Exclusive: Sanctions delay North Korea's atom bomb work, U.N. report says

By Louis Charbonneau and Michelle Nichols

UNITED NATIONS (Reuters) - Increasingly tough financial sanctions, an arms embargo and other international restrictions on trade with North Korea have significantly delayed expansion of Pyongyang's illicit nuclear arms program, according to a confidential report by a U.N. panel of experts seen by Reuters on Tuesday.

"While the imposition of sanctions has not halted the development of nuclear and ballistic missile programs, it has in all likelihood considerably delayed (North Korea's) timetable and, through the imposition of financial sanctions and the bans on the trade in weapons, has choked off significant funding which would have been channeled into its prohibited activities," the 52-page report said.

In the report to the U.N. Security Council's North Korea sanctions committee, the panel also recommended sanctioning three North Korean entities and 12 individuals. It will be up to the 15-nation council whether or not it follows the recommendations.

The three entities the panel said should be blacklisted are the newly created Ministry of Atomic Energy Industry, the Munitions Industry Department of the Central Committee of the Korean Workers Party (KWP), and the State Space Development Bureau.

The individuals the panel wants sanctioned include the atomic energy industry minister, once he is nominated, and four senior officials at the KWP Munitions Industry Department.

It also recommends the blacklisting of one national from Kazakhstan, Aleksandr Viktorovich Zykov, and two from Ukraine, Iurii Lunov and Igor Karev-Popov, for their involvement in North Korea-related arms deals.

"The DPRK (North Korea) has continued to defy the international community in a series of actions which have heightened concern about its intentions," it said.

The panel listed North Korea's February nuclear test and its rocket launches as examples of violations that have increased international concerns about Pyongyang. It was North Korea's third nuclear test since 2006.

Pyongyang is under U.N., U.S., European Union and other sanctions, including a U.N. ban on all arms exports, due to its nuclear weapons program.

IMPORT-EXPORT

Among potential violations the panel listed were the seizure by a U.N. member state of aluminum alloys suspected to be nuclear-related in August 2012 and the seizure of missile-related items bound for Syria in May 2012.

Previous breaches included shipments of arms-related material to Syria in November 2010 and rocket fuses for Iran in 2008, the panel report said.

"The DPRK has continued its efforts to import and export items relevant to missile and nuclear programs and arms," it said. "There was no major change in either the number or nature of the incidents investigated by the panel over the reporting period."

The panel said countries should be on the lookout for North Korean attempts to procure the following key items for Pyongyang's nuclear program - maraging steel, frequency changers, high-strength aluminum alloy, fibrous or filiamentary materials, filament winding machines, ring magnets, semi-hard magnetic alloys in thin strip form and other items.

U.N. diplomats said that China, North Korea's principal ally and trading partner, continues to play a key role in enabling Pyongyang to skirt sanctions, though this is not discussed explicitly in the panel's report.

Beijing has vowed to push for full implementation of the latest round of U.N. sanctions adopted by the council in March, though it remains unclear how much China was keeping that promise.

Recently Bank of China Ltd shut the account of North Korea's main foreign exchange bank, the state-run Foreign Trade Bank, which was hit with U.S. sanctions in March after Washington accused it of helping finance Pyongyang's nuclear weapons program.

That closure was the first significant, publicly announced step taken by a Chinese firm to curb dealings with North Korea.

TARGETING BANKS

The U.N. financial restrictions are working, the panel said.

"The panel is highly confident that financial measures of the resolutions in general are being effectively implemented by major banks," the experts wrote.

"It has concerns, however, about the ability of banks in states with less effective regulators and those unable to afford effective compliance to detect and prevent illicit DPRK transfers," said the report, citing a case involving the Bank of Congo in the Republic of Congo.

It said the Bank of Congo processed a wire transfer linked with an attempted arms shipment in 2009 to an account in the name of a diplomat at North Korea's embassy in Beijing, but Banque de France refused to accept the transfer.

"This case illustrates how the DPRK makes use of its diplomatic officials in the conduct of prohibited activities ... and in the using bank accounts to shield illicit fund transfers from bank's due diligence procedures," the experts said.

The report also said a diplomat at the North Korean embassy in the Republic of Congo has been actively involved in negotiating the contracts for the arms shipments.

The panel said that since May 2012 Japan has reported nine cases of suspected violations of the ban involving luxury goods including alcohol, tobacco, electronic items, automobiles and cosmetics.

The Security Council sanctions resolution adopted in March drew attention to North Korean bulk cash deliveries, an issue the expert panel also touched on in its report. [ID:nL1N0BZ6V1] U.N. envoys say such transfers are often carried out by North Korean diplomatic personnel.

The panel report referred to North Korea's "trade-based money-laundering via front companies and agents to pay for illicit procurements and to transfer proceeds of sales of weapons and WMD-related items."

"It (North Korea) uses company formation agents to establish firms off-shore in locales where laws make it difficult or impossible to determine beneficial ownership," the panel said. "It may often conduct its banking under a similar name in a different country."

The panel also said North Korea continues to violate the Security Council ban on luxury goods.

"The DPRK circumvented sanctions using ... false shipping and customs declarations and the use of intermediaries to make payments either through hand carrying or wire transfers. In at least two instances the end users were falsely declared as a diplomatic mission in Pyongyang," it said.

It said the panel had also requested information from China on six earlier luxury goods cases. "China's customs officials told the panel that goods covered by the panel's 2012 report were not considered luxury goods," the experts wrote.

(Reporting by Louis Charbonneau and Michelle Nichols. Editing by Christopher Wilson and Xavier Briand)

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Dennis Rodman Plans New North Korea Trip, Hopes to Secure Release of Detained American

Dennis Rodman has some fighting words for President Obama, who he says has failed in his foreign policy toward North Korean and its leader Kim Jong-Un.

"We got a black president who can't even go talk to him," Rodman told celebrity website TMZ.com. "How about that one?"

Rodman announced his plans to visit North Korea on Aug. 1 and he's got a self-imposed mission.

dennis Rodman

He wants to secure the release of 44-year-old Korean American Kenneth Bae, who was recently sentenced to 15 years hard labor.

The former NBA player said he's going because he feels the White House has failed with its North Korea policy.

PHOTOS: Dennis Rodman Goes to North Korea

Earlier this year, Rodman visited North Korea and even spent time with the North Korean leader. The two bonded over their love of basketball.

Last week, Rodman tweeted this message to Kim Jong-Un: "…do me a solid and cut Ken Bae loose."

U.S. officials told ABC News that they are in touch with Bae's family.

PHOTOS: An Inside Look at North Korea

The U.S. government is calling on the North Korean government to grant him amnesty.

The news of Rodman's trip comes as North Korea has been dialing back talk of war.

"At least Kim did one thing, he took the missiles back," Rodman said. "Thank you. Took the missiles back, right?"

RELATED: North Korean Missiles Moved Away From Launch Site

After his earlier trip this year to North Korea, Rodman sat down in an exclusive interview with ABC News George Stephanopoulos in which he praised the North Korean leader.

"I don't condone what he does," Rodman said, "but as far as a person to person, he's my friend."

RELATED: Dennis Rodman: Kim Jong Un Wants President Obama to 'Call Him'

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North Korea names another new armed forces minister

SEOUL (Reuters) - North Korea has replaced the hardline general who headed its armed forces ministry, in a further reshuffling of the top brass by young leader Kim Jong-un.

General Jang Jong-nam was named "minister of the People's Armed Forces" by state news agency KCNA in a report, the third official to take the role since Kim Jong-un formally assumed power in North Korea just over a year ago.

Jang, a relatively unknown general, was previously commander of the First Corps of the Korean People's Army.

The report would appear to show that armed forces ministry chief Kim Kyok-sik, reputed to have been behind the 2010 shelling of a South Korean island that killed four people, had been replaced.

Kim Kyok-sik himself was only named armed forces minister last November in a move North Korea watchers believed was part of an effort to solidify the grip of North Korea's young leader over the army.

The post of minister of the armed forces is considered subordinate to the Army Chief of General Staff and its head of the Political Department.

Jang is one of a group of younger soldiers who are stepping up to replace men who grew up under the country's founder Kim Il-sung, South Korean daily Chosun Ilbo reported.

It is not known how old Jang is.

Frequent reshuffles of top army figures have triggered speculation the 30-year old Kim Jong-un, the third of his family to rule North Korea, may be seeking to reassert the power of the Workers' Party of Korea over the country's generals.

