In an encouraging sign, the U.S. Treasury Department said authorities in the Chinese-administered region of Macau are prepared to unblock the frozen funds that North Korea says are the reason it has refused to move forward on a disarmament agreement.
The communist country struck a deal with the U.S. and four other nations in February to shut down its main nuclear reactor by Saturday in exchange for economic aid and political concessions.
If North Korea follows through with its promises, they would be the first moves the communist state has made to scale back its nuclear development since it kicked out international inspectors and in 2003 restarted its sole operating nuclear reactor.
But the hard-won agreement, reached four months after Pyongyang rattled the world by testing a nuclear device, has been held up by a dispute over North Korean funds frozen in a Macau bank.
Victor Cha, President Bush's top adviser on North Korea, met Tuesday with Pyongyang's top nuclear negotiator, Kim Kye Gwan, according to a U.S. official with knowledge of the meeting who spoke on condition of anonymity because of the sensitivity of the talks.
The official said Cha told Kim that North Korea was running out of time to act on the agreement.
For his part, Kim gave Cha no indication of whether the North would offer any concessions in the face of U.S. pressure or if it would be able to access its money before Saturday, the official said.
Cha is part of a U.S. delegation, including Democratic presidential candidate Bill Richardson and Anthony Principi, Bush's former veteran affairs secretary, on a four-day trip to Pyongyang to recover remains of American servicemen killed in the 1950-53 Korean War.
The funds were frozen after Washington blacklisted the small Banco Delta Asia bank for allegedly helping Pyongyang launder money and pass counterfeit $100 bills. BDA has denied any wrongdoing.
The North agreed to shut its main reactor only after the U.S. promised to resolve the financial issue within 30 days — which Washington failed to do because the fund transfer has been mired in technical complications.
"The United States understands that the Macau authorities are prepared to unblock all North Korean-related accounts currently frozen in Banco Delta Asia," the U.S. Treasury Department statement said, adding that the U.S. would support such action.
The International Atomic Energy Agency is slated to monitor and verify the shutdown in what would be its first visit since late 2002.
Kim told Principi on Monday that his government would allow U.N. nuclear inspectors into the country as soon as the $25 million in North Korean funds are released.
Chief U.S. negotiator Christopher Hill, in Seoul for meetings on North Korea, welcomed Kim's comment and said the Saturday shutdown deadline was not yet out of the question.
"Let's see how we do in the next couple of days," he said. "Obviously it's a very important week and I would say a crucial couple of days."
In Washington, State Department spokesman Sean McCormack declined to comment on what might happen if North Korea misses the deadline, but said the United States continued to believe that all parties to the agreement are "working in good faith to meet it."
But he told reporters the money issue "was more complicated than anyone could have imagined," and suggested Washington might not object to an extension in the deadline.
Kim, who is also vice foreign minister, told the U.S. delegation on Monday that it would be difficult to shut down the nuclear reactor by the Saturday deadline.
The only immediate cost the impoverished North would suffer for not shutting down the reactor by the deadline would be an initial 50,000 ton shipment of heavy fuel oil promised as a reward. That shipment was part of 1 million tons of oil it would get for dismantling its nuclear programs.
On Tuesday, Japan's Cabinet approved a six-month extension on trade sanctions against North Korea, which were imposed in the wake of the communist state's nuclear test last year, Cabinet Office spokeswoman Miwako Fujishige said. The measures include closing ports to North Korean ships and banning the import of North Korean goods.
Richardson said his delegation pushed Kim for a show of good faith that North Korea was ready to meet its obligations under the February deal, asking for a meeting of the six nations involved in the nuclear disarmament talks before the deadline.
He said he was hoping to travel to the reactor site in Yongbyon, 55 miles north of Pyongyang, but there were a lot of "political issues involved." He did not elaborate.