FACE-SAVING COMPROMISE?

An analyst in Seoul said Kim's comments might indicate Pyongyang was fishing for a compromise, where the United States could say not all of the North's accounts frozen at the Macau bank were used for illicit activity and then free up some funds.

"Seoul's preference is for the U.S. to find some gesture that will help North Korea save face. China's position is not all that different," said Kim Sung-han, head of North American studies at the Institute of Foreign Affairs and National Security.

Analysts have said a meeting between the U.S. and Chinese presidents next week in the United States could also increase the pressure on North Korea to return to talks.

Beijing is urging flexibility on the financial crackdown. Tokyo says Pyongyang must appreciate that unless the atomic issue and a separate standoff with Japan over abductees is resolved the North's already weak economic position would deteriorate further.

Hill, currently in South Korea, said Pyongyang was boycotting the discussions, but urged patience for the stalled process.

Washington says the financial issue is separate from the nuclear talks and has urged Pyongyang to return to the talks.

Hill said the amount of the frozen Macau funds was about $20 million, equal to approximately one week's worth of energy aid proposed by South Korea for the North in return for scrapping its nuclear programs.

"The DPRK needs to understand that as long as it is going to be producing nuclear weapons, we are going to be having a real close look at its finances," Hill said, referring to the North's official name, the Democratic People's Republic of Korea.

Hill, who was in Tokyo until Wednesday, had no substantive discussions with Kim in the Japanese capital, dimming prospects for renewed progress in the nuclear talks. Hill said he was ready to meet Kim face-to-face within the six-party format.

The last round of the talks among the two Koreas, China, Japan, Russia and the United States was held in November.