* New sanctions target North Korea's leadership
* Sanctions follow sinking of South Korean warship
* U.S. seen skeptical on resumption of nuclear talks (Adds details, quotes on sanctions)
By Arshad Mohammed
WASHINGTON, Aug 30 (Reuters) - President Barack Obama broadened financial sanctions on North Korea on 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 warship.
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 programs.
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 FREED U.S. PRISONER
North Korea removed one irritant to its relationship with the United States on 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 on 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)
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