The Nork counterfeit operation and "diplomacy"

NY Times:

It has all the makings of a James Bond movie: an isolated authoritarian regime running a secret counterfeiting network with tentacles reaching into foreign banks, the Irish Republican Army and Chinese underworld gangs dealing in narcotics and antiaircraft missiles.

This is the picture of North Korea that former American officials and analysts say Washington has pieced together in recent years as it has investigated the appearance around the world of bogus $100 bills so perfect that they have been called "supernotes."

Using government printing presses to run off another country's currency, possibly in an effort to destabilize that currency, would appear to be the sort of criminal act that demands tough international penalties. But Washington's effort to press its case has become mired in the tricky politics of an even larger and more serious problem: nuclear proliferation.

[Late in the week, the North Korean government vehemently denied any hand in counterfeiting and vowed to resist pressure from the United States over the matter. In one commentary carried by the state-run Korean Central News Agency on Saturday, The Associated Press reported, Pyongyang declared that it does "not allow such things as bad treatment of the people, counterfeiting and drug trafficking." North Korea also warned, The A.P. said, that a new military pact between Seoul and Washington meant that "dark clouds of a nuclear war are hanging low over the Korean Peninsula."]

South Korea, an important United States ally in the region, apparently fears that pushing the counterfeiting issue could derail efforts to persuade North Korea to give up its nuclear ambitions.

...

China, which independently confirmed the counterfeiting allegations, has emphasized to North Korea that the issue should not be seized upon as a pretext for avoiding the talks, which Beijing would like to see resume by mid-February.

South Korea and other nations have deeper concerns that hard-liners in the Bush administration may be using the issue to drive a tougher bargain with North Korea, or to derail the talks.

...

In particular, Mr. Asher said, the administration waited until September to give the Federal Bureau of Investigation and other law enforcement agencies time to finish two elaborate undercover operations focusing on members of China's notorious Triad criminal syndicates. The operations, which ended in August, netted $4 million worth of supernotes with narcotics and counterfeit versions of name brand cigarettes.

The operations, called Royal Charm and Smoking Dragon, arrested 59 people suspected of being gang members, including some lured into the United States when federal agents posing as organized crime figures invited them to a staged wedding. Before they were arrested, some of the suspects even offered to sell federal agents shoulder-fired antiaircraft missiles, Mr. Asher said.

He said he did not know if the missiles had been made in North Korea.

Other details of North Korea's counterfeiting operation trickled out in October after the arrest in Northern Ireland of Sean Garland, a leading member of a faction of the Irish Republican Army, on charges he circulated more than $1 million worth of fake $100 notes in Britain and Eastern Europe.

"North Korea has been using all the immunities and technical abilities that only governments have" to counterfeit United States currency, Mr. Asher said. "The whole world has tolerated North Korea's illegal sources of income too long."

Why are the South Koreans being such wimps about the Nork criminal conduct? If China has independently come to the same conclusion why is South Korea trying to avoid that conclusion? Why are trey tring to excuse this conduct?