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December 16 2009

18:24

DPM NEMYRIA'S CASE FOR UKRAINE IMF TRANCHE

C O N F I D E N T I A L SECTION 01 OF 04 KYIV 002140

SENSITIVE
SIPDIS

DEPT FOR EUR, EUR/UMB, EEB/OMA

E.O. 12958: DECL: 12/15/2019
TAGS: EFIN EREL ETRD PGOV PINR UP XH
SUBJECT: DPM NEMYRIA'S CASE FOR UKRAINE IMF TRANCHE

REF: A. KYIV 2133
¶B. KYIV 2102
¶C. KYIV 1982

Classified By: Ambassador John F. Tefft for Reasons 1.4 (b) and (d)

¶1. (C) Summary. Deputy Prime Minister Nemyria made a strong
pitch to the Ambassador for the disbursement of a fourth IMF
loan tranche to Ukraine. He talked of unreasonable IMF
demands for the passage of a 2010 budget, explained why the
central bank could not monetize for budget and gas payments,
and projected that a Ukraine meltdown would have spillover
effects for the region. Nemyria admitted that Prime Minister
Tymoshenko's presidential campaign had been damaged by
President Yushchenko, whose efforts had worked to
"demobilize" and fragment "post-orange" voters. Nemyria is
currently en route to Washington with key advisors for
emergency follow-up meetings with the IMF. End summary.

MORE FREQUENT FLIER MILES
-------------------------

¶2. (C) In a December 15 meeting with the Ambassador, Nemyria
revealed his talking points for December 17 and 18 meetings
with senior IMF officials. Nemyria heads back to Washington
only ten days after talks with IMF Managing Director
Dominique Strauss-Kahn, and less than a week since Foreign
Minister Poroshenko saw IMF Deputy Managing Director Lipsky.
The follow-up trip was apparently prompted by Prime Minister
Tymoshenko's December 14 call with Strauss-Kahn, who
allegedly expressed his openness to ongoing negotiations with
Ukrainian authorities. Nemyria will be accompanied by acting
Finance Minister Ihor Umanskiy, Deputy Finance Minister (and
budget expert) Anatoliy Myarkovksiy, and economic advisor
Mariia Nikitova.

GOU HONING ITS POSITION
-----------------------

¶3. (C) Nemyria tipped his hand by reviewing the GOU's
revised negotiating position. Tymoshenko wanted to make the
case that passage of a 2010 budget was not a reasonable
conditionality. Pre-election "political fragmentation" had
meant that there was almost no chance a budget could be
reviewed and adopted in the Rada (Ukraine's parliament)
before March or April. Furthermore, even if the budget were
reviewed, revised, and adopted on multiple readings (ref C),
President Yushchenko would again spite Tymoshenko and veto
the bill.

¶4. (C) The fact that the Prime Minister, the Ministry of
Finance, and the National Bank of Ukraine (NBU) had signed
the IMF Letter of Intent (LOI) was the best possible sign of
cooperation, Nemyria argued (ref B). It was clear the
President would not sign the LOI for political reasons (the
lack of an IMF program harms Tymoshenko's candidacy).
Therefore, there was a need to "de-politicize" the IMF
process, the Deputy Prime Minister said.

¶5. (C) The GOU would propose to the IMF that the Ministry of
Finance and the NBU jointly sign a second LOI, with the PM
providing a side letter to give her assurance that she would
propose a budget in line with the IMF's expectations after
the election. The GOU would also argue that the lack of a
2010 budget was not harmful. Having a continuing
resolution-type budget in 2010 would act as a
"straight-jacket" on the GOU for at least three months (i.e.
until after the inauguration). Any budget passed by the Rada
before the election would be populist and bloated, Nemyria
stated.

¶6. (C) Tymoshenko and her cabinet were concerned that the
IMF's Lipsky and staff-level "mathematicians" failed to see
their point. Lipsky had insisted in his meeting with Foreign
Minister Poroshenko that the 2010 budget be passed. IMF
staff had been allowed to "dictate the pace of the program",
especially over whether budget passage should be a lynchpin
requirement. Timing was crucial, and the IMF board needed to
be convinced quickly. Ukraine was willing to "compromise"
and accept a partial $2 billion tranche (instead of the full
$3.8 billion).

¶7. (C) In addition to political reasons preventing the NBU
from purchasing GOU securities to pay Gazprom or meet budget
obligations (ref B), Nemyria pointed to other factors that
militated against monetization. 1) He said it was "against
the law" for the NBU to finance the government deficit. 2)
He claimed the NBU could not provide funds to the government
via commercial banks, since auditors would not be able to
approve such transactions. Nemyria noted that this argument
had been used in July by Yushchenko, when the President
rejected the IMF's suggestion that the NBU monetize GOU
securities to make gas payments. 3) Nemyria claimed
monetization could lead to interest rates of 50-60%, such as
in Russia and Ukraine during the late 1990s. He said
Tymoshenko had been firm with Strauss-Kahn on December 14
when she noted that monetization was not an option.

¶8. (C) Note: The first point above was mentioned by Nemyria
and Poroshenko to the IMF last week. Nonetheless, while
legislation governing the powers of the NBU bans direct
lending to the GOU to finance the budget deficit, it does not
forbid the NBU from buying government treasury bills.
According to NBU official figures, the central bank purchased
UAH 27.7 billion in domestic treasury bills during the first
nine months of 2009. The IMF estimates the NBU has room to
print billions more, while holding enough reserves to protect
movement in the exchange rate. On the second point above,
according to Ukrainian legislation, loans to any one borrower
should not exceed 25% of a bank's capital. However,
state-owned Oshchadbank, the government's chief conduit for
monetization, has 53% of its loan portfolio booked with
Naftohaz, a sum roughly equal to 120% of its capital. A
bigger problem with domestic debt issuance to commercial
banks is that it crowds out other investment, given that
t-bill yields now exceed 24-25%. On the third point above,
the 2009 situation is qualitatively different from the 1990s.
Inflation this year will not reach higher than 15%, and
Ukraine's overall sovereign debt burden remains relatively
modest. End note.

OUTREACH GONE GLOBAL
--------------------

¶9. (C) Nemyria reported that Russia and Brazil had requested
an informal December 15 brief on Ukraine from the IMF board.
Strauss-Kahn told Tymoshenko that he had separately asked for
a brief from IMF executive directors and had planned to hold
sessions with the European, BRIC, and Nordic-Baltic groups on
Ukraine's behalf. The Deputy Prime Minister told the
Ambassador that he had recently met with the French, German,
and Chinese ambassadors. (Note: Key ally ambassadors
commented to the Ambassador on December 15 that they thought
both the Russians and the Chinese had been weighing in
heavily with the IMF. End note.)

¶10. (C) Nemyria reported that the German IMF executive
director had been the most cautious vis-a-vis emergency
lending to Ukraine. However, on the margins of the European
Peoples' Party congress in Bonn last week, Tymoshenko
apparently had been told by Chancellor Merkel that the German
Ministry of Finance planned to send updated instructions to
its representatives in Washington. Similarly, the French
Finance Ministry would send new instructions to its IMF
executive director, Nemyria told the Ambassador. (Note: Our
German embassy contacts told us on December 16 that Berlin
did not plan to back down from their firm approach to
Ukraine's IMF program. End note.)

IMF SDR ALLOCATIONS NOT ENOUGH
------------------------------

¶11. (C) Nemyria said that allocations of IMF Special Drawing
Rights (SDR) were nearly depleted. Most of the SDR
allocations had been used for gas and external payments.
According to the Deputy Prime Minister, the GOU had just
incurred an additional foreign currency obligation as a
condition of debt restructuring talks over a loan default by
Ukrzaliznytsa, the state railway company. The GOU would need
to pay an unspecified amount from the remaining SDRs to
Ukrzaliznytsa's creditors on December 29, Nemyria said.
(Note: We heard separately from Deputy Minister of Finance
Myarkovskiy that Ukraine had UAH 1.77 billion ($221 million)
in SDRs remaining. Nemyria made no mention of the GOU's use
of SDRs for November budget payments. Nemyria economic
advisor Nikitova admitted to us that SDRs were reported as
November revenue for IMF budget deficit calculations. End
note.)

¶12. (C) The Deputy Prime Minister assured the Ambassador
that gas prices for household consumers would increase by 25%
in April 2010. This figure was enough to make up lost
revenue from the Prime Minister's cancelled increases in
September, a move that breached one of the IMF's core
demands, argued Nemyria. Naftohaz executives were meeting on
December 15 over whether to buy more gas in December, rather
than wait until 2010 when prices will be higher. Nemyria
believed that if Naftohaz bought 5.5 billion cubic meters
(BCM) in December (for about $1.2 billion), it would not need
to purchase as much in Q1 2010. (Note: Naftohaz spokesman
Valentyn Zemlyansky told us on December 15 that Naftohaz
planned to take roughly 5.5 BCM and would make the payment
for December gas purchases, due January 7, by the end of the
month. End note.)

