As Kim Jong-nam knocks back his regular late-night whiskies in Macau before retreating to his five-star hotel suite, he may well be drinking at the Last Chance Saloon. The US-instigated financial crackdown on Banco Delta Asia is starting to bite on North Korea's international financial arrangements. The Stalinist hermit state of Mr Kim's father, Kim Jong-il, has never looked so isolated, according to diplomatic, financial and security analysts. They say Pyongyang's international business, trade and legal transactions are grinding to a halt. North Korea's fraternal comrades on the mainland, in Vietnam and in Cambodia are also turning away North Korean accounts, putting their own international financial reputations first. Older accounts in Austria, Singapore and Bangkok have also been shut. The squeeze has been biting for months and Pyongyang is now struggling to find alternative methods of moving foreign exchange about. And Mr Kim, the eldest son of the North Korean leader, is a prime example of the North Korean elite whose activities the crackdown is designed to cripple. His means of funding his family's Coloane villa, his travels to Bangkok and Moscow, as well as his bar and food bills, could all be curtailed - even if the transactions are legal. The move by the US Treasury Department in September 2005 to pressure the Macau government into freezing US$24 million in North Korean-linked funds in Banco Delta Asia was the most public act in the crackdown. The bank's ordinary Macau retail customers panicked and withdrew their savings en masse. The bank is now in the hands of government-appointed receivers amid reports from Washington that the US Treasury may soon admit some of the 50-odd accounts are used for legitimate international business activity, allowing them to be unfrozen. The Treasury Department has yet to publicise detailed evidence to back its September 2005 statement that Banco Delta Asia was a 'willing pawn for the North Korean government to engage in corrupt financial activities'. At the time it cited concerns such as the distribution of counterfeit currency and the servicing of North Korean front companies linked to cigarette smuggling and counterfeiting and drug trafficking. North Korea has repeatedly demanded that the funds be freed, pointing to a lack of evidence by US authorities. The point was again hammered home in meetings in Beijing this week between representatives from the North Korean Foreign Trade Bank and US Deputy Assistant Treasury Secretary Daniel Glaser. The talks ended without any breakthrough, putting at risk the chances of success at next week's six-party talks geared towards forcing North Korea to finally scrap its nuclear programme. The fight has gone far beyond Banco Delta Asia. The pressure of US scrutiny is deterring banks large and small from taking the risk of servicing North Korea's legitimate banking needs. Even if a significant portion of the US$24 million is released, far greater damage has already been done. North Korea's missile tests in July last year and its first detonation of a nuclear weapon in October have hardened Washington's resolve. UN Security Council sanctions in the wake of the tests have further tightened the screws. In a speech in December, a senior Treasury official alluded to the wider fight. Stuart Levey, the US undersecretary for terrorism and financial intelligence, said: 'We must also go beyond simply designating individuals and entities that have been named by the United Nations and proactively identify terrorist supports that threaten our societies, hold them publicly accountable, isolate them financially and commercially, and ensure that all of their activities, whether seemingly legitimate or illicit, are shut down.' Colin McAskill, the British manager of an investment fund attempting to invest in North Korea, was more blunt in a recent interview with The Christian Science Monitor. 'The US has been using coercion, innuendo, and sheer force to intimidate banks from dealing with North Korea,' he said. That intimidation has clearly been working, according to Bradley Babson, a respected researcher on the North Korean economy and former senior official at the World Bank. 'All evidence now suggests North Korea has been reduced to the most basic barter trade,' he said. 'It appears they have not been able to significantly develop new foreign exchange and trade finance facilities ... they are paying the price for their isolation in these matters over many years. They had far too great a reliance on Macau.' Mr Babson said he was confident that the sanctions were hurting the North Korean elite they are aimed at. Lower-level trade across the Chinese, South Korean and Russian borders was continuing, since it is not reliant on international banking facilities. In a recent study produced for the Stanley Foundation think-tank, Mr Babson said that while North Korea's fledgling market economy had not been affected, 'the [North Korean] leadership needs hard foreign currency both to sustain its weapons programmes and to provide the elites in North Korean society with the luxury goods they have come to expect'. The impounding of the Banco Delta Asia accounts and the wider drive to prevent North Korea obtaining alternative banking services elsewhere had 'hit at the heart of the ... leadership's needs for access to hard foreign exchange for these purposes,' the report said. 'It has to be one of the more successful examples of sanctions at work,' Mr Babson said this week. North Korea still operates a string of front companies across the region, including Hong Kong. Without access to routine letters of credit or remittance facilities - the standard tools of regional commerce - nor to overdrafts, they are left to barter. This involves creating complex and often delayed arrangements so vital goods and services can be exchanged without any funds moving. 'It's immensely complex and we're still not fully sure how they are pulling it off,' said one diplomatic source. 'Certainly it is not efficient.' Intelligence reports have noted possible shipments to Bangkok of gold mined in North Korea - one of its several precious commodities. Goods needed by the regime are then purchased with the proceeds and shipped home, without any foreign currency transactions involved. Significantly, North Korea has recently obtained a listing on the London gold market as a 'good deliverer' of gold and silver. Its return to the world's biggest exchange after a two-year suspension is a sign it intends to find ways around the sanctions to engage in legitimate business, something London bankers warn could prove a struggle. Investors such as Mr McAskill's Chosun Development and Investment Fund have long eyed North Korea's natural deposits of not just gold, but silver, zinc, uranium and platinum. One recent example of the financial squeeze on the Stalinist nation was the plight of the Kang Nam 5, the coastal trading vessel trapped in Hong Kong harbour for 10 weeks. The Marine Department would not let it leave for safety reasons, but its North Korean owners struggled to forward just US$30,000 to Hong Kong agents for repairs. The Kang Nam is one of several dozen small, ageing freighters taking odd lots of cargo around the region, earning hard currency for Pyongyang. 'They've never had trouble paying for anything before,' said an agent source. 'We understand they had the money, but they simply could not get it out.' The funds eventually turned up via an agent on the mainland and the ship finally left Hong Kong on January 5. How the Macau operations of North Korea have been replaced is less clear. The Macau relationship started to flourish in the mid- to late 1970s, soon after the left-wing revolution of 1974 saw the new Portuguese government recognise communist North Korea. Macau was not only a banking hub for Pyongyang, but a trading hub as well. Zokwang Trading Company Limited was one of its oldest anywhere, with North Korean agents carrying diplomatic passports as they worked out of a small office on Avenida de Sidonio Pais. Dozens of traders, bankers, unofficial diplomats and spies would live in Macau at any one time. Weekly Pyongyang-Macau-Bangkok flights ended about two years ago. Zokwang has traded cloth, rubber and ginseng, but is more famous for other commodities. Its five top officials were arrested in 1994 for attempting to deposit US$250,000 in counterfeit US currency. They were later released. Zokwang and other small firms have closed shop in Macau and moved a few kilometres away over the border to Zhuhai . The continued presence of Kim Jong-nam, complete with villa and easy freedom of movement, is a reminder of the links that have survived the handover to China. With unprecedented diplomatic and economic pressures on Pyongyang, the future shape of that relationship is far from certain.