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U.S., North Korea resolve Macau bank dispute as 6-party talks begin


The United States and North Korea have resolved a dispute over $25 million in frozen North Korean funds, clearing the way for progress in dismantling the North's nuclear programs, U.S. officials said today.

The U.S. nuclear envoy, Christopher Hill, said six-party talks, which resumed today, could now "move on to the next problem, of which there are many."

Meanwhile, North Korea questioned Japan's qualifications to participate in the talks, ratcheting up recent tensions between the two sides.

U.S. Deputy Assistant Treasury Secretary Daniel Glaser said the funds in a small bank in Macau would be transferred into a North Korean account at the Bank of China in Beijing to be used for education and humanitarian purposes. Glaser said North Korea had proposed the arrangement.

Sean McCormack, a State Department spokesman, acknowledged that the United States would have difficulty monitoring how North Korea uses the money.

"Because of the nature of Korean society, it is difficult to monitor activities in North Korea. There is a limited ability to do that," McCormack told reporters.

The funds, some of which U.S. authorities suspect may be linked to counterfeiting or money-laundering by cash-starved North Korea, had held up progress in nuclear disarmament talks. Officials in Macau said they would follow North Korea's instructions and release the frozen funds.

"North Korea has pledged ... that these funds will be used solely for the betterment of the North Korean people," Glaser said.

"We believe this resolves the issue of the DPRK-related frozen funds," he said, using the acronym for North Korea's formal name, the Democratic People's Republic of Korea.

The Feb. 13 disarmament agreement gave North Korea 60 days to shut down both its main reactor and a plutonium processing plant, and allow U.N. monitors to verify the closures. In return, North Korea is to receive energy and economic assistance, and a start toward normalizing relations with the U.S. and Japan.

Also today, Japan's chief envoy Kenichiro Sasae said his North Korean counterpart Kim Kye Gwan "questioned Japan's commitment to meet its requirements and also questioned its qualifications to remain participants" of the six-nation discussions.

Kim made the remarks at the opening session of the talks &

which also include South Korea, host China, the United States and Russia &

reiterating a position the regime has stated before. Sasae did not elaborate on what Kim said.

"I told them that their argument is totally off the mark and the question about our qualification is not worth a comment," Sasae told reporters.

Hill said he did not think the dispute would obstruct negotiations, but he urged North Korea to improve ties with Japan.

"Japan is obviously a very important country to us all, and I would include the DPRK in that, and I would hope the DPRK would understand what its interests are," Hill said.

In Vietnam earlier this month, talks between North Korea and Japan on normalizing ties ended without any progress. Korean negotiators at the time reacted angrily to Japan's insistence that they first resolve questions about the North's abduction of Japanese citizens in the 1970s and 1980s.

Chinese envoy Wu Dawei told delegates at the opening of the talks that the negotiations still faced "a lot of difficulties and obstacles," and called on representatives to "make joint efforts to overcome them."

This week's session will focus on reviewing the progress of five related working group meetings held over the past month, discuss specific steps necessary to meet the April 14 shutdown deadline and begin talking about what actions would come after it, Wu said.

U.S. allegations in 2002 that North Korea has a secret uranium enrichment program prompted the North to expel U.N. inspectors and eventually led to North Korea detonating its first nuclear device last year.

The North Korean deposits have been frozen in Banco Delta Asia, or BDA, since Washington blacklisted the small, privately run Macau-based bank 19 months ago on suspicion the funds were connected to money-laundering or counterfeiting.

Hill said the resolution showed "the DPRK understood our concerns and are prepared to cooperate with us to ensure that this money is used appropriately."

Those attending Monday's talks said Kim reiterated earlier remarks that North Korea would stop activities at the Yongbyon reactor once the funds were fully released.