Back from China, Kim Jong Il eyes ally's success - and largess

North Korean leader Kim Jong Il's visit to China's booming high-tech southeast this past weekend appears to be an emergency response to the economic blow dealt by recent US sanctions targeting alleged counterfeiting, say observers of the reclusive regime.

As Mr. Kim returned home by train Wednesday, North Korean experts here suspect he carried back a detailed agreement with China that could offset losses inflicted by the sanctions.

Pyongyang's Korean Central News Agency, confirming the visit, suggested the benefits for North Korea, saying Kim had thanked Chinese leaders for "disinterested assistance" whenever "it faced difficulties."

At the same time, KCNA said Kim and the Chinese discussed ways to "advance" six-party talks on its nuclear weapons program. The inference was that Kim, in exchange for massive Chinese aid, may have to back down on a refusal to go on with talks.

Analysts believe Kim has little choice. "He was in China to secure a banking line from the Chinese," says Tony Michell, a business consultant and frequent visitor to North Korea. "He's making sure he's getting supplies from China."

In September, the US Treasury Department ordered all US financial institutions not to do business with the Banco Delta Asia in Macao, a former Portuguese colony now part of China. Washington accused the bank of spreading counterfeit money printed in North Korea and processing payments for narcotics and weapons made there - charges the bank denies. Nonetheless, Macao authorities seized the bank and stopped all its dealings with North Korea.

The closing of the bank has dealt a severe blow to North Korea as well as its foreign investors, says Mr. Michell.

Kim's week-long mission ended in a meeting in Beijing with China's President Hu Jintao, who had concluded a major economic deal in a visit to Pyongyang just three months ago in which China reportedly promised North Korea billions of dollars in aid. Michell suggests that Kim's visit gave the Chinese a chance to elaborate on the deal, pledging investment in the North while giving China the rights to mineral resources.

"North Korea is really kind of scared by recent moves," says Kim Sung Han, professor at the Institute of Foreign Affairs and National Security, affiliated with South Korea's foreign ministry. Mr. Kim cites both the US sanctions on the bank in Macao and the subsequent freezing of all assets in the US or in US-controlled institutions of eight North Korean companies accused of dealing in weapons of mass destruction.

North Korea's "foreign financial sources can be blocked," says Kim. "That made Kim Jong Il rush to China."

Like many analysts here, Kim says Washington came up with the counterfeiting charge in order to force Pyongyang to live up to its pledge, in the statement of principles adopted by all six participants in September, to give up its nuclear program. North Korea has demanded a light water nuclear energy reactor as a prerequisite.

By imposing sanctions, says Kim, "it seems the US has discovered fatal spots on the North Korean body."

North Korea, however, has made the sanctions a reason to stay away from the table. "If the US truly wants to resume the six-party talks," KCNA said Wednesday, "it should lift, among other things, the sanctions," which it said are "the factor blocking resumption of the talks."

Kim Jong Il is "in urgent need of obtaining money from abroad," says Suh Jae Jean, senior research fellow at the Korea Institute of National Unification, an adjunct of South Korea's unification ministry. Sanctions, he says, are a significant obstacle for the North.

But Mr. Suh sees a face-saving way out. The formula, which he believes the Chinese urged on Kim, may be for Kim to acknowledge the counterfeiting - but say it went on without his knowledge and was "not the responsibility of the government."

If Kim then pledges to stop the counterfeiting, according to this logic, the US can lift the sanctions while North Korea agrees to another round of six-party talks. "China has offered a variety of incentives," says Kim Sung Han. "Chinese power and leverage is increasing. That's why the US is urging China to play a positive role."