Bank standoff dims hopes for N Korea nuclear deal

BEIJING, Dec 21 (Reuters) Negotiators said no progress had been made today at talks aimed at convincing North Korea to scrap its nuclear weapons, with Pyongyang refusing to budge before a climbdown on US financial curbs against it.

Envoys had earlier hoped for agreement by week's end on first steps toward implementing a September 2005 accord that offered the poor and isolated North aid and security guarantees in return for nuclear disarmament.

But envoys said the North remained preoccupied with accounts frozen at Macau's Banco Delta Asia (BDA), which Washington says was a ''willing pawn'' that Pyongyang used for counterfeiting and money-laundering.

''The North Koreans had a great deal of difficulty talking about anything but BDA,'' chief US negotiator Christopher Hill told reporters.

''And you recall, the purpose of these talks this week was to talk about denuclearisation of the Korean peninsula,'' he said.

With the negotiations that group the two Koreas, the United States, Japan, Russia and host China expected to break up by Friday, prospects for a breakthrough were dim.

''We were hoping to make more progress than we made, so we'll have to see if tomorrow will be a better day,'' Hill said.

The talks the first in more than a year had taken on new urgency since North Korea conducted its first nuclear test on October 9, he said, adding the financial curbs were in place to keep the North from using the global banking system to fund its weapons programme.

Japanese envoy Kenichiro Sasae accused Pyongyang of using the financial dispute to drive a stake into a proposed deal.

''North Korea's position on the financial issue is rigid and we don't see any flexibility. This is the biggest cause of difficulty,'' Sasae told reporters.

''LONG AND DIFFICULT DAY'' Separate talks between North Korea's foreign banking arm and US Treasury officials ended yesterday with no breakthrough on the finance dispute, but those talks were expected to resume in January.

On Monday, North Korea's chief negotiator, Kim Kye-gwan, laid out sweeping conditions for progress on the nuclear issue, including the lifting of both UN sanctions and the US financial crackdown.

But Pyongyang appeared to take a more pragmatic tack in subsequent talks and Hill had said they were working on a deal.

He gave no specifics, but hinted that any steps North Korea took towards scrapping nuclear arms would have to include verification -- likely opening the door to the return of international inspectors expelled in 2002.

But today, despite several meetings between the US and North Korean delegations, there was little sign that deal would come to fruition.

''It has been a long and difficult day today. We tried out a number of ideas on the DPRK delegation. So far, I must say, today was not a day when we registered much progress,'' Hill said.

Even China, usually eager to flag progress in the talks it has hosted since 2003, acknowledged there was no certainty of an agreement.

''Nothing would be better than if we can issue a document accepted by the six parties that distils their consensus,'' Foreign Ministry spokesman Qin Gang told reporters. ''Of course, there are disputes, and some of them are quite clear and sharp.'' Reuters SY GC2240