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Analysis: Banking on the Six-Party Deal

Council on Foreign Relations

March 15, 2007
Prepared by: Carin Zissis

Bit by bit, a path is being cleared to meet the requirements of the North Korean denuclearization agreement reached in the February 13 Six-Party Talks. The deal requires Pyongyang to shut down its main nuclear reactor in exchange for fuel oil and set up a series of bilateral talks, including U.S.-North Korea negotiations aimed at normalizing relations. On March 14, Washington took action on one of the biggest sticking points in its relations with Pyongyang with a decision that allows the release of some portion of $25 million (LAT) in North Korean funds from a Macao-based bank. The Six-Party Talks were stalled for over a year when Pyongyang walked away from negotiations in large part because of the 2005 U.S. blacklisting of Banco Delta Asia over North Korea’s alleged money laundering of counterfeit dollars there.

The goal of the new decision is to push the February disarmament deal forward. However, the U.S. Treasury Department’s ruling is double-edged: While allowing for the unfreezing of funds by Chinese monetary authorities, it prohibits U.S. banks from dealing with Banco Delta Asia. The ban has already caused a rift with China (FT), which says the U.S. failure to lift financial sanctions could disrupt the deal. The next round of Six-Party Talks is scheduled for March 19.

The importance of the funds to the survival of Kim Jong-Il’s regime remains in question, given that other North Korean criminal activities bring in much larger sums. A new Congressional Research Service report on North Korea’s criminal activity estimates drug dealing, counterfeiting, and insurance fraud generate profits between $500 million and $1 billion a year.

Read the rest of this article on the cfr.org website.

Copyright 2007 by the Council on Foreign Relations. This material is republished on GlobalSecurity.org with specific permission from the cfr.org. Reprint and republication queries for this article should be directed to cfr.org.