U.S. backs release of N. Korea funds

The Bush administration removed a key stumbling block to the nuclear disarmament of North Korea by agreeing Wednesday to enable the release of North Korean funds frozen in a Macao bank linked to illicit weapons and money laundering.

The decision by the Treasury Department clears the way for Chinese monetary authorities in Macao to return to North Korea as much as $25 million in funds held at Banco Delta Asia.

The freeze, imposed after U.S. authorities blacklisted the bank in September 2005 as a “primary money-laundering concern,” so angered the North Korean government in Pyongyang that it refused to participate in nuclear arms talks for more than a year.

North Korea agreed last month to shut its Yongbyon reactor, which produces plutonium suitable for nuclear weapons, as part of a deal that included a U.S. promise to resolve the dispute over the frozen funds within 30 days.

The U.S. ruling is doubled-edged: It enables North Korea to reclaim its money but also formally cuts off Banco Delta Asia from U.S. banking and financial systems because of the bank’s suspected illicit activities. Stuart Levey, U.S. undersecretary of Treasury for terrorism and financial intelligence, said the investigation uncovered evidence that North Korean companies used the bank for transactions related to Pyongyang’s nuclear program.

In addition, Levey said, numerous accountholders were involved in North Korea’s “trade in counterfeit U.S. currency, counterfeit cigarettes, narcotics trafficking” and with front companies that used the bank to launder hundreds of millions of dollars.

North Korean officials and Banco Delta Asia have denied the U.S. charges.

Daniel Glaser, who headed the Treasury Department inquiry, said no U.S. banks currently do business with the implicated financial institution. Macao, a former Portuguese colony near Hong Kong, is a semiautonomous territory in China.

The announcement came as the director of the International Atomic Energy Agency, Mohamed ElBaradei, wrapped up a one-day trip to Pyongyang to discuss one of the requirements of the disarmament pact: restoring international supervision of the regime’s nuclear program.

Speaking to reporters in Beijing, ElBaradei said his visit helped clear the air between the U.N. nuclear watchdog and the isolationist nation.

North Korea expelled U.N. inspectors in 2002 after the Bush administration accused it of concealing a uranium enrichment program in violation of an agreement with Washington. The ensuing standoff culminated in North Korea’s underground test last October of a small nuclear device that relied on plutonium, not enriched uranium, for fuel.

ElBaradei said North Korean officials expressed concern to him about the financial pressure from Washington over the last 18 months. He said the officials assured him they were “ready, willing and able” to quit plutonium production once they regained access to the frozen funds.

North Korea negotiated its landmark deal with the United States, China, South Korea, Japan and Russia. Under the Feb. 13 accord, Pyongyang has 60 days to shut and seal the nuclear reactor and a reprocessing facility at Yongbyon in exchange for shipments of heavy fuel oil.

Assistant Secretary of State Christopher Hill, the chief U.S. negotiator, told reporters in Beijing that he planned several days of meetings with his counterparts before the six-party talks formally resume Monday.

bob.drogin@latimes.com

mark.magnier@latimes.com

Drogin reported from Washington and Magnier from Beijing.