Korea nuclear talks stuck for now but options seen

SEOUL, Dec 22 (Reuters) North Korean nuclear talks may be stuck in the mud, but for now it does not hurt the various parties to spin their wheels.

The latest six-country talks in Beijing ended without result today. North Korea says it cannot move until the United States ends a financial crackdown designed to halt its alleged illicit activities and frees up its access to foreign currency.

''At this point anything that North Koreans do will be heralded as a breakthrough or a major concession, even if it a relatively meaningless step,'' said Ralph Cossa, head of the Pacific Forum CSIS think tank in Hawaii.

Analysts and government officials said the immediate concessions the North Koreans could make include an accounting of its plutonium stockpiles, which would be painful for Pyongyang because it would reveal one of it closely guarded secrets.

It could freeze its sole nuclear reactor at Yongbyon, which it has done before. It later extracted spent fuel rods from it for bomb material and then fired it up again to ratchet up tensions, they said.

It could also allow for international inspections of its facilities, knowing it can always kick out the inspectors.

In return, South Korea, which has steadily increased trade with North Korea despite UN sanctions imposed after Pyongyang's missile and nuclear tests, could quickly resume the huge humanitarian aid with the North it suspended earlier this year.

The United States, for its part, could find a face-saving way to release some of the 24 million dollar in North Korean accounts frozen at a Macau bank in exchange for a concession, analysts said.

''The Kim Jong-il government is like a theocracy where people believe in their deepest faith that the United States is trying to topple their leaders. A US move on the financial sanctions might help alter beliefs a little,'' said Chon Hyun-joon, an analyst at Seoul's Korea Institute for National Unification.

But a compromise is not going to be easy.

''You can't separate the good cash from the bad cash in those frozen accounts,'' said a South Korean official at the talks.

Despite Washington's mounting frustration over a process that has produced few results in more than three years of talks, there may be little appetite for tackling North Korea when its plate is already full with Iraq, Iran and conflict in West Asia.

''The reality is, the only reason that the six-party talks have gone on this long is that nobody is prepared to discuss the next step,'' Cossa said.

Analysts say the United States and North Korea stick to the process because they believe it will help them keep China on board -- essential for impoverished Pyongyang because Beijing is the closest thing it can call a major ally.

One alternative would be for Washington and Pyongyang to hold direct talks, but any agreement to do that would have to be reached in concert with Seoul and Beijing, the North's main backers, as well as Japan, a major stakeholder in the region, and neighbouring Russia, once the North's biggest benefactor.

Many are ready to throw in the towel when it comes to the talks actually leading to North Korea scrapping its nuclear weapons programme.

''The six-party talks may be useless in terms of reaching an agreement but they have become a forum that helps keeps peace in the region,'' Chon said.

REUTERS SP KN1447