US, Japan say NKorea nuclear talks at crossroads

BEIJING, Dec 17 (Reuters) The United States and Japan demanded real progress when talks on scrapping North Korea's nuclear arms resume this week, warning Pyongyang on Sunday that sanctions and isolation were its only alternative.

Analysts and officials held out little hope of a major breakthrough for the negotiations set to formally reopen on Monday between the two Koreas, the United States, Japan, Russia and host China after a gap of more than a year.

South Korea's chief envoy Chun Yung-woo also warned against hopes of dramatic progress, saying the talks would be ''exploratory in nature'' and had been made tougher by the North's nuclear test in October.

''I hope the DPRK understands that we really are reaching a fork in the road,'' U S chief negotiator Christopher Hill told reporters in Beijing, using the impoverished communist country's formal name, the Democratic People's Republic of Korea.

''We can either go forward on the diplomatic track or we have to go to a much different track, and that is a track that involves sanctions and that I think ultimately will really be very harmful to the DPRK economy.'' A missile test by North Korea in July and its nuclear test sparked international condemnation and U N sanctions supported even by its closest ally and biggest oil and aid supplier, China.

''I anticipate it won't be easy to seek substantive measures to resolve the situation partly because the talks will be exploratory in nature,'' Chun told reporters after meeting the other envoys except for the North Koreans.

But Beijing has been working closely with Washington to seek progress, Hill said after warm-up bilateral meetings today.

''The Chinese delegation and we have felt the urgency, having watched the DPRK conduct a missile test this summer and then a nuclear explosion this fall,'' he said.

North Korea's envoy, Kim Kye-gwan, urged an end to what he called Washington's hostility towards it.

On his arrival in Beijing on Saturday, Kim also demanded an end to U S financial restrictions against it as a prerequisite for progress on implementing a six-party statement of September 2005.

''LONG AND DIFFICULT WEEK'' In the 2005 document, North Korea agreed in principle to scrap its nuclear weapons in return for aid and security guarantees.

But it subsequently boycotted the six-party talks following a U S crackdown on suspected counterfeiting and money laundering by Pyongyang, which led to a freeze of North Korean assets at Macau's Banco Delta Asia.

Hill indicated that Washington was prepared to deal on the issue of financial measures, and a separate delegation from the U S Treasury Department would be meeting the North Koreans in Beijing this week.

''We would like to solve that issue, but of course that depends on cooperation from the DPRK side and it also depends on some legal matters,'' he said.

But Hill, Chun and Japan's envoy, Kenichiro Sasae, all said the focus of the talks should be the North's nuclear weapons.

Hill met with Chinese and South Korean envoys today but said there was no bilateral meeting with North Korea's Kim. North Korea's delegation kept mostly to itself before the formal start of the talks.

''If I do get a chance to see (Kim) bilaterally ... I'd like to make sure that he's got enough room for manoeuvre, that is, he has enough instructions to make a deal,'' Hill said earlier, adding he was prepared for a ''long and very difficult week''.

Reuters SSC DB2005