Deadline Passes for N. Korea
U.S. Officials Suggest That Lapse Need Not Derail Nuclear Deal

By Joohee Cho
Special to The Washington Post
Sunday, April 15, 2007

SEOUL, April 14 -- A deadline for North Korea to shut down its nuclear reactor passed Saturday with no known compliance action by the communist state, which has said it must first collect $25 million in frozen assets.

U.S. officials lamented the missed deadline, but treated it as something that need not derail the landmark nuclear agreement reached Feb. 13 after almost four years of negotiations.

U.S. Assistant Secretary of State Christopher R. Hill, in Beijing for consultations, told reporters there that the disarmament deal at present doesn't have "a lot of momentum." Later, he called on the North Koreans to "get moving on their issues."

In Washington, a senior State Department official, briefing reporters on condition of anonymity, said that the administration's patience was not infinite but that "it is probably prudent to give this thing a few more days." The official declined to put an arbitrary "time scale" on U.S. patience but said North Korean officials needed to call in U.N. nuclear inspectors to arrange for supervision of the shutdown "pretty quickly here."

By Saturday's bank closing time, North Korean officials had not withdrawn the money held at Banco Delta Asia in Macau, a Chinese territory.

The lack of action in the last hours before the deadline is not surprising, said analysts, who predicted that North Korea would take the first steps in coming weeks after it gets the money and that the process would likely remain on track.

"It's like grappling in a wrestling match," said Ryoo Kihl Jae, professor of North Korean studies at Kyungnam University in Seoul. "They're purposely keeping passive simply to grab an upper stance in the long and winding road ahead."

The South Korean news media reported Saturday that North Korean officials in Macau are preparing to withdraw the funds in cash.

As a precondition to shutting its plutonium-based reactor at Yongbyon and reopening the site to international inspectors, North Korea demanded the return of $25 million that was frozen 18 months ago after the U.S. Treasury blacklisted the tiny, family-owned bank for allegedly facilitating money-laundering and counterfeiting $100 bills by North Korea.

U.S. officials have also claimed that some of the accounts were used to facilitate the luxurious lifestyles of Kim Jong Il, leader of the world's newest declared nuclear power, and other top North Korean officials. Under terms of the agreement reached in February in six-party talks, the United States agreed to settle the money issue within 30 days. Last month, U.S. officials announced they had approved the transfer of the funds into a North Korean account at the Bank of China in Beijing "to be used for education and humanitarian purposes."

U.S. officials asserted that this settled the issue, but North Korea objected and refused to carry out its obligations in the deal until it had the money in hand. The transfer was then delayed for weeks when the Bank of China refused to facilitate the transfer. About $7 million of the assets belong to the largely foreign-owned Daedong Credit Bank, which had threatened legal action to stop the transfer.

The bank, which operates in Pyongyang, says its funds are the legitimate assets of foreign businesses operating in North Korea.

Macau financial authorities finally announced Wednesday -- with U.S. Treasury Department endorsement -- that the money was free for withdrawal or transfer. That left just three days for the North Koreans to collect the funds and meet their deadline obligations by taking action to shut down the reactor.

U.S. officials, acknowledging that that was not realistic, expressed hope that North Korea would make a positive gesture of compliance by at least inviting inspectors from the International Atomic Energy Agency back to Pyongyang. They were expelled in 2002.

But North Korea replied on Friday that it would take action when the solution to the Macau bank issue has "proved to be a reality."

"This is just a beginning. They want tangible results because from their point of view there could be another form of sanctions next time, aimed at democratization or humanitarian issues," said Lho Kyong Soo, professor of international politics at Seoul National University. The North Koreans are "testing the waters," he said.

Staff writer Glenn Kessler in Washington contributed to this report.

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