Renewed hope for North Korea nuclear talks?

Diplomats say transfer of $25 million in frozen funds to Pyongyang clears 'first obstacle' to future progress.

Japanese and US officials are urging Pyongyang to honor the terms of a long-delayed nuclear-disarmament deal, now that the transfer of more than $20 million in frozen North Korean funds has begun. Bloomberg reports that South Korea's chief diplomat at six-party nuclear negotiations says the transfer has "removed the first obstacle" to implementing a Feb. 13 agreement for Kim Jong Il to shut down the Yongbyon nuclear reactor, once the funds were made available.

The Associated Press reports that the US Treasury Department froze some $25 million in funds in 2005 at Macau's Banco Delta Asia (BDA) and blacklisted BDA for allegedly "helping the Pyongyang regime pass fake $100 bills and launder money from weapons sales." North Korea then balked at further discussions.

The North made the money's release its main condition for disarmament and boycotted international nuclear talks for more than a year, during which it conducted its first-ever bomb test in October.
But to win the North's promise to start dismantling its nuclear program, the U.S. agreed to give its blessing for the money to be freed and said it would happen within 30 days. The transfer has instead taken more than four months as the North insisted that it be sent electronically to another bank, apparently to prove the money is now clean.

Transferring the money to the communist nation, however, proved no easy task, reports The Washington Post. The ongoing investigation made most banks extremely reticent to become involved in the transaction.

Though the Treasury Department agreed to allow the return of money tainted by illicit activities, no bank was willing to transfer the money without explicit assurances that the Treasury would take no regulatory action. North Korea could have withdrawn the money in cash, but many experts suspected Pyongyang demanded a wire transfer to signal to financial institutions that it was once again part of the financial system.
U.S. officials trying to save the deal desperately searched for a willing bank, but each time an arrangement seemed possible, complications arose. Finally, after Russia indicated that one of its banks could help, the Treasury arranged for the Federal Reserve Bank of New York to transfer the money to a dormant North Korea account at a Russian bank that operates in the Far East, near the border with North Korea.

The BBC confirms that despite the diplomatic progress it was indeed a difficult decision for President Bush.

Our correspondent says the transfer represents a major concession by the Bush administration, which initially said there could be no promise over what it called the North's criminal activities.
But despite this step forward, analysts have cautioned that the financial wrangle is only the first of many obstacles in the path towards denuclearisation.
They say that North Korea has made no clear commitment to hand over the nuclear weapons and the stockpile of fissile material that it has already developed.

Reuters reports that diplomats and experts agree, that even if President Kim accepts the terms of the Feb. 13 deal – including admitting international atomic inspectors – it is unlikely that there will be "an early resumption of the six-party talks, and regional powers [will] wait to see what North Korea does next."

"It was a one-time, technical solution and did not quite allow North Korea's integration into the international financial system," said North Korea expert Paik Hak-soon at Seoul's Sejong Institute.
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