U.S., S. Korea Envoys Seek Solution to Impasse on North Korea

WASHINGTON – The top U.S. and South Korean envoys in the North Korea nuclear disarmament talks met amid reports that Russia had proposed a solution to an impasse over Pyongyang's access to $25 million that has been frozen in an Asian bank.

The chief U.S. envoy, Christopher Hill, and his South Korean counterpart, Chun Yung-woo, were preparing to move quickly once the banking issue has been solved, Chun said Monday. But after months of negotiations, both the United States and South Korea said they were tempering their expectations for the success of the Russian proposal.

"I'll believe it when I see it," Chun said.

North Korea has refused to move on its pledge to shut down its nuclear reactor until it has received the money, now sitting in accounts at Banco Delta Asia in Macau, a Chinese territory.

The U.S. Treasury Department said Monday that officials were discussing with Russian and Macau authorities a way to transfer the funds. Should the Russian proposal work, it would remove a headache for the United States at a time of increased tension between Washington and Moscow over other issues, including a U.S. plan to build a missile defense system in Europe.

Chun expressed some optimism that negotiators were making progress and said he had discussed with Hill strategies for continuing momentum after the banking issue has been resolved.

"I believe that all the parties have a strong determination to put BDA behind us," he said, referring to the Macau bank.

U.S. officials said Tuesday that Hill hoped to visit some of the five countries involved in the negotiations with North Korea during a trip that already includes a scheduled stay in Mongolia from June 15-18.

Gilbert Gallegos, a spokesman for New Mexico Gov. Bill Richardson, said the governor was notified Monday that the banking issue would be resolved in a couple of days.

Gallegos would not say where Richardson, a U.S. presidential candidate, got the information, except that it was from a reliable source. Richardson has contacts with high-ranking North Korean officials and has visited several times, most recently in April.

Media reports have said that Russia has acceded to a U.S. request that a Russian bank accept the North Korean money via a U.S. financial institution before the cash is moved to North Korea.

The money has been freed for release, but North Korea has not withdrawn it, apparently seeking to prove the funds are now clean by receiving them through an electronic bank transfer.

Other banks apparently have balked at touching the money. U.S. allegations of money laundering, counterfeiting and other crimes by North Korea, which led to the sequestering of the money, have held the disarmament process in limbo.

"The question for months has been what bank is going to risk getting a scarlet letter from the Treasury Department by handling this money," said Richard Bush, director of the Center for Northeast Asian Policy Studies at the Brookings Institution. He said no bank would consider accepting the money without assurances from the U.S. government.

The United States first moved against Banco Delta Asia in 2005, putting it on a money-laundering blacklist for what the Treasury Department determined were lax money-laundering controls. As a result, Macau regulators froze North Korean assets held by the bank. Washington alleged that the bank had helped North Korea distribute counterfeit currency, cigarettes and drugs, the proliferation of weapons of mass destruction and other crimes.

The United States' action so angered Pyongyang that it refused for more a year to participate in the six-nation nuclear arms talks in which it had just agreed to a disarmament formula that included aid in exchange for disarming itself. The North returned to disarmament talks in December.

A deal was struck Feb. 13, in part because of an agreement to resolve the dispute over the then-frozen funds. But subsequent glitches involving the once-frozen money and its transfer have thrown the disarmament process into limbo for months.