How to make agreements come unstuck!

While the Banco Delta Asia may unfreeze some North Korean assets US banks are banned from dealing with the bank. This will no doubt severely hurt its banking activity. The reaction of the Chinese clearly shows that this will cause difficulties for upcoming talks. I suppose people will express surprise if there are new problems when the talks begin again.

Rift opens over U.S. bank move ahead of nuclear talks
Thu Mar 15, 2007 7:54 AM EST



By Chris Buckley

BEIJING (Reuters) - A rift opened between the United States and China on Thursday on how to end a dispute about North Korean bank accounts, with China angry over a U.S. decision it said might harm talks to end Pyongyang's nuclear threat.

U.S. envoy Christopher Hill said the decision on North Korean accounts frozen in Macau's Banco Delta Asia (BDA) would help advance a deal obliging Pyongyang to close the reactor at the heart of its nuclear weapons program.

"I think we have fulfilled what we need to do," Hill told reporters of the bank decision. "I think we will get ourselves into a situation where BDA will not pose a stumbling block to the six-party process."

Those talks, which group the two Koreas, the United States, China, Japan and Russia, struck an accord on February 13 giving North Korea 60 days to shut its Yongbyon reactor in return for energy aid and security pledges. The United States then also promised to defuse within 30 days North Korea's complaints about the bank crackdown.

Pyongyang had no immediate comment on the bank move in which the U.S. Treasury Department barred U.S. banks from dealing with Banco Delta Asia.

The Treasury's announcement signaled an end to its 18-month investigation in Banco Delta Asia, which the United States says was a "willing pawn" in illicit North Korean financial dealings.

The U.S. move will allow the Chinese-controlled gambling enclave of Macau to decide whether to release an estimated $8 million to $12 million in frozen accounts.

But China, which worked closely with Hill in the disarmament talks, abruptly criticized the U.S. decision, raising the risk the dispute has not been laid to rest ahead of fresh disarmament talks scheduled in Beijing next week.

"We express our regret at the United States insisting on using U.S. domestic law to apply a ruling," Foreign Ministry spokesman Qin Gang told a news conference.

The spokesman, grim-faced and notably downcast, said that China wanted any decision on the North Korean accounts to help protect Macau's financial and social stability and to help the six-party talks, which were stalled for more than a year over North Korea's anger at the bank squeeze.

REGRET

"The reason China has expressed its regret because we have those two concerns and these should be fully taken into account," Qin said.

When pressed to elaborate on China's worries, Qin simply repeated the two concerns.

The Macau monetary authority also expressed "regret" over the U.S. decision, and said it would take steps necessary to maintain Macau's financial stability.

The bank move was the latest in a burst of diplomacy ahead of the talks on Monday aimed at implementing the first phase of the disarmament plan before a 60-day deadline.

International Atomic Energy Agency chief Mohamed ElBaradei was in Beijing on Thursday after visiting North Korea to negotiate the return of IAEA nuclear inspectors to the country.

ElBaradei said North Korea would be ready to re-admit its inspectors for the first time since the North kicked them out in late 2002, but that Pyongyang had made settling the dispute over what Washington has called illicit banking a condition for moving forward with denuclearization.

In September 2005, Washington labeled BDA a "primary money-laundering concern" that helped funnel Pyongyang's takings from counterfeiting U.S. money, drug trafficking and other misdeeds.

Chinese spokesman Qin did not directly answer questions about whether his country would raise the bank issue in the six-party talks and what Beijing hopes Pyongyang's response will be.

"We will express our concerns to the United States through suitable channels," he said. "I can't speak for North Korea."

Pyongyang stunned the world last October with its first nuclear test, drawing widespread condemnation and U.N. sanctions.

An Australian diplomat who visited the reclusive country this week said on Thursday the North Koreans had assured him they were committed to seeing through the February 13 deal.

(Additional reporting by Lindsay Beck in Beijing and Chisa Fujioka in Tokyo)