North Korean funds may be unfrozen

U.S., China close to accord on some of the $25 million, officials say

March 01, 2007|By New York Times News Service

WASHINGTON --China and the United States are close to an accord to let North Korea regain some of the $25 million in its funds frozen in a bank in Macau now that it has agreed to start dismantling its nuclear arms program, American officials said yesterday.

The American officials said that arrangements for North Korea to get a portion of the funds frozen at Banco Delta Asia, a small family-owned bank accused of money laundering, had been the subject of intense discussions this week in China. A deal could be announced in the next few weeks, they said.

The issue of the funds, frozen a year and a half ago, was a major factor in the on-again-off-again six-party negotiations with North Korea over its nuclear program. North Korea angrily boycotted the talks for most of the past year, charging that the bank action was based on false charges and was an example of economic coercion.

The intention to ease the freeze on the North Korean funds was not announced at the time of the North Korea accord reached Feb. 13, but officials said at the time that they expected the issue to be resolved. Daniel Glaser, a deputy undersecretary of the Treasury, has been in China this week for discussions about the subject.

Glaser said this week that the United States had gone through more than 300,000 documents from Banco Delta Asia and consulted on them with North Korea and China. The effort, American officials said, was meant to determine which of the North Korean funds were tainted by illegal activities and which were legitimate.

"All of this work that we've done has put us in a position where we can begin to take steps to resolve the Banco Delta Asia matter," Glaser told reporters in Hong Kong on Monday. He said the resolution of the matter would be completed "in a timely fashion" and "as quickly as possible."

The expected return of some of the frozen funds to North Korea - officials involved in the discussions said the sum could exceed $12 million - offers a striking case study of how the United States has used its financial laws to extend its reach to foreign banks and isolate a country from the international financial system.

Christopher R. Hill, the assistant secretary of state who negotiated the nuclear deal with North Korea, said yesterday that he had no doubt that freezing the funds compelled North Korea to negotiate. "I think they were concerned about the fact that we were able to go after an important note of their financing," he said, testifying before the House Foreign Affairs Committee.

Hill added that the agreement on nuclear matters meant no easing of American concerns over North Korea's illicit activities on drugs, weapons or counterfeiting. "I can assure you that we have not, and will not, trade progress on denuclearization by turning a blind eye to some of these other activities," he said.

The Bush administration hopes to replicate the North Korean experience with Iran, but American officials involved in the planning acknowledge that this might be more difficult because Iran has a web of banking relationships throughout Europe and the Middle East.

These steps have complicated business deals and the willingness of some foreign companies to invest in Iran, energy experts say. Recently, for example, Russia said it was slowing its investment in an Iranian civilian nuclear plant, saying that it objected to being paid in euros.

Banco Delta Asia was seen in financial circles as an early test case of American efforts to use such sanctions against not only North Korea, but also other countries charged with supporting terrorism or illegal weapons proliferation. In 2005, for example, the Bush administration labeled Banco Delta Asia a "primary money laundering concern" and charged that it was helping North Korea carry out counterfeiting, narcotics trafficking and other illicit activities.

North Korea denied the accusations, and Banco Delta Asia, in filings with the Treasury Department, said it had no evidence of such activities for North Korea.

Nevertheless, the bank and the Chinese government closed accounts of 20 North Korean banks, 11 North Korean trading companies, nine North Korean citizens and eight Macau-based companies that do business with North Korea, according to bank records. The bank also promised to cease any further business with North Korea or its business partners.

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