U.S. and North Korean officials will be getting together as early as this coming Monday to discuss what, after all, caused the latest round of six-party talks to fail. Although many have pointed to larger foreign-policy issues-such as security guarantees-the talks never had a chance to broach those important points because of a dispute on a more mundane issue: North Korea's alleged counterfeiting of dollars and other illicit activities.

The United States has frozen North Korean accounts at Macau's Banco Delta Asia (BDA) due to the regime's alleged counterfeiting and drug-running operations. North Korea insists the account must be unfrozen before talks on the nuclear issue can proceed. Clearly, U.S. concerns regarding fake dollars and drugs are secondary to the need for substantive negotiations over Pyongyang's nuclear weapons program. As South Korean President Roh Moo-Hyun noted in a December 23^rd interview with the Seoul Times, the United States decided to impose those financial sanctions just a few days before a September 2005 joint statement was to respond to Pyongyang's nuclear program, ensuring that a "September 19^th agreement was buried before it was born."

Since the illicit activities were a side issue injected into the process by Washington in the first place, U.S. officials should lift the sanctions next week and get on with the talks that really matter. Failure to negotiate only strengthens North Korea's incentive to expand its arsenal of nuclear weapons.

Still Some Promise

Despite much of the dispensed wisdom, North Korean leader Kim Jong Il still has an appetite for a comprehensive deal that involves step-by-step, reciprocal moves. Apart from a lifting of sanctions, the deal would have to include providing food and energy aid and making a non-aggression pledge, leading towards political recognition. Until the Bush Administration accepts this framework, or something like it, the North Korean nuclear talks will continue to fail. But since talking is clearly the only viable option, the Bush Administration may yet come around to adopting a more pragmatic approach.

To understand North Korea's position, a little history is in order. In the mid-1990s, when it seemed that the United States and North Korea might be on the brink of war over the nuclear issue, former President Jimmy Carter engaged in some last minute citizen diplomacy that opened the way to the 1994 "framework" agreement between Washington and Pyongyang. The agreement called for a gradual lifting of economic sanctions, the provision of food aid and energy assistance (in part involving the provision of proliferation-resistant nuclear reactors), and movement towards political recognition. In exchange, Pyongyang would take verifiable steps towards dismantling its nuclear and ballistic missile programs, including steps to prevent the use of plutonium- fuel rods for bomb production and a moratorium on missile testing.

For all of its ups and downs, the 1994 agreement made considerable progress while the United States lived up to its end of the bargain. When deadlines were not met for supplying the alternative reactors, or Congress refused to lift specific sanctions, North Korea would "act out", culminating in its summer 1998 ballistic missile test. But even after that test, the Clinton Administration managed to get the talks back on track, to the point of obtaining an agreement on a moratorium on North Korean missile tests, which lasted for eight years before it was broken by a test conducted in early 2006.  And though this is much forgotten, the U.S. inspectors had, in pursuance of the framework agreement, been on the ground in North Korea for much of the 1990s, to ensure that North Korea was upholding its agreed commitments.

Bush's Contribution, and Quandary

The Bush Administration changed all that. When Secretary of State Colin Powell suggested continuing along the lines that the Clinton Administration started, he was slapped down by hardliners on the Bush national security team. It took the Bush Administration roughly a year and one-half to resume talks, a period in which it lost time and credibility.

Kim Jong Il is willing to weather economic sanctions by starving his own people. And Pentagon analysts have determined that an attack on Pyongyang would prompt a counter-strike that could kill tens or even hundreds of thousands of people in the South Korean capital of Seoul. The United States and South Korea would win the war, but at too steep a price. Efforts to do "precision strikes" on North Korean nuclear facilities would almost surely flounder due to a lack of adequate intelligence as to where all the key facilities are located. And since it would still be an act of war, North Korea is expected to respond in kind.

So, like it or not, a cooperative approach to capping and dismantling Pyongyang's nuclear program is the only option available. Kim Jong Il is a vicious dictator whose word needs to be checked and double-checked by inspections and other means. But as an isolated autocrat with few real friends in the world, he may be persuadable, given the right package of incentives. Putting off this effort due to a dispute over banking sanctions foolishly undermines U.S., and Asian, security.

William D. Hartung is a senior research fellow at the World Policy Institute at the New School in New York.