(Reporting by David Chance. Editing by Dean Yates)

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North Korea has gained nothing from recent threats, Obama says

WASHINGTON (Reuters) - The United States and South Korea agree on maintaining a deterrent posture towards North Korea and on not rewarding that provocative behavior from Pyongyang, President Barack Obama said.

"President Park and myself very much share the view that we are going to maintain a strong deterrent, we're not going to reward provocative behavior, but we remain open to the prospect of North Korea taking a peaceful path," Obama said at a joint press conference with South Korean president Park Geun-hye.

"So far, at least, we haven't seen actions on the part of the North Koreans that would indicate they're prepared to move in a different direction," he added.

(Reporting By Mark Felsenthal; Editing by Sandra Maler)

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North Korea could reach U.S. with nuclear arms: Pentagon

By David Alexander

WASHINGTON (Reuters) - North Korea's continuing development of nuclear technology and long-range ballistic missiles will move it closer to its stated goal of being able to hit the United States with an atomic weapon, a new Pentagon report to Congress said on Thursday.

The report, the first version of an annual Pentagon assessment required by law, said Pyongyang's Taepodong-2 missile, with continued development, might ultimately be able to reach parts of the United States carrying a nuclear payload if configured as an intercontinental ballistic missile.

North Korea launched a multi-stage rocket that delivered a satellite into orbit in December, an advance that "contributes heavily" to the country's development of a long-range ballistic missile capability, the report said.

It is also continuing to refine its atomic weapons capability, including with a nuclear detonation in February, and is capable of conducting "additional nuclear tests at any time," the report said.

"These advances in ballistic-missile delivery systems, coupled with developments in nuclear technology ... are in line with North Korea's stated objective of being able to strike the U.S. homeland," the report said.

"North Korea will move closer to this goal, as well as increase the threat it poses to U.S. forces and allies in the region, if it continues testing and devoting scarce regime resources to these programs," it said.

The document characterized North Korea as one of the biggest U.S. security challenges in the region because of its effort to develop nuclear arms and missiles, its record of selling weapons technology to other countries and its willingness to "undertake provocative and destabilizing behavior."

The report comes at a sensitive time in the region, with friction between Washington and Pyongyang only now beginning to ease following two months of increasingly shrill rhetoric that seemed to edge the Korean peninsula close to war.

Tensions between the two countries rose sharply after North Korea put the satellite into space in late December and conducted the nuclear test in February. The test triggered new U.N. sanctions, which led to a barrage of threats from Pyongyang.

North Korea went so far as to warn of nuclear strikes on the United States and South Korea, as its new leader, Kim Jong-un, marked his first year in office following the death of his father.

The U.S. and South Korean militaries went ahead with a long-scheduled military exercise despite the threats and Washington sending stealth bombers and other planes to the region in a show of force.

North Korea signed a deal to get rid of its nuclear program in exchange for aid in 2005 but later backed out of the pact and now says it will not give up its atomic weapons program.

The United States has firmly rejected North Korean demands that it be recognized as a nuclear-armed state. Washington has stepped up its diplomacy with China over the issue.

(Reporting By David Alexander; Editing by David Brunnstrom)

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U.S. seeks North Korean amnesty for American jailed for 15 years

By Ju-min Park and Paul Eckert

SEOUL/WASHINGTON (Reuters) - North Korea sentenced an American citizen to 15 years of hard labor on Thursday for what it said were crimes against the state, prompting the United States to call for his immediate release to keep him from becoming a bargaining chip between the two countries.

Kenneth Bae, 44, was born in South Korea but is a naturalized U.S. citizen and studied psychology for two years at the University of Oregon. His sentencing comes after two months of saber-rattling that saw North Korea threaten the United States and South Korea with nuclear war.

Pyongyang has previously tried to use American prisoners as negotiation assets in talks with Washington. Washington is not looking for an envoy to try to secure Bae's release as it has sometimes done, said a U.S. official who spoke on condition of anonymity.

The official said the United States has sought in recent years to break out of a pattern of having to resolve repeated crises with North Korea through transactional deals.

"We urge the DPRK (North Korea) to grant Mr. Bae amnesty and immediate release," State Department deputy spokesman Patrick Ventrell said. It was not clear if Bae had been taken immediately to jail.

Bruce Klingner, a former CIA North Korea analyst, dismissed the idea that Bae's release would trigger the renewal of long-stalled diplomacy.

"Previous arrests of U.S. citizens didn't lead to changes in North Korean policy, resumption of bilateral dialogue or breakthroughs in U.S.-North Korean relations," said Klingner, a senior fellow at Washington's Heritage Foundation think tank.

Human rights activists in South Korea say Bae may have been arrested for taking pictures of starving children.

FAMILY SAYS 'BAFFLED'

Bae is "a committed Christian," said David Ross, director of a missionary training center at Antioch World Ministries Inc in Monroe, Washington.

"He has feelings for orphans and has done some ministry work feeding orphans," added Ross, who said he has been a casual acquaintance of Bae since they met four years ago through church affiliations in Hawaii. "He has a missionary heart," Ross said.

Bae's mother, Myung-Hee Bae, told Reuters in a brief telephone interview that she had last spoken to her son on April 23 and that he told her during the call that he was well. Myung-Hee Bae, who lives in the Seattle area, said it was the only call she had received from her son since he was detained.

His sister, Terri Chung, told CNN in an interview that he had been working as a tour guide bringing people from China into North Korea and that he had never before run into trouble doing so.

"We can't really know for sure why he would be arrested. He's only had the biggest heart for the people and the nation of North Korea," she said. "We are baffled just like anybody else about why a man like my brother could be arrested."

"We just pray and ask for leaders of both nations to please just see him as one man caught in between and we just ask that he be allowed to come home," Chung said.

Bae was one of five tourists who visited the northeastern North Korean city of Rajin in November and has been held since then. The State Department recommends that U.S. citizens avoid travel to North Korea, although it does not block trips.

"U.S. citizens crossing into North Korea, even accidentally, have been subject to arbitrary arrest and long-term detention," reads the department's travel warning, updated in March.

NEGOTIATING CARD?

Bill Richardson, a former U.S. ambassador to the United Nations who has made numerous trips to North Korea that included efforts to free detained Americans, said Bae's case should not become entangled in the current U.S.-North Korea impasse.

"Now that the sentencing and the North Korean legal process has been completed, it is important that negotiations begin to secure Kenneth Bae's release on humanitarian grounds or a general amnesty," said Richardson, who visited North Korea in January with Google Inc CEO Eric Schmidt.

White House spokesman Jay Carney said any negotiations with North Korea were "dependent upon the North Koreans demonstrating a willingness to live up to their international obligations."

North Korea is the subject of U.N. Security Council resolutions calling for an end to its nuclear and missile tests, as well as punitive U.N. sanctions.

Some media reports have identified Bae as the leader of the tour group. NK News, a specialist North Korea news website, said he was the owner of a company called Nation Tours that specialized in tours of northeastern North Korea.

The reports could not be verified and North Korean state news agency KCNA did not list any specific charge other than crimes against the state, and used a Korean rendering of Bae's name, Pae Jun-ho, when it reported the Supreme Court ruling.

"North Korea has shown their intention to use him as a negotiating card as they have done in the past," said Cheong Seong-chang, senior fellow at the Sejong Institute, a think tank in Seoul.

North Korea appears to use the release of high-profile American prisoners to extract a form of personal tribute, rather than for economic or diplomatic gain, often portraying visiting dignitaries as paying homage.

'HEFTY' SENTENCE

Former U.S. President Jimmy Carter, who has traveled to North Korea before to try to free a detained American, has no plans to do so for Bae, Carter's spokeswoman said.

According to North Korean law, the punishment for hostile acts against the state is between five and 10 years' hard labor.

"I think his sentencing was hefty. North Korea seemed to consider his acts more severe," said Jang Myung-bong, honorary professor at Kookmin University in Seoul and a North Korea law expert.

North Korea is one of the most isolated states on earth. Its official policy of "Juche," or self-reliance, is a fusion of Marxism, extreme nationalism and self-sufficiency centered on the cult of the ruling Kim family.

Bae likely will not be incarcerated in one of the North's notorious slave labor camps, such as the one where defector Kwon Hyo-jin was locked up. There, Kwon said, prisoners were worked to death and often survived only by eating rats and snakes.

