By Benjamin Kang Lim
Reuters
Wednesday, January 31, 2007; 11:51 AM

BEIJING (Reuters) - North Korea will feel compelled to announce plans for another nuclear test if a financial row with Washington is not settled, a source said on Wednesday as the latest talks wound up with no signs of a breakthrough.

U.S. Deputy Assistant Treasury Secretary Daniel Glaser, after meeting North Korean officials in Beijing on the financial dispute, described discussions as "painstaking."

The U.S. Treasury has accused North Korea of using Macau's Banco Delta Asia to launder earnings from counterfeit U.S. dollars and drug trafficking.

But a source close to the North Korean government said Pyongyang felt Washington lacked evidence of wrongdoing and wanted a quick solution.

North Korea was likely to express its frustration when it comes to six-party talks, aimed at dismantling its nuclear programs, scheduled for February 8 in Beijing, the source said.

"If the United States does not resolve it, North Korea will have no choice but to announce at the six-party talks that it plans to conduct another test," the source told Reuters after being briefed by a North Korean official.

The last session of talks grouping the two Koreas, the United States, Japan, Russia and host China was held in December -- two months after Pyongyang dramatically raised the stakes by holding its first nuclear test. It yielded no breakthrough.

The December session snagged over Pyongyang's complaints about the U.S. financial crackdown that led to Macau freezing $24 million in North Korean accounts.

Glaser told reporters he was sure North Korea was up to no good at the Macau bank. "We've been vindicated with respect to our concerns," he said.

But he said the latest talks, following negotiations in December, had yielded hopes of a settlement. The negotiators had discussed almost 50 account holders in the Macau bank, he said.

"We got some information that was very helpful to us," Glaser said, adding there was hope "to start moving forward and trying to bring some resolution to this matter."

There would be more financial talks, but no date has been set, Glaser said, adding that U.S. concerns went well beyond the Macau bank.

EFFORT REQUIRED

China's envoy to the six-party talks, Wu Dawei, told reporters that the next session could be relatively short, apparently placing an onus on negotiators, including North Korea's, to reach a deal this time.

"I hope the meeting can complete its talks in three to four days," Wu said. The success of the talks, he said, "requires efforts of all parties."

But U.S. officials have held out little hope of a quick resolution to the financial dispute, and Russia and South Korea also cautioned against expectations of a breakthrough.

"I think there is almost no chance of finding concrete, significant agreements during these talks," Russia's Alexander Losyukov, a deputy foreign minister, told Interfax news agency.

The Beijing-based source described the U.S. financial curbs as a "huge insult" to a sovereign country.

"If the United States does not resolve it, North Korea would be a 'sinner' taking part in the six-party talks ... North Korea would have no face and could not be on equal footing with the other parties at the six-party talks.

"The United States has no evidence, just like it had no evidence Iraq had weapons of mass destruction," the source said.

In Washington, the State Department said the U.S. view was that the financial dispute was separate from the six-way talks. "The financial discussions are not being held as part of six party talks and they are not related to issues of denuclearization of the Korean peninsula," spokesman Tom Casey told reporters.

The North Korean Embassy in Beijing declined to comment. The Chinese Foreign Ministry had no immediate comment.

(Additional reporting by Chris Buckley in Beijing, Jack Kim in Seoul, George Nishiyama in Tokyo and Maria Golovnina in Moscow)