WASHINGTON (Reuters) — A snag in what is probably the easiest phase of the North Korea nuclear agreement has sparked new criticism of the Bush administration but US officials appear committed to pursuing a solution, even if it reverses previous policy.More than a month after Pyongyang was due to shut down its Yongbyon nuclear complex under a February 13 deal, it has not done so, insisting it first receive $25 million in once-frozen accounts.

“It’s tricky but I think some way forward will be found because everybody has such an interest in getting this issue stabilised,” said Gary Samore, a non-proliferation expert and vice president at the Council on Foreign Relations.

The funds are held in the Macau-based Banco Delta Asia or BDA and the US State Department has been trying to persuade international and US banks, including Wachovia Corp., to facilitate a transfer of the accounts to the North. Whether other options are being actively discussed is unknown.

Because the US Treasury Department blacklisted BDA on grounds that it is tainted by Pyongyang’s counterfeiting and other illicit activities, reputable institutions have been reluctant to risk handling the funds. Keen for a foreign-policy success, President George W. Bush, who once branded North Korea part of an “axis of evil”, and top aides have shown unusual patience as the BDA issue plays out. The hard-won deal, achieved after North Korea tested a nuclear weapon last October, must not be allowed to founder over the relatively paltry sum of $25 million, chief US negotiator Christopher Hill and other officials have insisted.

But critics disagree. John Bolton, a leading opponent of North Korea when he was Bush’s UN envoy and top non-proliferation expert, excoriated the US approach in a Wall Street Journal column this week and urged Bush to withdraw from the deal. He argued that despite the agreement, there is still no sign Pyongyang will forsake nuclear weapons or that it made significant concessions, since the 50 megawatt nuclear reactor at Yongbyon is near the end of its life span anyway.

More alarming, Bolton and other critics said, is a reversal of policy that is undermining US credibility and muscle as Washington confronts not only North Korea but Iran as well.

On moving against BDA in September 2005, the Treasury said it had taken law enforcement actions that could only be reversed when Pyongyang halted counterfeiting, drug and cigarette smuggling — practices officials say continue even now.

Administration hardliners had long advocated such pressure — isolating North Korea from the international financial community — as the only way to force change in Pyongyang’s behaviour or perhaps topple the system.

They were so sure the pressures would stay in place until the Pyongyang government collapsed, that they gave little thought to how the penalties could be lifted as part of a diplomatic settlement, officials said. But when it became apparent there would be no negotiations or nuclear deal with North Korea if the funds were not released, Bush at first agreed Pyongyang could get some of the money back and then relented in giving all of it back.

Finally, after insisting it had done all it could by acquiescing in the funds’ release, the United States agreed to find a bank to handle the BDA transfer, a move critics say will allow Pyongyang back into the international financial system.

It is “perplexing to see the US now take a series of unilateral steps to unravel this policy (of UN sanctions and related actions) and reward North Korea for doing ... well nothing,” Michael Green, a former White House Asia adviser during the period when Bush refused to talk to Pyongyang, wrote in the Financial Times.