U.S. ready for talks and sanctions for North Korea

By Jon Herskovitz

SEOUL (Reuters) - The United States is ready to hold talks with North Korea if the conditions are right but will also press U.N. sanctions to punish Pyongyang for its nuclear and missile tests, a senior U.S. envoy for Asia said on Saturday.

North Korea, which tested a nuclear device in May, has said it was boycotting often stalled six-country talks on ending its nuclear arms program and will expand its nuclear arsenal in order to defend itself against a "hostile" United States.

"We have to be clear that under the right circumstances, we should be prepared to sit down with North Korea if they would abandon their nuclear ambitions," said U.S. Assistant Secretary of State Kurt Campbell ahead of talks with South Korean officials.

"There have to be consequences for these provocative actions so the United States is working in the international community, with the United Nations, to put forward a robust set of sanctions and unilateral actions that are designed to send a clear message to Pyongyang."

Campbell said the United States has been looking at going after funds suspected of being tied to the North's illicit activities, which Washington has previously said include counterfeiting, money laundering and drug running.

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.

"We are looking at a full range of particular steps that are designed to put more pressure on North Korea," he told reporters.

The last round of the disarmament-for-aid talks among the two Koreas, China, Japan, Russia and the United States was held in late 2008 as the term of former U.S. President George W. Bush was nearing its end.

The U.N. Security Council on Thursday expanded the list of North Korean bodies and individuals under sanctions for nuclear and missile activities, adding its atomic energy agency and two of its top officials.

The sanctions are aimed at cutting off the North's arms trade, a vital source of hard currency for the cash-short state.

North Korea has rattled regional security with the nuclear test, threats to attack the South and the test-launch of seven ballistic missiles earlier this month in defiance of a U.N. resolution barring it from firing ballistic missiles.

South Korean government officials said the military moves were aimed at building internal support for leader Kim Jong-il, 67, who is reportedly in poor health and wants to prepare for his youngest son to succeed him in Asia's only communist dynasty.

(Additional reporting by Kim Yeon-hee; Editing by Alex Richardson)