By Arshad Mohammed and Sue Pleming
WASHINGTON (Reuters) - The United States may soon remove North Korea from a terrorism blacklist to try to salvage nuclear talks with Pyongyang but faces resistance from Japan, a source close to the negotiations on said Friday.
"It's probably going to happen," the source said when asked whether Washington was weighing the removal of North Korea from the U.S. list of state sponsors of terrorism, which imposes a range of sanctions.
An announcement had been expected on Friday but U.S. officials said a decision had not been made. They pointed to a need to get "consensus" among the other four nations involved in the talks with Pyongyang.
Japan, in particular, has reservations.
Asked whether President George W. Bush had signed off on removing North Korea from the State Department's terrorism list, White House spokeswoman Dana Perino said: "No."
"We're continuing to work with our six-party partners but I don't expect anything else today on that," Perino added.
The Bush administration has been scrambling in its final months to save the aid-for-disarmament agreement with secretive and impoverished North Korea that it hoped to claim as a rare foreign policy success.
The drive to revive the deal also comes as North Korea has stepped up efforts to rebuild its nuclear facility at Yongbyon and banned U.N. monitors from the Soviet-era plant -- moves Washington and others say must be reversed.
Under a broad accord struck in 2005 between North Korea, South Korea, China, Japan, Russia and the United States, Pyongyang agreed to abandon all nuclear programs in exchange for potential economic and diplomatic benefits.
Under a subsequent pact, the United States suggested it would remove North Korea from the terrorism list in exchange for Pyongyang providing a "complete and correct" declaration of all of its nuclear programs.
That deal has become snagged by North Korea's reluctance to accept a mechanism allowing the United States or other members of the talks to verify its declaration.
It is also held up by Tokyo's objections to delisting North Korea until the issue of the abduction of Japanese nationals decades ago by North Korean agents is settled.
TALKS WITH JAPAN, OTHERS
U.S. Secretary of State Condoleezza Rice discussed North Korea on Friday with Japan's foreign minister, as well as those from China and South Korea, said her spokesman Sean McCormack, who expected Rice to talk to her Russian counterpart soon.
McCormack refused to be drawn on whether Japan was holding up the delisting, except to repeat the Bush administration's view that the abductions issue must be quickly resolved.
"We'll see if we get to the point where we have a verification protocol and regime that all the six parties can agree upon," he told reporters.
But the source close to the talks said Japanese Foreign Minister Hirofumi Nakasone had voiced misgivings about the U.S. plans and that Bush might speak to new Japanese Prime Minister Taro Aso to discuss the matter.
Analysts say one way to break the logjam could be for the United States to agree to less specificity in a verification protocol, making it more palatable to Pyongyang, which has said earlier proposals amounted to house-to-house searches.
The United States could then put forward a more specific set of verification procedures to be blessed by the six-party talks, possibly providing a face-saving out for Pyongyang.
But softening the verification language is likely to attract fierce criticism, particularly from conservative Republicans who believe the Bush administration would be giving in to North Korea and putting off any reckoning on suspected nuclear proliferation or uranium enrichment programs.
"This is still in play, but if the final result is a watered-down verification agreement backed by a unilateral U.S. statement of its understanding of verification procedures, the administration risks heavy criticism," said Michael Green, a former National Security Council Asia expert now at the Centre for Strategic and International Studies (CSIS) think tank.
North Korea tested a nuclear device in 2006 using plutonium and it is suspected of pursuing a uranium enrichment program, which would provide a second path to make fissile material for nuclear weapons.
Jon Wolfsthal, also from CSIS, said his understanding of the U.S. proposal was that North Korea would give China a set of verification steps it is prepared to take. Washington would then quietly accept the terms and drop Pyongyang from the terrorism list.
"We are obviously dancing to the North Koreans' tune at this point," Wolfsthal said.
(Additional reporting by David Alexander; Editing by John O'Callaghan)
