"It became clear in our exchanges with the Korean government that there was a desire to reopen issues that we considered non-negotiable and in that circumstance we had no choice," David Morrison told reporters during a news briefing at U.N. World Headquarters in New York. He said the conditions included ending all hard currency payments and discontinuing subcontracting of national staff through government recruitment as of March 1.

The conditions, adopted by UNDP's executive board in January, also included adjusting the content of current programs to support sustainable human development goals.

North Korea has been subject to U.N. Security Council sanctions since October following its proclaimed nuclear test.

"The two conditions with dates had to do with the use of internationally convertible currency in some of our payments and the practice employing as national staff Korean government employees on secondment from national ministries," he added.

UNDP's programs in the country are undergoing external audit after published reports suggested its own audits raised concerns about payments being channeled to the government.

Morrison said agency spending on the DPRK over that past 10 years totaled $47.5 million, of which about 40 to 60 per cent was spent in the country.

Out of the current nine international staff in Pyongyang, the DPRK capital -- eight UNDP and one UNDP-administered staff -- seven, including the resident representative, will leave the country by Saturday.

Under nuclear pact, US clears way for return of NKorean money
Washington (AFP) March 14 - The United States Wednesday cleared the way for the release of millions of dollars of North Korean money frozen in a Macau bank, a pivotal demand of the Stalinist state under a deal aimed at dismantling its nuclear arms program.

The move by the US Treasury came within a 30-day deadline stemming from a February 13 agreement, under which Pyongyang pledged to scrap its atomic drive in exchange for aid and a normalization of relations with Washington.

In September 2005, the Treasury accused Banco Delta Asia (BDA) of helping North Korea to circulate fake 100-dollar bills, and of laundering funds from narcotics and weapons trafficking.

Under a new ruling announced Wednesday, US banks are formally barred from any dealings with BDA, which effectively cuts the family-owned bank off from the global financial system.

But the formal ruling also ends the limbo that left BDA in receivership and the money beyond North Korea's reach, as it permits the authorities in the Chinese territory of Macau to resolve the bank's legal status.

"Our investigation of BDA confirmed the bank's willingness to turn a blind eye to illicit activity, notably by its North Korean-related clients," Stuart Levey, Treasury under secretary for terrorism and financial intelligence, said.

However, the bank had already collapsed under the weight of the US accusations, and North Korea can now gain access to some of its BDA accounts. Washington has conceded that not all the money was illicit.

More than 25 million dollars in North Korean accounts were frozen by authorities in Macau, near Hong Kong. It remains unclear how much of the funds the autonomous territory's administration will unblock.

A US willingness to resolve the banking dispute played a key role in enticing North Korea back to nuclear negotiations late last year, resulting in last month's landmark deal with leading diplomatic players.

A first round of bilateral normalization talks took place in New York last week and the full six-nation negotiations involving China, Japan, Russia, North and South Korea, and the United States are due to resume on March 19.

"Everyone's got obligations," State Department deputy spokesman Tom Casey said. "Everyone intends to meet their obligations. At least we do."

The head of the UN's atomic watchdog said Wednesday his agency's first direct talks with North Korea in more than four years had been useful and the nation remained committed to disarming.

However, International Atomic Energy Agency chief Mohamed ElBaradei also cautioned in Beijing that North Korea's nuclear weapons program would not end "overnight."

And he warned that Pyongyang remained insistent that the US banking sanctions must be lifted if the disarmament deal is to hold.

"Once that takes place they said they would be ready to fully cooperate and implement the (February) agreement," ElBaradei said.

North Korea kicked out IAEA inspectors in December 2002, then went on to conduct its first atomic test in October last year, but now appears to favor talks over confrontation.

US Treasury officials have met with the North Koreans three times over the past year to thrash out their accusations that Kim Jong-Il's regime routinely abuses the banking system.

The US government is prepared to continue bilateral talks with North Korea to discuss "the steps it could take if it truly wishes to alleviate its isolation from the international financial community," Levey said.

He also congratulated Macau for having instituted, with the backing of China's central government in Beijing, tough new laws against money-laundering and counterfeit currency.

earlier related report
No meeting between IAEA chief and top N. Korea negotiator
Tokyo (RIA Novosti) Mar 14 - The head of the United Nations nuclear agency has been unable to meet in Pyongyang with the top North Korean nuclear negotiator to discuss the shutdown of the country's nuclear facilities, a Japanese news agency said Wednesday.

Following the latest round of the six-nation talks aimed at resolving the North Korean nuclear standoff, Russia, the United States, South Korea and China agreed to provide humanitarian aid to North Korea, and North Korea agreed to shut down its nuclear reactor at Yongbyon.

Kyodo News, citing an IAEA spokesperson, said that Mohamed ElBaradei, director general of the International Atomic Energy Agency (IAEA), met with another deputy foreign minister instead of Kim Kye Gwan, the head of the North Korean delegation to the six-party talks.

