SEOUL, South Korea (AP) – North Korea and America ignored a South Korean offer to help resolve a banking dispute that has bedeviled progress on Pyongyang’s nuclear disarmament, the South’s president said Thursday in an interview with The Associated Press.

Roh Moo-hyun added that he believed the Pyongyang regime’s nuclear program was strictly a bargaining chip and predicted North Korean leader Kim Jong Il would give up the bombs if his conditions were met: security guarantees, economic aid and normal relations with America.

“North Korea harbors huge anxieties or fears toward the United States and (South Korea). And in this climate, North Korea, I believe, chose the development of a nuclear program, and with this nuclear program I believe they try to use it as a negotiating tool,” Mr. Roh said during an interview with AP President and CEO Tom Curley. “This was a political strategy.”

Mr. Roh, whose term expires in February, also said there could be time while he is in office to hold a summit with Kim – but only if the North moved to abandon its nuclear program.

International talks on North Korea’s nuclear arms program have been beset by repeated delays since late 2002, when Pyongyang expelled U.N. inspectors after Washington accused the communist nation of running a secret uranium enrichment program in violation of a 1994 disarmament deal.

Most recently, the process has deadlocked over some $25 million in North Korean accounts frozen in a Macau bank. That bank was blacklisted in 2005 by Washington for alleged complicity in counterfeiting American dollars and money laundering by the Pyongyang regime.

Washington agreed to help free the money to win North Korea’s promise to shut down its sole operating nuclear reactor by mid-April and eventually dismantle its weapons program. But the money has not yet been withdrawn because other banks have shunned the tainted funds – and North Korea has refused to lock down its reactor until it gets the money.

Mr. Roh said his government had hoped to help to resolve the dispute. He did not elaborate on the offer, but local news media have said Seoul was considering asking a South Korean bank to be the middleman for getting the money to a North Korean account.

“We have offered to help in resolving the issue to both sides, but after our offer there has not been an answer from either side,” Mr. Roh said, referring to Washington and Pyongyang.

The top American negotiator on North Korea, Assistant Secretary of State Hill, appealed Thursday for Pyongyang to shut its reactor regardless of the financial dispute.

A senior North Korean official rejected the appeal.

“From the beginning, our position has been consistent” that the North will close the Yongbyon reactor only after receiving the funds, Kim Myong Gil, an official at North Korea’s U.N. mission in New York, told AP by telephone. “There is no other way.”

Mr. Roh left open the possibility of meeting with Kim, which would be only the second such Korean summit. Kim met in 2000 with then South Korean President Kim Dae-jung.

However, Mr. Roh said no meeting could happen without movement at the North Korea nuclear talks, which also include China, Japan, Russia, South Korea and America.

The two Korean states, which remain technically at war because the 1950-53 Korean War ended in a cease-fire, have been pursuing efforts to reconcile in recent years. But ties cooled last year after North Korea tested long-range missiles in July and then conducted its first nuclear test explosion in October.

Rapprochement efforts resumed after the North pledged initial steps toward nuclear disarmament.

A high-level delegation from North Korea was in Seoul for reconciliation talks set to end Friday, where the South has insisted the North start to dismantle its weapons program before Seoul delivers promised aid.

Mr. Roh said Seoul would continue to use aid as leverage in pressing the North to disarm. South Korea has drawn criticism at home and abroad over its “sunshine policy” of continued engagement even as Pyongyang holds on to its nuclear weapons.

“The fact that the Korean government is practicing the ‘sunshine policy’ toward North Korea does not mean that we forfeit all rights to take issue with North Korea’s missile launches and nuclear test,” Roh said. “Although we fully embrace the ‘sunshine policy,’ I believe that what has to be said, has to be said.”

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Associated Press writers Jae-soon Chang and Beth Duff-Brown contributed to this report