U.S., N. Korea to Resume Financial Talks

DAVOS, Switzerland -- A senior Treasury official said the groundwork has been laid for U.S.-North Korea talks Tuesday on U.S. financial restrictions against the North's alleged smuggling and counterfeiting, which have angered Pyongyang and held up separate talks on scrapping its nuclear weapons program.

U.S. Deputy Treasury Secretary Robert M. Kimmitt said the talks will resume in Beijing at North Korea's request.

"I would say these talks are proceeding in a business-like fashion," he said in an interview Saturday on the sidelines of the World Economic Forum. "I think progress is being made on the technical understanding on both sides."

"But these are a set of talks, from our perspective, designed to make clear that the action that we took was narrowly targeted, focused on illicit conduct _ and the way to cure it is to foreswear such conduct, make restitution for what's been done in the past, and move forward," Kimmitt said.

In a sign of stepped-up diplomacy with Pyongyang, the U.S.-North Korea talks will be quickly followed in early February by another round of six-nation negotiations on the North's nuclear program. The nuclear talks involve the U.S., Russia, China, Japan and the two Koreas.

The U.S. Treasury said it notified all U.S. banks on Sept. 15, 2005 that they were banned from doing business with Banco Delta Asia SARL in Macau, which effectively barred the bank from operating in the world financial system. The United States initially alleged that North Korea was using the bank for cigarette smuggling and counterfeiting $100 bills. Later it alleged Banco Delta Asia was linked with a bank connected to the North's missile program.

The Treasury has not yet finalized the ban so banks are not legally banned from doing business with Banco Delta Asia _ but all affected banks immediately cut off all business with the bank, U.S. officials said.

The U.S. action on Banco Delta Asia came four days before a Sept. 19, 2005 agreement at the six-nation talks in which North Korea agreed to abandon its nuclear program in exchange for security guarantees and aid. That accord has yet to be implemented. Upset and citing the U.S. restrictions, Pyongyang withdrew from further talks and then tested a nuclear bomb on Oct. 9, 2006.

Kimmitt said that at a meeting with the North Koreans in New York in March 2006, U.S. officials explained that the Treasury took action against the Macau bank as it has in many other places in the world where it discovered suspicious activity.

The U.S. made clear "this was not directed against North Korea as a country, it was directed against the conduct in which North Korea was engaged using that bank," he said.

The North Koreans agreed to return to the nuclear talks in December, saying there were no preconditions. But the talks ended with no apparent progress due to the dispute over the U.S. financial restrictions.

Another round of nuclear talks is expected to take place in Beijing in early February.