¶13. (C) If it came down to making tough spending choices,
Tymoshenko would opt to contain possible social unrest,
according to Nemyria. The top item on her crisis agenda was
making wage and pension payments, the second was meeting
Ukraine's monthly bill to Gazprom, and the third was all
remaining budget obligations, including payment of large and
growing VAT refund arrears. In response to the Ambassador's
questions, Nemyria commented that Ukraine needed more
stability before refunding VAT to exporters, though he noted
some SDRs had been used for that purpose in recent weeks.

DIM PROSPECTS WITHOUT IMF
-------------------------

¶14. (C) Nemyria concluded his review of Ukraine's position
on the IMF by stating that the Fund program had been a
success thus far. Ukraine's economy had stabilized; the run
on bank deposits had been stopped. But speculative,
short-term capital could flee from Ukraine at any time, and
parent banks were poised to pull stakes if things got too far
off track with the IMF, Nemyria added.

¶15. (C) The Deputy Prime Minister commented that his recent
media interviews were neither "blackmail" nor "soft
blackmail", as critics suggested (ref A). IMF staff simply
had not paid enough attention to the potential strategic
consequences of Ukraine's economy unraveling. There would be
a spillover to the region, Nemyria noted, especially
affecting fragile economies like neighboring Hungary. Any
strategic opportunity for reforming Ukraine after the
presidential election would be lost.

TYMOSHENKO'S ELECTION CHANCES
-----------------------------

¶16. (C) The presidential election was now a contest between
Tymoshenko and opposition Party of Regions leader Viktor
Yanukovych. There was no longer "any talk of a third
candidate" (i.e. Arseniy Yatsenyuk). Yanukovych had an
impressive lead of 7-10%; he would likely preserve this
margin through the first round of balloting on January 17.
Nemyria commented that Yanukovych's core was solid but his
projected 2nd round support of 42% would be 6% less than in
¶2004.

¶17. (C) The biggest concerns for Tymoshenko were the
fragmentation and "demobilization" of the "post-orange"
electorate. Pro-European voters had split their allegiances
among a number of Ukraine's eighteen candidates, though in
aggregate they added up to more votes than Yanukovych could
expect to receive. The key was to attract those voters
between the first and second rounds, while eroding
Yanukovych's base in the east.

¶18. (C) President Yushchenko's criticism had hurt
Tymoshenko, especially his stroking of nationalist sentiment
with such statements as "she's selling Ukraine to the
Russians" or "she's on par with Yanukovych" or "she's never
been a Ukrainian patriot". Tymoshenko had made a decision
not to respond, but it was "really damaging". Yushchenko was
attempting to discourage support for Tymoshenko in the west,
a de facto policy of supporting Yanukovych.

¶19. (C) Nemyria said he did not expect large-scale voting
irregularities such as in 2004, but he speculated there could
be attempts to manipulate final tallies. He praised the idea
of Georgia sending observers to Donetsk oblast, one result of
Tymoshenko's unpublicized meeting with Georgian President
Saakashvili in Bonn last week.

PRESENTING TYMOSHENKO'S EURO-ATLANTIC CREDENTIALS
--------------------------------------------- ----
¶20. (C) Nemyria presented Tymoshenko as the obvious choice
in a "black and white" race. He pointed to the fact that
Yanukovych would recognize South Ossetia and Abkhazia (he had
twice announced his intention to do so). The Prime Minister
wanted to continue NATO integration, but she took seriously
the fact that NATO was a divisive issue. Tymoshenko
estimated that 23-25% of Ukraine's population supported
Ukrainian membership, a figure far below Yushchenko's
oft-mentioned claims of 33%, especially since the Georgia
conflict. A final decision on NATO would be left to a
referendum, according to Nemyria. In any case, Ukraine was
willing to continue taking an active role in humanitarian and
peacekeeping operations with Euro-Atlantic partners.

COMMENT
-------

¶21. (C) Nemyria's points on the budget have validity if seen
through a narrow lens. It is likely true, for instance, that
any 2010 budget passed before the election would be rife with
populist pork. However, it is not clear that NBU Governor
Stelmakh would be willing to sign a follow-up LOI with just
the Ministry of Finance. Similarly, it does not necessarily
follow that a continuing resolution-type budget would be a
fiscal "straight-jacket", given the fact that it allows for
discretionary spending without specific line items.
Furthermore, we agree with the IMF that not only can
monetization happen via t-bill issuances to finance gas
purchases (and/or short-term wage and pension payments),
there would not necessarily be a major inflationary or
exchange rate effect. Nemyria's finance team will have to
make more poignant explanations to Washington interlocutors
to overcome these concerns.
TEFFT

December 15 2009

17:47

UKRAINE FOREIGN MINISTER'S CASE FOR IMF LOAN

C O N F I D E N T I A L SECTION 01 OF 02 KYIV 002135

SENSITIVE
SIPDIS

DEPT FOR EUR, EUR/UMB, EEB/OMA

E.O. 12958: DECL: 12/14/2019
TAGS: EFIN EREL ETRD PGOV PINR UP XH
SUBJECT: UKRAINE FOREIGN MINISTER'S CASE FOR IMF LOAN

REF: A. KYIV 2133
¶B. KYIV 2130

Classified By: Ambassador John F. Tefft for Reasons 1.4 (b) and (d)

¶1. (C) Summary. Ukrainian Foreign Minister Poroshenko
described meetings with IMF deputy managing director Lipsky
as "not constructive" and relations more generally with the
IMF as "very bad". Poroshenko told the Ambassador on
December 13 that he had weighed in with the Constitutional
Court to strike down the IMF-criticized social standards law,
and that he had asked the President to overcome his
"politically motivated" opposition to the IMF Letter of
Intent (LOI). Describing Ukraine's situation as "dangerous",
Poroshenko said even a partial IMF disbursement would ensure
payments to Gazprom and foreign creditors. End summary.

FOREIGN MINISTER DOWNBEAT ON IMF
---------------------------------

¶2. (C) Foreign Minister Poroshenko told the Ambassador that,
after meeting with IMF deputy managing director Lipsky in
Washington on December 11, it was clear Ukraine's current
situation was "dangerous" and relations with the IMF were
"very bad". Talks with Lipsky over disbursing the IMF's
fourth tranche were described as "not constructive".

¶3. (C) Addressing recent IMF-criticized legislation
increasing social payments, Poroshenko told the Ambassador
that he had spoken with the Chairman of the Constitutional
Court. The Court had indicated it would cancel provisions of
the budget-busting social standards law on constitutional
grounds, according to Poroshenko, but only after the
presidential election.

¶4. (C) Poroshenko conceded that President Yushchenko had
refused to sign the LOI for political reasons. Even though
the President otherwise had "no influence" over economic
policy, Poroshenko had called Yushchenko from Washington to
brief him on his December 10 meeting with the Secretary and
had asked him to consider accommodating the IMF.

¶5. (C) In any case, Poroshenko argued, Yushchenko's
signature would be meaningless, since there was no prospect
of the Rada adopting an IMF-compliant budget before the
election. (Comment: With this statement, Poroshenko may have
been attempting to deflect criticism of the President's
refusal to sign the LOI. However, the IMF would have
considered disbursing at least a partial fourth tranche had
Yushchenko signed the LOI and had the Cabinet of Ministers
re-submitted a draft 2010 budget. With a presidential
signature, the IMF would have waived the requirement to pass
the 2010 budget. End comment.)

¶6. (C) Poroshenko suggested that a partial IMF disbursement
would be adequate for Ukraine's budget, gas, and debt payment
needs. Additionally, an IMF disbursement would also free up
contingent loan offers from the EBRD, World Bank, and the
European Investment Bank. Poroshenko said the IMF's Lipsky
had suggested getting a "bridge loan" from some other source
to pull the country through the immediate crisis. Shaking
his head, Poroshenko told the Ambassador that, without any
monies forthcoming, the $12 billion disbursed so far by the
IMF would have been "wasted." (Note: Poroshenko's
calculations likely include three tranches of the IMF's
Stand-By Arrangement, as well as roughly $2 billion
transferred in IMF Special Drawing Rights. End note.)

GLOOMY ON FINANCES
------------------

¶7. (C) Although Ukraine could probably pay its gas bill in
January, it would likely not be able to do so in February,
according to Poroshenko. External debt had grown in 2010 but
remained modest overall. The Foreign Minister said there was
a real possibility of loan defaults threatening the already
fragile banking system. This would affect not just Ukrainian
banks, he said. December revenues for the government were
abysmally low, reflecting low business profits and general
credit problems throughout the economy. VAT arrears were a
major and growing concern. The Foreign Minister admitted
that he did not have a complete read on government finances,
as acting Finance Minister Umanskiy had not assented to his
request for details.

¶8. (C) Poroshenko said he told Lipsky that even a limited
disbursement to cover gas and other foreign debts would be
enough to save Ukraine from massive defaults. Lipsky had
replied that Ukraine's external debt could be financed out of
NBU reserves. Poroshenko commented that this would
over-expose state-owned banks to particular borrowers, since
such banks are the only institutions that can legally receive
central bank disbursements. Poroshenko pointed to current
exposure by state-owned banks to Naftogaz, which he said was
already dangerous and threatened the stability of the banking
system.

