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Deadline for shutdown of North Korean reactor in peril

BEIJING—The U.S. Treasury's inability to release frozen North Korean bank funds has stalled talks on dismantling Pyongyang's nuclear-weapons program and jeopardized an April 14 deadline for North Korea to shut down a nuclear reactor, senior Asian officials said Wednesday.

China's chief envoy to the nuclear talks and South Korea's foreign minister said the U.S. and North Korea remained divided over how to transfer some $25 million in bank funds, imperiling the deadline for North Korea to shut down its Yongbyon nuclear reactor.

Missing the deadline is all but unavoidable, said Chinese envoy Wu Dawei. "I believe it's definite. It cannot be helped," Wu told Japanese lawmakers in remarks that Japan's Kyodo news agency picked up on Wednesday.

The delay in returning the money has soured the mood after a Feb. 13 diplomatic breakthrough in which China, North Korea, South Korea, the United States, Japan and Russia set a 60-day timetable for Pyongyang to shut down its nuclear facilities in return for energy aid and security pledges.

The plan hinged on the Bush administration obtaining the release of North Korean money at Macau's tiny Banco Delta Asia, which the administration accused in 2005 of laundering money for North Korea.

U.S. officials decline to say why Daniel Glaser, the deputy assistant treasury secretary for terrorist financing and financial crimes, has been unable to arrange a transfer of the North Korean funds from Banco Delta Asia to another bank.

On March 19, five days after the Treasury barred the Macau bank from the American financial system for allegedly laundering illicit North Korean money, Glaser said the North Korean money would be transferred to the Bank of China but that North Korea would use it only for humanitarian purposes.

Diplomats at the six-nation talks waited until March 22 for the transfer, then suspended the talks in exasperation. Glaser flew to Beijing on March 25 but hasn't spoken to the news media.

North Korea refuses to take disarmament steps until it gets its money back.

The State Department said Wednesday that the Macau bank issue "has been more complex in its implementation than anybody from any of the six parties could have imagined." Treasury spokeswoman Molly Millerwise said in an e-mail that Glaser "continues to work hard in Beijing and remains focused on implementation of the agreement . . . as quickly as possible."

The Bush administration appears to be suffering a backlash against its use of Article 311 of the 2001 Patriot Act, which gives the Treasury Department the power to pursue banks anywhere around the world for suspected involvement in terrorist financing. Foreign banks worry that under Article 311, U.S. officials can cut them off from the global financial system without any legal proceedings and without producing any evidence.

A Seoul-based analyst, Peter M. Beck of the International Crisis Group, which seeks peaceful resolution of crises, said Washington had underestimated the difficulty of finding a bank to receive Banco Delta Asia's North Korean money.

"It clearly shows that the Bush administration miscalculated when it thought that it could snap its fingers and the money problem would be solved," Beck said. "Even the Chinese bankers are holding their nose and saying, `We don't want to be blacklisted next.' "

A Chinese expert on North Korea accused the Bush administration of failing to offer the Bank of China sufficient guarantees that it wouldn't be targeted for accepting tainted money.

"The problem lies with the United States," said Li Dunqiu, an analyst with the Development Research Center of the State Council, China's Cabinet.

"It allowed North Korea to take the money back, but it still branded the money as illicit. No bank in the world will be willing to handle the money as long as the United States regards it as illicit," Li said.

A recently retired treasury official suggested that China also may be using the issue to hit at the Bush administration for a broad array of unilateral steps it's taken against Iran and North Korea outside the United Nations Security Council. Russia and China have expressed displeasure at the administration's tendency to do end runs around the U.N. sanctions process, which Washington regards as too slow.

"The sanctions against a country like Iran (traditionally) were done with a broad brush," said the official, pointing out that the Treasury Department now has a number of narrow unilateral sanctions that can lock banks or countries out of the U.S. financial system and thus the global financial system. The official declined to be identified because of his recent departure from the department.

Even if the frozen assets finally are released, analysts said, it wouldn't solve the broader issue of Pyongyang's eventual access to the global banking system.

"What North Korea cares about is not just the $25 million," said Li, the Chinese analyst. "It is deeply concerned about its trade and financial environment in the future."


(McClatchy Newspapers correspondent Kevin G. Hall in Washington and McClatchy Newspapers special correspondent Fan Linjun in Beijing contributed to this report.)


(c) 2007, McClatchy-Tribune Information Services.

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