By Arshad Mohammed

WASHINGTON (Reuters) - President Barack Obama
broadened financial sanctions on North Korea Monday and
froze the U.S. assets of four North Korean citizens and eight
firms in part to punish it for the sinking of a South Korean

Obama signed an executive order that lets the United States
block the U.S. assets of North Korean entities that trade in
conventional arms or luxury products, counterfeit currency or
engage in money laundering, drug smuggling or other "illicit"
activity that supports the government or its leaders.

The administration targeted one North Korean citizen and
three entities under the new order, aimed at the North Korean
leadership, and an additional three citizens and five state
entities under existing U.S. authority.

Perks and luxuries such as jewelry, fancy cars and yachts
derived from North Korea's shadowy network of overseas
interests are believed to be one of the main tools Pyongyang
uses to ensure loyalty among top military and party leaders to
North Korean leader Kim Jong-il.

Stuart Levey, Treasury under secretary for terrorism and
financial intelligence, said the new order would help go after
businesses "that enrich the highest echelons of the North
Korean government while the North Korean people suffer."

It was unclear how the actions, which U.S. Secretary of
State Hillary Clinton previewed in July, might affect the odds
of reviving multilateral talks on ending North Korea's nuclear

Washington views the atomic capabilities of the North,
which tested nuclear devices in 2006 and 2009, as a threat to
its allies South Korea and Japan and a proliferation risk.

U.S.-North Korean relations have deteriorated since Obama
took office, with his aides deeply unhappy about Pyongyang's
decision to conduct nuclear and missile tests last year as well
as the March 26 sinking of the South Korean corvette Cheonan.

Forty-six South Korean sailors were killed in the incident,
which the United States, South Korea and other nations blame
squarely on North Korea. Pyongyang denies responsibility.

In the executive order, posted on the U.S. Treasury
website, Obama cited the Cheonan's sinking as well as the
nuclear and missile tests as evidence North Korea poses "an
unusual and extraordinary threat to the national security,
foreign policy, and economy of the United States."

At Treasury, Levey said "the destructive course the North
Korean government is charting is facilitated by a lifeline of
cash generated through a range of illicit activities" that the
United States is determined to counter.

Existing authority allows the United States to go after
entities involved in Pyongyang's weapons of mass destruction
and ballistic missile programs but not trade in luxury goods
and conventional arms.

The main purpose of the sanctions is not to actually freeze
North Korean assets that might be in U.S. banks -- analysts say
there are unlikely to be any -- but rather to discourage other
banks from dealing with North Korea, thereby cutting off its
access to foreign currency and luxury imports.

It was unclear what had determined the timing of the
executive order.


North Korea removed one irritant to its relationship with
the United States Friday when it released U.S. citizen
Aijalon Mahli Gomes, arrested in January and sentenced to eight
years of hard labor for entering the country illegally.

North Korea's state media Friday said the country's No.
2 leader had told former U.S. President Jimmy Carter, who
secured Gomes' release, that Pyongyang was committed to
denuclearizing the Korean Peninsula and resuming talks.

The Obama administration has been skeptical about returning
to so-called six-party negotiations with the two Koreas, China,
Japan and Russia, arguing it does not want to talk for the sake
of talking and North Korea must show some commitment to
abandoning its nuclear programs.

While there have been reports the Obama administration is
debating getting back into talks, several analysts said they
were skeptical this would happen any time soon.

"I think what they are doing right now is focusing on the
military exercises and the new financial sanctions," said
Victor Cha, a former National Security Council official now at
the Center for Strategic and International Studies think tank.

Alan Romberg, an analyst with the Henry L. Stimson Center
think tank, said Obama's moves were partly to punish the North
for the Cheonan sinking and partly to pressure Pyongyang to
engage seriously on denuclearization.

"It is also part of a continuing effort to put pressure on
the North so that when we get back to denuclearization talks
they will get serious," he said, suggesting the additional
sanctions may give Washington more leverage in any talks.

The U.S. Treasury posted the names of the North Korean
citizens and entities that were sanctioned on its Web site.

North Korean citizen Kim Yong Chol was targeted under the
new order, as were the following three North Korean state-owned
entities: Green Pine Associated Corporation, Office 39 and the
Reconnaissance General Bureau, a U.S. official said.

Three individuals -- Ri Hong-Sop, Ri Je-Son and Yun Ho-Jin
-- were targeted under previous executive orders as were five
entities: Korea Heungjin Trading Company, Korea Taesong Trading
Company, Munitions Industry Department, Second Academy of
Natural Sciences and Second Economic Committee.
(Additional reporting by Andrew Quinn; Editing by Mohammad
Zargham and Jerry Norton)