South Korea Koreas Nuclear
Ahn Young-joon  /  AP
A South Korean Marine aims his machine gun during a drill against possible attacks by North Korea at South Korea's western Yeonpyong Island, near the disputed sea border with North Korea, Thursday, June 4, 2009.(AP Photo/Ahn Young-joon)
updated 6/4/2009 4:17:34 PM ET 2009-06-04T20:17:34

South Korea said a North Korean patrol boat entered its waters around their disputed maritime border Thursday but backed off after nearly an hour following repeated warnings. A senior American diplomat meanwhile cautioned Pyongyang that its bad behavior would no longer be rewarded.

The naval standoff came amid concerns that the North might try to provoke an armed clash in the area — the scene of deadly naval skirmishes in 1999 and 2002 — to stoke tensions that were already running high after Pyongyang's nuclear test and a barrage of missile launches last week.

The regime has also conducted amphibious assault exercises near the sea boundary and appeared to be preparing for more missile tests.

The intrusion occurred as U.S. Deputy Secretary of State James Steinberg was in Seoul to coordinate a united response to Pyongyang's belligerence. South Korean news reports said a delegation of senior U.S. officials was working on financial sanctions against Pyongyang.

Steinberg told South Korean President Lee Myung-bak that "North Korea would be mistaken if it thinks it can make provocations and then get what it wants through negotiation as it did in the past. The U.S. won't repeat the same mistake again," Seoul's presidential office said in a statement.

Complicating the situation, two American journalists were to go on trial Thursday in North Korea's top court , on allegations they entered the country illegally and engaged in "hostile acts." Pyongyang's official Korean Central News Agency said in a brief dispatch the trial would begin at 3 p.m., but there were no further details as that time passed.

Some experts believe the North is using the trial and its nuclear and missile tests for leverage in possible talks with the United States, and that it hopes to win concessions or much-needed economic aid.

Sides technically at war
The North Korean patrol boat crossed about a mile into South Korean-claimed waters near their disputed western sea border and turned back some 50 minutes later without incident after a warning from the South, South Korea's Joint Chiefs of Staff said.

It was likely chasing away Chinese fishing boats illegally catching crabs in the area, it said.

Pyongyang did not comment on the maritime incident.

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North and South Korea technically remain at war because they signed a truce, not a peace treaty, in 1953. North Korea disputes the U.N.-drawn maritime border off its west coast and has positioned artillery guns along the west coast on its side of the border, according to Seoul's Yonhap news agency.

Stuart Levey, the Treasury Department's undersecretary for terrorism and financial intelligence, agreed with South Korean Vice Finance Minister Hur Kyung-wook to strengthen cooperation in the fight against money-laundering and counterfeiting, Hur's office said.

The Dong-a Ilbo newspaper said U.S. and South Korean authorities have confirmed the North has kept producing high-quality fake U.S. dollar bills, known as "supernotes," and that Washington could use the counterfeiting as justification for its own sanctions. It cited an unidentified source in Washington.

Regime gets angry
The alleged counterfeiting was discussed Wednesday at a meeting in Seoul between U.S. and South Korean intelligence authorities, the report said. The American officials are believed to be part of Steinberg's delegation.

Levey, also a part of the delegation, was in charge of the U.S. financial restrictions imposed on a bank in the Chinese territory of Macau in 2005 for allegedly helping North Korea launder money from counterfeiting and other illegal activities. The move effectively led to the North being cut off from the international financial system, as other institutions voluntarily severed their dealings with the bank and the nation.

North Korea became so angry that it stayed away from nuclear disarmament talks for more than a year. The deadlock was resolved when the U.S. freed some $25 million in North Korean funds held at the Macau bank, a move that allowed Pyongyang back into the international banking system.

Curtailing the North's financial dealings with the outside world is being considered as part of U.N. punishments, along with freezing company assets and enforcing an arms embargo, according to U.N. diplomats.

But China and Russia, key allies of North Korea, have raised questions about some of the proposals, diplomats said on condition of anonymity because the consultations are private.

The Yonhap news agency said Steinberg's delegation planned to present evidence of the North's counterfeiting in talks with Chinese officials to try to persuade Beijing to agree to financial sanctions. The delegation planned to visit China on Friday.

Meanwhile, North Korea released few details about the trial of the two American journalists, Laura Ling and Euna Lee, who worked for former Vice President Al Gore's Current TV media venture. They were arrested March 17 near the North Korean border while on a reporting trip to China. Conviction for "hostility" or espionage could mean five to 10 years in one of North Korea's harsh labor camps.

The trial came as North Korea pushed ahead with preparations to launch a long-range ballistic missile, believed capable of reaching the U.S. The missile was being assembled at a newly completed facility in Dongchang-ni near China, according to South Korea's JoongAng Ilbo newspaper. Earlier reports said it could be ready for launch in a week or two.

More on North Korea

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