North Korea committed to disarmament deal -US

BEIJING, May 30 (Reuters) China and the United States are confident North Korea remains committed to a disarmament agreement but the issue of North Korean funds languishing in a Macau bank needs to be resolved, a US envoy said today.

North Korea agreed on February 13 to begin work to scrap its nuclear weapons programme but has demanded the once-frozen funds in Macau be transferred first.

The 25 million dollars at Banco Delta Asia was blocked after the United States blacklisted the bank, accusing it of laundering illicit funds for the secretive communist state.

US Assistant Secretary of State Christopher Hill met Wu Dawei, the Chinese envoy to six-party talks on the nuclear crisis, in Beijing today.

''We both agreed that both in private channels and publicly the DPRK, the North Koreans, continue to be committed to the Feb. 13 agreement,'' Hill told reporters.

He said he and the Chinese discussed possible ways of overcoming the protracted Macau bank impasse.

''We need to put our heads together and find a solution,'' Hill said.

North Korea missed an April 14 deadline to start closing its Yongbyon reactor, a source of plutonium for bombs, as required by the six-party disarmament deal.

Under the pact, also involving South Korea, China, Japan and Russia, North Korea also agreed to allow International Atomic Energy Agency (IAEA) inspections.

But the Yongbyon reactor continued to function, apart from occasional shut downs for what appeared to be repairs, Hill said earlier.

He added he was wary of predicting when the North might allow visits by the inspectors.

''We've been wrong so many times in terms of predicting when this should happen,'' Hill said.

''The positive side is the North Koreans have continued to indicate they're prepared to do what they're supposed to do.

The problem has been we've really had trouble resolving this issue in Macau.'' Because the US Treasury Department blacklisted the Macau bank on the grounds that it is tainted by Pyongyang's counterfeiting and other illicit activities, reputable institutions have been reluctant to risk handling the funds.

''It's proven to be very difficult for any bank to move the money because of the previous legal issue, so we've got to see if we can resolve that,'' he said.

REUTERS GL VV1656