US likely to remove N.Korea from blacklist: source

WASHINGTON (Reuters) - The United States is likely to remove North Korea provisionally from a terrorism blacklist to try to salvage talks aimed at ending Pyongyang's nuclear program, a source close to the negotiations said on Friday.

The source, who asked not to be named because of the sensitivity of the issue, said the Bush administration had not made a final decision but did not rule out an announcement later on Friday.

"It's probably going to happen," the source said when asked if Washington was weighing the provisional removal of North Korea from the U.S. list of state sponsors of terrorism, which imposes a range of sanctions on Pyongyang.

The Bush administration has been scrambling in its final months to save a six-nation, aid-for-disarmament agreement with secretive and impoverished North Korea that it hoped to claim as a rare foreign policy success.

Under the broad accord struck in 2005 between North Korea, South Korea, China, Japan, Russia and the United States, Pyongyang agreed to abandon all nuclear programs in exchange for potential economic and diplomatic benefits.

Under a subsequent pact, the United States suggested it would remove North Korea from the terrorism list in exchange for Pyongyang providing a "complete and correct" declaration of all of its nuclear programs.

The deal has become snagged by North Korea's reluctance to accept a mechanism allowing the United States or other members of the talks to verify its declaration.

One way to break the logjam would be for the United States to agree to less specificity in a verification protocol, which would be more palatable to North Korea. Pyongyang has said earlier proposals amounted to house-to-house searches.

The United States could then put forward a more specific set of verification procedures to be blessed by the six-party talks, possibly providing a face-saving way out for Pyongyang.

BACKLASH IN STORE

Softening the verification language is likely to attract fierce criticism, particularly from conservative Republicans who believe the Bush administration would be giving in to North Korea and putting off any reckoning on suspected nuclear proliferation or uranium enrichment programs.

"This is where you are going to get a huge backlash," said Charles "Jack" Pritchard, a former U.S. negotiator with North Korea now at the Washington-based Korea Economic Institute.

Pritchard said critics could paint such an agreement as reflecting U.S. recognition that, because a broad verification agreement could not be reached, "we are going to discard that and go for a smaller one."

North Korea tested a nuclear device in 2006 using plutonium and it is suspected of pursuing a uranium enrichment program, which would provide a second path for making fissile material for nuclear weapons.

Jon Wolfsthal, an analyst with the Center for Strategic and International Studies, said his understanding of the U.S. proposal was that North Korea would give China a set of verification steps it is prepared to take.

Washington would then quietly accept the terms and drop Pyongyang from the terrorism list.

"Basically, we agree to go first, even though the steps have in fact been coordinated in advance," said Wolfsthal.

China would then "reveal this breakthrough" that North Korea had agreed to the verification mechanism, he said.

"We are obviously dancing to the North Koreans' tune at this point," Wolfsthal said. "This is an unfortunate situation. But given where we are, we have very limited options."

(Editing by John O'Callaghan)