N. Korea bans U.S. dollars

A satellite photo of the North's suspected nuclear weapons facility in Hagap

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VIDEO CNN's Rebecca MacKinnon says food aid cuts are being tied to a dispute over N. Korean abductions of Japanese citizens. PLAY VIDEO RELATED • Story: Oil runs dry for North Korea  • Story: N. Korea says pact with U.S. 'void'  Gallery: Food crisis  Inside out: How North Korea sees the world  Special Report: The two Koreas  1994 agreement North Korea promised to give up its nuclear weapons program and allow inspections to verify that it did not have the material such weapons would require. The country has yet to allow the inspections. N. Korea nuclear facts North Korea launched a medium-range "test" missile over Japan in 1998. The 1994 Agreed Framework was signed by North Korea with the Clinton administration. In return, an international consortium is building new nuclear reactors in North Korea.

SEOUL, South Korea (CNN) -- North Korea will stop using U.S. dollars from next month, in an apparent retaliatory move after Washington halted oil shipments to Pyongyang.

The measure is the latest in a continuing diplomatic sparring with the United States that has increased tensions since U.S. President George Bush labeled the communist state part of an "axis of evil" in January and North Korea's recent admission it was pursuing a nuclear weapons program.

China's Xinhua news agency reported that North Koreans and foreigners will need to convert U.S. dollar accounts at the state-run Korean Trade Bank into euros or other currencies, quoting a letter from the bank.

North Koreans have had to adhere to the measure since November 18, the letter said, while foreigners will need to convert their dollars by December 1.

"Hotels, foreign-exchange shops and foreign-related services will receive no U.S. dollars from the start of December," a staff member of the Korean Trade Bank was quoted as saying in the Xinhua report.

U.S. dollar accounts will be converted automatically to euros if no declaration is made by the end of the month.

The dollar ban was a "political means" to react to increasing pressure from the U.S., an unnamed British diplomat was quoted as saying in the Xinhua report.

Washington suspended fuel oil shipments from December to the communist state in a bid to force North Korea to abandon its nuclear program. (Oil runs dry)

The suspension comes ahead of North Korea's harsh winter months that are set to compound what is already a famine crisis in the country. (Gallery: Food crisis)

But North Korea called the oil cut a violation of the energy aid pledged to Pyongyang as part of a 1994 deal.

Under the so-called "Agreed Framework" made with the Clinton administration, North Korea agreed to pull down its nuclear weapons facilities in return for the U.S.-led construction of two light water power reactors that did not produce material suitable for nuclear weapons. (Pact with U.S. 'void')

The deal also included 500,000 tons of oil a year from the United States.

Sample euro banknotes and coins have been put on display outside the Korean Trade Bank along with a poster informing local residents to change their dollars, Xinhua reported.

No deadline was given for the exchange, however.

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