CEYLA TO BE REPLACED
--------------------

¶9. (C) Poroshenko informed the Ambassador that IMF
interlocutors had indicated Ceyla Pazarbasioglu was being
replaced as Ukraine mission director. The Foreign Minister
expressed concern that this would hamper the IMF's engagement
with Ukraine.

COMMENT
-------

¶10. (C) Poroshenko had been tasked by Prime Minister
Tymoshenko to ask Lipsky whether Ukraine could be included on
the agenda of the IMF's next board meeting (ref B). Based on
what we heard separately from IMF resident representative Max
Alier (ref A), Poroshenko's request was likely rebuffed by
Lipsky, further underscoring the firm line the IMF has taken
on Ukraine. Reaching out to the Ambassador, Poroshenko was
clearly seeking an ally on the IMF loan. Yet, he made pains
to show he was not taking sides in the dispute among
Ukraine's presidential candidates, focusing instead on the
country's dire predicament that he said would affect both
current authorities and their successors.
TEFFT

December 14 2009

17:19

UKRAINE'S "SCARE TACTICS" OVER IMF LOAN

C O N F I D E N T I A L SECTION 01 OF 03 KYIV 002133

SENSITIVE
SIPDIS

DEPT FOR EUR, EUR/UMB, EEB/OMA

E.O. 12958: DECL: 12/13/2019
TAGS: EFIN EREL ETRD PGOV PINR UP XH
SUBJECT: UKRAINE'S "SCARE TACTICS" OVER IMF LOAN

REF: A. KYIV 2130
¶B. KYIV 2102

Classified By: Economic Counselor Edward Kaska for Reasons 1.4 (b) and
(d)

¶1. (C) Summary. Kyiv-based IMF resident representative Max
Alier told Econoff on December 11 that GOU representatives
deliberately misled Ukrainian and international media outlets
into believing that Ukraine had met the IMF's "primary
demands" for releasing a fourth loan tranche. Alier
reiterated that the IMF's "very reasonable" conditionalities
were firm and still unmet. He speculated that Prime Minister
Tymoshenko was "letting out all the horses" to put pressure
on the European Union, Russia, and the United States to weigh
in with IMF management to again ease the conditions for
disbursal. Alier did not discount further GOU "scare
tactics" over a gas shutoff, social unrest, or a default on
domestic debt. End Summary.

NEMYRIA'S FALSE POSITIVE
------------------------

¶2. (C) Alier passed on Deputy Prime Minister Nemyria's
readout to him from December 6 talks in Washington with IMF
and USG officials, which Alier said was "surprisingly
positive". The Deputy Prime Minister told Alier that he
thought a disbursement could be done in a few days, and he
said the GOU was pushing to include the subject of an
emergency loan to Ukraine on the next IMF board meeting
agenda.

¶3. (C) Alier told Econoff, however, that IMF management was
against the idea of a fast-tracked loan, especially without
support from IMF mission director Ceyla Pazarbasioglu or a
completed staff-level review. Further concessions on IMF
conditionalities were unlikely, he said. The IMF was firm in
its view that it had already been "very reasonable" with its
still unmet demands of Ukraine's authorities (ref B).

GOU MEDIA SPIN ON IMF LOAN
--------------------------

¶4. (C) Alier noted with concern that Nemryia had taken his
interpretation of the Washington talks to Ukrainian and
international media outlets, which widely reported on
December 11 and over the weekend that the GOU had made
progress in its negotiations with the IMF. Nemyria was
quoted by no fewer than a dozen international media outlets
as stating that Ukraine had met the IMF's "primary demands"
and was hoping for a loan disbursement to avert another
January gas crisis. Nemyria told media that the lack of an
IMF disbursement would be a "fatal error" and could
destabilize the eastern European region. Nemyria's
spokeswoman stressed that the IMF money was needed to pay
Ukraine's January 7 bill to Gazprom.

¶5. (C) Prior to his meeting with IMF deputy managing
director Lipsky in Washington, Foreign Minister Poroshenko
was similarly quoted on December 11 to have said there would
be a "higher risk" of gas supply disruptions to Europe if
Ukraine did not receive an IMF tranche. (Note: Poroshenko
privately clarified his position with the Ambassador on
December 13, suggesting that Ukraine could probably pay its
gas bill in January, but that the situation was precarious
and would be even worse in February without external support.)

¶6. (SBU) Local commentary on the GOU's statements has been
mostly derogatory. A Ukrainian business daily declared on
December 14 that Tymoshenko was attempting to put
"psychological pressure" on the IMF. Another pundit noted
that the IMF loan was needed more by the government than the
economy as a whole.

GOU PRESSURE FOR DISBURSAL
--------------------------

¶7. (C) The IMF's Alier characterized Nemyria and
Poroshenko's public statements as "scare tactics" designed to
pressure the European Union, Russia, and the United States to
weigh in with the IMF. "You can't imagine the number of
calls" the IMF had received in response to the media stories,
including from Russia, Alier said. "The Prime Minister was
playing all sides, not necessarily against each other but to
her advantage," the IMF had concluded. Alier warned that
Ukraine's partners should take Tymoshenko's assurances "with
a big grain of salt".

¶8. (C) The Prime Minister was "willing to promise anything
to anybody" to make budget, gas, and domestic debt payments,
according to Alier. Alier predicted Tymoshenko would use
public relations messaging to threaten a gas shut off, social
unrest, or a sovereign default on domestic debt. In his
words, Tymoshenko was "letting out all the horses."

THREATS OF GAS DISRUPTION NOT CREDIBLE
--------------------------------------

¶9. (C) Alier said the GOU's talk of gas transit disruptions
were not a credible ploy to instigate European support for
emergency lending. The Europeans had learned their lesson
from January 2009; most countries reliant on Ukraine for
transit flows now had enough gas in storage to last through
the winter heating season. Instead, Europeans had become
cynical about Ukrainian duplicity and tended to believe
Russian messages blaming Kyiv for problems with energy
security. Alier said that the January 7 payment to Gazprom
was "likely, but in the hands of the Prime Minister".

THE "SOCIAL UNREST" CARD
------------------------

¶10. (C) The IMF official focused heavily on the possibility
of social unrest, which he predicted could be the GOU's "next
escalation". Alier speculated that Tymoshenko might choose
to encourage or support protests, but that such a tactic
would backfire. He predicted that the Prime Minister could
instead find herself in the position of being a lightning rod
for public discontent.

IMF ON UKRAINE DEBT DEFAULT
---------------------------

¶11. (C) GOU fears over December domestic debt payments could
be justified, but Alier downplayed the foreboding concerns
expressed to Econoff by Deputy Minister of Finance Kravets on
December 11 (ref A). The IMF had calculated that the GOU
needed to repay or rollover UAH 1.8 billion ($225 million) in
domestic debt by the end of December. The Ministry of
Finance's plans for December auctions of short-term treasury
bills would likely only raise enough to cover domestic debt
servicing, one-third of which was owed to the National Bank
of Ukraine (NBU). The IMF was not aware of any cross-default
covenants that could be triggered by non-payment of maturing
domestic debt, but Alier did not rule out the possibility
that such existed. In any case, threatening defaults to gin
up emergency external lending would be a "very negative
action", said the IMF official.

BUDGET SITUATION STILL WORSENING
--------------------------------

¶12. (C) Arrears of public sector wages and pensions were
already visible, according to the IMF, even though Tymoshenko
had determined to do "whatever it took" to make these
payments. The month of January 2010 would be no better; not
only had taxes been paid in advance, revenues were still
collapsing as a result of Ukraine's GDP decline and the lag
effect "catching up" on the real economy. (Note: Although
Alier stated that there are visible wage and pension arrears,
our assessment is that these are localized and not widespread
to date. Alier did not elaborate or provide evidence to
support his claim. End note.)

NBU'S PERFECT COVER
-------------------

¶13. (C) The NBU was in a position to monetize GOU securities
without causing inflation or dangerously depleting reserves,
according to Alier, but its decision to help the GOU make
budget, gas, or debt payments would continue to be
politically motivated. NBU Governor Stelmakh was waiting
until the last minute before the presidential election to
throw his support behind either Tymoshenko or opposition
Party of Regions leader Yanukovych. If the former appeared
to be gaining ground, Stelmakh would likely turn on the
printing presses. If Yanukovych looked set to hold on,
Stelmakh would refuse to concede.

¶14. (C) President Yushchenko was providing the perfect cover
to the NBU, allowing Stelmakh to maneuver between both
Tymoshenko and Yanukovych. Stelmalkh's signing of the IMF
Letter of Intent gave him some credibility with the Prime
Minister. However, Alier speculated Stelmakh had also told
Yanukovych that the NBU Governor's signature was meaningless
without Yushchenko's support (ref B), and that it did not
count as a vote for Tymoshenko. According to Alier, Stelmakh
knew the stakes were high. His actions could help decide the
presidential race, as well as determine whether he would be
prosecuted by Yushchenko's successor for what the IMF
acknowledged were his many misdeeds.

