State Department spokesman Sean McCormack said Tuesday that Macau monetary authorities had agreed to open the accounts to their owners.

"The bottom line is they have unblocked these accounts and authorised account holders to withdraw the funds from those accounts," he said, citing a statement by a Macau monetary policy spokeswoman.

Washington lifted its objections to releasing the funds last month in a deal that included a North Korean pledge the money would only be used for "humanitarian purposes."

But the 25 million dollars remained blocked due to what US and Chinese officials described as technical problems, as other banks declined to take the money for fear it would sully their reputations.

McCormack added Washington now expected North Korea to follow through with its pledge to shut down and seal its reactor by a Saturday deadline.

"The ball is in their court on the matter," McCormack said.

"The issue has been resolved, I think in the view of all the parties in the six-party talks, and we'll see if the North Koreans share that view," he said, referring to the parties to North Korean disarmament negotiations -- China, Japan, North Korea, South Korea, Russia and the United States.

Earlier, Assistant Secretary of State Christopher Hill said Washington supported the unfreezing of the accounts.

"This is obviously a very big step when it comes," Hill, the chief US nuclear envoy, told reporters.

"I think it should clear the way for the DPRK (North Korea) to step up the (disarmament) process," he added after talks with his South Korean counterpart Chun Yung-Woo.

Chun said the North was familiar with the necessary procedures to free the money and should now take steps "as soon as possible" to shut down its Yongbyon reactor.

The White House hailed the announcement. "I think that as North Korea nears its deadline, that this step was a big one," deputy spokeswoman Dana Perino said.

"We have been assured (the money) is going to be used for humanitarian and education reasons."

North Korea has said it will allow inspectors from the UN nuclear watchdog, the International Atomic Energy Agency, back into the country to monitor its compliance with the February 13 agreement.

In the first phase of the six-country agreement, the North had agreed to shut down the reactor by this Saturday in exchange for badly needed fuel oil.

McCormack also indicated that Washington would allow some flexibility in dealing with the 60-day deadline set in the February 13 agreement under which North Korea pledged to shut and seal Yongyong and begin the process of complete denuclearisation in exchange for fuel and other aid.

He said that with only four days remaining to the deadline, there could be technical difficulties in shutting down the reactor.

"You're bumping up against the technical ability to do that safely," he said. "We'll see where we are at on Saturday," he said.

"Everybody should act in such a way that they intend to meet the 60-day deadline," he said, stopping short of insisting that the North Koreans complete the reactor shutdown by Saturday.

China said the six-party deal would not fail even if the weekend deadline was not met.

The six-nation talks were launched in 2003 aimed at ending the North's nuclear weapons ambitions. After testing several missiles in July, Pyongyang shocked the world with its first atomic weapons test in October.

Japan has taken the hardest line in the talks, and on Tuesday it extended sweeping sanctions against North Korea for another six months to press it to give ground in an emotionally charged row over its past kidnappings of Japanese nationals.

Meanwhile, New Mexico state governor Bill Richardson led a US team to North Korea, officially to secure the remains of US troops killed in the Korean War but also to discuss the nuclear dispute.

earlier related report
Doubts over North Korea deal
by Lee Jong-Heon
Seoul (UPI) April 10 - With a weekend deadline for initial denuclearization steps just days away, prospects remained dim that North Korea would act on a nuclear disarmament agreement on schedule over a protracted dispute of a funds transfer.

Top U.S. nuclear envoy Christopher Hill, who came to Seoul on Tuesday, said he was still optimistic that the six-nation agreement on ending the North's nuclear drive could be implemented despite the tight timeline.

But Pyongyang has not budged an inch, sticking to its position that calls for a full transfer of funds frozen in a Macao bank before taking initial steps to shut down its nuclear facilities under a Feb. 13 agreement.

Under the deal, the communist North promised to shut down and seal its plutonium-producing reactor at Yongbyon and invite back U.N. nuclear inspectors within 60 days in return for energy aid and political benefits as part of the initial phase for dismantling its nuclear programs. In return, Washington accepted the North's long-standing demand that its $25 million funds frozen in Banco Delta Asia, a Macao-based bank, be released.

But the transfer has been delayed due to "technical problems." Kim Jong Il's regime has refused to take any steps toward denuclearization until all of the funds are released, raising doubts about the 60-day deadline on April 14.

"I'm hopeful we can resolve (the financial issue) in the very, very near future, at which point we can get on with the task of denuclearization," Hill told reporters upon arriving at a Seoul airport from Tokyo, where Hill met his Japanese counterpart.

"Clearly, this banking issue in Macau, which many of us had hoped we had resolved some weeks ago, still has not been finalized," Hill was quoted as saying by Seoul's Yonhap News Agency. "We've got a few more days, so let's see how we do in the next couple of days. Obviously, it's a very important week and I'd say a crucial couple of days," he said.

The U.S. envoy said the anticipated delay would not change the deadline of the second phase of the Feb. 13 agreement, which requires the North to disable its nuclear facilities before the end of the year.

Hill plans to meet his South Korean counterpart and other officials before leaving for Beijing on Thursday.

His Asian trip coincides with a rare visit to Pyongyang by Bill Richardson, the Democratic governor of the U.S. state of New Mexico, and Victor Cha, top U.S. presidential adviser on North Korea. The U.S. delegation is due to arrive in Seoul on Wednesday through the inter-Korean border village of Panmunjom. Greeting the visiting U.S. delegation, North Korean officials reportedly reiterated to the U.S. delegation that the BDA-linked funds must be released first before its initial denuclearization steps.

Analysts in Seoul say the North seems to use the financial issue to drag out the process of dismantling its nuclear weapons program while enjoying economic benefits from South Korea and elsewhere.

"North Korea seems to stall the denuclearization process, while extending just gestures aimed at winning economic aid," said Hong Yong-pyo, a political science professor at Seoul's Hanyang University. "It is doubtful North Korea would abandon its nuclear drive."

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