- The Washington Times - Thursday, March 22, 2007

BEIJING — The latest round of the six-party talks ended in failure yesterday when North Korea’s lead negotiator returned to Pyongyang after Chinese diplomats and banking authorities were unable to free up funds frozen in a Macao bank.

The chairman of the talks, Chinese Vice Minister of Foreign Affairs Wu Dawei, issued a brief statement saying “parties agreed to recess and will resume the talks at the earliest opportunity to continue to discuss and formulate an action plan for the next phase.”

Negotiations broke down Tuesday following North Korean negotiator Kim Kye-gwan’s refusal to participate in discussions on implementing initial steps of a Feb. 13 agreement to denuclearize his country until the transfer of $25 million from accounts at Banco Delta Asia (BDA) has been completed.

The Macao bank, one of the isolated and impoverished country’s few outlets to the international financial system, has been blacklisted by the U.S. Treasury Department since 2005 for its role in facilitating North Korean money laundering and counterfeiting activities.

Earlier this week, U.S. officials said funds could be moved to a North Korean account with the Bank of China, but it was up to the Monetary Authority of Macao, a territory controlled by the mainland, to authorize the transaction.

China had promised to resolve the issue as quickly as possible, but Foreign Ministry spokesman Liu Jianchao told reporters yesterday, “The difficulties of this matter are beyond our expectations.” He said the problems were “due to technical and procedural issues we had not expected.”

South Korea’s Yonhap news agency said the transfers were delayed because authorities in Macao were having problems authenticating 50 North Korean accounts, most belonging to Zokwang Trading Co., a North Korean firm the U.S. suspects of involvement in illegal financial activities.

Another complication to emerge was the coordination of Chinese foreign and banking policies. Mr. Wu said concerns at the Bank of China over possible repercussions from accepting tainted money had not been alleviated.

Mr. Wu told reporters, “We need to consult with [the Bank of China] to see whether or not they can fulfill this responsibility.” He added that the matter was one “that cannot be decided by the government.”

In Hong Kong, Bank of China Vice Chairman and President Li Lihui told reporters the bank had not been asked to do the transaction and said it was obligated to abide by Chinese laws against terrorism and money laundering.

Participants in the six-party talks offered widely varying interpretations as to who was responsible for a banking issue causing the hard-won agreement on denuclearization to unravel.

Mr. Kim waved to reporters but offered no comment at the Beijing airport before returning to North Korea.

Russia’s Alexander Losyukov blamed the U.S. for “the whole problem,” according to ITAR-Tass news agency. The envoy was quoted as saying the U.S. had not assured the Chinese that the Bank of China could accept the funds without fear of facing sanctions or a backlash from the banking community and the U.S. government.

Japanese negotiator Kenichiro Sasae said, “This round of talks started with the BDA problem and ended with the BDA problem.” In Tokyo, Prime Minister Shinzo Abe criticized North Korea, saying “this kind of attitude is meaningless.”

The head of the U.S. team, Assistant Secretary of State Christopher Hill, remained upbeat despite the setback, saying “we are still on schedule.”

The agreement reached last month calls for North Korea to shut down its Yongbyon nuclear facility by April 14. No date has been announced for a resumption of six-party talks.

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