SEOUL The U.S. pointman for sanctions on North Korea begins talks in Malaysia on Sunday, possibly on links banks have to the North's finances, while a report said Pyongyang may have shot mid-range missiles in a series fired on Saturday.
North Korea launched seven ballistic missiles, South Korea's defense ministry said, in an act of defiance toward the United States on its Independence Day, further stoking regional tensions already high due to Pyongyang's nuclear test in May.
"We are on high alert," a South Korean Defense Ministry source said, adding there were no initial signs more launches were coming on Sunday.
The launch, which marks an escalation of tensions by the North, will likely weigh on sentiment when markets open in Asia on Monday, but investors do not expect a major impact.
The North appears to have fired two mid-range Rodong missiles, which can hit all of South Korea and most of Japan, and five Scud missiles, which can strike most of South Korea, Yonhap news agency quoted a South Korean official as saying.
The official said two of the missiles travelled at a greater velocity than the others, indicating they were the Rodong type.
"We found five of the seven missiles fell near the same spot in the East Sea (Sea of Japan), which indicates that their accuracy has improved," another official told Yonhap.
The missiles flew about 420 kms (260 miles) and it will take a few days to confirm what was fired, the official said. Initial reports on Saturday said all the missiles appeared to be Scuds.
The Scud and Rodong are ballistic missiles. Their launch would mark an escalation by the North, which has fired several non-ballistic, short-range missile since the May 25 nuclear test.
North Korea is barred by U.N. resolutions from firing ballistic missiles. It has more than 600 Scud type missiles and 300 Rodong missiles which have been deployed and target U.S. allies South Korea and Japan, defense officials have said.
The North's last major missile launch was in 2006 near the July 4 U.S. holiday when it fired ballistic missiles including its long-range Taepodong-2, which could hit U.S. territory but has not had a successful test flight.
Japan is considering introducing a new ground-based missile defense system to complement interceptors it currently has, the Japanese daily Mainichi reported.
U.S. PRESSES SANCTIONS
The launches came as the United States has cracked down on firms suspected of helping the North in its arms and missiles trade, which was subject to U.N. sanctions imposed after the nuclear test and is a vital source of foreign currency for cash-short North Korea.
The United States may have found several bank accounts in Malaysia suspected of belonging to North Korea and may freeze them as part of the crackdown, Yonhap reported, citing an unidentified source in Washington.
U.S. Ambassador Philip Goldberg, the U.S. coordinator for the implementation of U.N. Security Council Resolution 1874, will discuss the banks with officials in Malaysia, the source said.
However, Malaysian Deputy Finance Minister Chor Chee Heung cast doubt on the report when asked if such discussions were the object of Goldberg's visit.
"I don't think so," he told Reuters. "Many U.S. officials have been wanting to visit to find out about things here for themselves, and to visit and discuss with our officials and this is one of those visits ... I believe this visit is just routine."
Goldberg arrives in Malaysia on Sunday evening.
The U.N. resolution, passed June 12, bans export of all weapons by North Korea. It also bans financial transactions that could aid the North's nuclear or missile programs.
Goldberg went to Beijing last week for talks with Chinese officials on enforcing sanctions. The help of China, the North's biggest trade partner and benefactor, is essential for enforcing sanctions, experts said.
Chinese foreign ministry spokesman Qin Gang said in a statement on Sunday regarding the missile launches: "China has taken note of this situation and hopes all sides will show restraint and together maintain the peace and stability of the region." Russia has made a similar comment.
The U.S. Treasury brought North Korea's international finances to a virtual halt in 2005 by cracking down on a Macau bank suspected of aiding the North's illicit financial activities. Other banks, worried about being snared by U.S. financial authorities, steered clear of the North's money.
The impact was seen as especially painful for the country's leadership, which was unable to move money around easily.
(Additional reporting by Yoko Nishikawa in Tokyo, Tom Miles in Beijing and Razak Ahmad in Kuala Lumpur; Editing by Jerry Norton)