U.S. works to resolve dispute over North Korean bank accounts

WASHINGTON—The Bush administration thinks it's found a way to end a dispute over $25 million in frozen North Korean bank accounts, and it hopes to restart talks on dismantling Pyongyang's nuclear program, the State Department said Friday.

After two weeks of Treasury Department talks in Beijing and the Chinese-controlled territory of Macau, State Department spokesman Sean McCormack said that a "potential solution" to releasing all the money had been found.

Demanding its money, North Korea has twice walked out of negotiations. It tested a nuclear device last autumn.

Now the question is whether the money actually will be transferred and North Korea will accept the arrangements. The State Department seemed confident, and announced that U.S. negotiator Christopher Hill was returning to Asia for talks on implementing a Feb. 13 accord to begin dismantling North Korean's nuclear program.

McCormack and other U.S. government officials declined to say, however, how the money would be transferred.

The Treasury's initial action in September 2005 led to intense friction with the State Department and raised questions about the Treasury's reach into the financial systems of other countries. Using a little-known provision of the USA Patriot Act, Section 311, it froze North Korean money at a bank in Macau, a Chinese-controlled territory, alleging that the family-owned Banco Delta Asia had helped North Korea launder counterfeit U.S. currency.

North Korea quit the talks on eliminating its nuclear program and tested a nuclear device. After receiving U.S. assurances that its money would be restored, North Korea returned to the talks and reached agreement Feb. 13 to begin the dismantlement process.

But because no bank would accept money that had been labeled as tainted, North Korea hasn't gotten its $25 million, and it walked out of further discussions on implementing the accord. As a result, an initial April 14 deadline for Pyongyang to shut down and seal its nuclear reactor at Yongbyon is in doubt.

Banco Delta Asia remains cut off from the U.S. financial system. And there's an additional question: In announcing that the money would be freed, the Treasury said last month that Pyongyang had pledged to use it for humanitarian purposes, but it remains unclear how that pledge will be enforced.

The administration appears to be united now that North Korea will receive all $25 million. Earlier this year, top State and Treasury department officials had suggested that only a portion of the money would be returned.

But McCormack said Friday, "We have arrived at the point where we . . . have expressed our support for release of all the funds."

The Treasury Department said it had "communicated its support for the release of all funds."