SEOUL - North Korea said on Monday that the standoff over frozen funds had been resolved and it would now start implementing a nuclear disarmament deal struck in February.

The first step would be to hold discussions in Pyongyang on Tuesday with officials of the UN nuclear watchdog on shutting down the country's nuclear facilities, North Korea's KCNA news agency quoted a Foreign Ministry spokesman as saying.

"As the funds that had been frozen at Macau's Banco Delta Asia have been transferred as we demanded, the troublesome issue of the frozen funds is finally resolved," he said.

He said there could now be "action for action": "As part of that, there will be discussions with International Atomic Energy Agency (IAEA) delegates June 26 in Pyongyang on shutting down nuclear facilities and inspections and monitoring."

Earlier, Russia's Dalkombank said $25 million, frozen after the United States accused North Korea of laundering illicit funds, had been transferred to Pyongyang.

North Korea had refused to honour the disarmament-for-aid deal struck by six countries until it got the money back.

That breakthrough came as an IAEA inspector arrived in China on his way to North Korea, where he hopes to arrange the return of officials to monitor a shutdown of the Yongbyon reactor.

Olli Heinonen, the International Atomic Energy Agency's deputy director general for safeguards talks to journalists after arriving the airport in Beijing Monday, June 25, 2007. [AP]

The reactor is the centrepiece of North Korea's nuclear programme.

In exchange for the shutdown, North Korea will receive fuel aid and other benefits, including steps to lift trade sanctions and remove it from a US list of state sponsors of terrorism.

"Now we are going to negotiate how to verify and make sure the reactor will be shut down and sealed, so this is the next step on this long trip," Olli Heinonen, the IAEA's deputy director in charge of global nuclear safeguards, told reporters. Heinonen's four-member team is due to arrive in Pyongyang on Tuesday and is expected to stay for five days in the country. North Korea ejected IAEA inspectors in December 2002 and left the nuclear Non-Proliferation Treaty shortly afterwards.

In 2005, North Korea announced it had nuclear weapons. Last year, the country test-detonated its first nuclear device, drawing widespread condemnation and UN financial and arms sanctions.

US envoy Christopher Hill, who made a surprise overnight trip to the East Asian state last week, said in Tokyo on Saturday that North Korea would probably shut Yongbyon within three weeks.

Despite signs of a reduction in tension, Pyongyang's official Rodong Sinmun newspaper accused Washington earlier on Monday of escalating provocative war manoeuvres against North Korea.

"The US anachronistic hostile policy and moves for military confrontation... (are) escalating the tensions on the Korean peninsula and increasing the danger of war," the newspaper said, according to a report on the North's KCNA news agency.