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Last Updated: Thursday, 2 February 2006, 10:31 GMT
N Korea 'not forging US dollars'
A South Korean bank clerk works next to a show case of counterfeit U.S. dollar bills at a local bank in Seoul, Thursday, Feb. 2, 2006.
Washington has accused the North of circulating fake greenbacks
North Korea is no longer forging US dollars, contrary to US claims, South Korea's intelligence agency has said.

The agency had no evidence Pyongyang has made forged, so-called "supernotes" since 1998, a lawmaker briefed by the National Intelligence Service said.

US sanctions imposed in connection with the alleged forgery have stalled talks on the North's nuclear ambitions.

The US negotiator to the talks warned on Wednesday that diplomacy was the preferred, but not the only, option.

The South's National Intelligence Agency (NIS) briefed lawmakers in a closed door session on Thursday.

Forging US currency
Exporting missiles
Drug trafficking

A legislator with the ruling Uri Party, Im Jong-in, later told reporters that North Koreans had been arrested in 1990 for counterfeiting US dollars, but that was the last time the NIS was aware of such behaviour was in 1998.

Washington's belief that the North was continuing the practise has led to US sanctions on a number of firms, infuriating Pyongyang and stalling international talks on its nuclear programme.

Christopher Hill, the US chief negotiator on the North, said Washington could consider other options if the stalemate continued.

"We want a diplomatic solution to this problem ... we believe it's the best solution, absolutely the best solution (but) it's probably not the only solution," he told a forum in Washington.

The international community has looked in the past to China, as the North's closest ally, to bring Pyongyang back to the talks table.

But an influential think-tank warned in a report issued on Thursday that China did not wield as much leverage as was generally thought.

"China's influence on North Korea is more than it is willing to admit but far less than outsiders tend to believe," the International Crisis Group report said.

However, the report did acknowledge that China was still in the best position to coerce the North, given the two countries' economic interaction.

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