COMMENT
-------

¶15. (C) IMF resident representative Alier's comments reflect
real disillusionment towards Ukraine within the Fund.
Notwithstanding Deputy Prime Minister Nemyria's misleading
suggestions to the public, the IMF will not weaken its
resolve on conditionalities before the presidential election.
IMF staff-level experts clearly interpret the GOU's threats
as negative and exaggerated, perhaps even further reducing
the likelihood of additional "flexibility". Alier's
assessment that the NBU will act as a spoiler (or kingmaker)
appears correct, especially if Yushchenko extends Stelmakh's
term after the NBU Governor's formal retirement tomorrow.
TEFFT

December 11 2009

15:52

"URGENT" WORRIES FROM UKRAINE FINANCE MINISTRY

C O N F I D E N T I A L KYIV 002130

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E.O. 12958: DECL: 12/10/2019
TAGS: EFIN EREL ETRD PGOV PINR UP XH
SUBJECT: "URGENT" WORRIES FROM UKRAINE FINANCE MINISTRY

REF: KYIV 2102

Classified By: Economic Counselor Edward Kaska for Reasons 1.4 (b) and
(d)

¶1. (C) Ukrainian Deputy Minister of Finance Andriy Kravets
notified the embassy on December 11 that Foreign Minister
Poroshenko was planning today to ask IMF first deputy
managing director John Lipsky to consider including Ukraine
on the agenda of the next IMF board meeting. Poroshenko had
received direct instructions from Prime Minister Tymoshenko,
after acting Minister of Finance Umanskiy briefed her on
Deputy Prime Minister Nemyria's December 6 meetings in
Washington (reftel). Kravets characterized Poroshenko's
message as "extremely urgent" and expressed hope that Ukraine
"still had a chance" to get an IMF disbursement before the
end of 2009.

¶2. (C) Kravets stated that the Ministry of Finance had
already begun to roll out Plan B: a three-part auction of
domestic treasury bills. The Deputy Finance Minister said
auctions would take place on December 15, 22, and 29. The
first auction would be the bellwether for market interest on
the Ministry of Finance's initial offer of 12-month t-bills
at a rate of 20-25%. Higher yield debt issuances, such as in
the "extremely difficult" month of October (when the GOU sold
UAH 4.3 billion or $540 million in t-bills for near 30%) were
"unacceptable" and would "destroy" the domestic market.

¶3. (C) The likely purchasers of GOU debt were banks with
foreign capital. Kravets listed Raiffeisen-Aval, Erste,
Ukrsotsbank (UniCredit), ING, Ukrsibbank (BNP Paribas), and
Citi as interested parties. The Ministry of Finance was
readying a scheme to name primary dealers that would be
launched after the December auctions.

¶4. (C) Kravets expressed concern that, if Ukraine did not
access IMF financing or successfully auction domestic
t-bills, Ukraine's budget situation would be "disastrous".
The Ministry of Finance also needed to roll over UAH 2
billion ($250 million) in internal debt. Failure to do so
could "provoke" an external default, according to Kravets,
who did not elaborate on how this would occur.

COMMENT
-------

¶5. (C) Deputy Minister Kravets was harried and anxious when
explaining the GOU's predicament to Econoff. He did not ask
for specific USG intervention with the IMF, but mentioned
that the Prime Minister had been "grateful" for recent
meetings between Poroshenko, Nemyria and USG officials in
Washington. Kravets' mention of a possible external default
scenario, which would be triggered by a default on domestic
debt, was the first the embassy had heard of such grave and
immediate GOU concerns.
TEFFT

June 28 2009

17:20

KUWAIT'S AID TO PAKISTAN

UNCLAS SECTION 01 OF 02 KUWAIT 000639

SENSITIVE
SIPDIS

STATE FOR NEA/ARP, SCA/P, EEB/IFD/ODF

E.O. 12958: N/A
TAGS: PREF EAID PHUM PREL PK KU

SUBJECT: KUWAIT'S AID TO PAKISTAN

REF: A. STATE 61218
¶B. KUWAIT 555
¶C. KUWAIT 539

¶1. (U) This is an action request. Please see paragraph 10.

¶2. (SBU) Summary and Key Points
----------------------------

-- The Kuwait Red Crescent (KRC) has made preparations to
provide Pakistani Internally Displaced Persons with 20,000
tents and 10,000 packages of foodstuffs, cooking utensils,
blankets, and hygienic supplies. Each package is designed to
supply a family of 5 for a month.

-- KRC will deliver to ICRC in August 1,200 tons of flour and
800 tons of rice.

-- KRC is currently coordinating with ICRC and Pakistani Red
Crescent about aid delivery and hopes to be able to deliver
aid shortly.

-- The GoK has not made any decisions about direct government
to government assistance to Pakistan for IDPs.

-- The Pakistani Embassy has approached the GoK for
permission to set up a bank account under the name of the
Prime Minister (not the GoP or the Embassy) to collect
assistance for IDPs.

-- The Kuwait Fund is waiting for the security situation to
improve to sign the loan agreement for the approximately $50
million in reconstruction assistance.

End summary and key points.

¶3. (SBU) Econcouns discussed aid to Pakistan with Kuwait Fund
Regional Manager for East, South Asia & Pacific Countries
Waleed Al-Bahar on June 23 and with Rashed Al-Hajri,
Counselor for MFA's Asia Department and Kuwait Red Crescent
President Barges Al-Barges on June 25. Econcouns thanked the
Kuwaitis for their Tokyo Donors' Conference pledges and
stressed that there was a separate urgent need for assistance
to IDPs (ref b).

KRC ready to act
----------------

¶4. (SBU) Al-Barges said that the KRC had already approved
funds to purchase 20,000 tents, 10,000 boxes of foodstuffs,
10,000 blankets, 10,000 boxes of hygienic materials (soaps,
toothbrushes, feminine napkins, etc., and 10,000 boxes of
kitchen utensils. Each box's contents would meet the needs
of 5-7 people for one month and are designed to meet the
International Federation of Red Cross and Red Crescent
Societies standards. In addition, KRC is prepared to supply
the ICRC with 1,200 tons of white flour and 800 tons of rice
(in 40 kg sacks).

¶5. (SBU) Al-Barges explained that the KRC had started setting
aside the funds when the crisis started in anticipation of an
appeal by the ICRC. He had been surprised by ICRC's relative
slowness in making the appeal and had written the ICRC in an
effort to move things along. Currently, he said, the KRC is
coordinating with the ICRC about aid delivery, but that the
ICRC ""wanted to be in charge."" He hoped to be able to work
out the cooperation modalities shortly. The KRC is ready to
send a team to Pakistan to assess buying the items locally in
an effort to speed up delivery. If the items are not
available, the KRC will procure them in Kuwait, but that
would add delivery time. He added that the KRC was also
coordinating with the Pakistani Red Crescent on aid delivery.


GoK hasn't decided on IDP aid
-----------------------------

¶6. (SBU) Although Al-Barges stated that the KRC had the
support of the GoK in its actions, he was not aware of any
formal decision on government to government assistance.
Separately, Al-Hajri confirmed that. He said that the MFA
had brought the issue to the attention of the cabinet, but
there had not yet been a cabinet decision on the matter. ""The
cabinet has a number of issues to consider now,"" he explained.

Pakistani PM opening bank accounts
----------------------------------

¶7. (SBU) Al-Hajri asked whether the GoP had approached the
USG seeking permission to open bank accounts in the name of
the Prime Minister to collect donations from overseas
Pakistanis (and others) for the IDPs. He explained that the
Pakistani embassy in Kuwait had formally approached the GoK
for permission to open a bank account in the name of the
Prime Minister (not the GoP or the embassy). He added that
the MFA had confirmed with the Kuwaiti embassy in Islamabad
that the GoP had made similar requests to other countries.
He said that the GoK was considering the request. Speaking
personally, however, he expressed concern about the request
to open the account in the name of the PM rather than the GoP
and about the potential for corruption that this would
entail.

Kuwait Fund Development Assistance
----------------------------------

¶8. (SBU) Al-Bahar explained that the Kuwait Fund had already
agreed on an earthquake reconstruction project worth 14.3
million KD ($50 million) for Pakistan. The only thing
delaying the start of the project, he said, was the security
situation in Pakistan, which was preventing Kuwait Fund staff
from travelling to the country to sign the loan agreement.
As a way to speed up project implementation, he added, the
Kuwait Fund was approving procurement for the project in
coordination with the GoP. The GoP could start procurement
and be reimbursed by the Kuwait Fund, once the loan agreement
was signed.

¶9. (SBU) Al-Bahar also discussed the Kuwait Fund's
participation (with the Asian Development Bank, the Islamic
Development Bank, and others) in the Neelum Jhelum
hydroelectric project. He said that the total value of the
project was about $2.2. billion and that the GoP had asked
for around $600 million from Arab funds. For its part, the
Kuwait Fund's share of the project would be in the range of
10-11 million KD ($38 million). The Islamic Development Bank
had already sent a mission to Pakistan and a contractor had
been selected. For its part, the Kuwait Fund needed to send
an assessment mission to move forward, but the project was
already starting. (Note: The earthquake project is the
project referred to in Kuwait's $49 million Tokyo Donors'
Conference pledge, which is now $50 million at current rates
of exchange. The $38 million is an addition project. In
earlier conversations, Al-Bahar had implied to econoffs that
both projects would fulfill Kuwait's Tokyo pledge, but it
appears as if he caused some confusion with regard to the
units (i.e., dollars verses Kuwaiti Dinars. End note.)