ElBaradei is expected to return to Beijing Wednesday to discuss the results of the meeting with Christopher Hill, the U.S. Assistant Secretary of State for East Asian and Pacific Affairs and head of the American delegation to the six-nation talks.

Hill is due to arrive in Beijing Wednesday to attend the sessions of two working groups, on denuclearizing the Korean Peninsula, headed by China, and a Russia-led group on peace and security in Northeast Asia.

The two groups have been established in line with a joint statement outlining the initial stage of denuclearization, which was adopted at the fifth round of the talks February 13.

Besides the shutdown of the nuclear reactor, the denuclearization plan suggests the return of IAEA inspectors to the country.

In exchange for concessions by North Korea, Washington also pledged to strike North Korea off its list of countries sponsoring terrorism and to lift financial sanctions on Pyongyang.

Ahead of the next round, scheduled for March 19, negotiators have set up five working groups to help the parties along the way toward implementing the September 2005 agreement.

In September 2005, Pyongyang promised to dismantle its nuclear program in exchange for aid and security guarantees. The negotiations broke off later that year when Washington blocked the regime's $24 million account at a Macao bank over alleged counterfeiting and money laundering.

They did not resume until December 2006, two months after North Korea reported carrying out its first nuclear bomb test.

earlier related report
South Korea In Peace Dilemma
by Lee Jong-Heon
Seoul (UPI) March 14 - South Korean officials are hopeful that the recent breakthrough on North Korea's nuclear impasse would lead to the establishment of a permanent peace regime on the Korean peninsula replacing the current fragile armistice.

They vow to play a key role in promoting a lasting peace on the divided peninsula, saying it is vital to pushing for the country's export-driven open economy.

But many analysts here warn South Korea's much-touted peace initiative is likely to be dismissed in the process of "bigger deals" between North Korea and the United States, largely backed by China.

Conservatives are also concerned the North's peace offensive may weaken the decades-long security alliance between South Korea and the United States which has effectively deterred another war in the peninsula.

Under a Feb. 13 nuclear accord, the communist North promised to shut down and seal its plutonium-producing reactor at Yongbyon and eventually "disable" all its existing nuclear facilities in exchange for massive energy and economic assistance. The accord also calls for the United States to launch bilateral dialogue with the North aimed at normalizing diplomatic ties, complying with Pyongyang's long-standing call for direct talks Washington.

The working group on Pyongyang-Washington relations is one of five created as part of the nuclear deal reached at the latest six-nation talks on ending the North's nuclear drive. The other four working groups would handle specific issues, such as peace and security in Northeast Asia, denuclearization, Japan-North Korea relations, and North Korean energy and economic needs.

The working groups' meetings will be held this week in Beijing to discuss the specific issues ahead of another round of the six-party talks scheduled to open on March 19.

"On the heels of the Feb. 13 accord, there has been a breathless diplomatic drama that can reshape security arrangements on the Korean peninsula and in Northeast Asia," a senior government official said, speaking on condition of anonymity. "The burst of diplomatic activities have been driven by North Korea and the United States, which relaxed their stance toward each other."

At the first working group meeting with the United States held in New York last week, North Korea reportedly proposed setting up diplomatic ties, skipping the step of establishing liaison offices in each country.

North Korea and the United States fought against each other in the 1950-53 Korean War, which is technically not over. The armistice signed at the end of the conflict has yet to be replaced by a peace treaty.

The United States maintains a military presence in the South as a deterrent against the North's 1.2 million-strong armed forces, the world's fifth largest. The inter-Korea border is the world's last Cold War flashpoint with nearly 2 million troops on both sides.

On the back of the fresh peace mood, South Korean officials have pledged to push to promote a peace regime on the peninsula and used inter-Korean dialogue to discuss ending the armistice.

In an address this week, President Roh Moo-hyun said his government would strive to replace the cease-fire with a permanent peace treaty. "The North Korean nuclear issue must be resolved peacefully, so that inter-Korean relations will advance to a new height and peace will be settled on the peninsula. The armistice in Korea should also be transformed into a peace treaty," he said.

Security analysts here welcome the peace overtures, but cautioned that Seoul's role may be weakened as the North has long called for a direct deal with the United States to resolve the peace issue, now greeted by the Bush administration's "strategic swing" in dealing with the communist country.

"It is highly likely that the proposed peace process would be led by the United States and North Korea, bypassing South Korea," said Cho Min, a senior researcher at the Korea Institute for National Unification (KINU), a government think tank. "This could bring about unfavorable conditions to South Korea and the reunification of the peninsula."

Chun Hyun-joon, also of KINU, called on South Korea to make concerted efforts toward the North to keep its voice heard on the peace issue. "It poses great challenges to South Korea. We should not sit idle," he said.

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