US inclined to urge unfreezing some N.Korean funds

WASHINGTON, Mar 3 (Reuters) In a step that would remove a major irritant for North Korea, the United States is leaning toward recommending foreign regulators unfreeze millions of dollars in North Korean funds, a US official said.

About 24 million dollar in North Korean accounts was frozen by foreign bank regulators after the US Treasury designated a Macao bank used by North Korea as a ''primary money laundering concern'' in September 2005.

That decision complicated US efforts to persuade North Korea to abandon nuclear arms and on Feb. 13 Washington agreed to resolve the matter within 30 days as part of a wider deal to get Pyongyang to take steps toward giving up such arms.

The official said the US Treasury was likely to recommend that foreign regulators unblock a portion of the frozen North Korean funds but he said he could not provide details.

''That is the direction they are headed,'' said the official, who declined to be named because the matter has not been made public. The official said that unblocking 8 million dollar to 12 million dollar had been discussed within the US government.

A State Department spokesman declined to comment on the matter, as did Treasury spokeswoman Brookly McLaughlin.

Several officials told Reuters in January they believed the Bush administration was inclined to find a solution to the year-long dispute over the accounts in Macao's Banco Delta Asia, which Washington has called a ''willing pawn'' in Pyongyang's counterfeiting and money-laundering activities.

The dispute over the frozen monies threatened to unravel a September 19, 2005, agreement under which North Korea committed to ''abandoning all nuclear weapons and existing nuclear programs'' in return for the prospect of aid and security guarantees.

The agreement was hammered out in six-party talks among the two Koreas, China, Japan, Russia and the United States. North Korea cited its unhappiness about the blocked funds as a major reason for refusing to return to the talks for a year.

However, the talks resumed last year and on February 13 they produced an deal under which North Korea agreed to take steps toward nuclear disarmament in exchange for 300 million dollar in aid and the prospect of other diplomatic and security benefits.

The agreement, reached four months after Pyongyang stunned the world with its first nuclear test, requires North Korea to shut down the reactor at the heart of its nuclear program and to allow international inspections.

In a nod to other benefits that it might ultimately receive if it carries through on abandoning its nuclear arms programs, the deal called for a working group on the normalization of US-North Korean relations to meet within 30 days.

That working group is scheduled to meet for the first time on Monday in New York.

Reuters DH VP0725