Action Request
---------------

¶10. (SBU) Please advise as to whether the GoP has approached
the USG to open a bank account in the name of the Prime
Minister in order to ""collect donations"" for IDPs. Post
would also appreciate any advice Department can provide to
pass back to the GoK on acceding to such a request. End
action request.

********************************************* *********
For more reporting from Embassy Kuwait, visit:
visit Kuwait's Classified Website at:

http://www.intelink.sgov.gov/wiki/Portal:Kuwa it
********************************************* *********
JONES

April 02 2009

18:03

SOFIA'S MEAN STREETS

C O N F I D E N T I A L SOFIA 000154


SIPDIS

EUR/CE - TOM YEAGER

E.O. 12958: DECL: 04/02/2019
TAGS: PGOV PREL BU
SUBJECT: SOFIA'S MEAN STREETS

Classified By: Charge Alex Karagiannis for reasons 1.4 (b) and (d).

¶1. (C) Summary: Sofia's streets are a showcase for
potholes and uncollected garbage. Lined by decaying soviet
style blocks and uncompleted new construction (mixed with
some glitzy modern buildings), they are ugly. While the
ordinary crime rate is low, organized crime violence is a
recurrent feature as rivals compete for turf and engage in
contract killings. This landscape is the visible result of
years of pervasive political corruption and the persistent
failure in Bulgaria,s law enforcement and public
administration systems. While the Socialist(BSP) led
government tries to convince the public and the EU that it is
seriously fighting crime and corruption, every day the
average person sees massive flouting of the law. Gangsters,
thugs, and mutri (shady businessmen) in expensive cars show
off their ill-gotten wealth. They easily slip through the
cumbersome and corrupt justice system (no major OC figure has
ever spent significant time in jail). Some young people see
mutri as role models: cool, feared, and above the law. A
coarsening of society is taking place. Tired and cynical
about government institutions and politicians, Bulgarians
have come to accept corruption as part of the normal
landscape and find it easier to cope with it rather than to
change it. This mood will likely dominate as Bulgarians go
to the polls this summer. End Summary.

----------------
UGLY AND BOORISH
----------------

¶2. (SBU) Arriving in Sofia by air, a traveler is unsure if
Bulgaria is yet a modern EU country. Airport Terminal 2 is
clean, modern, and efficient; Terminal 1 is old, dingy, and
cigarette-smoke infused. Once a traveler hits the airport
access road and the main thoroughfares, the picture gets
starker. Drab, decrepit soviet style blocks rise up, in
stark juxtaposition to the Porsche dealership. Crumbling
streets with unevenly patched pavement, potholes that can
pass for tank traps, and sidewalks crammed with parked cars
are routine. Basic infrastructure is mediocre to poor. A
years-long garbage mess (no room in landfills) has gotten
worse over a contract dispute with the collection companies;
refuse is both scattered and piled high. Packs of wild dogs
roam widely, even in central residential areas and what
passes as the leafy, upscale suburban neighborhoods. What
had been a rather green, complacent, modestly architecturally
interesting city with a pleasant historic center has become a
car-choked, trashy mess.

¶3. (C) Bad as that is, the organized crime situation is
ugly as well. Ordinary crime is pretty low, and most
citizens feel safe. But crimes directed at and by the bling,
shady nouveau riche -- intimidation, extortion, kidnappings
-- have become more visible, and those criminals are more
arrogant. The raw statistics indicate failure or
unwillingness to deal with serious crimes: since 1997, there
have been over 130 contract murders, with only a handful of
arrests and just five convictions. What previously had been
professional killings (both shootings and bombings) with no
collateral damage, have now gotten sloppier; in one instance
a drive-by machine gun spray failed to do the job outside a
popular restaurant, but did terrorize other patrons. One
prominent, perhaps shady, lawyer was gunned down just days
ago in a provincial capital.

¶4. (SBU) Over the past six months, there have been bombings
at so-called gentlemen,s clubs -- as organized crime
families play out their turf wars. The number of kidnappings
of wealthy (and perhaps sleazy) businessmen has gone up;
it,s a lucrative new racket. Recently, in one very crude,
but effective extortion case, one hotel owner received a
hand-grenade with the pin removed. Organized criminals and
their no-neck, black-leather-clad body guards flaunt and
disobey the law; big, black SUVs are the rage, barreling down
streets, ignoring traffic and parking regulations. Seeing no
force to control them, many ordinary Bulgarians have followed
suit, running lights, passing against oncoming city traffic,
and the like. Young people find mutri -- cool guys above the
law with money and status -- an attractive role model. In a
hilarious interview that unwittingly confirms the view that
muscle and money are what matter, the new "Miss Bulgaria"
spoke openly that she is not some "cheap prostitute" and how
her Russian "businessman" boyfriend helps get nice things --
in what is widely considered to have been a rigged selection.
The overall attitude amounts to private gain and social
indifference.

-----------------------------------
PUBLIC SERVICES -- CRIMINAL NEGLECT
-----------------------------------

¶5. (C) Sofia's dilapidated condition does not come from a
poor economy. National growth has averaged about seven
percent for five years. The central government has
maintained large fiscal reserves and not spent wisely on
basic infrastructure. Meanwhile, corruption siphoned off the
nation's wealth to shady businesses, government officials and
political parties, imposing a heavy toll on public services.
Potholed and poorly lit roads are the norm. Sofia's garbage
collection crisis, recalling scenes of Naples, now in its
sixth week, is symbolic of an indifferent, sometimes testy
relationship between the municipal and central governments as
they play a blame game in advance of summer elections. The
most vital public services, law and order forces, have gone
from bad to worse. Almost a year after the forced
resignation of disgraced Interior Minister Petkov, there are
few tangible changes at that sprawling, dysfunctional agency.
Things are little better at the newly created State Agency
for National Security (DANS). Intended to target high level
organized crime and corruption, DANS is instead politicized;
some officials have links to criminals and shady businesses.

¶6. (C) Meanwhile, old scandals fester and new ones emerge.
The line-up is extensive; a short list of the most prominent
case includes Sofia,s heating utility; Sofia,s garbage
service; the state Road Infrastructure Fund; misuse of
multiple EU SAPARD and PHARE funds; multiple agricultural and
environmental programs; numerous dubious land swaps; the
National Revenue Agency; and the Customs Agency, notorious
for its many senior officials known by their criminal
nicknames such as "The Penguin" and "Silicon Girl." Looking
at summer parliamentary elections, Bulgarians understand that
mainline parties profit from corruption and have no real
interest in reform. A new party, Leader, the personal
project of a shady businessman (unknown five years ago and
today the second wealthiest Bulgarian), has a genuine chance
to enter parliament. Though formed on the premise that it is
more cost effective to own your own party than to pay off
other politicians, Leader,s clever slogans of protest,
populism and nationalism appeal to alienated voters.

¶7. (C) COMMENT: Sofia is not Bulgaria, so the picture here
may be more intense than elsewhere. Nor is cynicism about
politicians and government anything new. Bulgarians tend to
look outside themselves for hope; many value the abstraction
of the EU far above any of their own politicians or
institutions. Neither Sofia,s streets nor the mutri culture
will likely be cleaned up quickly under such conditions.
But, high frustration and resignation levels are now mixed
with some real anger. If a new government makes a clean-up a
priority, it could tap into and motivate citizen support.
END COMMENT.


Karagiannis

February 23 2009

17:59

CIVIL SOCIETY ACTIVISTS OFFER MIXED ASSESSMENT OF THE POLITICAL ENVIRONMENT REF: CAIRO 246 Classified By: Ambassador Margaret Scobey for reason 1.4 (d).

C O N F I D E N T I A L SECTION 01 OF 02 CAIRO 000325

SIPDIS

FOR NEA/ELA AND DRL/NESCA
NSC FOR PASCUAL AND KUCHTA-HELBLING

E.O. 12958: DECL: 02/23/2029
TAGS: PGOV PHUM KDEM KCOR ECON EFIN EG
SUBJECT: CIVIL SOCIETY ACTIVISTS OFFER MIXED ASSESSMENT OF THE POLITICAL ENVIRONMENT REF: CAIRO 246 Classified By: Ambassador Margaret Scobey for reason 1.4 (d).
1.(C) Summary: During a February 11 tea with the Ambassador, civil society activists provided their views on the current state of political liberalization. Hossam Bahgat, Executive Director of the Egyptian Initiative for Personal Rights noted that the progress set in motion between 2003 and 2005 currently manifests itself in continuing demonstrations, strikes and protests. He criticized the stifling role of State Security (SSIS) in public life. Hisham Kassem, president of the Egyptian Organization for Human Rights, cautioned that observers should not expect President Mubarak to make any significant concessions on political reform. Kassem described young bloggers as a powerful force for change. Engi Haddad, president of the Afro-Egyptian Organization for Human Rights, suggested that fighting corruption will drive a wedge between the ruling party and the business elite. Haddad described her organization's plans to try to block a potential GOE privatization vouchers plan, out of concerns over corruption. End summary. --------------------------------------------- ---------- Some Bright Spots Amidst Infighting and SSIS Harassment --------------------------------------------- ----------

2.(C) Hossam Bahgat hopes for a return to the 2003-5 period when the GOE opened the political space to allow the growth of independent media and public expression. Bahgat asserted that this opening still influences the current political scene, and that recent restrictions have not reversed the progress. He cited the steady stream of demonstrations and protests throughout Egypt as evidence of political change, saying that such a landscape would not have been possible ten years ago. He also cited the December 2008 establishment of the real estate tax collectors union, Egypt's first independent labor union, as a positive step. Bahgat noted that the new channels for political engagement are mostly secular, while Islamist forces had formerly occupied this space. He rejected a return to the political "stagnation" that dominated the country before 2003.

