North Korea nuclear talks end with no progress

By Ben Blanchard and Teruaki Ueno

BEIJING (Reuters) - Talks on North Korea's nuclear program ended abruptly with no progress on Thursday after four days of negotiations derailed by the issue of funds frozen in a Macau bank.

Throughout the session, which began on Monday, North Korea avoided discussing a February deal to shut its main nuclear reactor by mid-April, demanding that $25 million at Macau's Banco Delta Asia first be transferred to a bank in Beijing.

North Korean envoy Kim Kye-gwan left for home suddenly without talking to reporters, but a North Korean government source in Beijing said: "Our delegation went home because there was no progress on the promised transfer of the funds."

A statement released by China, host of the six-party talks that also group South Korea, the United States, Japan and Russia, said the participants had agreed only to meet again.

U.S. envoy Christopher Hill said he had not anticipated the delay in transferring the funds to a North Korean account at the Bank of China but that he hoped it could be resolved quickly.

"Every time I think there is a solution to the banking issue something else crops up," he told reporters. "We do hope that they can do this in the next few days."

The White House insisted Pyongyang must live up to the deal it struck for taking steps toward nuclear disarmament in exchange for energy aid and security pledges.

Other delegations expressed frustration at the foot-dragging. "It is deplorable that North Korea did not show a positive stance and stuck to its position to the bitter end that it would not take part in talks unless the funds were returned," Japanese chief negotiator Kenichiro Sasae said.

STUCK IN MACAU

Washington said on Monday it had ended an investigation into the Macau bank, accused of harboring North Korean earnings from international crime, which had prompted Macau authorities to take over the bank and freeze the accounts.

But the money remains stuck in Macau.

Chinese chief envoy Wu Dawei said the problem hinged on convincing the Bank of China to accept the transfer. "Whether or not the Bank of China can fulfill this responsibility, we need to consult with them," Wu told a news conference. "This is a matter that cannot be decided by the government."

A Bank of China spokesman, asked about reports it was blocking the transfer, said it had not been asked to conduct the transaction and stressed that the bank was obliged to abide by anti-money laundering and anti-terrorism laws.

In the meantime, North Korea, which stunned the world with its first nuclear test last October, was unwilling to talk about substantive issues of disarmament.

Envoys said there was still hope it would fulfill the first part of the February agreement and shut the Yongbyon reactor at the heart of its nuclear program by next month.