Sunday, 15 April 2007

U.S., China disagree over BDA issue

The mainstream media has been carrying banner headlines claiming the more than 18-month drama over North Korean-related funds locked up in the Macau-based Banco Delta Asia has finally been resolved. Again. In fact, this is the second or third time the issue has been "resolved" since the original announcement on March 14.
But again we find ourselves asking the same question, for the second or third time: Has it really been resolved?
According to a spokesperson for the Macau Monetary Authority on Tuesday afternoon, all and any restrictions on the movement of North Korea-related funds held in the BDA had been lifted with immediate effect. "Authorized account holders simply need to come to the bank and arrange for the transfer or the withdrawal of their funds."
Three days after the announcement, there has apparently been no mad dash by account holders to recover their money. The MMA said they have received a number of inquiries from account holders, but no withdrawals or transfers.
The devil, it seems, is in the details. And as any reporter who has been covering the issue since September 2005 will doubtless agree, there has never been anything transparent or simple about the Banco Delta Asia affair.
With the exception of government officials such as Assistant Secretary of State Christopher Hill, who was in Seoul this week, and South Korean Foreign Minister Song Min-soon, most people with inside knowledge of the BDA issue are keeping tight-lipped or speaking only on condition of strict anonymity. Given the sensitive nature of the issue, that is hardly surprising.
"We have heard the same claims that this has been resolved many times before," said one, adding with more than a hint of sarcasm, "and always there is something new and allegedly unexpected."
After a conspicuous silence, North Korea yesterday finally responded to the reported "availability" of their accounts with a short statement from the Foreign Ministry in Pyongyang. The statement said a North Korean financial institution will confirm if the "measure is valid" without offering any details. The statement also said the North remains committed to implement the Feb. 13 agreement, but will move only when the transfer of the funds becomes a reality.
Perhaps their reluctance could be linked to the MMA's almost casual reference to simply "transfer the funds."
"The Banco Delta Asia's U.S. dollar correspondent bank accounts were closed in 2005, which means they can't make dollar transfers or do foreign exchange deals with any other banks to convert the funds to other currencies," said another source, also on condition of anonymity.
"As a consequence," he said, "other banks around the world would be equally reluctant to receive transfers from the BDA while they are still being blacklisted - just like the case of the Bank of China refusing to accept the funds."
The U.S. Treasury's announcement back in March that it had concluded its investigations into the Banco Delta Asia, and that it had no objections to the release of the frozen funds, was welcomed as a long-awaited breakthrough. Made on the eve of the last round of six-party talks in the Chinese capital, it was seen as lifting the final barrier for Pyongyang to begin the next phase of the implementation of the Beijing agreement - the shut-down by April 14 of its main reactor at the Yongbyon nuclear complex.
But there was a rather significant little addition to the Treasury's announcement. No American financial institution would be permitted to conduct any form of business with the BDA. Since all U.S. dollar transactions ultimately go through a U.S. bank, this effectively cut the Banco Delta Asia and its U.S. dollar account holders (the North Korean account holders) off from the international banking system. The funds - albeit allegedly now unfrozen - were going nowhere.
"This is a case of the U.S. Treasury giving with one hand, and taking away with the other," said one account holder at the time. "Despite their claims to the contrary, they actually found no evidence of deliberate wrongdoing by the BDA, and this is just an act of spite against a small family-owned bank." It also raised questions about North Korea's future ability to conduct normal international banking operations, and it had far reaching consequences.
The North Koreans reacted by once again boycotting the talks and asserting they would take no part in substantive negotiations or implementation until the funds were verifiably released.
Washington expressed its displeasure but insisted it would do everything possible to facilitate the release of the money.
A senior Treasury official spent two weeks in Beijing negotiating with Chinese and North Korean officials, but left saying they had been unable to find a solution. A few hours later, the U.S. State Department released a statement contradicting the Treasury, and announced a "pathway" had in fact been determined during secret talks between Chris Hill and a North Korean official in New York.
This again raised pointed questions about whether Treasury and State were actually working on the same team, or playing what South Korean President Roh Moo-hyun recently described as "a game where two players secretly gang up to trap a third player."
By Monday, however, the State Department was backpedaling, and referring to the "pathway" in the past tense, as an option that had "had" the potential to work.
There has been no statement or official indication of any links between the failed Treasury talks, the State Department's "pathway" and the Macau Monetary Authority's announcement that the funds are now available to the account holders.
But as was pointed out earlier in this article, the BDA affair has been anything but transparent and simple since Treasury first accused the BDA in September 2005 of being complicit in North Korea's alleged illegal financial activities.
As Washington begins to ratchet up the pressure on Pyongyang to meet its commitments under the Feb. 13 Beijing agreement, citing the resolution of the BDA issue, the authorities in Beijing and Macau have now begun expressing concerns. China suggested on Thursday the release of North Korean funds blocked in a Macau bank was still not quite resolved.
In a rather astonishing development, given the circumstances, the Chinese Foreign Ministry issued a statement saying, "The legitimate and reasonable concerns and interests of all parties should be addressed so we can find a way to properly resolve the issue as soon as possible."
With the deadline for Pyongyang to shut down its reactor at Yongbyon today, that "as soon as possible" obviously isn't going to be soon enough.

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