China on Thursday said it deeply regretted the US decision to ban American banks from dealing with Banco Delta Asia after concluding that the Macao bank had helped North Korea launder money.
The ban by US Treasury will test whether Pyongyang will follow through on last month’s agreement to dismantle its nuclear programme, but also paves the way for the bank to release a portion of the $25m in North Korean assets that was not related to illicit activity.
“We have expressed our deep regret to the US side,” foreign ministry spokesman Qin Gang told reporters in a regular briefing in Beijing.
Boomberg news agency also quoted him as saying: ”We believe the US side should take actions that help stimulate progress in the six-party talks and help in maintaining social stability of the Macao Special Administrative Region.”
North Korea has demanded that the US lift what it terms the financial “sanctions” imposed on its regime. The US Treasury designated Banco Delta Asia as a “prime money laundering concern” in 2005. That sparked a run on the bank, which resulted in the Macao government taking control of the family-owned institution and freezing $25m in North Korean assets. The Macao government has also launched its own investigation, but has yet to reveal its findings.
Earlier on Thursday, the Macao government also expressed its ”deep regret” at the Treasury department’s decision and said it will continue to administer the bank.
Stuart Levey, Treasury undersecretary for terrorism and financial intelligence, on Wednesday said the 18-month US investigation had confirmed that Banco Delta Asia had turned a ”blind eye” to illicit activity by North Korea.
The ban came as Mohamed El-Baradei, the head of the International Atomic Energy Agency, said North Korea was prepared to move ahead on dismantling its nuclear programme if the US lifted the sanctions.
Speaking in Beijing on Wednesday after returning from Pyongyang, in what was the first IAEA visit to North Korea since its inspectors were evicted in 2003, Mr El-Baradei said: ”They are waiting for the lifting of financial sanctions against the Macao bank.”
While the Macao government must determine how much money can be returned to North Korea without breaching international financial regulations, they are in close consultation with Washington. One US official said Chris Hill, the US negotiator in for the nuclear talks, was pushing for a ”maximalist” position that would encourage the North Koreans to implement the deal. But the official said some Treasury officials were reluctant to provide more than about a third of the funds.
Michael Green, former Asia director for the National Security Council, said Washington would soon know whether North Korea’s demand to get the full $25m was “a bluff or their bottom line”.
David Asher, a former State Department Asia expert who was involved in investigating North Korean illicit activities, said Pyongyang was even more concerned about the impact the Banco Delta Asia investigation had in sending a signal to the international banking community not to deal with North Korea.
“This was a pin prick in a central artery, and there was a lot of bleeding,” said Mr Asher.
Mr Green said North Korea might be disappointed that the US would not reverse the signal sent to the international banking community.
”That requires the US government to send a great big ’never mind’ around the world,” said Mr Green. ”And I don’t think Treasury or the administration are inclined to do that because the North Korean financial flows are being used to support their nuclear programme and their illegal activities.”
Shinzo Abe, Japan’s prime minister, told reporters in Tokyo on Thursday that the US move wouldn’t affect Japan’s stance on pushing for North Korea’s nuclear disarmament, according to Bloomberg news agency.
The next round of the so-called six party talks on the North Korean nuclear accord is due to begin on March 19.
Last month, Pyongyang promised to shut down its main nuclear reactor under the supervision of IAEA inspectors in return for 50,000 tonnes of heavy fuel oil, food relief and other aid.
This was envisaged as the first in a series of transactions under which North Korea would provide additional information about its nuclear weapons programme and eventually disable all of its nuclear facilities in return for an additional 950,000 tonnes of fuel oil.