In the past week, there has been good news and bad relating to the seemingly never-ending attempt to persuade North Korea to give up its nuclear weapons. The good news was the announcement that the next round of negotiations with North Korea is set to begin Thursday in Beijing. The bad news is North Korea's continued insistence that the issue of U.S. financial "sanctions" against the North must first be "discussed and resolved" before nuclear talks can truly proceed.

The sanctions refer to a 2005 U.S. Treasury Department finding against Banco Delta Asia, accusing the small Macau-based bank of being a "willing pawn" in North Korean money laundering and counterfeit-currency trafficking. The allegations, and a warning that Washington was considering a ruling that would exclude the bank from any dealings with the U.S. financial system, led the government of Macau (which operates under the watchful eye of China) to freeze BDA's assets (including $24 million in North Korean accounts). Other financial institutions around the world, fearing similar action, began closely scrutinizing or even severing their financial ties with North Korea, thus magnifying the effect.

While Washington has steadfastly maintained that the financial restrictions are completely unrelated to the ongoing nuclear weapons talks, Pyongyang has been just as adamant that it would not even discuss giving up its nuclear weapons until Washington ended its "hostile" sanctions policy.

The resulting standoff caused a 13-month suspension of the Six-Party Talks (involving North and South Korea, China, Japan, Russia, and the U.S. and aimed at the denuclearization of the Korean Peninsula). The talks resumed in late December 2006, but that round went absolutely nowhere, with Pyongyang reportedly holding firm in its refusal to discuss the nuclear issue until the sanctions were lifted. Side discussions on the financial issue were equally futile.

The United States explained to the North what it had to do to resolve the problem: namely, verifiably end its counterfeiting and money-laundering activities. The North maintained its innocence, demanding that the sanctions be lifted as proof that Washington was prepared to give up its "hostile policy" toward Pyongyang.

In an effort to avoid another long period of stalemate, the primary U.S. negotiator for the Six-Party Talks, Assistant Secretary of State Christopher Hill, met with his North Korean counterpart, Vice Foreign Minister Kim Kye Gwan, in Berlin in mid-January for "discussions." Hill was insistent that his talks not be described as negotiations, which can only occur "in the context of the Six-Party Talks" in Beijing.

Hill came out of the meeting confident that some measurable progress would be made at this upcoming round of talks. In fact, initial press reports described Hill as "optimistic" about future progress, although State Department officials have since tried to lower expectations regarding any breakthroughs.

As part of the process leading up to the Thursday round of formal talks, a second bilateral dialogue was held in Beijing this past week between the Treasury Department's Deputy Assistant Secretary for Terrorist Financing and Financial Crimes, Daniel Glaser, and the head of North Korea's Foreign Trade Bank, O Kwang Chol. Glaser reported to the press that the two sides had gone over detailed information relating to 50 BDA accountholders: a "painstaking" process. He seemed to think he had proved his point, noting "we have been vindicated with respect to our (money laundering) concerns." He added his opinion that the two sides were now in a position "to start moving forward and trying to bring some resolution to this matter," but gave no hint as to how long this would take or what it would entail (or even when the two sides would again meet to continue the process).

There is little indication North Korea has seen, much less acknowledged, the error of its ways, however.

As the financial talks were concluding, a "source close to the North Korean government" told Reuters in Beijing that U.S. allegations were a "huge insult" to North Korea and that "the United States has no evidence, just like it had no evidence Iraq had weapons of mass destruction." More ominously, the source warned that a failure to resolve the sanctions issue will leave North Korea with "no choice but to announce at the Six-Party Talks that it plans to conduct another (nuclear weapons) test."

It's possible, of course, that this represents mere bluster. Seasoned negotiators have pointed out that Pyongyang is frequently most stubborn and bombastic just before making a concession. Clearly, Washington hopes that this is again the case.

Hill continues to assert that there is a "basis for making progress" at this upcoming round and that he hopes for a "substantial start" toward implementing an earlier North Korean pledge — in September 2005, before the financial standoff ground the process to a halt — to abandon "all nuclear weapons and existing nuclear programs" (as part of a broader agreement offering economic aid and security assurances to Pyongyang).

For its part, Pyongyang states that it remains committed to the ultimate denuclearization goal, but that the lifting of sanctions must come first. While it is reasonable to expect some general reaffirmation of this goal at the upcoming round of talks, "substantial progress" toward achieving it seems a long way off.