"If an American served jail together with North Korean inmates, which won't happen, he could tell them about capitalism or economic developments. That would be the biggest mistake for North Korea," said Kwon, a North Korean sentenced to a camp for seven years until 2007. He defected to South Korea in 2009.

"(Bae) would be sent to a correctional facility that only houses foreigners and was set up as a model for international human rights groups."

Bae's sentencing brought bad back memories for Euna Lee, one of two U.S. journalists sentenced to 12 years in 2009 and released only after a visit to Pyongyang by former President Bill Clinton. She cried out loud in the courtroom when her labor camp sentence was handed down.

"The word 'labor camp' took the tiny hope I had away from me. I was physically and mentally weak and I really thought I would not make it home," South Korea-born Lee said via email.

Lee, then a journalist for Current TV, said her 12-year sentence included two years for illegal border crossing and 10 for the "hostile act" of making a documentary on North Koreans who risk their lives fleeing their country for nearby China.

Bae was given counsel by the Swedish Embassy in Pyongyang because the United States does not have diplomatic relations with North Korea. The embassy has declined to comment on the case and Ventrell said the Swedes did not attend Bae's trial.

(Additional reporting by Christine Kim in Seoul, Matt Spetalnick and Arshad Mohammed in Washington, Laura L. Myers in Seattle and Dan Whitcomb in Los Angeles; Editing by Alistair Bell, David Brunnstrom and Mohammad Zargham)

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South Korea wants talks with North on shuttered industrial zone

SEOUL (Reuters) - South Korea said on Thursday it was proposing formal talks with North Korea to discuss restarting work at a joint factory zone located just north of the rivals' heavily armed border which has been suspended since early April amid security tensions.

North Korea has denied South Korean workers and supplies entry to the industrial zone located a few miles inside the border accusing Seoul of using the joint project to insult its leadership. About 180 South Korean workers remain in the area and are believed to be running out of food and supplies.

It has also withdrawn its workforce from the zone amid spiraling tensions between the two Koreas amid a fusillade of hostile rhetoric from Pyongyang in response to what it sees as threatening U.S. and South Korean military drills.

Ties between the two Koreas were all but severed after the sinking of a South Korean navy ship in 2010 widely blamed on Pyongyang. The North also bombed a South Korean island later that year.

(Reporting by Jack Kim; Editing by David Chance)

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Defiant North Korea readies mass parade for founder

By David Chance

SEOUL (Reuters) - North Korea prepared for the annual celebration of its founder's birth on Monday, having rejected talks with South Korea aimed at reducing tensions and reopening a joint industrial park between the two countries.

The North has threatened for weeks to attack the United States, South Korea and Japan since new U.N. sanctions were imposed in response to its latest nuclear arms test in February.

Speculation has mounted of a new missile launch or nuclear test in a bid to either force Washington to hold talks with Pyongyang or to shore up the leadership of Kim Jong-un, the grandson of the reclusive state's founder.

The third Kim to rule in Pyongyang attended a midnight celebration of his father and grandfather's rule with top officials including his kingmaker uncle Jang Song-thaek and the country's top generals.

In Tokyo on Sunday, U.S. Secretary of State John Kerry again offered talks if North Korea abandoned its nuclear weapons programme, which Pyongyang describes at its "treasured" sword.

Kerry's trip to South Korea, China and Japan was aimed at reassuring its allies and putting pressure on Beijing to act decisively to implement the United Nations sanctions.

North Korea has repeatedly stressed that it fears Washington wants to invade it and has manipulated the United Nations to weaken it. At the weekend, Pyongyang rejected an overture by new South Korean President Park Geun-hye as a "cunning" ploy.

"We will expand in quantity our nuclear weapons capability, which is the treasure of a unified Korea ... that we would never barter at any price," Kim Young-nam, North Korea's titular head of state, told a gathering of officials and service personnel applauding the achievements of Kim Il-Sung.

Kim Il-Sung's birthday is usually marked with a mass parade to showcase the North's military might. In 2012, following the death of his father, the 30-year old Kim Jong-un made a public speech, the first in living memory for a North Korean leader.

(Additional reporting by Arshad Mohammed and Kiyoshi Takenaka in TOKYO)

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Exclusive: Aid groups to suffer if EU sanctions North Korean bank

By Megha Rajagopalan

BEIJING (Reuters) - European aid groups operating in North Korea might have to hand-carry cash into Pyongyang or stop work altogether if Washington convinces the European Union to sanction the reclusive country's main foreign exchange bank, aid workers said.

Germany and France had already expressed concern about the possible impact on aid groups as well as European embassies in Pyongyang should the EU sanction the Foreign Trade Bank, separate sources said. Many foreign entities with offices in North Korea use the bank.

Washington announced sanctions in March, saying the bank helped fund Pyongyang's banned nuclear program. Japan followed suit last week while Australia is expected to do the same. [ID:nL3N0CH0VZ] The U.S. measures prohibit any transactions between U.S. entities or individuals and the Foreign Trade Bank.

Embassies, non-governmental organizations and U.N. agencies such as the World Food Programme use the Foreign Trade Bank. It is the last major institution in North Korea for legal international transactions and Pyongyang specifically required NGOs to use it, aid workers said.

"You can't operate without the bank," said Katharina Zellweger, who headed the Swiss Agency for Development and Cooperation in Pyongyang from 2006-2011. "Except if you carry in suitcases of cash. But I don't think that is the right way to go."

NO EU PLAN ... YET

No firm EU proposal to sanction the bank has so far been put forward, diplomats in Brussels said, although they did not rule out that it could be added to the EU sanctions list against North Korea at some point.

A U.S. State Department official told reporters in Brussels on March 26 that Washington hoped the EU looked "hard" at imposing sanctions. The intention was not to hurt NGOs that did legitimate work, the official added.

"We will work through any concerns that arise related to purchases of humanitarian goods, but it is critically important that we isolate FTB for its facilitation of proliferation activities," an official from the U.S. Treasury Department told Reuters last week.

NGOS TAKE CONCERNS TO EU DIPLOMATS

About six European NGOs have offices in North Korea. Their work focuses largely on humanitarian aid and agricultural development projects. American NGOs work in North Korea but none have a permanent office in the country.

Countries with embassies in Pyongyang include Britain, Germany, Sweden, Poland, the Czech Republic, Romania and Bulgaria. France has a cultural affairs office in Pyongyang but it is not a diplomatic mission. Washington has no diplomatic ties with North Korea.

European NGOs in North Korea said they had told EU diplomats the Foreign Trade Bank was vital to their work. Two sources with knowledge of those talks said France and Germany expressed concern during meetings in Brussels about the impact of sanctions on aid groups and embassies should the EU adopt them. French and German aid organizations have offices in Pyongyang.

Romania's Foreign Ministry said its embassy in Pyongyang depended on the bank to pay for utilities and other services and would struggle to operate if it was sanctioned. Bulgaria said its mission would not be affected. Other European countries declined to make on-the-record comments.

An EU official in Brussels said the adverse impact on NGOs, embassies and other organizations would need to be considered if measures were taken against the Foreign Trade Bank.

Emilia Casella, a spokeswoman for the World Food Programme in Rome, said the agency used the bank to receive and make payments and expected it would continue to do so. The United Nations Development Programme (UNDP), which has an office in Pyongyang, declined to comment.

Even if the EU took no action or gave an exemption to certain organizations, non-U.S. banks sending money to the Foreign Trade Bank will have noted Washington's sanctions.

Indeed, experts have said the U.S. move against the bank was designed to make foreign banks that do business in the United States think twice about dealing with the bank, much the same way banks have become wary about having ties with financial institutions in sanctions-hit Iran.

If entities in Pyongyang had to use the Foreign Trade Bank, they would end up spending a lot of time seeking clarity or an exemption to avoid hassle from the U.S. Treasury and their homebase bank, said George Lopez, a former U.N. North Korea sanctions monitor, now at the University of Notre Dame.

"Usually the latter (the homebase bank) is the group most nervous and difficult because its own reputational status is on the line," Lopez said.

OBSCURE BANK

Little is known about the Foreign Trade Bank, whose assets and investments are a state secret. It is also unclear where it has branches. Visitors to North Korea said its headquarters is a stately Soviet-style building near Kim Il Sung Square in central Pyongyang.

Washington announced sanctions on the bank just days after fresh U.N. sanctions were imposed on North Korea for its February 12 nuclear test, the country's third. The U.N. sanctions tighten financial curbs on North Korea, including the illicit transfer of bulk cash, and crack down on its attempts to ship and receive banned cargo.

