updated 6/16/2007 9:36:18 AM ET 2007-06-16T13:36:18

North Korea invited U.N. nuclear inspectors on Saturday in the first concrete sign of a breakthrough in a stalemate over its nuclear program, as the transfer of frozen North Korean funds at the center of the dispute neared completion.

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The North sent a letter to the International Atomic Energy Agency, inviting inspectors to discuss shutting down its nuclear reactor, because “it is confirmed that the process of de-freezing the funds ... at Banco Delta Asia in Macau has reached its final phase,” the country’s official Korean Central News Agency reported.

It said a “working-level delegation” from the U.N. nuclear watchdog had been invited to discuss procedures for the IAEA’s verification and monitoring of the Yongbyon reactor’s shutdown.

IAEA spokesman Ayhan Evrensel in Vienna declined to comment on the North Korean report. The agency would neither confirm it received a letter from North Korea nor offer a timetable for the possible return of inspectors.

North Korea had refused to act on its February pledge to shut down the reactor until it received access to about $25 million once frozen in the Macau bank, blacklisted by the United States. The U.S. accused Banco Delta Asia of helping North Korea’s government pass fake $100 bills and launder money from weapons sales.

Claiming the financial freeze was a sign of Washington’s hostility, North Korea boycotted six-nation nuclear talks for more than a year, during which it conducted its first-ever atomic bomb test last October.

South Korea’s chief nuclear envoy, Chun Yung-woo, welcomed the North Korean announcement as “good news.”

“As we watch how the discussions between North Korea and the IAEA proceed, we will start preparations for implementing our own obligations as outlined by the Feb. 13 agreement,” Chun told The Associated Press by telephone.

Chun was referring to the shipment of 50,000 tons of heavy fuel oil the North Korea is to receive in return for shutting down its reactor and allowing U.N. inspectors back into the country to verify the closure and seal the facility. North Korea expelled IAEA inspectors in December 2002.

Signs of a breakthrough in the standoff emerged this week as the North Korean funds at the Macau bank finally began to be transferred.

‘Some technical problems’
U.S. nuclear envoy Christopher Hill said earlier Saturday that a technical glitch was holding up the final transfer, but that the issue would likely be resolved soon.

“I heard that the money was transferred, it’s in Russia, and they’re having some technical problems in getting it to the bank where the actual North Korean accounts are,” Hill told reporters at an Asia Society conference in Mongolia.

Hill did not provide details of the technical problem, but said it should be resolved by Monday, and possibly as early as Saturday.

Once the North Koreans get the money, “we hope they will get on with what they need to do in terms of implementing the February agreement,” Hill said.

Although the timing of the next round of six-nation talks is up to the host country, China, Hill said he expected them to be held in early July. He said it was important for North Korea to fulfill its obligations under the first phase of the disarmament agreement before the next meeting.

“I would anticipate we would want these first-phase items to be done before we have a six-party meeting because we don’t want to have a six-party meeting to discuss what we’ve discussed before,” Hill said. “I’m not making that some kind of condition, I just think it’s a logical sequence of events.”

The first phase requires North Korea to shut down its reactor and invite IAEA inspectors.

Following the money
In the next phase, North Korea is required to make a complete declaration to the IAEA and other parties about its nuclear program, which then is to be dismantled. As a reward, the country would ultimately get aid worth 1 million tons of heavy fuel oil along with political concessions.

Hill was to travel to China, South Korea and Japan next week.

To win the North’s promise to start dismantling its nuclear program, the U.S. agreed to allow the North Korean funds at the Macau bank to be freed. But the transfer has taken months as North Korea insisted that it be sent electronically to another bank, apparently to prove the money is now clean.

Several media reports have said the money was being sent through the U.S. Federal Reserve branch in New York to North Korean accounts in Russia’s Far East. Hill did not confirm the exact route of the money transfer.

On Thursday, Macau’s chief finance official said the money had been transferred from Banco Delta Asia, but it remained unclear if the entire amount had moved. Officials knowledgeable about the transfer have said more than $23 million was involved.

The participants in the six-nation talks are the U.S., the two Koreas, Russia, China and Japan.

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