After bank tussle,focus now on N Korea disarmament

SEOUL, June 15 (Reuters) The banking dispute holding up a North Korean nuclear weapons deal looked today to be almost resolved but few expected it to prompt the hermit state to actually start dismantling its atomic armoury any time soon.

China-controlled Macau, where the North Korean funds have been stuck for nearly two years over US money-laundering charges, announced yesterday that some 20 million dollars had finally been transferred out of the territory.

Although all parties agreed the money could move out of Macau's Banco Delta Asia (BDA), it has taken months to find any bank willing to risk letting tainted North Korean money pass through its tills.

''The process of denuclearising (North Korea) is much more difficult than the BDA problem,'' the Yonhap news agency quoted Chun Yung-woo, Seoul's chief envoy to six-way talks on ending the North's nuclear programme, as saying.

He said the BDA dispute was just the first obstacle to implementing a Febuary 13 deal between the two Koreas, China, Japan, Russia and the United States for the impoverished North to shut its nuclear reactor and finally end its ambition to be a nuclear power.

North Korea sees resolving the BDA issue as the key to allowing it back into the global banking system from which it has been largely ostracised by US charges of illicit financial activities.

But analysts said the resolution might well not be enough to remove the stigma attached to handling North Korean funds.

Japan's Kyodo news agency quoted Macau authorities as saying the funds would move along a highly unusual route first to the US Federal Reserve New York branch, then to Russia's central bank and finally to a Russian bank.

''It was a one-time, technical solution and did not quite allow North Korea's integration into the international financial system,'' said North Korea expert Paik Hak-soon at Seoul's Sejong Institute.

Even though US President George W Bush has the political will to sort out the problem, Paik said the complexity of the issues meant the negotiations would take a long time.

Japanese Foreign Minister Taro Aso said he did not expect an early resumption of the six-party talks, and regional powers wait to see what North Korea does next.

Pyongyang's main commitment under the Febuary 13 deal -- the deadline for which passed two months ago -- is to start shutting down its Yongbyon nuclear reactor, the source of material for its weapons programme.

It must also re-admit international atomic inspectors.

Once it closes the reactor and accepts inspections, the resource-poor state will receive 50,000 tonnes of heavy fuel or equivalent in aid.

There is a total of 950,000 tonnes in oil waiting for Pyongyang once it completes disabling all its nuclear facilities and makes full disclosure of its nuclear programmes.

But many analysts say that North Korea is likely to drag the talks on as long as possible, seeing nuclear power as about the only leverage it has in a largely hostile world.

REUTERS AGL BST1033