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Last Updated: Monday, 26 February 2007, 11:24 GMT
US hint on North Korea sanctions
Lisboa Casino
Macau was a key banking centre for North Korea
A US Treasury delegation is in Macau to discuss lifting sanctions imposed on a bank in the Chinese territory accused of helping North Korea launder money.

An official said the treasury was ready to "begin taking steps" to settle the dispute over Banco Delta Asia.

The sanctions, imposed last year, led to the freezing of some $24m of North Korean funds.

The North insisted the issue be dealt with as part of nuclear talks which saw a breakthrough on 13 February.

Under the agreement, North Korea agreed to "shut down and seal" parts of its nuclear programme in exchange for aid, ahead of the programme's eventual abandonment.

South Korea said on Monday that preparations were under way to send $20m worth of fuel oil shipments to the North, as one of the first steps under the agreement.

The announcement came a day before the two Koreas resumed ministerial talks in Pyongyang.

The talks were suspended after the North carried out missile and nuclear tests last year.

In a further sign of renewed diplomatic activity, North Korea's chief nuclear negotiator, Kim Kye-gwan, is reported to be flying to the US at the end of this week to meet his American counterpart Christopher Hill.

South Korean media said he would be attending the first meeting of a working group to study the normalisation of diplomatic relations between the US and North Korea, as also agreed under the 13 February deal.

Talks boycott

The US Treasury team were meeting Macau financial authorities who took control of Banco Delta Asia (BDA) after Washington blacklisted it in September 2005.

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The US accused the bank of being a primary conduit for money earned by North Korea from counterfeit currency and drug smuggling.

The freeze on North Korea's financial assets led Pyongyang to boycott the six-party talks on its nuclear programme from November 2005 until after it carried a nuclear test in October 2006.

The North insisted the issue of the sanctions be addressed as part of the talks, which resumed in December.

Discussions between US and North Korean financial officials on the issue had brought the US treasury "to the point where they can begin taking steps to resolve the BDA matter", US consulate official Dale Kreisher in Hong Kong said.

Shipment preparations

Under the 13 February agreement, Pyongyang pledged to shut down its Yongbyon reactor within 60 days in return for 50,000 metric tons of fuel aid.

A further 950,000 tonnes of fuel oil or an equivalent in economic aid will be sent to the North once it permanently disables its nuclear operations.

As part of the deal, the US also agreed to begin the process of removing North Korea from its list of state sponsors of terrorist and establish diplomatic relations.

South Korea's unification ministry said on Monday that the government had started preparations to supply North Korea with 50,000 tonnes of heavy fuel oil.

Ministry spokesperson Yang Chang-seok said the shipment would cost around 20 billion won ($20m).

The cost of the 950,000 tonnes is set to be shared by all five countries involved in the North Korean talks - South Korea, the US, Japan, China and Russia.

Tokyo has said it will not contribute until the issue of its citizens abducted to be trained as spies by North Korea in the 1970s and 80s is addressed.

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