April 10, 2007 / 9:20 AM / 12 years ago

N.Korea funds may be freed as nuclear deadline nears

SEOUL (Reuters) - The United States announced on Tuesday that millions of dollars frozen in a Macau bank will soon be released to North Korea, and told Pyongyang it must now start shutting down a nuclear reactor days before a deadline.

Christopher Hill, U.S. Assistant Secretary of State and chief negotiator in the six-party talks on North Korea's nuclear program, is surrounded by reporters after meeting Japanese Vice Foreign Minister Shotaro Yachi at the Foreign Ministry in Tokyo April 10, 2007. REUTERS/Yuriko Nakao

The reclusive state has insisted it will only close the reactor, which supplies it with weapons-grade plutonium, once $25 million dollars (13 million pounds) in funds linked to North Korean interests and frozen since 2005 in Macau’s Banco Delta Asia are freed.

Under an international deal agreed two months ago to end its nuclear weapons programme, North Korea has until Saturday to start shutting down its Yongbyon atomic plant.

“The United States understands that the Macau authorities are prepared to unblock all North Korean-related accounts currently frozen in Banco Delta Asia,” a U.S. Treasury statement said.

A Macau Monetary Authority official said only that there would be an announcement of some kind within a “few days”.

The funds were frozen after Washington accused the Macau bank of being involved in money laundering.

Furious that the money still had not been freed, North Korea walked out of a round of six-country talks on its nuclear programme in March, five months after its first atomic test.

“NOW WE NEED TO MOVE ON”

The Treasury’s announcement came as top U.S. officials visited both sides of the divided Korean peninsula.

“I think we’ve reached a very important day today with the imminent release of these funds,” chief U.S. nuclear negotiator Chris Hill said in Seoul.

“Now we need to move on from this banking issue to the real purpose of our February agreement, which is to get on with denuclearisation.”

On Monday, New Mexico Governor Bill Richardson flew to North Korea where he is to receive the remains of six U.S. soldiers killed during the 1950-53 Korean War.

NBC television reported that North Korean officials had told Richardson that once the money was released, U.N. nuclear inspectors, expelled in 2002, would be allowed back in.

Richardson plans on Wednesday to cross the demilitarised zone which has divided the peninsula since 1953 and enter South Korea with the soldiers’ remains. They are to be flown to Hawaii for identification.

North Korea was also on the agenda of talks in Seoul between South Korean President Roh Moo-hyun and visiting Chinese premier Wen Jiabao.

Adding pressure on Pyongyang, Japan said it would extend sanctions imposed last October in response to the nuclear test.

Foreign Minister Taro Aso told reporters the sanctions, which include a ban on imports from the impoverished state and bar all North Korean ships from Japanese ports, would be extended for six months.

He said Tokyo’s decision was due largely to a lack of progress both in resolving the domestically highly sensitive issue of Japanese nationals abducted by North Korea decades ago and in closing Pyongyang’s nuclear reactor.

In response, Pyongyang launched a fresh tirade against Japan, accusing it of distorting the history of its occupation of the Korean peninsula in the first half of the 20th century, in particular over forcing women to be sex slaves for its troops.

A February 13 agreement between the two Koreas, China, Japan, Russia and the United States gave Pyongyang 60 days to shut its nuclear facilities in return for energy aid.

China, which has hosted six-party talks since 2003, shrugged off the snags that have arisen since the February deal.

“I don’t agree that because of some delays in the initial stage the six-party talks will fail or be annulled,” Foreign Ministry spokesman Qin Gang told a briefing.

Additional reporting by Paul Eckert in Washington, Chisa Fujioka and Elaine Lies in Tokyo, Jack Kim and Jon Herskovitz in Seoul and Ben Blanchard in Beijing

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