much of the North's international financial dealings. Banco Delta Asia remains on the U.S. blacklist, barred from doing business with the world's largest economy, and other banks do not want to meet the same fate by dealing with North Korea — one of the world's poorest nations.

Speaking Thursday amid news of the fund transfer, U.S. Treasury Secretary Henry Paulson noted the U.S. measures had led private financial institutions worldwide to end dealings with North Korean firms accused of engaging in weapons proliferation.

"The result is North Korea's virtual isolation from the global financial system," he said in remarks to the New York-based Council of Foreign Relations released in Washington. "The effect on North Korea has been significant, because even the most reclusive regime depends on access to the international financial system."

U.S. officials have argued that the best way for the North to restore its reputation and ability to do business would be to end its nuclear weapons program, which Pyongyang insists it needs to defend against a possible American invasion.

U.S. State Department spokesman Sean McCormack would not confirm the transfer, saying, "The North Koreans have said that they would like to see all of the $25 million transferred. That is an issue that we the U.S. government have been working on."