Money Still Stalls the North Korea Nuclear Deal

Four weeks ... and counting. More than a month after North Korea was supposed to begin verifiably stopping its nuclear work under a disarmament deal accepted by it and five other countries, the secretive communist government is still running its reactor and producing plutonium for nuclear bombs. The immediate problem remains money: North Korea has been stymied in transferring suspect funds recently unfrozen from a Macao bank to other financial institutions, and it says there will be no movement on the nuclear front until it can access its money that way.

There are paradoxes galore in the problem. The Bush administration has relented on the financial pressures that it had been touting as a signal success. Indeed, it is now actively trying to help North Korea engineer a pathway for the funds to be moved–to clear the way for the nuclear deal to proceed.

That U-turn on the Bush administration's squeeze strategy has upset many conservatives and neoconservatives, including former high-ranking officials. A Treasury Department that once orchestrated the financial squeeze play is now searching for a scenario where Pyongyang can re-collect its money.

"The proud inheritors of Eliot Ness," Michael Green, a former top Asia hand at the White House, remarked Tuesday, "are being forced to find a way to transfer what amounts to drug money" back to accounts controlled by North Korean leader Kim Jong Il.

Green, who now holds the Japan Chair at the Center for Strategic and International Studies and teaches at Georgetown University, said he is worried that the administration's policy switch risks "making it easier for them [the North Koreans] to get back to business" in illicit activities, such as alleged counterfeiting, money-laundering, and trafficking in synthetic drugs.

"North Korea will have paid a pretty small price for testing nuclear weapons, if we're not careful," he said at a forum Tuesday at the Woodrow Wilson International Center for Scholars in Washington. "One risk is we've handed the initiative back to North Korea."

U.S. officials don't accept that view, though they acknowledge frustration and impatience with the delays in commencing with the North's nuclear disarmament. Right now, their focus is on discerning a way for North Korea to move funds, while assuring would-be parties to the transactions that they will not run afoul of U.S. Treasury sanctions for doing business with Banco Delta Asia, the family-run Macao bank designated as a money-laundering concern.

Banks are also concerned about possible future U.S. forays into probing and penalizing institutions that work with North Korea. "We're trying to do what we can to help them [the North Koreans] move forward to solve these problems," says a State Department official.

The North Koreans are clearly dissatisfied with the prospect of merely recouping their money. They could, says the official, pick up their funds in Macao and physically move the money back to North Korea, if they want. "That's not the way they wish to accomplish this," said the official. Instead, as Japanese officials and a growing number of Korea watchers suspect, Pyongyang appears to want to use the dispute to ensure future access to international financial institutions. Closing down that access had been a key tool of the administration's policy toward North Korea–one especially cherished by hawks in various agencies.

The North Koreans reportedly have asked that Washington allow an American bank to effect the transfer of Macao funds–presumably to drive home their point about continued international access. The American bank might then send the money on to accounts elsewhere. The State Department official would not confirm or deny such a specific request–and whether it is being weighed in Washington. But U.S. officials are conferring with banks and legal specialists to assess what kind of transfer would be possible.

Even if the financial problem is surmountable, few expect smooth progress in dealing with the unpredictable North to follow. As Japan's foreign minister, Taro Aso, said recently, "My sense is that there will be a mountain or two before we can move into initial [disarmament] steps." And maybe some deep valleys as well.

Source : www.usnews.com