End of Fund Dispute Clears Way for North Korean Nuclear Talks

Washington - Negotiators from North and South Korea, Japan, Russia, China and the United States are expected to advance discussions on dismantling North Korea’s nuclear program now that certain North Korean assets held in Macau’s Banco Delta Asia (BDA) have been unfrozen.

“We’re going to try to have everyone go away from this in a couple of days with a pretty clear understanding of what that second phase is going to be,” Assistant Secretary of State for East Asian and Pacific Affairs Christopher Hill said March 19, after the first day of the new round of the Six-Party Talks on North Korea's nuclear program.

Earlier, Treasury Department Deputy Assistant Secretary for Terrorist Financing and Financial Crimes Daniel Glaser announced in Beijing that the United States and North Korea had reached an understanding on the disposition of some $25 million of North Korea-related assets frozen in BDA.  Macau authorities had frozen the assets during investigations into the bank’s illicit activities on behalf of North Korea.

The North Korean government has demanded the funds be freed before it rejoins the Six-Party Talks.  “I think they [the North Koreans] recognize that this indeed means the matter is resolved,” Hill said.

On March 14, the U.S. Treasury Department ruled that BDA “allowed its North Korean clients to use the bank to facilitate illicit conduct and engage in deceptive financial practices.”  The Treasury banned U.S. financial institutions from opening and maintaining correspondent accounts for or on behalf of BDA.  This ruling remains in force.  (See related article.)

But the North Koreans proposed that the questionable funds be moved to an account held at the Bank of China and used “solely for the betterment of the North Korean people, including for humanitarian and educational purposes,” according to Glaser’s announcement.

“It’s a proposal that takes into account our concerns. … We feel this is the basis of the solution,” Hill said.

Glaser said the Macanese authorities will release the funds according to their own procedures, but “we want it to happen as soon as possible,” he added.

On February 13, the parties in the Six-Party process reached an agreement under which the United States promised to finalize its ruling on BDA and help resolve the issue of the funds within 30 days, and North Korea pledged to shut down the nuclear facility in Yongbyon within 60 days.  (See related article.)

“We met our 30-day requirement by announcing the rule.  We then followed that up with intense consultations,” Hill said, adding that North Korea should now proceed with the shutdown.  In return, it should expect the first shipment of oil from South Korea.  The second phase would involve complete disablement of the North Korean nuclear program and further energy and economic assistance from the Six-Party group, Hill said.

Hill also indicated that at the end of the 60-day period there should be a meeting of the foreign ministers of the Six-Party group to “get together to chart the course ahead.”

For more information on U.S. policy, see The United States and the Korean Peninsula.