"If the EU extends sanctions to the Foreign Trade Bank, as the U.S. has done, then like all other embassies, U.N. organizations and NGOs in North Korea we too will have problems to implement our humanitarian projects here," said Bettina Beuttner, spokeswoman for the German NGO Welthungerhilfe, which has a base in Pyongyang. "If this happens, we do not yet know how we will be able to work."

A representative from another NGO in Pyongyang, who declined to be identified because of the sensitivity of the matter, said if it became impossible to send money to North Korea the organization would have to freeze its programs.

Washington has targeted North Korea's limited financial links to the global community before. In 2005, some $25 million in North Korean money was frozen in a U.S. Treasury-inspired raid on Macau-based Banco Delta Asia (BDA), which Washington alleged handled illicit funds for Pyongyang.

Besides the EU, Washington has also spoken to China about the Foreign Trade Bank. David Cohen, the U.S. Treasury undersecretary for terrorism and financial intelligence, told reporters he raised the issue with Chinese officials in Beijing last month, although he did not say what their response was.

It is unclear how much of the $6 billion in annual trade between China and North Korea goes through the bank. China is by far the North's biggest trade partner.

Felix Abt, a Swiss entrepreneur who has worked in Pyongyang and helped run a financial training programme for Foreign Trade Bank officials, said sanctions would be a "huge setback for economic development" in North Korea. "In the worst case scenario ... it would drive the economy underground. They would have to use cash couriers or other funny methods," he said.

Zellweger, who has studied small North Korean businesses and the country's economy, said local firms trying to do legitimate business would be pushed into what she called a "grey zone" if foreign companies stopped using the bank.

"It makes it so no one wants to do business with North Korea, even legal business," said Zellweger.

(Additional reporting by Adrian Croft and Justyna Pawlak in Brussels, Ioana Patran in Bucharest, Tsvetelia Tsolova in Sofia, Stephanie Ulmer-Nebehay in Geneva, Louis Charbonneau at the United Nations and Anna Yukhananov in Washington; Editing by Dean Yates)

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G8 foreign ministers meet in London to address Syria, North Korea

By Natalie Huet

LONDON (Reuters) - G8 foreign ministers meet on Wednesday in London, where host Britain will press its case for doing more to help the Syrian opposition against President Bashar al-Assad and end a devastating civil war.

Responding to threats from North Korea of an imminent conflict with its southern neighbor will also be high on the agenda of the Group of Eight leading industrialized nations - the United States, Britain, France, Germany, Italy, Japan, Canada and Russia - gathered in Britain's capital till Thursday.

Leaders of the Syrian National Coalition will be present on the sidelines of the G8 and hold talks with those foreign ministers willing to meet them, British Foreign Secretary William Hague told reporters on Tuesday.

Hague, his French counterpart Laurent Fabius and U.S. Secretary of State John Kerry are expected to hold talks with the civilian opposition figures.

"I will be joining and convening some of those meetings to discuss the urgent humanitarian needs and the urgent need for a political and diplomatic breakthrough on Syria," Hague said.

France and Britain are expected once again to press the case for amending or lifting an arms embargo on Syria to support the outgunned rebels waging a two-year-old uprising against Assad and help end a civil war that has already claimed an estimated 70,000 lives and displaced millions of people.

"This is turning into the greatest humanitarian catastrophe of the 21st century so far, and we cannot watch this happen," Hague said, adding that humanitarian aid, while indispensable, would not alone solve the Syrian crisis.

"We certainly believe that it's necessary to continue, if the situation continues to deteriorate, to increase the practical help we give to the Syrian opposition," Hague said.

ARMS TALKS

Paris and London say they want to raise pressure on Assad and try to force him to the negotiating table by allowing the supply of arms to the rebels.

But other G8 countries such as Russia and Germany have opposed the move, fearing it could lead to weapons falling into the hands of Islamist militants and fuel a regional conflict.

Changing the EU arms ban on Syria, which must be renewed or amended by June 1, needs backing from all 27 EU states. Britain and France have said they could act alone if they do not get their way.

Hague said Britain had made no decision yet to supply lethal weapons to the Syrian opposition, but that he would discuss the matter with his French counterpart Fabius on Wednesday.

"We think that as things stand today there is going to be a very strong case for further amendments to the embargo or the lifting of the embargo," he said.

G8 foreign ministers will also discuss how to respond to North Korea, which has waved threats of imminent conflict against the United States and South Korea and on Tuesday warned foreigners to evacuate the South to avoid being caught in a war.

Russia said on Tuesday the G8 was in agreement in rejecting North Korea's recent provocative behavior and urged all sides to pursue diplomacy to calm the increasingly tense situation in northeast Asia.

Hague said that, just like Iran, nuclear-ambitious North Korea had the choice between engaging in "realistic" international talks or facing increased international sanctions.

"If they continue on this path ... they will end up with a broken country that is isolated," Hague said, noting that even longtime ally China was disapproving of North Korea's actions.

Other than top international issues, Hague said foreign ministers planned to discuss Burma, Somalia, cyber-security and the issue of preventing sexual violence in warzones.

(Additional reporting by John Irish in Paris; Editing by Jon Hemming)

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South Korea increases surveillance as North moves missile

By Daum Kim and Phil Stewart

SEOUL/WASHINGTON (Reuters) - South Korea has raised its surveillance of North Korea after the reclusive state moved one or more long-range missiles in readiness for a possible launch, Yonhap news agency reported on Wednesday.

Admiral Samuel Locklear, the commander of U.S. forces in the Pacific region, said the U.S. military believed North Korea had moved an unspecified number of Musudan missiles to its east coast.

An Obama administration official, speaking on condition of anonymity, told Reuters "our working assumption is that there are two missiles that they may be prepared to launch". That was in line with South Korean media reports.

The North has been threatening the United States and its "puppet" South Korea on an almost a daily basis in recent weeks, although the threats appear to be aimed partly at boosting internal support for young leader Kim Jong-un.

The Combined Forces Command in Seoul raised its "Watchcon 3" status, a normal defense condition, by one level in order to step up monitoring and increase the number of intelligence staff, a senior military official told Yonhap on Wednesday.

"There are clear signs that the North could simultaneously fire off Musudan, Scud and Nodong missiles," Yonhap quoted an unidentified official as saying.

Pyongyang has frequently tested short-range Scud missiles but the longer-range Musudan and Nodong missiles are an unknown quantity. The Musudan missiles are reckoned to have a range of roughly 3,000-3,500 km (1,865-2,175 miles).

The North has said it would target American bases in the Pacific, although it is not known whether the untested missiles have the range to do so.

"If the missile was in defense of the homeland, I would certainly recommend that action (of intercepting it). And if it was defense of our allies, I would recommend that action," Locklear told a Senate hearing in Washington.

Pyongyang has turned up its shrill rhetoric in recent weeks after the United Nations Security Council imposed sanctions for the state's third nuclear weapons test in February.

It has threatened a nuclear strike on the United States - something it does not have the capacity to carry out - and "war" with South Korea.

On Tuesday, it told foreigners in South Korea to leave the country to avoid being dragged into a "thermonuclear war". It previously warned diplomats in Pyongyang to prepare to leave.

The streets of Seoul, a city of 10 million people, bustled as normal on Wednesday morning as commuters travelled to work in sunny, spring-time weather. Foreign embassies in the capital of Asia's fourth-largest economy have played down the latest North Korean threats as rhetoric.

The North closed a money-spinning joint industrial park it operates with South Korean companies this week, putting at risk a venture that is one of its few sources of hard cash.

Analysts say the current tensions will likely last until the end of April, when joint U.S.-South Korean military drills end. The harsh rhetoric also precedes the first anniversary of Kim's formal ascent to power in Pyongyang.

The North has termed the drills "hostile" preparation for invasion by Seoul and Washington, who say the drills are regular annual exercises.

(Writing by David Chance; Editing by Paul Tait)

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China rebukes North Korea, says no state should sow chaos

By Jane Chung

SEOUL (Reuters) - Staff at embassies in North Korea appeared to be remaining in place on Saturday despite an appeal by authorities in Pyongyang for diplomats to consider leaving because of heightened tension after weeks of bellicose exchanges.

North Korean authorities told diplomatic missions they could not guarantee their safety from next Wednesday - after declaring that conflict was inevitable amid joint U.S.-South Korean military exercises due to last until the end of the month.

