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US trying to skirt Korean banking row

The US believes a banking dispute blocking a nuclear disarmament accord will drag on and has pressed North Korea to start shutting its reactor in return for a firm US promise of a solution, a report said yesterday.

South Korea's Yonhap news agency said Washington had suggested to Pyongyang that the nuclear deal should be implemented first as it is taking "significant time" to settle the banking row.

The US offer, made through diplomatic channels, promises the communist North a "tangible commitment" to settling the dispute exactly as Pyongyang desires and as quickly as possible, Yonhap quoted a source as saying.

"At present, North Korea has not responded positively to the US offer ... but the United States is likely to continue to explain its position to North Korea through the New York channel," the source was quoted as saying.

North Korea has no diplomatic ties with the US but its mission to the UN headquarters in New York serves as a channel.

North Korea carried out its first nuclear test last October. It has promised to start shutting down its nuclear reactor in exchange for fuel oil under the first stage of an accord reached at six-nation talks in February.

But the North refuses to move until it recovers US$25 million in funds that were frozen in Macau's Banco Delta Asia (BDA) after Washington blacklisted the bank in 2005 for allegedly laundering illicit funds.

The source told Yonhap: "None of the six-nation talks representatives had expected the BDA issue to drag on like this. It is a very abnormal situation, and North Korea needs to make a bold decision."

The US said it had lifted the restrictions on the accounts in March. But the North has had problems arranging a transfer via a foreign bank since banks are unwilling to touch apparently tainted money.

The US-based Wachovia bank said earlier this month it was considering a US State Department request to help process the transfer.

But South Korea's Dong-A Ilbo newspaper said yesterday that efforts to use US banks such as Wachovia had come unstuck because of the US Patriot Act, under which the funds were originally frozen.

It quoted a diplomatic source as saying that Washington, at a US-China forum last Tuesday and Wednesday in Washington, asked Beijing to help liquidate BDA or let other banks take it over.

The paper said that China, which has sovereignty over self-governing Macau, had yet to respond.

The first phase of the February deal was supposed to have been completed by April 14.

US chief nuclear negotiator Christopher Hill said the banking issue was one of the most complex matters of his career, but he hoped for a solution within a month.
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