U.S. sanctions cost North Korea millions

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U.S. economic "defensive measures" aimed at curbing illegal activities by North Korea have cost the Pyongyang regime millions of dollars in lost cash over the past several months through banking restrictions and other actions, U.S. officials estimate.

One sign that the economic measures are hurting the communist regime in North Korea is Pyongyang's continued refusal to rejoin six-nation talks on its nuclear program until the United States lifts what it regards as sanctions, said Bush administration officials involved in Asia matters.

"We think the defensive measures are hurting them," said one official who spoke on the condition of anonymity.

North Korean officials have told Chinese officials that they will not come back to the six-party talks until the United States lifts economic restrictions imposed on the Macau-based Banco Delta Asia, something the Bush administration is refusing to do, saying the measures are not nuclear-related, but simply efforts to protect the U.S. financial system and to pressure Pyongyang into halting activities such as counterfeiting U.S. currency.

The Bush administration official pointed out that U.S. financial actions against North Korea were never part of the agenda of talks aimed at halting covert North Korean nuclear programs. Those talks also include representatives of China, South Korea, Japan and Russia.

Officials said there are intelligence reports that North Korea is continuing work on its nuclear programs, including plutonium-fueled efforts and a uranium-enrichment program that remains couched in mystery. The impoverished communist-ruled state has earned hard cash through counterfeiting U.S. currency, specifically a high-quality forged $100 bill. Its other activities include selling illegal drugs, such as heroin and cocaine.

The latest U.S. action was a May 8 ban that blocked any U.S.-based company from flying the North Korean flag on its merchant ships. The ban was imposed after the government learned that North Korea was selling its flag to companies at two to three times the usual international price as a way to raise cash. The Clinton administration permitted the flaggings in 2000.

Weeks after the Bush-era ban went into effect, U.S. intelligence agencies detected launch-preparation activities at a North Korean missile facility that indicate the regime may be preparing to conduct a missile test. Officials said the North Koreans are unpredictable and could be engaging in brinksmanship, but they do not expect Pyongyang to break its self-imposed moratorium on missile tests.

The most effective restrictions were Treasury Department penalties imposed on Banco Delta Asia in September. The bank was sanctioned as a "primary money-laundering concern" for its 20-year role in helping the North Korean government.

The bank was involved in major North Korean foreign purchases including precious metals used in manufacturing and was the main outlet for more than $45 million in North Korean-made counterfeit $100 bills since 1989, the officials said.

The Treasury Department said a North Korean government front company used Banco Delta Asia for more than a decade to carry out illegal activities, including smuggling counterfeit-brand tobacco products. The company also took part in international drug trafficking on behalf of North Korean government agents.

Officials said the penalties against Banco Delta Asia, which have been supported by China's government, have had a ripple effect among international financial institutions that now are taking steps to avoid working with North Korean government agents and front companies linked in the past to illegal activities.