Whatever the atmosphere in Pyongyang, the rain-soaked South Korean capital, Seoul, was calm. Traffic moved normally through the city center, busy with Saturday shoppers.

South Korea's Yonhap news agency quoted a government official as saying diplomats were disregarding the suggestion they might leave the country.

"We don't believe there's any foreign mission about to leave Pyongyang," the unidentified official was quoted as saying. "Most foreign governments view the North Korean message as a way of ratcheting up tension on the Korean peninsula."

North Korea has been angry since new U.N. sanctions were imposed following its third nuclear weapons test in February. Its rage has apparently been compounded by joint U.S.-South Korean military exercises that began on March 1.

China's Xinhua news agency on Friday had quoted the North's Foreign Ministry as saying the issue was no longer whether but when a war would break out.

Most countries saw the appeal to the missions as little more than strident rhetoric after weeks of threatening to launch a nuclear strike on the United States and declarations of war against the South.

But Russia said it was "seriously studying" the request.

A South Korean government official expressed bewilderment.

"It's hard to define what is its real intention," said the official, who asked not to be identified. "But it might have intensified these threats to strengthen the regime internally or to respond to the international community."

The United Nations said its humanitarian workers remained active across North Korea. Secretary General Ban Ki-Moon, however, remained "deeply concerned" about tensions, heightened since the imposition of U.N. sanctions against the North for its third nuclear arms test in February.

Chinese Foreign Minister Wang Yi repeated Beijing's calls for dialogue to resolve the tensions in a phone call with Ban.

"We oppose provocative words and actions from any party in the region and do not allow troublemaking on China's doorstep," a statement on the ministry's website said, citing Wang.

The appeal to diplomats followed news reports in the South that North Korea, under its 30-year-old leader Kim Jong-un, had moved two medium-range missiles to a location on its east coast. That prompted the White House to say that Washington would "not be surprised" if the North staged another missile test.

Kim Jong-un is the third member of his dynasty to rule North Korea. He took over in December 2011 after the death of his father, Kim Jong-il, who staged confrontations with South Korea and the United States throughout his 17-year rule.

North Korea has always condemned the exercises held by U.S. forces and their South Korean allies. But its comments have been especially vitriolic this year as the United States dispatched B-2 bombers from its home bases to stage mock runs.

"MADCAP NUCLEAR WAR"

North Korea's government daily newspaper said tension remained high because the United States was "waging madcap nuclear war maneuvers".

"This is aimed at igniting a nuclear war against it through a pre-emptive strike," the Minju Joson said in a commentary. "The prevailing situation proves that a new war, a nuclear war, is imminent on the peninsula."

A television documentary broadcast on Friday quoted North Korean leader Kim as saying, during a provincial tour last month, that the country needed to "absolutely guarantee the quality of our artillery and shells to ensure a rapid pre-emptive attack on our enemies".

But some commentators examining the outcome of meetings in Pyongyang last week - of the ruling Workers' Party and of the rubber-stamp legislature - concluded that Kim and his leadership were more concerned with economic than military issues.

Internet site 38 North, which specializes in North Korean affairs, cited the reappointment of reformer Pak Pong Ju as prime minister, the limited titles given to top military and security officials and the naming of a woman to a senior party post.

"These personnel appointments make a great deal of sense in the context of Pyongyang's declarations ... that its economic policy will be modified by introducing systemic reforms while also continuing the development of nuclear weapons," 38 North commentator Michael Madden wrote.

"(They) appear to be important steps in moving key economic development products and production away from the control of the military to the party and government."

North Korea has not shut down one symbol of joint cooperation, the Kaesong industrial zone just inside its border. But last week it prevented South Koreans from entering the complex and about 100 of them who have since remained were due to return home on Saturday, leaving a further 500 there.

The barrage of North Korean threats has created jitters in South Korea's financial markets.

Shares slid on Friday, but analysts said much of the decline was linked to the Bank of Japan's monetary easing policies and one analyst said further major falls were unlikely.

"In a sense, for now the yen is of greater concern than the North Korea risk," said Ko Seunghee, a market analyst at SK Securities. "There is a sense that the KOSPI (index) will not fall sharply or drop below the 1,900 level unless big news about North Korea breaks out."

(Additional reporting by Michael Martina in Beijing, Writing by Ron Popeski; Editing by Robert Birsel and Stephen Powell)

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North Korea Moves Missile, Could Be Preparing a Test

north korea

U.S. officials suspect that North Korea may be preparing for a test of its Musudan medium-range missile after seeing evidence of it being transported to North Korea's eastern coast. Such a launch would be the latest in a series of provocations by North Korea in recent weeks.

Earlier Thursday, South Korea's defense minister told his nation's lawmakers that a North Korean missile with "considerable range" had been transported to that country's eastern coast. Defense Minister Kim Kwan-jin said he could not explain the movement and added that the missile was not capable of reaching the United States.

U.S. officials have identified the missile as a mobile-launched Musudan missile estimated to have a range of between 1,800 and 2,500 miles that could put U.S. military bases in Okinawa and Guam within its range.

RELATED: North Korea Relocates Long-Range Missile in Latest 'Rhetorical Threat'

The officials said that, two days ago surveillance satellites detected the movement by train of a Musudan mobile launcher as well as fuel and equipment needed for a missile launch.

One official said it is possible that as many as two missiles could be readied for a potential launch because there were more missile components spotted than might be needed if only one missile was being launched.

The U.S. is trying to locate the location on the eastern coast where the launcher and missile components are currently located.

The officials said there is speculation that a missile test could be in the works and that it could occur soon. Unlike long-range missiles, which can spend weeks on a launch pad in preparation for a launch, mobile-launched missiles can be launched fairly quickly and with little warning.

PHOTOS: Inside North Korea

The Musudan is a medium-range missile that has never been tested before, though it has been publicly paraded by North Korea in the past. U.S. officials have been expecting it to be tested at some point over the past few years.

A U.S. official said that, so far, North Korea has not provided a notice to mariners about a potential missile launch. During previous long-range launches, the North Koreans have listed advance warnings to mariners and aviators. In addition to serving as safety warnings that a missile may land near a body of water, they have also served as indicators of a possible launch. The official said launching this missile without such an advance advisory would be seen as a provocation.

READ MORE: N. Korea's Real Power, Kim Jong Un's Aunt, Uncle

One of the officials said there is also concern about how Japan might react if a North Korean missile were to overfly its territory. Placing the Musudan on the eastern coast indicated the trajectory might take it over Japan. Last December, in advance of North Korea's long-range missile test that month, the Japanese government gave orders to its military shoot down a missile should it appear to be headed for Japanese territory.

That did not happen, as the Unha 3 missile was launched on a southward trajectory away from the Korean Peninsula. Japan has both land-based and ship-based missile interceptors like the ones aboard U.S. Navy ships.

In light of North Korea's recent threats to launch missiles at the United States, the Pentagon has assigned two of its missile-defense-capable Navy destroyers to provide missile defense if needed.

On Tuesday, the Pentagon confirmed the destroyers USS John S McCain and USS Decatur had been sent to pre-determined locations in the western Pacific.

The USS Decatur will soon be replaced by the destroyer USS Fitzgerald so that it can return to its homeport of San Diego after a seven-month deployment.

RELATED: U.S. Troops Stand 'Poised to Respond' at NKorea Border

Japan and South Korea both have short-range air missile defense systems, the U.S. Navy ships can provide backup if the trajectory is beyond that range and pose a threat to other partners in the region and U.S. territory.

In the wake of North Korea's missile threat on Wednesday, the Pentagon announced that it was sending a land-based missile defense system to Guam.

North Korea also has a mobile-launched, long-range missile known as the KN-08. North Korea has never tested the missile, but it is of particular concern because it can be launched with little warning and is believed to be able to reach parts of the United States.

One official said there has been no worrisome activity related to the KN-08.

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U.S. to send missile defenses to Guam over North Korea threat

By Phil Stewart and Jack Kim

WASHINGTON/SEOUL (Reuters) - The United States said on Wednesday it would soon send a missile defense system to Guam to defend it from North Korea, as the U.S. military adjusts to what Defense Secretary Chuck Hagel has called a "real and clear danger" from Pyongyang.

At the same time, North Korea repeated its threat to launch a nuclear attack on the United States. Pyongyang said it had ratified a potential strike because of U.S. military deployments around the Korean peninsula that it claimed were a prelude to a possible nuclear attack on the North.

