Wednesday, April 11, 2007

The Bush administration, reversing a six-year-old North Korea policy based on deep mistrust, said it will now rely on Pyongyang’s “good faith” to ensure that funds released yesterday from a Macao bank are not misused.

With time running out on a breakthrough nuclear accord, the United States said it had removed the final roadblock by agreeing for $25 million in Banco Delta Asia to be released to its depositors, principally the North Korean government.

Washington had wanted the money to be placed in a bank in a third country, where it could be monitored to ensure it was used only for humanitarian purposes. But with a deadline looming on Saturday for North Korea to shut down its nuclear reactor at Yongbyon, the Americans had been unable to find a bank willing to handle the money.

With the financial issue now resolved, U.S. officials said, they expect North Korea to move swiftly to shut down the reactor.

“The bottom line is, authorized account holders as of now will be able to access the funds in those accounts,” State Department spokesman Sean McCormack told reporters, citing assurances from the Macao government.

A spokeswoman for the Monetary Authority of Macao, Wendy Au, was quoted by Japan’s Kyodo news agency as saying, “The account holders or authorized parties can go to the bank and withdraw or deal with their deposits.”

Mr. McCormack said the North Koreans had promised “to spend the money for the betterment of the North Korean people,” and not for the personal benefit of its officials.

“In any negotiation, you are going to get to a point where every party … wants something, and they are not going to get it exactly in the form that they want it — and that’s part of the negotiating process,” he said.

“You compromise, but you compromise within reason,” he said. “You compromise in order to achieve a larger objective and the important thing is that, along the way, you not abandon [your] principles … and what you want to achieve at the end of the process.”

Nevertheless, the concession is likely to anger some administration supporters — such as former undersecretary of state for arms control and international security, John R. Bolton — who already were critical of the nuclear deal.

Under a Feb. 13 agreement reached at six-party talks in Beijing, the United States promised to resolve the Macao bank issue within 30 days and Pyongyang pledged to shut down the Yongbyon reactor within 60 days.

Washington argued it had met its obligation when the Treasury Department barred American banks from doing business with Macao’s Banco Delta Asia on March 14, but North Korea refused to shut the reactor until it received access to its funds.

Experts now say it may not be possible to safely close the reactor by Saturday, suggesting the deadline may have to be extended.

A Treasury Department delegation spent the past two weeks in Beijing trying to find a Chinese bank willing to accept the money from Macao, but none was willing to cooperate with U.S. conditions.

Chinese banking officials were also worried that their institutions would be blacklisted by Washington, just as Banco Delta Asia was last month. The United States charges that the North Korean funds include the proceeds of counterfeiting and money laundering.

The administration conceded yesterday that it is extremely difficult to monitor anything that goes on in North Korea, the world’s most reclusive state. But officials indicated that Secretary of State Condoleezza Rice had decided the deal was a reasonable compromise in order to ensure that Yongbyon is closed.

“This is a process in which good-faith actions will be met in turn by good faith, which results in a building of confidence, which allows all the parties to make some of the tough decisions that are going to be needed if we are going to all achieve our goals,” Mr. McCormack said.

“This is something that we are going to watch closely,” he added. “We are going to ask the North Koreans about [how they are using the money] in subsequent negotiations — whether or not they are abiding by their pledges, and to the best of our ability determine whether or not they are abiding by that pledge, as well as other pledges that they made in this process.”

The Monetary Authority of Macao took over Banco Delta Asia’s management after it was alerted by the United States about suspicious transactions.

Christopher Hill, the chief U.S. nuclear negotiator, said yesterday in Seoul that the release of the funds “should clear the way for the [North] to step up the process of dealing with its obligations within the 60-day period.”

China said the six-party deal would not fail even if the weekend deadline was not met.

The six-nation talks were started in 2003 aimed at ending the North’s nuclear weapons ambitions. After testing several missiles in July, Pyongyang shocked the world with its first atomic weapons test in October.

Japan has taken the hardest line in the talks. Yesterday, it extended sweeping sanctions against North Korea for another six months to press it to give ground in an emotionally charged row over its past kidnappings of Japanese nationals.

The North Koreans told a visiting U.S. delegation in Pyongyang this week that they will allow U.N. inspectors to return to the North to monitor Yongbyon’s closure as soon as they have the $25 million.

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