Exclusive: Obama widens sanctions on North Korea

A portrait of former North Korean leader and founder Kim Il-Sung is seen from across the Tumen river at a border crossing with China's northern Jilin province, August 29, 2010.

WASHINGTON (Reuters) - President Barack Obama on Monday froze the U.S. assets of three North Korean entities and one individual, a U.S. official said, in part to punish Pyongyang for the sinking of a South Korean warship.

Obama signed an executive order to widen the scope of U.S. sanctions to allow Washington to go after the assets of North Korean entities that trade in conventional arms and luxury products and that counterfeit U.S. currency.

The steps, which U.S. Secretary of State Hillary Clinton generally outlined in July, aim to target the leadership of the isolated, authoritarian nation, whose nuclear programs are seen as a direct threat to U.S. allies South Korea and Japan.

U.S.-North Korean relations have deteriorated since Obama took office, with his aides deeply unhappy about Pyongyang's decision to conduct its second nuclear test last year as well as the March 26 sinking of the South Korean corvette Cheonan.

Forty-six South Korean sailors were killed in the incident, which the United States, South Korea and other nations have squarely blamed on North Korea. Pyongyang has denied responsibility.

A U.S. official, who spoke on condition of anonymity, said the new executive order would give the United States more tools to go after North Korean entities, particularly those that are engaged in "illicit" financial activities.

Obama's executive order widened the scope of existing U.S. sanctions -- which can now be imposed on entities involved in Pyongyang's weapons of mass destruction and ballistic missile programs.

"It seeks to disrupt the financial networks that facilitate North Korean trafficking in arms and related material, procurement of luxury goods, and engagement in other illicit activities, including money laundering and currency counterfeiting," said the official.

It was unclear what had determined the timing of the executive order.

NORTH KOREA FREED U.S. PRISONER

North Korea removed one irritant to its relationship with the United States on Friday when it released U.S. citizen Aijalon Mahli Gomes, who was arrested in January and sentenced to eight years of hard labor for entering the country illegally.

North Korea's state media on Friday said the country's No. 2 leader had told former U.S. President Jimmy Carter, who secured Gomes' release, that Pyongyang was committed to denuclearizing the Korean Peninsula and resuming talks.

The Obama administration has been skeptical about returning to so-called six-party negotiations with the two Koreas, China, Japan, Russia, arguing that it does not want to talk for the sake of talking and that North Korea must show some commitment to abandoning its nuclear programs.

While there have been reports that the Obama administration is debating getting back into talks, several analysts said they were skeptical that this would happen anytime soon.

"I think what they are doing right now is focusing on the military exercises and the new financial sanctions," said Victor Cha, a former National Security Council official now at the Center for Strategic and International Studies think tank in Washington.

Alan Romberg, an analyst with the Henry L. Stimson Center think tank, said Obama's moves were partly to punish the North for the Cheonan and partly to pressure Pyongyang to engage seriously on denuclearization.

"It is also part of a continuing effort to put pressure on the North so that when we get back to denuclearization talks they will get serious," he said, suggesting that the additional sanctions may give Washington more leverage in any talks.

"When we get back to talking about denuclearization ... there is going to be a bargaining process of some sort about sanctions," he said.

(Editing by Mohammad Zargham)