Correction to This Article
This article incorrectly said that the U.S. Treasury Department had frozen $25 million in North Korean funds at Banco Delta Asia in Macau. Monetary authorities in Macau froze the assets in response to a Treasury probe that alleged some of the funds came from money laundering and counterfeiting.

U.S., Critic of N. Korea Payments, Also Sends Millions

By Colum Lynch
Washington Post Staff Writer
Sunday, June 24, 2007

UNITED NATIONS -- Over the past six months, the Bush administration has repeatedly criticized the U.N. Development Program for channeling millions of dollars in hard currency into North Korea to finance the agency's programs, warning that the money might be diverted to Pyongyang's nuclear weapons program.

But the United States also has funneled dollars to Kim Jong Il's regime over the past decade, financing travel for North Korean diplomats and paying more than $20 million in cash for the remains of 229 U.S. soldiers from the Korean War. And in a bid to advance nuclear talks, the Bush administration recently transferred back to North Korea about $25 million in cash that the Treasury Department had frozen at Banco Delta Asia, a Macao-based bank that the United States had accused of laundering counterfeit U.S. currency on behalf of North Korea.

Such transactions emphasize philosophical differences in the administration over the wisdom of engaging with North Korea and highlight the compromises that the United States, the United Nations and others face in dealing with Pyongyang.

"The U.S. has no moral high ground," said Michael Green, a former special assistant to President Bush who served as senior director for Asian affairs in the National Security Council. "In terms of bribing Kim Jong Il, UNDP is a minor offender."

North Korea's regime has skillfully extracted hundreds of millions of dollars in bribes from foreign companies and governments, and has persuaded South Korea and China to supply billions of dollars' worth of food and fuel with virtually no oversight. South Korea reportedly paid hundreds of millions to bribe the North Korean leader to attend a 2000 summit, and China agreed in 2005 to build a $50 million glass factory for North Korea in exchange for its participation in six-nation nuclear talks.

Such payments are "part and parcel of doing business in North Korea," said L. Gordon Flake, executive director of the Mansfield Foundation, a nonprofit organization that promotes U.S. relations with Asian countries.

Since 1995, the United States has provided the North Korean regime with more than $1 billion worth of food and fuel in the hopes of forestalling famine -- and of restraining Kim's nuclear ambitions. In an effort to promote diplomatic contacts between the two countries, the Energy Department has channeled money to U.S. nonprofit agencies and universities, including a $1 million grant to the Atlantic Council to cover travel costs for informal talks between U.S. and North Korean diplomats.

U.S. military officials routinely traveled to North Korea's demilitarized zone between 1996 and 2005 to give cash to North Korean army officers for the recovery of the remains of 229 of the more than 7,000 U.S. troops missing in North Korea since the Korean War. "There was a painstaking transfer process: cold, hard cash, counted carefully, turned over carefully," said Larry Greer, spokesman for the Pentagon's Prisoner of War/Missing Personnel Office.

Greer insisted that the payments, which covered labor, material and other expenses, were in line with recovery operations in other parts of the world. But he and other officials said North Korea frequently tried to inflate the costs and once requested that the U.S. military build a baby-clothing factory. The United States demurred, he said.

The Bush administration dramatically scaled back U.S. assistance to North Korea in 2002, but it continued to finance the effort to recover remains of Korean War veterans until 2005, when the U.S. military said it could no longer ensure the safety of U.S. recovery teams. Between 2002 and 2005, the United States flew a seven-member North Korean team, at a cost of $25,000 a year, to Bangkok for discussions about future recovery missions, according to the Congressional Research Service.

"It's pretty close to a ransom of remains," said James A. Kelly, U.S. assistant secretary of state for East Asian and Pacific affairs, adding he had little confidence that Washington could account for how the money was spent. "I personally didn't like it, but I didn't feel it was enough to get into a big squabble with the veterans organizations that felt strongly about it."

Mark D. Wallace, the U.S. representative to the United Nations for administration and reform, lambasted the U.N. Development Program earlier this year for engaging in similar practices. For instance, he faulted the UNDP for flying a North Korean official in business class to New York at a cost of $12,000 to attend a meeting of the U.N. agency's board of directors.


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