SEOUL - Negotiations to transfer North Korean funds held at a Macau bank, central to the reclusive state moving on a nuclear disarmament deal, are in their final stages, South Korea's foreign minister said on Wednesday.

A North Korean missile unit takes part in a military parade to celebrate the 75th anniversary of the founding of the Korean People's Army in Pyongyang, April 25, 2007. [Reuters]

And Yonhap news agency quoted a South Korean official as saying the transfer could be completed by the end of the week.

"Related countries have entered the final stages of resolving the BDA (Banco Delta Asia) issue," Foreign Minister Song Min-soon told reporters.

Song added that North Korea was among those countries looking for a way out of the problem but said it was too early to talk of a time-frame.

Pyongyang has refused to honor a February deal to begin shutting its Yongbyon nuclear reactor and source of material for atomic bombs until the $25 million of its funds stuck in BDA in Macau is released through normal banking channels.

That would in effect allow DPRK back into the international banking system from which it is currently ostracized.

"There is a high possibility all of North Korea's funds in BDA will be transferred within this week," Yonhap quoted what it called a key government official as saying.

The funds were effectively frozen in BDA and, because of the stigma attached to holding North Korean assets, banks have baulked at acting as a conduit for the money to be returned to Pyongyang.

The official denied some media reports that some of the money had already been withdrawn.

Optimism that the bank issue could finally be resolved has grown following word from Russia that it would help out.

Russia is one of five regional powers - along with China, Japan, South Korea and the United States - which has been negotiating with North Korea to end its nuclear weapons program in exchange for massive economic aid.