North Korea threatens to boost nuclear arsenal

TOKYO, Apr 13 (Reuters) North Korea said today it might boost its nuclear deterrent if six-country talks on ending its atomic programmes remained deadlocked, but said it would return if Washington met a demand to unfreeze it assets.

Pyongyang's top envoy to the stalled negotiations told a news conference in Tokyo the United States must lift what the North considers to be financial sanctions against it.

''I told them the minute we have the funds or I have the funds in my hand I will be at the talks. But if they continue to come with pressure and sanctions, we will respond with extremely strong measures,'' envoy Kim Kye-gwan said.

''There is nothing wrong with delaying the resumption of the six-party talks. In the meantime we can make more deterrent. If the United States doesn't like that, they should create the condition for us to go back to the talks.'' In an official media report today, North Korea reiterated it has been building a nuclear deterrent to counter what it views as Washington's hostile policy towards it.

Washington has clamped down on a Macau-based bank it suspects of assisting Pyongyang in illicit financial activities, including money laundering.

Kim has been in Tokyo, where he attended a security symposium along with most of the other chief delegates to the six-party talks, including US envoy Christopher Hill.

At the airport before departing, Kim said it was up to the United States to seek bilateral discussions.

''I always have patience,'' he said.

FACE-SAVING COMPROMISE? An analyst in Seoul said Kim's comments might indicate Pyongyang was fishing for a compromise, where the United States could say not all of the North's accounts frozen at the Macau bank were used for illicit activity and then free up some funds.

''Seoul's preference is for the US to find some gesture that will help North Korea save face. China's position is not all that different,'' said Kim Sung-han, head of North American studies at the Institute of Foreign Affairs and National Security.

Analysts have said a meeting between the US and Chinese presidents next week in the United States could also increase the pressure on North Korea to return to talks.

Beijing is urging flexibility on the financial crackdown. Tokyo says Pyongyang must appreciate that unless the atomic issue and a separate standoff with Japan over abductees is resolved the North's already weak economic position would deteriorate further.

Hill, currently in South Korea, said Pyongyang was boycotting the discussions, but urged patience for the stalled process.

Washington says the financial issue is separate from the nuclear talks and has urged Pyongyang to return to the talks.

Hill said the amount of the frozen Macau funds was about 20 million dollars, equal to approximately one week's worth of energy aid proposed by South Korea for the North in return for scrapping its nuclear programmes.

''The DPRK needs to understand that as long as it is going to be producing nuclear weapons, we are going to be having a real close look at its finances,'' Hill said, referring to the North's official name, the Democratic People's Republic of Korea.

Hill, who was in Tokyo until yesterday, had no substantive discussions with Kim in the Japanese capital, dimming prospects for renewed progress in the nuclear talks. Hill said he was ready to meet Kim face-to-face within the six-party format.

The last round of the talks among the two Koreas, China, Japan, Russia and the United States was held in November.

Reuters SHB GC1506