Hard bargaining begins at N.Korea nuclear talks

BEIJING, Dec 19 (Reuters) The United States and North Korea held ''lengthy and substantive'' talks today, offering a glimmer of hope that six-party negotiations aimed at dismantling the North's nuclear programmes may yield progress.

North Korea opened the talks by presenting sweeping demands in return for scrapping its nuclear weapons, starting with the lifting of US financial curbs and UN sanctions.

But the chief US negotiator Christopher Hill said that today, the second day, the real discussions began.

''Today was a much more substantive discussion,'' he told reporters of the one-on-one meetings between the US and North Korean delegations.

''There was certainly a willingness to listen and engage with some of our ideas,'' he said.

The discussions went on during and after an evening banquet that included delegates from the two Koreas, the United States, China, Japan and Russia -- all six countries at the talks being held in the shadow of the North's first nuclear test on October 9.

The other parties say they want to see progress at this round of talks, the first in more than a year, on implementing a joint statement agreed in September 2005 in which North Korea said in principle it would give up its nuclear arsenal in exchange for aid and security guarantees.

''We went through some really specific ideas as to how to get going on implementing the joint statement,'' Hill said.

The chief Japanese negotiator, Kenichiro Sasae, held out hopes for flexibility in the coming days, but cautioned that North Korea and the other parties remained far apart.

''At this point in time I cannot say anything optimistic. But I hope North Korea will respond more positively tomorrow,'' Sasae told reporters.

RIFTS Even China, usually eager to stress progress in the talks it has hosted since 2003, said there were rifts.

''Some of the differences between the sides are quite clear and some disputes are quite sharp,'' Foreign Ministry spokesman Qin Gang told a news conference.

The biggest stumbling block is financial curbs Washington imposed last year after determining that Pyongyang was involved in money-laundering and counterfeiting US dollars. The UN Security Council authorised sanctions in October after condemning the nuclear test.

A separate delegation from the U.S. Treasury department met North Korean bank officials for three hours to discuss the financial restrictions.

''These discussions have been a good opportunity for an initial exchange of views,'' Daniel Glaser, the Treasury department official leaading the delegation, told reporters.

''If these talks are to be really productive, this is going to have to be a longterm process by which we all work to address the fundamental underlying concerns,'' he said, adding the financial group planned to meet again on Wednesday.

Other envoys suggested North Korea may trim its demands in coming days.

South Korean envoy Chun Yung-woo said Pyongyang's ambitious list of demands was a predictable bid to bolster its bargaining position, not a final offer.

Hill said he hoped this session of talks would wrap up within the week, but the Chinese spokesman Qin said there was no deadline, raising the possibility of them dragging into Christmas.

''I'd suggest the participants exercise more patience and they'd best train for a marathon,'' Qin said.

REUTERS SY KP2259