BEIJING/WASHINGTON (REUTERS) - China on Friday (Dec 29) denied reports it had been illicitly selling oil products to North Korea in violation of UN sanctions, after US President Donald Trump said he was unhappy that China had allowed oil to reach the isolated nation.

China on Thursday had blocked a US effort at the United Nations to blacklist six foreign-flagged ships Washington believes had engaged in illicit trade with North Korea, a UN Security Council diplomat said.

Trump said on Twitter on Thursday that China had been "caught RED HANDED" allowing oil into North Korea and that would prevent "a friendly solution" to the crisis over Pyongyang's development of nuclear-tipped missiles capable of hitting the United States.

In a subsequent New York Times interview, Trump explicitly tied his administration's trade policy with China, North Korea's neighbour and lone major ally, to cooperation in resolving the North Korea standoff.

"I have been soft on China because the only thing more important to me than trade is war," he said. "If they're helping me with North Korea, I can look at trade a little bit differently, at least for a period of time. And that's what I've been doing. But when oil is going in, I'm not happy about that."

South Korea's Chosun Ilbo newspaper this week quoted South Korean government sources as saying that US spy satellites had detected Chinese ships transferring oil to North Korean vessels about 30 times since October.

US officials have not confirmed details of this report but a US State Department official said Washington had evidence that vessels from several countries, including China, had engaged in transhipping oil products and coal.

Chinese Foreign Ministry spokeswoman Hua Chunying told reporters she had noted recent media reports, including suggestions a Chinese vessel was suspected of transporting oil to a North Korean vessel on Oct 19.

"In reality, the ship in question has, since August, not docked at a Chinese port and there is no record of it entering or leaving a Chinese port," Hua said, adding that the reports"did not accord with facts."

"China has always implemented UN Security Council resolutions pertaining to North Korea in their entirety and fulfils its international obligations. We never allow Chinese companies and citizens to violate the resolutions," Hua said.

"If, through investigation, it's confirmed there are violations of the UN Security Council resolutions, China will deal with them seriously in accordance with laws and regulations."

South Korea said on Friday that in late November it seized a Hong Kong-flagged ship, the Lighthouse Winmore, suspected of transferring oil to North Korea. The ship's registered manager, Lighthouse Ship Management, is in the Chinese port of Guangzhou.

A South Korean Foreign Ministry official said the ship transferred as much as 600 tons to the North Korea-flagged Sam Jong 2 on Oct 19 in international waters between China and the Korean peninsula, on the order of its Taiwan-based charterer, Billions Bunker Group.

Taiwan's presidential office said the firm was not incorporated in Taiwan and China's Foreign Ministry spokeswoman said she did not have any information about the matter.

US SHIP-BAN PROPOSAL

Both ships were among 10 vessels the United States proposed that the UN Security Council should blacklist for illicit trade with North Korea, documents seen by Reuters this month showed.

"China blocked six of the proposed vessels," a UN Security Council diplomat said. "Four of the vessels were designated yesterday."

Three of the ships designated were North Korean, while the other was the Panama-registered Billions No. 18.

The other ships included the Lighthouse Winmore, the Xin Sheng Hai; the Yu Yuan; the Glory Hope 1 (also known as Orient Shenyu), and the Kai Xiang.

The Trump administration has led a drive to step up global sanctions on North Korea and the UN Security Council last week unanimously imposed new sanctions in response to Pyongyang's Nov. 29 test of an intercontinental ballistic missile (ICBM).

Those sanctions seek to further limit North Korea's access to refined petroleum products and crude oil and Washington says the full cooperation of China, North Korea' main trading partner, is vital if this peaceful pressure campaign is to succeed.

It has warned that all options are on the table, including military ones, if sanctions fail.

US Defence Secretary Jim Mattis was asked by reporters on Friday whether the US Navy might become involved in seizing vessels suspected of transferring oil to North Korea.

He said he would not speculate on future operations but added: "Obviously if a government finds that there is a ship in their port conducting trade that was forbidden under the UN Security Council resolution, then they have an obligation and so far we have seen nations take that obligation seriously."

In September, the Security Council put a cap of 2 million barrels a year on refined petroleum products exports to North Korea.

The latest UN resolution seeks to ban nearly 90 per cent of refined petroleum exports to North Korea by capping them at 500,000 barrels a year.

It also caps crude oil supplies to North Korea at 4 million barrels a year and commits the Security Council to further cuts if North Korea conducts another nuclear or intercontinental ballistic missile test.

Ship tracking data in Thomson Reuters Eikon shows that the Lighthouse Winmore has mainly been doing supply runs between China and Taiwan since August.

Prior to that, it was active between India and the United Arab Emirates. In October, when it allegedly transferred petroleum products to the North Korean ship, the Lighthouse Winmore had its tracking transponder switched off.

South Korea's customs service concluded that the Lighthouse Winmore had loaded about 14,000 tonnes of Japanese refined petroleum products in South Korea on Oct 11, reportedly bound for Taiwan, the South Korea official said.

"It's unclear how much oil the ship had transferred to North Korea for how long and on how many occasions, but it clearly showed North Korea is engaged in evading the sanctions," the official told Reuters.

It was not immediately possible to find contact information for the Taiwanese charter company.

The Hong Kong government said it was "liaising with the Korean parties concerned to obtain further information about the incident, and will take appropriate actions as necessary".

Employees at the office of Lighthouse Ship Management declined to comment and said they had no knowledge of the situation.