Rift over U.S. bank move ahead of nuclear talks

By Chris Buckley

BEIJING (Reuters) - A rift opened between the United States and China on Thursday on how to end a dispute about North Korean bank accounts, with China angered by a U.S. decision it said might harm talks to end Pyongyang's nuclear threat.

U.S. envoy Christopher Hill said in Beijing that the decision on North Korean accounts frozen in Macau's Banco Delta Asia (BDA) would advance a deal obliging Pyongyang to close the reactor at the heart of its nuclear weapons program.

"I think we have fulfilled what we need to do," Hill told reporters of the decision. "I think we will get ourselves into a situation where BDA will not pose a stumbling block to the six-party process."

Those talks, which group the two Koreas, the United States, China, Japan and Russia, struck an accord on February 13 giving North Korea 60 days to shut its Yongbyon reactor in return for energy aid and security pledges. The United States then also agreed to defuse within 30 days North Korea's complaints about the bank crackdown.

Pyongyang had no immediate comment on the bank move in which the U.S. Treasury Department barred U.S. banks from dealing with Banco Delta Asia -- ending the investigation and opening the way for Macau to decide whether to release an estimated $8 million to $12 million in frozen accounts.

The Treasury's announcement came after an 18-month probe into BDA, which the United States says helped funnel Pyongyang's takings from counterfeiting U.S. money and other misdeeds.

But China, which worked closely with Hill in the disarmament talks, chided the U.S. decision, raising worries about the implications and suggesting the dispute has not been laid to rest ahead of fresh six-party talks scheduled in Beijing next week.

"We express our regret at the United States insisting on using U.S. domestic law to apply a ruling," Foreign Ministry spokesman Qin Gang told a news conference.

The spokesman, grim-faced and notably downcast, said that China wanted any decision on the bank to help protect Macau's financial and social stability and to help the six-party talks, which were stalled for more than a year over North Korea's anger at the bank squeeze.

REGRET

"The reason China has expressed its regret because we have those two concerns and these should be fully taken into account," Qin said. When pressed to explain China's worries, Qin simply repeated the two points.

Until now, China has mostly kept publicly aloof from the bank dispute, saying it was an issue for Macau, a self-administered gambling enclave under Chinese sovereignty and indirect control.

Hill said Beijing had been consulted over the Macau bank and he didn't think the rift would upset the nuclear talks.

"They want to make sure that Macau's reputation is intact so I'm not surprised they would say that but I would disagree," Hill told reporters of China. "This is not going to be a problem for six-party undertakings," he said later.

The Macau monetary authority expressed regret over the U.S. decision.