3.(C) Bahgat criticized State Security's influence over the bureaucracy and civil society, asserting that SSIS controls faculty appointments and NGO travel to international conferences. He described the bureaucracy as a cover for the SSIS officers who create government policy from behind the scenes. Bahgat asserted that "real reform" will not be possible until there is a GOE political decision to scale back SSIS' role. He said that in order to maintain leverage over civil society, the government has written the penal code so that any NGO breaks several laws each day. Bahgat claimed activists know that the GOE could prosecute them at will if they cross political red-lines.

4.(C) Hisham Kassem, president of the Egyptian Organization for Human Rights and founder of the independent daily "Al-Masry Al-Youm," said that real political change will only come when Mubarak exits the stage. Kassem cautioned that Mubarak will not make any significant concessions on democratic freedoms. He criticized the quasi-governmental National Council for Human Rights for not being particularly active, and characterized the Egyptian human rights community as damaged by in-fighting. Kassem plans to step down as president of the Egyptian Organization for Human Rights at the end of 2009, but he will remain on the board.

5.(C) Kassem predicted that information technology would change the Egyptian media over the next ten years, noting that there will soon be 20 million web-enabled cell phone users able to receive instant news reports. He described young bloggers as a "major force for change," and commented that many political figures are trying to "pounce on them" to recruit them into different political parties. He praised Egyptian political debates on Facebook during the Gaza crisis as "healthy." Kassem characterized 2005 as "the best year of our lives," but lamented that the GOE had crushed the political "uprising" that began at that time.

6.(C) Kassem asserted that State Security undermines civil society by, for example, preventing NGOs from leasing office space. According to Kssem, although the GOE political leadership give SSIS a free hand to beat demonstrators, State Scurity needs explicit orders to move against a pominent activist. Kassem asserted that there are sme limits on SSIS power by recounting how an SSI officer tried CAIRO 00000325 002 OF 002 to observe the February 7 Administrative Court ruling that named an Ayman Nour ally the head of the opposition Al-Ghad party (reftel). Kassem said that when the officer told the judge he was attending the court session as a representative of the fictional "Dahaliya Party" ("Interior Party"), the judge promptly ejected him. --------------------------------------- Corruption as a Growing Political Issue ---------------------------------------

7.(C) Engi Haddad, President of the Afro-Egyptian Organization for Human Rights, cited corruption as a major impediment to reform. She contended that fighting corruption would drive a wedge between the ruling National Democratic Party and the business elite. She described anti-corruption work as "even riskier" than opposition politics, recounting that SSIS told her directly they cannot "cover her" on anti-corruption work, meaning that she is exposed to potential political retribution. Haddad also criticized the lack of freedom of information, recounting how she recently attended a board meeting of the Suez Canal Bank as a shareholder, but was unable to obtain basic information about the bank's finances.

8.(C) Haddad's organization is trying to block the government's potential privatization vouchers plan, out of concern over corruption. Under the proposed plan, which is still under discussion in parliament, the government would privatize state-run companies by distributing ownership vouchers to all citizens over the age of 18. Haddad expressed concern that the distribution system for the vouchers would be based on inaccurate lists, and that private interests could take advantage of citizens by buying up blocs of vouchers at below-market prices. Her organization has prepared a legal case arguing that the state-run companies are "public" assets, not "government" property, and that therefore the GOE does not have the right to distribute the vouchers. Haddad also noted that she is speaking to business people about creating a fund to potentially buy vouchers at a fair price to prevent predatory financiers from purchasing the vouchers at below-market prices.

9.(C) Haddad called for activists to build apolitical civil society organizations, focusing on development and charity to claim this space from the Muslim Brotherhood. She noted that a group of young American University in Cairo graduates have been running a program for the past three years providing micro-loans to low-income businesspeople. Haddad described how Egyptian activists support themselves either through business activities, or by competing for donations, which creates tensions between NGOs. She explained how SSIS tries to intimidate her by disclosing that they know the details of her personal life. SCOBEY

0 02/23/2009 7601 PGOV,PHUM,KDEM,KCOR,ECON,EFIN,EG
CIVIL SOCIETY ACTIVISTS OFFER MIXED ASSESSMENT OF THE POLITICAL ENVIRONMENT

During a February 11 tea with the Ambassador, civil society activists provided their views on the current state of political liberalization. Hossam Bahgat, Executive Director of the Egyptian Initiative for Personal Rights noted that the progress set in motion between 2003 and 2005 currently manifests itself in continuing demonstrations, strikes and protests. He criticized the stifling role of State Security (SSIS) in public life. Hisham Kassem, president of the Egyptian Organization for Human Rights, cautioned that observers should not expect President Mubarak to make any significant concessions on political reform. Kassem described young bloggers as a powerful force for change. Engi Haddad, president of the Afro-Egyptian Organization for Human Rights, suggested that fighting corruption will drive a wedge between the ruling party and the business elite. Haddad described her organization's plans to try to block a potential GOE privatization vouchers plan, out of concerns over corruption.

February 17 2009

23:57

(U) Secretary Clinton?s February 12, 2009,

S E C R E T STATE 014421


E.O. 12958: DECL: 02/12/2019
TAGS: EG IS IR MEPP UN
SUBJECT: (U) Secretary Clinton?s February 12, 2009,
Meeting with Egyptian Foreign Minister Aboul Gheit

¶1. Classified by NEA Acting Assistant Secretary Jeff
Feltman for reasons: 1.4 (b) & (d).

¶2. (U) February 12, 2009; 13:00 p.m.; Washington, DC.

¶3. (U) Participants:

U.S.
The Secretary
NEA Acting Assistant Secretary Feltman

Egypt
Foreign Minister Aboul Gheit
Egyptian Ambassador to the U.S. Sameh Shoukry

¶4. (S) SUMMARY. Secretary Clinton and Foreign Minister
Aboul Gheit met on February 12 and engaged in a warm
discussion on the need to strength the U.S.-Egyptian
bilateral relationship. The FM was delighted when the
Secretary accepted Egypt?s invitation to attend the
upcoming March 2 Donor?s Conference in Cairo and urged a
presidential visit in Cairo or Washington soon.
Regarding peace efforts in the region, Aboul Gheit said
the United States had only two options, either pick up
the Clinton Parameters of December 2000 or the Annapolis
process from where it left off. On Iran and Syria,
Aboul Gheit urged caution in any attempt to engage both
countries. The FM urged the United States not to
actively oppose the candidacy of Hosny Farouk for UNESCO
Director General. Both leaders agreed on the need to
get the U.S.-Egyptian bilateral assistance program back
on track. END SUMMARY.

----------------
EMBRACING CHANGE
----------------

5.(S) Aboul Gheit opened the meeting by conveying warm
greetings from President Mubarak. He was effusive in
his praise of Secretary Clinton and expressed hope that
a "very difficult" eight-year period in the relationship
was over. He noted that Egypt is "eager to embrace
change." The Secretary emphasized the United States
strong, continuing commitment to work with Egypt.

----------------------
GAZA DONORS CONFERENCE
----------------------

¶6. (S) Aboul Gheit then turned to the March 2 Gaza
Donors conference, stating that President Sarkozy and
PM Berlusconi would attend. Noting that it would be an
"excellent follow up" to the Mitchell visit, he asked
the Secretary to attend the conference and for the
United States to be a co-sponsor. The Secretary
confirmed her attendance and underscored that the United
States wanted to work closely with Egypt on the
framework for the conference in order to ensure a
positive outcome. The Secretary stated that the United
States wanted the conference to send a message about
Egypt's leadership and to make clear to others in the
region the importance we attach to Egypts role and our
support for like-minded states that share Egypts
strategic approach.

----------------------------
THE UNITED STATES IS BACK
----------------------------

7.(S) Delighted with the Secretarys response, an
effusive Aboul Gheit urged the Secretary to deliver a
speech at the conference and assured that she would be
received by President Mubarak. He said that although
Sarkozy and Berlusconi would be there at the same time,
that the attention should be on the Secretary, to
symbolize the return of the United States to the
Israeli-Arab negotiations. Foreign Minister Aboul
Gheit noted that the Europeans had begun to assert
themselves during the U.S. transition period; the
Secretarys presence in Cairo would clearly convey the
message that "the United States is back."

