U.S. Assistant Secretary of State Christopher Hill said he and Chinese nuclear envoy Wu Dawei agreed that North Korea appeared ready to follow through on a February agreement committing it to shutting down its main Yongbyon nuclear reactor in exchange for energy aid.
"Once they have their funds from the bank, they are prepared to do their part of the bargain, which is to shut down the Yongbyon plant," Hill said, referring to a financial dispute involving North Korean funds, earlier frozen in a Macau bank accused by the U.S. of aiding Pyongyang in money laundering and counterfeiting.
The U.S. helped unfreeze the $25 million being held in Banco Delta Asia, but the money's transfer has been delayed because foreign banks are unwilling to touch the funds.
The North has made the resolution of the banking row an absolute precondition for nuclear disarmament.
Hill rejected a suggestion that the six-party disarmament negotiations, which have been stalled since February, were dead.
"It's certainly not dead," he said. "Certainly we have a pretty serious bump in the road here, we plan to get over it ... it really is a technical matter which cannot just be solved through political means."
Hill exchanged ideas with Wu on ways to resolve the matter but wouldn't give specific details.
Meanwhile, South Korea urged its communist neighbor to the north to shut down its nuclear reactor Wednesday, and to gradually open their heavily armed border to regular train traffic.
The Cabinet-level talks — the highest regular channel of dialogue between the former wartime foes — entered their second day as Hill and Wu met in Beijing.
"We explained that implementing the Feb. 13 agreement is important in that efforts to denuclearize are the basis for peace on the Korean peninsula," South Korean spokesman Ko Gyoung-bin said after morning talks between the North and South delegations. "We stressed the necessity of implementing the agreement quickly."
South Korea also proposed formally restarting cross-border rail service between the countries in phases, and "in a way that benefits both the South and the North," Ko said.
Earlier this month, the two Koreas held a cross-border test run of trains on restored tracks, marking the first time trains have crossed the border since rail links were cut early in the 1950-53 Korean War.
Pyongyang boycotted international nuclear negotiations for more than a year over the release of the frozen funds, and conducted a nuclear test in October. Last week, it launched at least one short-range missile into coastal waters — a move played down by Seoul and Washington as part of the North's regular military drills.
He said earlier he also planned to discuss with the Chinese how to get inspectors from the U.N.'s nuclear watchdog to North Korea — part of the dismantlement process outlined in the February pact.
Wu and Hill, who was in China on a one-day stopover, also discussed China-U.S. relations and the issues of climate change and the Darfur crisis.
Meanwhile in Seoul, U.S. Ambassador to South Korea Alexander Vershbow said Washington was "prepared to move forward toward the establishment of normal relations with the DPRK," using the abbreviation of the North's official name, the Democratic People's Republic of Korea.
In February, the U.S. agreed as part of the pact to enter talks with North Korea aimed at normalizing relations and putting aside the hostility that has lingered since they fought each other in the 1950-53 Korean War. The conflict ended in a cease-fire that has never been replaced by a peace treaty.
"We're ready to begin the process of removing North Korea from the list of state sponsors of terrorism and from the application of the Trading with the Enemy Act," Vershbow said at a symposium.
"But progress on all these tracks depends on achieving the complete elimination of North Korea's nuclear weapons and nuclear programs," he said. "We are not ready to settle for a partial solution. It is only with complete, verifiable and irreversible denuclearization that we can contemplate the full normalization of relations."