On 16 June 2007, North Korea invited IAEA inspectors for further discussions on closing down its main Yongbyon nuclear reactor pushing forward efforts to end a much-hyped standoff with the United States. International efforts to dismantle North Korea's nuclear weapons program had become entangled in the transfer of US$25 million blocked funds to the North. According to American officials, at least US$23 million of the disputed funds - believed to be part of a North Korean money laundering scheme - was moved from the US-blacklisted Macau bank, the Banco Delta Asia, to Russia's central bank, from where it is likely to be transferred to a Russian commercial bank near the North Korean border. North Korea has repeatedly cited the financial row for the lack of progress in executing its agreement to start disarming. Pyongyang has viewed the Bush administration's policy as one-sided and hostile and therefore compelling it to boost its self-defense deterrent, a term it uses to describe its nuclear program.

North Korea's decision to restart the nuclear installations at Yongbyon that were shut down under the US-North Korean Agreed Framework of 1994, to withdraw from the Nuclear Non-Proliferation Treaty (NPT), and its multiple missile tests on 4 July 2006 created a security and foreign policy problem for the US. Moreover, the 9/11 attacks ensured that the US would deal stringently with states trading hardware in the nuclear bazaar and Pyongyang was already a distinguished member of the 'axis of evil' regimes. In October 2002, the US accused North Korea of having an illicit uranium-enrichment program with centrifuge designs and components provided by the A Q Khan network. North Korea was also identified as the possible source of the uranium hexafluoride that Libya received for its centrifuge facilities. North Korea has also been accused of exporting nuclear materials and expertise to Iran. The two countries also have a history of collaboration in ballistic missiles development - Iran's Shahab series of missiles are modeled on North Korea's Nodong missiles.

A credible break was attained to discuss North Korea's nuclear weapons program through the six-party talks, which began with the US, China, Japan, Russia, North and South Korea in August 2003. The six-party talks have been criticized not only because they were frequently stalled but also, because of how North Korea managed to secure economic and energy aid from Washington. Many in the foreign policy circle debated if the deal was worth celebrating and if Washington and its allies could have done better. After all, the 13 February 2007 accord imposed new conditions on the US and North Korea wherein Pyongyang agreed to shut down its Yongbyon reactor and allow IAEA inspectors in return for energy, food, and aid worth 50,000 tons of heavy fuel. Washington also agreed to detach the terrorist tag from Pyongyang's back and assured it of a resolution to the Macau money laundering issue. In spite of winning a non-aggression pledge from Washington, North Korea missed the 14 April deadline to freeze its Yongbyon facility and refused to move until it received the US$25 million of frozen funds.

After a prolonged blame game, the funds at the Macau bank were transferred through the Federal Reserve Bank of New York. However, prospects for denuclearization of the Korean Peninsula continue to appear grim because of the North's highly unreliable nature. Firstly, because the North has not only managed to collect its funds at the Banco Delta Asia but also insisted that the money has to be wired back hoping to reenter the world financial system. It still has to be seen if the world is ready to accept North Korea's tainted money and pull it back into normal international financial transactions. Secondly, the 13 February agreement calls for shutting down not just the Yongbyon nuclear program but also for revealing all its current nuclear programs including plutonium extraction from spent fuel rods. In addition, moving beyond the 13 February agreement, North Korea would also be expected to return to the NPT. Thirdly, as per the 19 September 2005 agreement North Korea should eliminate the warheads it has produced, the plutonium it has extracted and return to IAEA safeguards. The challenge here is to stretch beyond the scope of 13 February agreement, which is rather narrow because it has concentrated more on the invitation of IAEA officials and less on what facilities and programs have to be reported for inspection. Finally, it remains unclear whether the suspected uranium enrichment program is also included in the list of nuclear programs to be declared.

In spite of much imprecision in the dealings with North Korea, the six-party talks cannot be dismissed as a failure. Rather, it should be seen as a step towards normalization of ties between North Korea and the US, and in pushing forward the peace process in Northeast Asia. The task continues to be arduous for even before any progress was made in ending its nuclear program, North Korea fired a short-range missile into the Sea of Japan on 19 June 2007.