Reports: US pushing financial sanctions on NKorea

SEOUL, South Korea (AP) " The U.S. is pushing hard to slap strong financial sanctions against North Korea as part of U.N. punishments or even as indepedent measures for the communist nation's latest nuclear test, news reports said Thursday.

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.

Levey was to meet with South Korean Vice Finance Minister Hur Kyung-wook later Thursday, Hur's office said without elaborating. Financial sanctions on North Korea will be a key topic at the meeting, the South's Yonhap news agency reported.

Curtailing the North's financial dealings with the outside world is being considered as part of U.N. punishments, along with freezing company assets and enforcing an arms embargo, according to U.N. diplomats.

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.

Yonhap said Steinberg's delegation plans to present evidence of the North's counterfeiting in talks with Chinese officials to try to persuade Beijing to agree to financial sanctions. The delegation plans to visit China on Friday.

Meanwhile, North Korea released few details about the trial for the two American journalists, Laura Ling and Euna Lee, who worked for former Vice President Al Gore's Current TV media venture. They 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.

The trial 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."