--------------------------------------------- --
PROPOSED MEETINGS AT FRINGE OF DONOR CONFERENCE
--------------------------------------------- --

8.(S) In terms of other meetings in Cairo, Aboul Gheit
suggested that the Secretary meet with the GCC+3. He
also suggested a GCC+3 meeting with the P5+1, noting
that this had been a very useful gathering to send
signals to Iran and others. Aboul Gheit proposed that
if the Secretary were to arrive in the afternoon of
March 1, that she could do one of these sessions then,
with the following session the following evening. The
Secretary responded positively but noncommittally,
saying that she would have to check her schedule. "We
want to send a signal that we know who our friends are,"
the Secretary said.

---------------------------
PROPOSED PRESIDENTIAL VISIT
---------------------------

9.(S) Aboul Gheit asked when "we can allow our two
presidents to meet," and encouraged that it be soon. He
conveyed that President Mubarak would be willing to
travel to the United States or to host the President in
Cairo, adding, You decide." He noted that given the
President's promise to deliver a speech in a Muslim
country, Cairo would be the perfect venue, given that it
is the seat of al-Azhar University and the center of
the Arab world. Other countries like Morocco or
Indonesia, while important, he noted, are peripheral to
the real Arab heartland, which is what the President
hopes to reach. In terms of audience, the FM said "I
can provide 20,000 people" in a secure venue, listening
to the Presidents message. The Secretary agreed to
convey the invitation. She cautioned that President
Obama is currently constrained by the work needed to
address the economic challenges, "but I will faithfully
represent your arguments."

----------
ASSISTANCE
----------

¶10. (S) Aboul Gheit raised the issue of U.S. assistance
to Egypt, asking that the USG "re-open the Egypt
program." "Decisions were taken unilaterally," he said,
which is not how allies and friends should deal with
one another. While Egypt had remained "polite," the FM
said that Egyptians had "distanced themselves" in this
regard. He urged that the United States and Egypt work
to mend this aspect of the relationship. The Secretary
expressed understanding, acknowledging that there had
been both cuts in the program and programmatic decisions
made by the United States. "I'm going to look into
this," she promised. She noted that Congress is also a
factor in the assistance relationship, and underscored
the need to examine how to "get Members of Congress to
see you as a friend and ally."

---------------------------
PALESTINIAN RECONCILIATION
---------------------------

¶11. (S) Aboul Gheit said that Omar Soliman had reported
to him that a longer-term calming should be ready for
announcement on February 17 or 18. The Israelis are now
informed. On February 22, Egypt will host all of the
Palestinian factions in Cairo to launch a reconciliation
process that "could last days or weeks, if not months."
The "quiet" and the reconciliation process should allow
the PA, Abu Mazen, and Salam Fayyad "some relief" from
the threats of illegitimacy, as a start to restoring
their authority. The Secretary urged that we be kept
informed of how this is progressing, as we needed to
understand what the conditions for Palestinian
reconciliation will be.

¶12. (S) Responding to the Secretary's comments about
"lost ground and lost time," Aboul Gheit noted that, in
terms of the Israeli-Palestinian negotiations, the
United States had only two options: either pick up the
Clinton Parameters of December 2000, or pick up the
Annapolis process from where it left off. "There is no
third way." The Secretary asked about the Arab League
Initiative. It is still there, the FM acknowledged, but
the Israelis never picked up on it, with the issue of
refugees being more difficult than the issue of
Jerusalem. Israel cannot accept the formulation on
refugees, he said, but maybe it can be set aside
temporarily. He emphasized the need for Egypt to
understand what the United States was doing regarding
negotiations, referring to the failed 2000 Camp David
summit when "we didn't know what was happening."

---------------------------------------------
IRANIAN INFLUENCE AND ARAB POLITICAL DISARRAY
---------------------------------------------

¶13. (S) In response to the Secretary's questions about
Palestinian reconciliation efforts, Aboul Gheit spoke of
a "region in the midst of a war" -- a cold war that
often turns hot and then back to cold. This is largely
due to the fact that Iran wants to extend its influence
across the region and to "collect cards" to use in
bargaining over its nuclear program. Iran has IRGC
forces "everywhere." Iran uses Hamas and Hizballah.
"Sadly," even some Arabs are collaborating with Iran,
such as Syria and Qatar. Imagine, he noted, Qatar is a
"principality" of only "60,000 maybe 100,000 people, and
it is creating havoc in the region." He noted that
there are more Egyptian guest workers in Qatar than
Qatari citizens. Iran also promoted "two wars in two
years," he said, referring to Gaza and the 2006 Lebanon
war. Iran is destabilizing the region and must be
confronted everywhere.

¶14. (S) Aboul Gheit urged that the United States, should
it decide to engage, do so "with eyes wide open." He
predicted that the USG would discover by the end of 2009
that the Iranians did not deliver anything and that the
Iranians "express what they don't believe." The
Secretary emphasized that, indeed, the USG was going
into this process well aware of the difficulties. But
any engagement should demonstrate clearly that Iran
either can deliver or that it won't deliver. At this
point, people question whether the United States is to
blame for Iranian intransigence, but engagement should
show exactly where the problems are.

¶15. (S) Aboul Gheit added that that the threat of
sanctions is not sufficient, and the threat of war
contradicts the message the Administration is trying to
send to the Muslim world. So he suggested being "very,
very firm" in any talks with the Iranians. He mused
about whether, ultimately, the United States should
agree to enrichment on Iranian soil that is heavily
patrolled by comprehensive international supervision.

------
SYRIA
------

¶16. (S) On Syria, Aboul Gheit noted that Egypt is aware
that the United States wants to try a new approach. He
said that Egypt is planning an effort to reconcile Arab
differences among ourselves. He cautioned that the USG
should be cautious with Syria, noting that the Syrians
seek to escape the Special Tribunal for Lebanon, to
obtain assurances about the future of their regime, seek
a return of the Golan Heights, and want acknowledgement
of their predominance in Lebanon. The Syrians should be
"forced to pay a price" for any of these, and not be
given any of these up front. He concluded by urging the
United States to tell the Syrians to "stay away from the
Iranians."

---------------
UNHELPFUL QATAR
---------------

¶17. (S) Finally, Aboul Gheit said, "there is Qatar."
Qatar is financing "everything." Qatar claims to have
frozen the Arab peace plan and to have ordered the Arab
states to cut off ties to Israel. What is motivating
Qatar is an image of "the great state of Qatar" -- a
Qatar that hosts the Lebanese factions for a Doha
accord, the Sudanese for another Doha accord, the
various Arabs to respond to the Gaza crisis, and so on.
The FM opined that the only country that can check
Qatar's behavior is the United States. The United
States needs to say, you are troubling our allies and
confusing our policies." The FM suggested that the Emir
and the Prime Minister need to feel that "Washington is
cold."

-----------------------------
HOSNY CANDIDACY FOR UNESCO DG
-----------------------------

¶18. (S) Aboul Gheit raised the issue of Egyptian Cultural
Minister Farouk Hosny's UNESCO DG candidacy. "I hope, I
hope, I hope, if you can't support him, that you won't
oppose him." The Secretary said that we had real
concerns about Hosnys statements. Moreover, as we ask
the Israelis to take a lot of hard decisions regarding
negotiations and facts on the ground, we do not need
additional problems. Foreign Minister Aboul Gheit said
that perhaps he could solve the issue with the Israelis,
by promising them that, if Hosny is elected, his first
visit as UNESCO DG would be to Israel. The Secretary
responded that Israeli concurrence could help, but we
still had our own concerns. She recommended that Egypt
seek other candidates.

-------------------------------
PROPOSED FRENCH SUMMIT IN APRIL
-------------------------------

¶19. (S) Aboul Gheit and the Secretary briefly conferred
on the idea of a French-hosted summit in early April,
and agreed that it was premature to commit to such a
step. The Secretary noted that the Israeli political
calendar made the timing especially awkward.

--------------------------------------
EGYPTS PUSH FOR INCLUSION IN G-8/G-20
--------------------------------------

20.(C) Aboul Gheit made a pitch for Egypt to be included
in an expanded G-20 and that the group of five
"outreach" countries to the G-8 be expanded to include
Egypt on a permanent basis. The Secretary said that she
would look into the issue.

CLINTON

October 21 2008

18:08

TYMOSHENKO APPEALS TO USG: UKRAINE HAS "HOURS, NOT

C O N F I D E N T I A L KYIV 002111

SIPDIS

DEPT FOR EUR, EUR/UMB, EEB/OMA
DEPARTMENT PLEASE PASS TO TTORGERSON

E.O. 12958: DECL: 10/21/2018
TAGS: EFIN PGOV PREL ECON ETRD XH UP
SUBJECT: TYMOSHENKO APPEALS TO USG: UKRAINE HAS "HOURS, NOT
DAYS" TO TACKLE CRISIS

REF: KYIV 2105 AND PREVIOUS

Classified By: AMBASSADOR WILLIAM B. TAYLOR, REASONS 1.4(B) AND (D)

¶1. (U) This is an Action Request. See Summary and Paragraphs
11 and 12.

