China Says U.S. Move on Macau Bank Threatens Talks

March 15 (Bloomberg) -- U.S. moves against a Macau bank it accused of laundering money for North Korea threaten an agreement with Kim Jong Il's government to end its nuclear weapons program, China's Foreign Ministry said.

``We have expressed our deep regret to the U.S. side,'' ministry spokesman Qin Gang said today in a regular briefing in Beijing. ``We believe the U.S. side should take actions that help stimulate progress in the six-party talks and help in maintaining social stability of the Macau Special Administrative Region.''

North Korea on Feb. 13 agreed to dismantle its nuclear weapons program in exchange for food and energy aid and prospects of normalizing ties with the U.S. and Japan. Under the accord, North Korea has 60 days to shut its Yongbyon nuclear reactor.

U.S. Treasury Department officials took action yesterday that could free North Korean funds frozen in Macau's Banco Delta Asia SARL even as the regulators cut the financial institution off from the U.S. banking system. The accounts were frozen soon after the Treasury Department blacklisted the bank in 2005, saying it was a ``money-laundering concern.''

``I'm pretty confident that we'll get through this issue, just fine,'' U.S. Assistant Secretary of State Christopher Hill said. ``My sense is they were concerned about the effect on Macau as a banking center.''

``Our concern is the long term future of BDA, not Macau monetary authorities, so frankly we try to make it very clear to the Chinese that we are supportive of Macau. I think we'll be ok on this issue,'' he told reporters.

18-Month Probe

U.S. Treasury Undersecretary Stuart Levey said yesterday that an 18-month probe found Banco Delta Asia had allowed North Korea to launder money. The findings will be shared with authorities in Macau, who will then decide whether to release as much as $25 million in North Korean accounts at the bank, he said.

North Korea's government is demanding the return of the money before it will allow nuclear inspectors into the country, the chief of the United Nations' nuclear watchdog agency, Mohamed ElBaradei, said in Beijing yesterday after holding talks in Pyongyang, the North Korean capital.

The U.S. move could hurt the financial sector in Macau, a thriving gambling center and former Portuguese colony that returned to Chinese rule in 1999, Qin said.

``We have to consider how to push for progress of the six- party talks,'' Qin said. ``We also have concerns about Macau. We believe both should be taken into full consideration.''

Envoys Meet

Hill and envoys from China, Japan, North Korea, Russia and South Korea are in Beijing this week to begin work on following through on the Feb. 13 agreement. The envoys will begin discussing in detail steps needed to dismantle the plutonium- producing Yongbyon reactor on March 17 and 18.

The U.S. decision won't affect Japan's stance on pushing for North Korea's nuclear disarmament, Prime Minister Shinzo Abe said.

``This is a U.S. law enforcement decision and has no impact on Japan,'' Abe told reporters today in Tokyo. ``North Korea must abandon its nuclear program in line with the agreement reached at the six-party talks.''

Japan has refused to give energy assistance unless North Korea pledges to resolve its kidnapping of Japanese citizens three decades ago. Representatives from Japan and North Korea met last week in Hanoi for two days as part of the agreement and made no progress on the abduction issue.

The Treasury decision ``won't change the direction of the discussions we've made so far,'' Chief Cabinet Secretary Yasuhisa Shiozaki said at a regular press conference in Tokyo earlier today. ``We will just wait for the Macau authorities' decision.''

The Hong Kong Monetary Authority, the city's de facto central bank, said today in a statement that it ``will monitor closely'' the situation regarding Banco Delta Asia, and its Hong Kong subsidiary Delta Asia Credit Ltd.

``The HKMA will take such supervisory measures as appear necessary from time to time to ensure that the interests of the depositors of DAC remain protected,'' an unidentified HKMA spokesman said in the statement.