Washington had been informed of the potential attack by North Korea, a spokesman for its army said in a statement carried by the English language service of state news agency KCNA. It was unclear how such a warning was given since North Korea does not have diplomatic ties with Washington.

Experts say North Korea is years away from being able to hit the continental United States with a nuclear weapon, despite having worked for decades to achieve nuclear-arms capability.

North Korea has previously threatened a nuclear strike on the United States and missile attacks on its Pacific bases, including in Guam, a U.S. territory in the Pacific. Those threats followed new U.N. sanctions imposed on the North after it carried out its third nuclear test in February.

"Some of the actions they've taken over the last few weeks present a real and clear danger," Hagel told an audience at the National Defense University in Washington.

U.S. stocks sank to their lows of the day after Hagel's comments and the Guam deployment news.

The yield on the benchmark 10-year U.S. Treasury note briefly dropped below 1.8 percent for the first time since January as investors sought safety in government bonds, driving their prices higher. The dollar strengthened modestly against the euro and yen.

The South Korean won hit a six-month low on Wednesday.

"I would say that people are taking it a lot more seriously than they used to," said Steve Van Order, a fixed income strategist at Calvert Investments in Maryland, referring to the tensions with North Korea.

Despite the rhetoric, Pyongyang has not taken any military action and has shown no sign of preparing its 1.2 million strong armed forces for war, the White House said on Monday.

That would indicate that its threats are partly intended for domestic consumption to bolster young leader Kim Jong-un ahead of celebrations marking the anniversary of the birthday of Kim Il-sung, the state's founder and the younger Kim's grandfather, on April 15.

Caitlin Hayden, spokeswoman for the White House National Security Council, criticized the latest North Korean statement.

"It is yet another offering in a long line of provocative statements that only serve to further isolate North Korea from the rest of the international community and undermine its goal of economic development," Hayden said.

North Korea had "ratified" a merciless attack against the United States, potentially involving a "diversified nuclear strike", the KCNA statement concluded after railing against annual war games between South Korea and the United States that run throughout April.

"The moment of explosion is approaching fast. No one can say a war will break out in Korea or not and whether it will break out today or tomorrow," the KCNA statement said.

HAGEL: MUST TAKE THREATS SERIOUSLY

Hagel said he had to take the threats seriously, language he has used in recent weeks as the United States has revamped its missile defense plans and positioned two guided-missile destroyers in the western Pacific to bolster missile defense.

The United States has also flexed its muscle during the military drills with South Korea, flying two radar-evading stealth bombers on a first-of-its-kind practice bombing run over South Korea.

In the latest move, the Pentagon said it was deploying a Terminal High Altitude Area Defense system to Guam in the coming weeks. The THAAD system includes a truck-mounted launcher, interceptor missiles and an AN/TPY-2 tracking radar.

Last month, Hagel said the Pentagon would add 14 new anti-missile interceptors in Alaska and move ahead with the deployment of a second missile-defense radar in Japan.

Adding to tensions, North Korea on Wednesday closed access to a joint factory zone with South Korea, putting at risk $2 billion a year in trade that is vital to the impoverished state.

It said on Tuesday it would revive a mothballed nuclear reactor able to produce bomb-grade plutonium.

Hagel called America's responses so far "measured, responsible, serious" and also said the United States was working with allies to lower tensions.

"We are doing everything we can, working with the Chinese, others to defuse that situation on the peninsula," he said.

In Beijing, China's deputy foreign minister met ambassadors from the United States and both Koreas to express "serious concern" about the Korean peninsula, China's Foreign Ministry said on Wednesday.

It was a sign that China, the North's major benefactor, was increasingly worried about events spinning out of control.

(Additional reporting by David Alexander in Washington and Caroline Valetkevitch in New York. Writing by Dean Yates)

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North Carolina Won't Establish State Religion

North Carolina Wont Establish State Religion

It turns out North Carolina won't be establishing its own religion after all. A resolution proposed this week by GOP state lawmakers that said the state has the right to declare an official religion will never come to a vote.

The legislation, House Joint Resolution 494, filed Monday by two GOP legislators and co-signed by 12 others, says the Supreme Court cannot block a state "from making laws respecting an establishment of religion." But on Thursday, House Speaker Thom Tillis' said the resolution was dead, according to WRAL.

The bill was initially filed in response to a lawsuit filed last month by the American Civil Liberties Union against the Rowan County Board of Commissioners, which, the ACLU said, opened 97 percent of its meetings in 2007 with explicitly Christian prayers. Filing the lawsuit on behalf of three residents, the ACLU wrote in a press release, "the commissioners, who deliver the prayers themselves, routinely call on Jesus Christ and refer to other sectarian beliefs during invocations."

The legislation filed by Reps. Harry Warren and Carl Ford stated the "North Carolina General Assembly asserts that the Constitution of the United States of America does not prohibit states or their subsidiaries from making laws respecting an establishment of religion."

Warren and Ford did not return several requests for comment, but Warren told The Salisbury Post he never really expected the bill to go too far.

"I didn't expect it to go anywhere," Warren told the newspaper, noting that the bill was referred to the committee for Rules, Calendar and Operations of the House. "Quite often bills go there and never come out."

Co-signer Rep. Phil Shepard said in an interview before the bill was killed, "I don't support anything that would maintain a state religion, but … we have the right to assemble and pray."

"I wouldn't want anyone to say we would be an all Catholic state, an all Episcopalian state, an all Baptist state … there may be some that feel that way but I don't."

The crux of the resolution lay in the 10th Amendment, which leaves to the states powers not explicitly given to the federal government in the Constitution. In recent years states have used this "nullification" argument in attempts to defy federal laws and Supreme Court rulings, most recently about gun control and the Affordable Care Act.

The bill wouldn't have actually created a religion. But it would have made an argument that they could. And the bridge between arguing and doing is key.

University of North Carolina constitutional law professor Michael Gerhardt said "people can believe what they want to believe."

"They are entitled to believe it, they are entitled to think it, they are entitled to say it, but they aren't entitled to act on it," Gerhardt said. "However they are not entitled to reject applicable Supreme Court opinion."

"The issue they are raising is settled by constitutional law," Gerhardt said. "They are trying to turn the clock back on the First Amendment."

And now that won't happen.

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North Korea can likely revive reactor in six months, needs years for more bombs

By Louis Charbonneau

UNITED NATIONS (Reuters) - North Korea can probably restart a mothballed plutonium-producing reactor in six months if it is determined to do so and the site has suffered no major structural damage, but it may take years to produce significant new atom bomb material.

Pyongyang announced on Tuesday that it would revive the aged Yongbyon five-megawatt research reactor that yields bomb-grade plutonium, but stressed it was seeking a deterrent capacity.

Several nuclear experts familiar with North Korea's program said it would probably take the North Koreans about half a year to get the Yongbyon research reactor up and running, provided it has not suffered significant damage from neglect.

The decision to restart the reactor was the latest chapter in an escalating crisis that erupted after Pyongyang was hit with U.N. sanctions for conducting a third nuclear test in February, and the United States and South Korea staged military drills that North Korea viewed as "hostile."

The Yongbyon reactor has been technically out of operation for years. But Siegfried Hecker - a Stanford University nuclear scientist who is believed to have been the last Westerner to visit the Yongbyon nuclear complex - said the Yongbyon research reactor has been on standby since July 2007.

"If they restart the reactor, which I estimate will take them at least six months, they can produce about six kilograms of plutonium (roughly one bomb's worth) per year," Hecker said in an interview published on Tuesday on a Stanford website.

He said that it would take the North approximately three to four years before it could get another 12 kg (26 lbs) of plutonium, which would suffice for two more weapons.

Satellite images published by 38North, a specialist North Korea website, showed new construction activity at the reactor site from early February until the end of March. It said the imagery indicated that construction had begun along a roadway and toward the back of the reactor building.

(http://38north.org/2013/04/yongbyon040313/)

NO FOREIGN HELP NEEDED, EXPERTS SAY

Isolated North Korea occasionally lets nuclear experts like Hecker into the country, most likely to persuade them that its nuclear capabilities are not imaginary, U.N. diplomats and officials say.

Hecker added that when he last visited North Korea in 2010, he estimated that the country had a stockpile of 24 to 42 kg (53 to 93 lbs) of plutonium, roughly four to eight bombs worth. If the country's February nuclear test used plutonium - which is not clear - the stocks would be about five to six kg lower, he said.

