Meanwhile, operating without much reference to the state Department, the Treasury announced that it had targeted a small bank in Macau for money laundering and corrupt activities on behalf of North Korea. The resulting sanctioning of the bank had the effect to stopping all other banks from dealing with the North and of causing the impounding of US $25 million belonging to the North. With tensions mounting the North Koreans tested missiles including the long-range Taepodong in July 2006, which led the UNSC to issue a sanctions resolution against the North. But on 9 October, the North carried out a nuclear test and, presumably to satisfy its Chinese ally, it then declared that it was still committed to the denuclearization of the Korean peninsula. Yet another UN Sanctions resolution was passed, but like the first, the resolution was neither mandatory, nor did it provide a basis for the use of force.
The Americans had tried to use the Chinese to bring pressure to bear on the North and indeed the Chinese Premier Wen Jiabao had called for ‘restraint’. The Chinese were outraged by the nuclear test and denounced the North’s behavior as ‘brazen’- a term usually reserved for imperialists and other enemies. Concerned about possible reactions in South Korea and Japan, the US government immediately reassured both allies of the continued viability of its extended deterrence in order to obviate moves by either to acquire its own nuclear deterrent. The Chinese side soon cooled its anger with the North and begun to press the US to show flexibility to enable all sides to return to the 6PT. the North insisted, however, that first the sanctions on the Macau bank be lifted and that the US$25 million be returned to Pyongyang. This led to bilateral negotiations with the US which the Bush administration had long resisted and an agreement in Berlin that supposedly would lead to a deal designed to end the North’s nuclear programme. That in turn led complex negotiations in Beijing resulting in an agreement to curtail the nuclear programme by stages linked to the provision of fuel oil. It amounted to Bush accepting a ‘freeze’ by the North and an agreement similar to Clinton’s Framework Agreement, which he had dismissed on becoming president in 2001. US officials claimed that the new agreement went further as it committed the North to dismantling its nuclear facilities; that the phasing of the fuel supplies meant that the bulk would be delivered at the end, once the North had carried out its part of the bargain; and finally that the agreement involved all members of the 6PT. However, the deal was denounced by the supporters of Bush’s previous tough stand and others were quick to point out that for all the tough talk of the previous five years the North now had a nuclear device, which enough plutonium to make up to ten bombs.
The North had shut down its nuclear reactor at Yongbyon, even blowing up the water cooler tower. In October the State Department removed the North from its list state sponsors of terrorism. But the process of implementing agreements about verification and the phasing of aid proved to be difficult and the North Korean refusal in December 2008 to accept a Chinese-drafted agreement, and that in turn led to the North restarting its nuclear programme. Arguably, Bush diplomatic approach to the North may have been more successful had it not been delayed by his initial hard line of the previous four to five years, and even in the ensuing years to the end of his presidency Bush’s new approach was still plagued by divisions within his ranks. There is no doubt that the mixed signals from the Bush administration accentuated the paranoia in Pyongyang about the American threat to the survival of the regime. As against that, it can also be argued that a regime which lines of China or Vietnam would most likely have continued to develop a nuclear weapons programme as the ultimate deterrent against foreign adversaries. In any event, American options were limited as the vulnerability of the 20 million people in Greater Seoul to North Korean artillery made a military attack to enforce a change of regime out of the question.