U.S. to impose financial sanctions on North Korea: report

The United States has told South Korea it is preparing financial measures to punish North Korea for illicit weapons trade and counterfeit activities in the wake of its nuclear test last week, a newspaper report said on Friday.

North Korea has been ratcheting up regional tensions since it fired a long-range rocket over Japan in April, and on Thursday the hermit state put two female U.S. journalists on trial accused of illegally entering its territory with "hostile intent."

Analysts say the pair, who were working for the Current TV network co-founded by former U.S. Vice President Al Gore, have become bargaining chips in high-stakes negotiations with the United States, which has long sought to end the North's nuclear ambitions.

In a separate move Friday, North Korea proposed talks with the South over a joint factory enclave that is the only major link between the rival states, more than a month after the last attempt at dialogue broke down in acrimony.

South Korea accepted the proposal for a June 11 meeting over the Kaesong park just inside the communist state, where about 100 South Korean firms use cheap North Korean labor and land to make goods, a Unification Ministry official said.

North Korea in May declared all contracts there invalid in what analysts said a hard-nose ploy to squeeze more money from the South. It has also been holding a South Korean worker there for about three months on suspicion of insulting its leaders.

Plans to hit the North's finances were discussed during a four-day visit to Seoul by U.S. Deputy Secretary of State James Steinberg, the South Korean daily newspaper Chosun Ilbo said.

"The U.S. delegation led by Steinberg explained when visiting President Lee Myung-bak and others Washington's own sanctions against the North centered around financial sanctions," the paper quoted a presidential Blue House official as saying.

Envoys from the five permanent U.N. Security Council members, Japan and non-council member South Korea met at the U.S. mission to the United Nations in New York for several hours Thursday to try to hammer out an agreement on a resolution that would expand sanctions against Pyongyang for its recent nuclear test.


In 2005, the Bush administration imposed financial sanctions on the North over counterfeiting and drug-running. The move focused on a Macau bank and effectively shut off the North's access to the international financial system.

"If BDA Banco Delta Asia in Macau was against a single bank, this time it is about cutting off transactions with banks that are suspected of being involved in the North's WMD weapons of mass destruction trade," the newspaper report said.

The 2005 crackdown on BDA froze about $25 million in funds of Pyongyang's leadership. Most banks around the world steered clear of North Korean funds as a result, fearful of being snared themselves by U.S. financial authorities.

Bankers at the time said that as a result North Korea was forced to move its money around in suitcases of cash.

The North boycotted six-party nuclear disarmament talks, involving the two Koreas, the United States, Russia, Japan and China, until Washington executed an elaborate scheme to transfer its money in BDA to the North in 2007..

U.S. officials said they also had suspected the bank of aiding in North Korea's counterfeiting of U.S. currency.

South Korean authorities are now working with the U.S. Treasury to investigate so-called "supernotes" -- high quality counterfeit U.S. dollars -- that have surfaced in the southern port city of Busan and may have originated in the North, a government source told Reuters.

Additional reporting by Kim Jung-hyun, Lee Shin-hyung; Editing by Jon Herskovitz and Alex Richardson

People look at the moon at the Temple of Hercules at the Citadel in Amman. REUTERS/Muhammad Hamed