North Korea has repeatedly threatened to use nuclear weapons to attack the United States and its bases in South Korea, but Hecker said he was skeptical about Pyongyang's ability to hit targets on U.S. or South Korean territory.

Olli Heinonen, former head of the U.N. International Atomic Energy Agency's (IAEA) safeguards department, told Reuters he had a similar prediction, though he said it was possible North Korea could have the research reactor running in less than six months.

"We don't know how much preparatory work they've done," said Heinonen, who is currently at Harvard University and has visited North Korea and met with North Korean scientists.

Both Hecker and Heinonen said North Korea could most likely restart the reactor without any foreign assistance, despite U.N., U.S. and other sanctions aimed at curtailing its ability to purchase nuclear and missile technology.

A U.S. official concurred with Hecker and Heinonen.

"North Korea's assertion that it intends to bring Yongbyon back on line can't be easily written off as an insurmountable hurdle," the official said on condition of anonymity.

Mark Fitzpatrick of the International Institute for Strategic Studies think tank in London, however, said there was a possibility that the Yongbyon reactor has been rendered inoperable for unknown reasons.

"It's been a mystery to me why they haven't started it up before this," he said. "The most logical answer is that they couldn't ... But there's no certainty here."

If the reactor is functional, Fitzpatrick said, the half-year timeline for restarting it made sense.

URANIUM ENRICHMENT

IAEA spokeswoman Gil Tudor said North Korea's decision to restart Yongbyon was "another deeply regrettable development, which is in clear violation of U.N. Security Council resolutions."

The Security Council has repeatedly sanctioned North Korea for its nuclear tests and repeated missile launches, and ordered it to abandon both its nuclear and missile programs.

Heinonen said North Korea has already mothballed and restarted the five-megawatt graphite-moderate research reactor before. It shut down the plant after signing the "Agreed Framework," a 1994 deal with the United States under which Pyongyang agreed to freeze Yongbyon in exchange for heating oil and construction of newer light-water reactors.

Pyongyang began to restart the reactor in late 2002 after Washington accused it of secretly developing a parallel uranium enrichment program in violation of the 1994 deal. Washington ceased aid to the North and Pyongyang accused it of reneging on its promise to build the light-water nuclear reactors.

North Korea then expelled all inspectors from the IAEA and in 2003 withdrew from the nuclear Non-Proliferation Treaty. In 2006, it tested its first nuclear device, using plutonium from Yongbyon, followed by two more in 2009 and earlier this year.

Certain technical challenges await the North Koreans. In 2008 they destroyed the Yongbyon reactor's cooling tower as a confidence-building step in U.S.-led multilateral negotiations aimed at reducing tensions on the Korean peninsula.

But the reduction in tensions was short lived. Six-nation aid-for-disarmament talks between the two Koreas, China, Russia, Japan and the United States have been stalled for years.

Heinonen said that either North Korea must build a new cooling tower or create an underground cooling plant, like one that was under construction at a site in Syria that Israel bombed in 2007. Western intelligence sources have said North Korea helped build the Syrian reactor, which the government of President Bashar al-Assad has said was not a nuclear site.

David Albright, a former weapons inspector and head of the Washington-based Institute for Science and International Security think tank, said it was important not to underestimate the nuclear capabilities of the North Koreans or their determination to live up to their word.

"North Korea huffs and puffs a lot, but underneath that they pretty much do as they say," said Albright, who met with North Korean nuclear scientists in Pyongyang in 2011. "They have been saying they want to improve the quality of their nuclear weapons and they may very well do that."

As well as reviving the reactor at Yongbyon, the North's only known source of plutonium for its nuclear arms program, Pyongyang's official KCNA news agency said a uranium enrichment plant would be put back into operation.

Hecker, who visited the enrichment plant in 2010, said North Korea has a good safety record for its five-megawatt research reactor, but he voiced concerns about the new plant it intends to construct.

"I am much more concerned about the safety of the new light-water reactor they are building," he told Reuters without elaborating.

(Reporting by Louis Charbonneau; Additional reporting by Paul Eckert and Tabassum Zakaria in Washington; Editing by Warren Strobel, Mary Milliken and Eric Beech)

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North Korea pressures South by halting entry to industrial zone

By Christine Kim and Ju-min Park

SEOUL (Reuters) - North Korea stepped up pressure on Seoul by delaying access to a joint industrial park in a move that could trap hundreds of South Korean workers on the northern side of the world's most militarized border.

It was not immediately clear if the move was aimed at closing the Kaesong Industrial zone, which generates $2 billion a year in trade for the impoverished North and $80 million in cash wages that go straight to its government. North Korean delays to accessing the zone are very rare.

The delay came after Pyongyang said it would restart a nuclear reactor that it uses to produce plutonium for its nuclear weapons program and as Washington deployed military resources in South Korea amid growing tensions with the North.

As of 8:54 p.m. ET, 861 South Korean workers were in the zone that is home to 123 South Korean firms just inside North Korea. They employ more than 50,000 North Koreans to make low grade household goods.

The complex was established as a form of joint-Korean cooperation in the early 2000s.

"We are waiting for access from the North Korean authorities," a Unification Ministry official said. The ministry said 179 workers were also awaiting entry at the border.

For over a month North Korea has been threatening the United States with a nuclear attack and to bomb its Pacific bases as well as saying it will wage war on South Korea.

The moves are in response to what Pyongyang says are "hostile" military drills between the United States and South Korea and new sanctions imposed on the isolated country for its third nuclear test, staged in February.

The South Korean won was trading at a six and a half-month low in early domestic trade due to the escalation in tensions.

MAJOR TEST

North Korea's young leader Kim Jong-un, aged 30, has ratcheted up tensions since he took office in December 2011 by also staging two long-range rocket launches in defiance of U.N. sanctions.

His actions pose a major challenge to new South Korean President Park Geun-hye who took office just a week after the North's February 12 nuclear test.

South Korea insists it has a contingency plan for dealing with any hostage situation in Kaesong, but officials refused to disclose what it would do in the event North Korea chose to prevent its citizens from returning home.

Most observers believe North Korea will stick to threats and that much of its hostile rhetoric is designed for internal consumption to solidify the young Kim's rule.

Earlier this week Kim appointed key allies to top posts and cemented the power of his uncle Jang Song-thaek and aunt Kim Kyeong-hee by naming one of their close associates as prime minister.

U.N. Secretary-General Ban Ki-moon said the crisis over North Korea had gone too far and he appealed for dialogue.

"Nuclear threats are not a game. Aggressive rhetoric and military posturing only result in counter-actions, and fuel fear and instability," Ban, a South Korean, told a news conference during a visit to Andorra.

The Pentagon, meanwhile, said another U.S. guided-missile destroyer had taken up position in the western Pacific to assist with missile defense.

The Unification Ministry said 446 workers were due to cross back to South Korea on Wednesday but said they had not yet been given permission to do so.

(Reporting by Christine Kim and Ju-min Park; Editing by David Chance and Dean Yates)

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Analysis: Meet North Korea's new Kim, same as the old Kims?

By Matt Spetalnick and Mark Hosenball

WASHINGTON (Reuters) - North Korea's young leader Kim Jong-un is using his forebears' time-tested "crazy-guy-in-the-neighborhood" strategy, senior U.S. officials say, but with a provocative new twist - aiming Pyongyang's threats directly at the United States.

There are indeed signs of an earlier method in what might seem like Kim's rhetorical madness, which U.S. policymakers say is patterned after more than a half century of rule over the reclusive state by his father and grandfather.

But with a large degree of uncertainty surrounding Kim and limited U.S. intelligence on North Korea's leadership, Washington is still trying to gauge how far the untested 30-year old leader might go to prove himself to his people, and his generals, or to make a belligerent point to South Korea's new president and the world.

North Korea's surprise announcement on Tuesday of plans to restart a long-shuttered nuclear reactor, while not issued by Kim personally, could further raise the stakes in his standoff with the West.

"All bets are off on whether this guy recognizes where the off-ramps are," one senior administration official said. "We don't have enough history with him to know whether or not he has the sophistication that his father displayed in dealing with diplomatic confrontation."

This official and others spoke on condition of anonymity to discuss months of North Korean threats and actions, including missile and nuclear tests, that pose a challenge to President Barack Obama's policy of "strategic patience" toward Pyongyang.

That policy - a refusal to offer new incentives to Pyongyang until it suspends its disputed nuclear program - has yielded little but defiance since Obama took office in 2009.

