North Korea had boycotted six-nation talks aimed at ending its nuclear programs after the United States slapped restrictions on Banco Delta Asia in late 2005, accused of laundering money for Pyongyang.
Under the U.S. measure, the Macau-based bank has frozen about $25 million of the North's holdings in some 50 accounts and cut off transactions with the communist country, which is believed to choke off Pyongyang's cash flow.
After its nuclear test in October last year the North returned to the six-party nuclear talks and agreed on an aid-for-arms deal last month. But it threatened to back away from the Feb. 13 accord unless the financial issue was fully resolved.
The United States has long rejected the North's demand, saying the financial issue is not relevant to the nuclear talks but a matter to be handled by law-enforcement authorities. Nevertheless, the United States announced Monday it would release all of the North's $25 million frozen at the Macau bank, a move expected to break the years-long nuclear impasse.
"The United States and North Korean governments have reached an understanding on the disposition of DPRK-related funds frozen at Banco Delta Asia," U.S. Deputy Assistant Treasury Secretary Daniel Glaser said after its 18-month-long investigation into the bank. DPRK stands for North Korea's official name, the Democratic People's Republic of Korea.
The North's fund will be transferred to an account "held by North Korea's Foreign Trade Bank at the Bank of China in Beijing," Glaser said in a statement issued in Beijing. "North Korea has pledged, within the framework of the six-party talks, that these funds will be used solely for the betterment of the North Korean people, including for humanitarian and educational purposes," said Glaser, who flew to Beijing after traveling to Macau where he discussed the financial issue with Macau authorities.
Speaking alongside Glaser, U.S. top nuclear envoy Christopher Hill also said, "We are very pleased to announce that we've been able to reach an understanding with the DPRK on the full return of funds."
The U.S. move comes just hours before nuclear negotiators opened a new round of the six-nation talks involving the two Koreas, the United States, Japan, China and Russia.
In a keynote speech at the six-party talks, the North's top negotiator, Kim Kye Gwan, said that his country will halt its nuclear activities as soon as all of its funds frozen at a Macau bank are released, referring to completion of the money transfer to the North's bank. "If the Banco Delta Asia issue is completely resolved, (North Korea) will halt its nuclear activities at Yongbyon," Kim was quoted as saying.
Under the Feb. 13 accord, the North promised to shut down and seal its plutonium-producing reactor at Yongbyon within 60 days in exchange for up to 1 million tons of heavy fuel oil and equivalent energy.
The financial-sanctions issue was one of the major outstanding hurdles to the nuclear accord, largely because part of the North's funds frozen in BDA and other offshore bank accounts are the private funds of its leader, Kim Jong Il, and his personal consumptions.
The U.S.-led sanctions had led other countries to impose tougher financial regulations against the North, damaging Pyongyang's foreign business dealings. The United States, Japan and other countries have also banned sales of luxury items to the North. In the face of a cash crunch, the North has sought to sell its gold reserves and other natural resources to earn hard currency, while using direct talks with Washington to call for lifting the financial squeeze.
South Korean officials welcomed the U.S. decision to release North Korean assets as a move that would speed up the process of the North's nuclear disarmament and promote peace and stability on the Korean peninsula and the Northeast Asian region.
"With the BDA issue resolved, there will be no big obstacle to implementing measures within the 60-day deadline that leads to North Korea's shutdown of nuclear facilities," Seoul's nuclear envoy Chun Yung-woo said.
In Seoul, Unification Minister Lee Jae-joung said South Korea would put six-party nuclear talks ahead of progress in inter-Korean relations to help resolve the nuclear crisis. "I think North Korea has changed its external policies," Lee said, citing progress in nuclear negotiations. "We will cooperate with, and assist, the North to maintain the change," he told reporters, indicating Seoul would resume economic aid to the impoverished communist neighbor.
Nam Sung-wook, a North Korea professor at Korea University in Seoul, said this week's six-way talks would be focused on how to achieve denuclearization. "Now that the BDA issue is resolved, the six-way talks would tackle the central issues of denuclearization, inspections and energy aid," he said.