N. Korea Sets Terms for Return to Nuclear Talks

By Glenn Kessler
Washington Post Staff Writer
Thursday, March 9, 2006

In a rare meeting between U.S. and North Korean officials this week, North Korea pressed the United States to end efforts to stem alleged money-laundering and counterfeiting activities, warning that otherwise it would not return to the six-nation talks on its nuclear programs.

Li Gun, the senior North Korean official at the meeting, made four requests, according to a U.S. official familiar with the talks. They included demanding that the United States remove what he called "financial sanctions," form a joint U.S.-North Korean task force to examine the counterfeiting concerns, give North Korea access to the U.S. banking system, and provide North Korea with technical help on identifying counterfeit bills.

"We cannot go into the six-party talks with this hat over our head," the official quoted Li as saying.

The U.S. officials viewed the meeting as only a briefing, not a negotiation, and rejected any link between Treasury Department actions to thwart alleged counterfeiting and the six-party talks. D. Kathleen Stephens, the principal deputy assistant secretary of state for East Asia, opened the meeting, but the briefing was led by Daniel Glaser, a deputy assistant Treasury secretary.

The nearly three-hour meeting was held Tuesday in New York at the U.S. Mission to the United Nations. It came as North Korea rattled nerves in Asia yesterday with a missile test, and as a senior Republican lawmaker accused the White House of giving "exceedingly constrained options to our negotiators" and urged a more creative approach, including direct talks with Pyongyang.

"The six-party process is beginning to appear moribund," declared Rep. Jim Leach (R-Iowa), chairman of the House International Relations subcommittee on Asia and the Pacific. "It's time for the United States to lead," he said, rather than "indebting us to the diplomacy of countries that may have different interests."

The nuclear talks -- which include China, Japan, South Korea and Russia -- have been on hiatus since November because of North Korean distress over the Treasury Department investigation. In September -- just as the six-party talks reached a breakthrough agreement in which North Korea said it would give up its nuclear programs in exchange for aid, security assurances and eventual normalization of relations -- the Treasury designated a Macao bank as acting as a front for North Korean counterfeiting operations.

The Treasury action had wide repercussions, forcing all U.S. banks to cut off correspondent-banking relations with Macao's Banco Delta Asia -- and leading many banks around the world to curtail dealings with North Korea to avoid any similar taint. "BDA was designated because its facilitation of North Korean illicit financial activity presents an unacceptable risk to the U.S. financial system," Glaser said in a statement issued after the meeting.

The Treasury Department has alleged that senior officials at Banco Delta Asia accepted large deposits of cash, including counterfeit money, and agreed to place it in circulation. Treasury officials also alleged that the bank accepted multimillion-dollar wire transfers from North Korean front companies that were involved in criminal activities.

At the meeting, Li said there is no evidence of illicit activity by North Korea. Li noted that U.S. credit cards cannot be used in North Korea, forcing U.S. diplomats to enter the country with large amounts of cash. He suggested that counterfeit money had entered North Korea through this route.

Despite Li's official denials, Chinese officials have privately told U.S. officials that North Korea has admitted that some individuals had been involved in such activities in the past.

U.S. officials have repeatedly denied any link between the Treasury action and the nuclear talks, saying the government in Pyongyang is trying to use the issue as a way to start a dialogue with the United States outside the six-party framework. Li began the session Tuesday by saying that North Korea was upset that it had to be called a briefing rather than a bilateral negotiation.

The North Koreans had canceled a session scheduled in December over the semantic dispute.

"This is not a U.S.-North Korea issue," State Department spokesman Sean McCormack said yesterday. "This is a matter of getting back to the six-party talks."

Assistant Secretary of State Christopher R. Hill, who played a key role in negotiating the September agreement, said on Capitol Hill yesterday that the United States is ready to resume the six-nation talks on implementing the agreement "without conditions."

Leach said the case for allowing Hill to go to Pyongyang "to test the boundaries -- and push the implementation -- of the joint statement is compelling." He also said the United States and North Korea should consider establishing liaison offices in each other's capitals. "There is clearly a problem of communication between our two governments," he said.

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