Joseph DiTrani, formerly the U.S. intelligence community's top expert on North Korea, said the "cadence change" displayed by Kim's tough talk and military gestures, such as this year's nuclear test, indicate he is under heavy pressure from the country's military elite.

"He's got to present (an image of) ... strength to those elements," DiTrani said.

NO CAUSE FOR ALARM?

Though Kim has fired or demoted some generals since taking power, Pyongyang's military leadership remains a political force to be reckoned with.

He has sought to placate them by paying homage to the "Military First," or Songun, philosophy his late father, Kim Jong-il, preached to justify use of impoverished North Korea's scarce resources to build a 1.2 million-strong army and a nuclear weapons program, Asia experts say.

Still, the Obama administration insists there is no cause for alarm.

Pyongyang's assertion over the weekend that it had entered a "state of war" with South Korea over its joint military drills with the United States, has not led to corresponding movements of North Korean forces, the White House said.

And while Pyongyang's bluster may be unsettling, images of Kim posing in front of maps portraying missile targets on the U.S. mainland require a stretch of the imagination, given that North Korea has yet to prove it has mastered ballistic technology capable of reaching American shores.

U.S. officials insist they are anything but nostalgic for Kim Jong-il, who was seen by Washington as dangerous though at least predictable. He issued threats and even acted militarily to get the world's attention but would draw the line at open armed conflict, using crises he provoked as leverage in international negotiations.

The younger Kim, little known to the West when he took power in December 2011, appears intent on stretching the limits of his family's playbook. He has taken the spotlight not only to issue some threats in person but has gone a step further, hurling them at his country's superpower foe.

"There are clear differences in style and tone (between father and son)," another senior U.S. official said. "He is much more personally involved in the forefront ... and these threats are more specific and more directly oriented at the United States this time around."

But this official insisted that even with this new variation of what he called North Korea's "crazy man strategy," Kim would not succeed in getting Washington and its allies to "buy them off" with aid, fuel or other concessions, as previous U.S. administrations have periodically tried to do.

Obama himself offered food aid to North Korea last year, under stringent monitoring terms to ensure it wouldn't be diverted to the military, in return for a moratorium on nuclear and long-range missile tests. The deal imploded less than three weeks later when Pyongyang announced plans for what it called a satellite launch and U.S. officials said was a missile test.

TARGETING DOMESTIC AUDIENCE

Some U.S. officials believe Pyongyang's bellicosity is aimed primarily at a domestic audience.

They see Kim trying to keep his vast, poorly paid army motivated with anti-U.S. propaganda and improve his status among North Korea's largely dirt poor population by standing up to foreign enemies, even as he seeks to cement his grip on power.

But there is growing concern that Kim's inexperience coupled with his drive to prove himself could lead to a limited strike on a South Korean target, such as a ship or border post, or that the two sides could stumble into military confrontation.

"The greater likelihood is miscalculation," former U.S. Defense Secretary Leon Panetta told CNBC on Monday. "And if they do something that escalates quickly, that's the greater danger."

U.S. officials and independent Korea watchers alike acknowledge, however, they are so short on personal information about Kim that predicting his behavior remains a guessing game.

The Obama administration's original hopes that Kim would turn out to be a reformer have yet to materialize and seem unlikely to any time soon, U.S. officials say.

Despite that, most Korea watchers believe Kim is a rational actor who understands his military is no match for Seoul and its U.S. ally and that straying too far from historic North Korean practices could jeopardize his own political survival.

Kim dialed down the harsh rhetoric in his latest speech this week when he avoided repeating recent threats to attack South Korea and the United States.

And he has occasionally tried to project a warmer image. Weeks after ordering an internationally banned nuclear explosion, he indulged his passion for basketball by hosting former NBA star Dennis Rodman.

"An awesome kid," said Rodman, who has now spent more time with Kim than any Western officials ever have.

(Additional reporting by; Arshad Mohammed and Phil Stewart in Washington and David Chance in Seoul; Editing by Warren Strobel and Todd Eastham)

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North Korea to restart nuclear reactor in weapons bid

By Jack Kim

SEOUL (Reuters) - The United States has positioned a warship off the Korean coast as a shield against ballistic missile attack as South Korea's new president vowed swift retaliation against a North Korean strike amid soaring tensions on the peninsula.

But Washington also said it had seen no worrisome mobilization of armed forces by the North Koreans despite bellicose rhetoric over a ramping up of international sanctions against Pyongyang over nuclear weapons tests.

"If there is any provocation against South Korea and its people, there should be a strong response in initial combat without any political considerations," South Korean President Park Geun-hye told the defense minister and senior officials.

North Korea says the region is on the brink of a nuclear war in the wake of U.N. sanctions in response to its February nuclear test and a series of joint U.S. and South Korean military drills that have included a rare U.S. show of aerial power.

In Washington, the White House has said the United States takes seriously North Korea's war threats. But White House spokesman Jay Carney said on Monday: "I would note that despite the harsh rhetoric we are hearing from Pyongyang, we are not seeing changes to the North Korean military posture, such as large-scale mobilizations and positioning of forces."

North Korea further escalated its rhetoric on Saturday by saying it was entering a "state of war" with South Korea in response to what it termed the "hostile" military drills.

A U.S. defense official said the USS McCain, an Aegis-class guided-missile destroyer used for ballistic missile defense, was being positioned off the peninsula's southwestern coast.

"This is a prudent move that provides greater missile defense options should (they) become necessary," said the official, speaking on condition of anonymity. The ship was not expected to participate in any exercises, the official added.

South Korea has changed its rules of engagement to allow local units to respond immediately to attacks, rather than waiting for permission from Seoul.

Stung by criticism that its response to the shelling of a South Korean island in 2010 was tardy and weak, Seoul has also threatened to target young North Korean leader Kim Jong-un and to destroy statues of the ruling Kim dynasty in the event of any new attack, a plan that has outraged Pyongyang.

CHINA CALLED TO HELP ENFORCE SANCTIONS

North Korea stepped up its rhetoric in early March, when U.S. and South Korean forces began annual military drills that involved the flights of U.S. B-2 stealth bombers in a practice run, prompting the North to put its missile units on standby to fire at U.S. military bases in South Korea and in the Pacific.

The United States also deployed F-22 stealth fighter jets on Sunday to take part in the drills. The Pentagon said it was the fourth time F-22s had been deployed to South Korea.

Australia, a close U.S. ally and rotating U.N. Security Council member, said it would urge China to help enforce sanctions banning the flow of technology and equipment to North Korea.

Australian Prime Minister Julia Gillard, who leaves on Friday for Beijing, plans to call on Chinese leaders to help bolster stop-and-search provisions for shipping to and from North Korea, Foreign Minister Bob Carr said. Canberra also plans its own banking and financial sanctions.

"The immediate priority is to see the sanctions agreed on by the Security Council are properly enforced," Carr said on Tuesday.

KIM JONG-UN TIGHTENS GRIP ON POWER

North Korea has cancelled an armistice agreement with the United States that ended the Korean War and has cut all hotlines with U.S. forces, the United Nations and South Korea.

At a recent meeting of North Korea's ruling Workers Party Central Committee, leader Kim Jong-un rejected the notion that Pyongyang was going to use its nuclear arms development as a bargaining chip for foreign aid for the impoverished nation.

"The nuclear weapons of Songun Korea are not goods for getting U.S. dollars and they are ... (not) to be put on the table of negotiations aimed at forcing the (North) to disarm itself," KCNA news agency quoted him as saying.

Songun is the Korean word for the "Military First" policy preached by Kim's father who used it to justify the use of the impoverished state's scarce resources to build a 1.2-million strong army and pursue development of weapons of mass destruction.

At the meeting, Kim appointed a handful of personal confidants to the party's politburo, further consolidating his grip on power in the second full year of his reign.

Former premier Pak Pong-ju, a key confidant of the leadership dynasty, was re-appointed to the post from which he was fired in 2007 for failing to implement economic reforms.

Pak, believed to be in his 70s, is viewed as a key ally of Jang Song-thaek, the young Kim's uncle and also a protege of Kim's aunt. Pak is viewed as a pawn in a power game that has seen Jang and his wife re-assert power over military leaders.

Analysts said the move would not likely change North Korea's approach to a confrontation that appears to have dragged the two Koreas closer to war.

(Additional reporting by Paul Eckert, Phil Stewart, David Alexander and Jeff Mason in WASHINGTON; Editing by Will Dunham and Michael Perry)

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