Diplomat: U.S. Won't Reward N. Korea's Bad Behavior Again

SEOUL, South Korea – The U.S. won't repeat the mistake of rewarding North Korea's bad behavior, a senior American diplomat was quoted as saying Thursday, as Washington reportedly pushed for strong financial sanctions on Pyongyang for its latest nuclear test.

Deputy Secretary of State James Steinberg also told South Korean President Lee Myung-bak that China is changing its position on ally Pyongyang, and the North is not reading the difference properly, Seoul's presidential office said in a statement.

The statement quoted Steinberg as telling Lee, "North Korea would be mistaken if it thinks it can make provocations and then get what it wants through negotiation as it did in the past. The U.S. won't repeat the same mistake again."

Steinberg's delegation has been on a trip to Japan, South Korea and China to discuss a joint response to Pyongyang's May 25 underground nuclear blast.

Complicating the situation, two American journalists were to stand trial at North Korea's top court Thursday on charges of entering the country illegally and engaging in "hostile acts." Pyongyang's official Korean Central News Agency said in a brief dispatch the trial would begin at 3 p.m. (0600 GMT), but there were no further details as that time passed.

Some experts believe the North is using the trial and its nuclear and missile tests to strengthen its position in possible talks with the United States, and that it hopes to win concessions or much-needed economic aid.

News reports in Seoul said the U.S. is pushing hard to slap financial sanctions against the North as part of U.N. punishments or even as independent measures for its latest nuclear test.

The Dong-a Ilbo newspaper said U.S. and South Korean authorities have confirmed the North has kept producing high-quality fake U.S. dollar bills, known as "supernotes," and could use the counterfeiting as justification for Washington's own sanctions. It cited an unidentified source in Washington.

The alleged counterfeiting was discussed Wednesday at a meeting in Seoul between U.S. and South Korean intelligence authorities, the report said. The American officials are believed to be part of Steinberg's delegation, which also includes Stuart Levey, the Treasury Department's undersecretary for terrorism and financial intelligence.

Levey was in charge of the U.S. financial restrictions imposed on a bank in the Chinese territory of Macau in 2005 for allegedly helping North Korea launder money from counterfeiting and other illegal activities. The move effectively led to the North being cut off from the international financial system, as other institutions voluntarily severed their dealings with the bank and the nation.

Pyongyang became so angry that it stayed away from nuclear disarmament talks for more than a year. The deadlock was resolved when the U.S. freed some $25 million in North Korean funds held at the Macau bank, a move that allowed Pyongyang back into the international banking system.

Levey met with South Korean Vice Finance Minister Hur Kyung-wook and the two agreed to strengthen cooperation on the fight against money-laundering, Hur's office said.

Curtailing the North's financial dealings with the outside world is being considered as part of U.N. punishments, along with freezing company assets and enforcing an arms embargo, according to U.N. diplomats.

But China and Russia, key allies of Pyongyang, have raised questions about some of the proposals, diplomats said on condition of anonymity because the consultations are private.

Yonhap said Steinberg's delegation plans to present evidence of the North's counterfeiting in talks with Chinese officials to try to persuade Beijing to agree to financial sanctions. The delegation plans to visit China on Friday.

Meanwhile, North Korea released few details about the trial of the two American journalists, Laura Ling and Euna Lee, who worked for former Vice President Al Gore's Current TV media venture. They were arrested March 17 near the North Korean border while on a reporting trip to China. Conviction for "hostility" or espionage could mean five to 10 years in one of North Korea's harsh labor camps.

The trial came as North Korea pushed ahead with preparations to launch a long-range ballistic missile, believed capable of reaching the U.S. The missile was being assembled at a newly completed facility in Dongchang-ni near China, according to South Korea's JoongAng Ilbo newspaper. Earlier reports said it could be ready for launch in a week or two.