However Hill said he believed that the problems would be resolved by Monday.

North Korea has refused to comply with the February deal to shut its nuclear reactor until it receives 25 million dollars, frozen in Macau in 2005 after the United States raised suspicions of money-laundering and counterfeiting.

Hopes of an end to the four-month standoff rose after Macau officials said this week more than 20 million dollars of the funds frozen in Banco Delta Asia (BDA) had finally been transferred.

However a Russian diplomatic source said on Friday that the funds have not yet been fully transferred.

"The consultations of the specialists of the parties concerned are still not complete, because certain technical questions remain to be cleared up," the source was quoted by the ITAR-TASS news agency saying.

In a complex US-brokered deal, the cash was to be transferred from a bank in Macau to the New York Federal Reserve, then to the Russian central bank and on to a private Russian bank where cash-strapped North Korea has an account.

Japanese media reported on Friday authorities in Macau said that the funds from the BDA had arrived at the New York branch of the Federal Reserve.

US and Chinese banks had refused to touch the money, which was blacklisted on US allegations it came from money-laundering and counterfeiting.

The North, which sparked international outrage when it tested an atom bomb last October, agreed in February to disable its nuclear programmes in return for badly needed fuel aid and diplomatic benefits.

As a first step it was to have shut down its Yongbyon reactor -- which produces the raw material for bomb-making plutonium -- by mid-April, but the deadline passed with no progress.

earlier related report
NKorea invites UN atomic inspectors to discuss shutdown
by Jun Kwanwoo SEOUL, June 17, 2007 (AFP) - Hopes were raised Sunday that North Korea would soon begin dismantling its atomic weapons programmes, after the communist state invited UN inspectors to discuss shutting down its main nuclear reactor.

The North said Saturday it had sent a letter inviting the UN nuclear watchdog to discuss the shutdown, adding that a banking dispute with the United States which had blocked a February disarmament pact was almost over.

South Korea on Sunday hailed Pyongyang's invitation to inspectors from the International Atomic Energy Agency (IAEA), a move also praised by Washington amid optimism that the disarmament process would now gain momentum.

"We welcome the North Korean move as good news," South Korean foreign ministry spokesman Han Hye-Jin told AFP.

"We hope the February 13 agreement will be implemented as quickly as possible following the North Korean-IAEA consultations."

White House spokesman Scott Stanzel chimed in: "This is a good step.

"Now we can hopefully continue on the path set out in the agreed February 13 framework that will lead to a nuclear-free Korean peninsula."

Japan however sounded a note of caution, with Foreign Minister Taro Aso telling reporters on Sunday: "I think we should refrain from being overly pleased at the news, at least until the nuclear facility is fully disabled."

North Korea's atomic energy chief Ri Je Son wrote IAEA director general Mohamed ElBaradei about procedures for "the suspension of operations" of its Yongbyon reactor, the state Korean Central News Agency (KCNA) reported.

The shutdown of the reactor was one of the first steps to be taken by the North under the February 13 deal, reached by the two Koreas, China, Japan, Russia and the United States.

Ri said an IAEA delegation had been invited to Pyongyang, "as it is confirmed that the process of de-freezing the funds of the DPRK at Banco Delta Asia (BDA) in Macau has reached its final phase," KCNA reported.

In Vienna, IAEA spokeswoman Melissa Fleming confirmed receipt of the invitation, adding only: "We will be deciding next steps tomorrow (Monday)."

For Koh Yu-Hwan, a North Korea expert at Dongkuk University in Seoul, Saturday's letter from the communist state was good news.

"With Pyongyang inviting IAEA inspectors, I expect to see a significant speed-up in the nuclear disarmament process," Koh said Sunday.

Under the February deal, North Korea agreed to disable its nuclear facilities in return for one million tons of heavy fuel oil or equivalent aid under the deal. But it repeatedly refused to begin implementing the agreement until it received 25 million dollars in funds which had been frozen at BDA in 2005, over US allegations of money laundering and counterfeiting.

The money, seen by the US Treasury as illegal proceeds, was transferred out of Macau on Thursday to the New York Federal Reserve, from where it was to be sent on to a private Russian bank at which the North has an account.

US chief nuclear envoy Christopher Hill was quoted Saturday as saying technical problems had occurred as the funds were sent to the Russian bank, but that the glitch would likely be fixed by Monday.

Six-nation talks on the North's nuclear programmes could resume early next month, he was quoted as saying during a visit to Mongolia. Hill said after telephone talks with his South Korean counterpart Chun Yung-Woo Sunday that Seoul would plan to ship fuel oil to North Korea in return for the shutdown of the Yongbyon reactor, Japan's Kyodo news agency said.

But Hill said it will probably take several weeks before the shipment actually reaches the North, Kyodo said.

The US envoy is scheduled to visit Japan, South Korea and China this week for talks on pushing forward the six-nation nuclear disarmament deal.

Under a second phase of the pact, the North, which has worked for decades to develop a nuclear bomb, would disable all its nuclear programmes in return for the remaining 950,000 tons of oil or equivalent aid, and diplomatic benefits.

earlier related report
SKorea to begin sending fuel aid to NKorea: US negotiator
Tokyo, June 17, 2007 (AFP) - South Korea is set to begin planning Monday to ship fuel oil to North Korea in return for Pyongyang taking initial steps to shut down its nuclear reactor, the top US envoy said Sunday.

Christopher Hill, the main US negotiator for North Korean disarmament talks, said that his South Korean counterpart told him of the preparations during their talks by telephone earlier Sunday, Kyodo News reported.

But Hill, who is currently visiting Mongolia, said it will probably take several weeks before the shipment actually reaches North Korea, Kyodo said.

Hill and Chun Yung Woo held the telephone talks a day after the North said it has sent a letter inviting the UN nuclear watchdog to discuss shutting down its main nuclear reactor.

It said the invitation came after a banking dispute with the United States which had blocked a February nuclear disarmament pact was almost over.

Hill is expected to head to Japan, South Korea and China later this week for talks on the next steps in the six-party nuclear disarmament talks.

The talks involve the US, China, the two Koreas, Russia and Japan.

Hill reportedly welcomed the North Korean announcement and said he has also talked with his Japanese counterpart Kenichiro Sasae.

Japanese foreign ministry officials were not immediately available for comment Sunday. The Japanese newspaper Asahi Shimbun quoted an unnamed senior foreign ministry official as saying "we welcome the move by North Korea, if the report is true," after Pyongyang's invitation to the UN nuclear watchdog.

Under a February 13 six-nation agreement, the nuclear-armed North agreed to disable its atomic programmes in return for aid and diplomatic benefits.

The first stage, the shutdown of the Yongbyon reactor, was to have been completed by April 14 but North Korea refused to make a start until it received 25 million dollars in funds that had been frozen in a Macau bank since 2005 at US instigation.

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