US Could Financially Sanction North Korea

SEOUL, South Korea (AP) - The U.S. is likely to slap strong
financial sanctions against North Korea that are separate from
punishments being considered at the U.N. for the nation's latest
nuclear test, a news report said Thursday, a move certain to
infuriate Pyongyang.

Meanwhile, two American journalists were to stand trial at North
Korea's top court Thursday on charge of entering the country
illegally and engaging in "hostile acts." Pyongyang's official
Korean Central News Agency said in a brief dispatch the trial would
begin at 3 p.m. (0600 GMT).

Some experts believe the North is using the trial and its
nuclear and missile tests to strengthen its position in possible
talks with the United States, and that it hopes to win concessions
or much-needed economic aid.

U.S. and South Korean authorities have confirmed that the North
has kept producing high-quality fake U.S. dollar bills, known as
"supernotes," and could use the counterfeiting as a reason for
Washington's own sanctions, Seoul's Dong-a Ilbo newspaper said,
citing an unidentified source in Washington.

The alleged counterfeiting was discussed Wednesday at a meeting
in Seoul between U.S. and South Korean intelligence authorities,
the report said. The American officials are believed to be part of
an interagency delegation, led by Deputy Secretary of State James
Steinberg.

The delegation has been on a trip to Japan, South Korea and
China to discuss a joint response to Pyongyang's May 25 nuclear
blast. Other officials include Stuart Levey, the Treasury
Department's undersecretary for terrorism and financial
intelligence.

Levey was in charge of the U.S. financial restrictions imposed
on a bank in the Chinese territory of Macau in 2005 for allegedly
helping North Korea launder money from counterfeiting and other
illegal activities. The move led effectively to North being cutoff
from the international financial system as other institutions
voluntarily severed their dealings with the bank and the nation.

Pyongyang got so angry over this that it stayed away from
nuclear disarmament talks for more than a year. The deadlock was
resolved when the U.S. freed some $25 million in North Korean funds
held at the Macau bank, a move that allowed Pyongyang back into the
international banking system.

In Washington, State Department spokesman Philip J. Crowley
would not directly say that Levey's inclusion in the delegation
suggests the possibility of independent U.S. financial sanctions.
The spokesman only said that the U.S. is looking for various "ways
that are both, multilateral, bilateral, to help North Korea
understand it has obligations under international law."

The U.S. delegation's trip came as North Korea pushed ahead with
preparations to launch a long-range ballistic missile, believed
capable of reaching the U.S. The missile was being assembled at a
newly completed facility in Dongchang-ni near China, according to
South Korea's JoongAng Ilbo newspaper. Earlier reports said it
could be ready for launch in a week or two.

Steinberg warned the North that it is on the "wrong" path and
should come back to nuclear disarmament talks.

"I think we have a common view that we need to take steps to
make clear to the North that the path it's on is the wrong one,"
Steinberg told reporters Wednesday after talks with South Korea's
vice foreign minister, Kwon Jong-rak.

But he added if the North were prepared to change its course,
Washington was ready to "enter an effective dialogue that will
really lead to a complete and verifiable denuclearization of the
peninsula."

New sanctions being considered against North Korea include
curtailing its financial dealings with the outside world, freezing
company assets and enforcing an arms embargo, U.N. diplomats said
Wednesday.

But China and Russia, key allies of Pyongyang, have raised
questions about some of the proposals, diplomats said on condition
of anonymity because the consultations are private.

Tensions on the peninsula have been ramped up in recent days.

North Korea's military reportedly strengthened its defenses and
conducted amphibious assault exercises along its western shore.
South Korea, which has put its troops on high alert, sent a
high-speed ship equipped with guided missiles to the area and
bolstered its artillery batteries.

The two American journalists, Laura Ling and Euna Lee from
former Vice President Al Gore's Current TV media venture, were
arrested March 17 near the North Korean border while on a reporting
trip to China. Conviction for "hostility" or espionage could mean
five to 10 years in one of North Korea's labor camps.

"Since North Korea is faced with the benign neglect of the
U.S., the best way to attract attention is to be hawkish," said
analyst Lee Sang-hyun of the Sejong Institute think tank.


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