Fake Bills, Nuclear Impasse Haunt Korean Border

By Louisa Lim

Published March 25, 2006 at 2:08 PM CST

South Korean soldiers stand guard on the border. The treeline behind them is where North Korean soil begins. The haze is from spring sand arriving from the Gobi desert. Observers say talks on North Korea's nuclear future "are in a fog of yellow sand."

In February, at a market in Seoul, South Korea, three people were caught trying to exchange $140,000 in "supernotes." That's the name for counterfeit U.S. $100 dollar bills that are manufactured in North Korea.

The discovery was embarrassing for the South Korean government, which is not eager to crack down on counterfeiters for fear of disrupting a policy of engagement with the North. North Korea backed out of six-party talks on its nuclear ambitions in November, saying it won't participate until the U.S. stops pursuing the counterfeiting issue.

South Korea's ambiguous position on counterfeiters is straining the longtime U.S. ally's currently shaky relationship with the Bush administration. And while many analysts believe that Pyongyang -- its finances squeezed -- must eventually return to the negotiating table, the delay causes more anxiety about North Korean progress toward nuclear weapons.