Summary
-------

¶2. (C) At a late night meeting on October 20, Prime Minister
Tymoshenko told the Ambassador that Ukraine had "hours, and
not days" to restore confidence in the country's financial
system. The situation in the country was more dire than
commonly believed, she claimed. She and Finance Minister
Pynzenyk asked the USG to encourage the IMF to approve a
support package at an IMF Board meeting on October 22 in
Washington. Tymoshenko also asked that the highest levels of
the USG weigh in with President Yushchenko to cancel snap
elections now scheduled for December 14. The IMF would put
tough restrictions on Ukraine in return for support. Rada
backing for the unpopular measures would be difficult in the
best of cases, and impossible with elections looming,
Tymoshenko and Pynzenyk argued.

¶3. (C) Action Request: Ukraine's financial situation is
precarious, but most observers do not yet see a meltdown as a
foregone conclusion. Nonetheless, swift IMF action now
appears to be the only possibility to restore confidence in
Ukraine in the short run, and we urge Washington to weigh in
with the IMF as Tymoshenko is requesting. Whatever her
political motives may be in seeking USG help to delay the
election sought by Yushchenko, Tymoshenko is nonetheless
correct that continued political infighting will prevent
Ukraine from adequately addressing the crisis, and may even
neutralize the positive effects of an IMF program. End
summary and action request.

"Hours, and Not Days"
---------------------

¶4. (C) Prime Minister Yulia Tymoshenko summoned the
Ambassador to an 11 p.m. meeting on October 20 to seek USG
support for an IMF support package and to postpone early
parliamentary elections. Flanked by Deputy PM Hryhoriy
Nemyrya and Finance Minister Victor Pynzenyk, Tymoshenko used
dramatic language to argue that Ukraine's financial system
was in a far more precarious situation than commonly
believed. Things were deteriorating rapidly, and Ukraine had
"hours, and not days," to restore confidence. Pynzenyk said
action was necessary by the end of the week. If swift action
were not taken, both Tymoshenko and Pynzenyk told the
Ambassador, the banking system and the hryvnia could
collapse. Restoring confidence after a complete collapse
would be a long and painful process, they said.

¶5. (C) Tymoshenko said that Ceyla Pazarbasioglu, head of the
IMF delegation currently in Kyiv, was equally alarmed by the
situation. The delegation had prepared a support package
that now needed the approval of the IMF Board. Tymoshenko
said the IMF would share all details of the package only
after approval by the IMF Board. However, Tymoshenko claimed
the package could be "the most ambitious program in IMF
history." Nemyrya said it could be larger than the $14
billion figure mentioned by GOU and NBU officials in recent
days.

IMF To Link Support to Tough Conditions
---------------------------------------

¶6. (C) Although details were still missing, Tymoshenko and
Pynzenyk said, Ukraine already knew that the IMF would expect
tough measures in return for its support. Responding to a
question by the Ambassador, Tymoshenko confirmed that Ukraine
would need to limit growth in salaries and pensions, a main
driver of growth, inflation and the ballooning current
account deficit. Pynzenyk said the GOU would provide
immediate and significant support to banks. It would also
make changes to the budget and pass a number of other laws.
They were not more specific on fiscal changes expected by the
IMF, nor did they indicate whether the IMF might require the
National Bank of Ukraine to modify its policy of pegging the
hryvnia to the dollar.

¶7. (C) The measures would be highly unpopular, Pynzenyk said,
and difficult to pass in the Rada. In particular, the Rada
would not approve tough measures without assurances that the
IMF would actually deliver on its part of the deal. If
neither the IMF nor the Rada acted soon, the situation could
worsen beyond repair, Pynzenyk said. Hence speed was of the
essence: the IMF Board would discuss the proposed package on
October 22 in Washington, Pynzenyk said. He and Tymoshenko
asked that the USG weigh in with the IMF, and in particular
First Deputy Managing Director John Lipsky and the U.S.
executive director, to guarantee approval of the package. At
the very least, Pynzenyk said, the IMF should adopt
"simplified measures" to document that it was backing
Ukraine.

Tymoshenko: Presidential Secretariat Doesn't Understand
--------------------------------------------- ----------

¶8. (C) According to Tymoshenko, the IMF had not conducted a
direct dialog with the National Security and Defense Council
(NSDF), which discussed emergency measures on October 20
(septel). Instead, the IMF held separate discussions with
the GOU, the NBU and the Presidential Secretariat. She was
vague on whether the measures envisaged by the NSDC actually
addressed the conditions put forth by the IMF. In any case
the Presidential Secretariat did not comprehend the depth of
the crisis, she said. Pynzenyk said he talked to Oleksandr
Shlapak, Deputy Head of the Presidential Secretariat, after
the latter met with the IMF and concluded that Shlapak still
did not understand the situation. He said he feared that
President Yushchenko was not being properly briefed.

PM Asks USG to Weigh in With Yushchenko
---------------------------------------

¶9. (C) Tymoshenko also asked that the highest levels of the
USG weigh in with President Yushchenko to delay early
parliamentary elections. During the October 20 NSDC meeting
Yushchenko agreed to suspend his decree calling for new
elections, she said. At a press conference moments later,
however, Yushchenko announced that elections would only be
delayed by a week to December 14. The move took her by
surprise, Tymoshenko said. She no longer understood what
drove the President. With elections on the horizon nobody in
the Rada would support the unpopular measures needed for IMF
backing. Insisting on elections in the present circumstances
was irresponsible and would destroy the economic and
political stability of the country. The proper decision
would be for her and her ministers to resign, she said, but
that would only deepen the overall crisis and leave nobody to
sign an agreement with the IMF. The Party of Regions (PR)
"would rule the country completely" if elections were held
according to Yushchenko's timetable. The President "was
fantasizing" if he believed claims by the PR that it would
support his reelection bid, she said.

World Bank, EBRD Also Ready to Help
-----------------------------------

¶10. (C) Nemyrya said the World Bank was also considering a
loan package, known as DBL3, that would need support from WB
President Robert Zoellick. He asked for USG support for this
package as well. The EBRD was also sending a delegation to
Kyiv. On the way out, Nemyrya told the Ambassador that
Tymoshenko fully supported the idea of a Strategic Framework
Agreement. Consultations and assistance related to the
financial crisis would be welcome.

Comment and Action Request: How Bad Is the Situation?
--------------------------------------------- ---------

¶11. (C) Tymoshenko's assessment of the financial situation
belongs to the most pessimistic that we are hearing in Kyiv.
It is broadly expected that the crisis will lead to a
significant drop in economic growth and to a devaluation of
the hryvnia, but it is not a foregone conclusion among market
participants that a meltdown is imminent -- otherwise it
would have already occurred. The markets are currently
frozen and in a wait and see mode. What happens next will
depend on world events and Ukraine's policy responses.
Although some market participants feel that the NBU and GOU
are in control, many question whether policymakers fully
understand the problems in the banking sector and have an
idea what to do next. All are hoping that the IMF program
will bring more transparency and provide a way forward. We
agree that, whatever the underlying reality in the banking
sector may be, swift IMF action is at the moment the only way
to restore confidence in Ukraine in the short term, and we
encourage Washington to weigh in with the IMF Board to secure
formal support for a Ukraine program at the October 22 Board
meeting.

¶12. (C) Tymoshenko may be privy to insider information not
(yet) available to the markets. The situation is truly dire
if that is the case. Whatever her motives in seeking USG
help to stop the elections sought by Yushchenko, it is true
that Ukraine needs unity to address the current crisis.
Electioneering will prevent the Rada, the GOU and the
President from making the hard decisions expected by the IMF,
and could even neutralize any stabilizing effects of an IMF
program. We therefore encourage a dialog with President
Yushchenko aimed at tabling the idea of elections until an
IMF program, along with parallel actions taken by Ukraine,
have stabilized the country's financial system and restored
confidence. End comment and action request.
TAYLOR

September 11 2008

18:27

SCENESETTER FOR GENERAL GRAPSAS' VISIT TO D.C.

S E C R E T SECTION 01 OF 03 ATHENS 001294


SIPDIS

CJCS FOR THE CHAIRMAN, STATE FOR P&EURSE

E.O. 12958: DECL: 09/10/2018
TAGS: GR PGOV PREL
SUBJECT: SCENESETTER FOR GENERAL GRAPSAS' VISIT TO D.C.
SEPTEMBER 15-19

Classified By: AMB DANIEL SPECKHARD. REASONS 1.4 (B) AND (D).

SUMMARY
-------

¶1. (C) The visit of General Demetrius Grapsas, Chief of the
Hellenic National Defense General Staff, to Washington is an
important opportunity to recognize Greece's support of
multiple U.S. Navy and Air Force operations in the Eastern
Mediterranean and the Middle East, including Iraq through
overflights and transmissions through Souda Bay, as well as
its ongoing contributions to Afghanistan and Kosovo. A
pragmatic and apolitical officer, Grapsas will be receptive
to our suggestions of ways Greece can further contribute. He
is keenly interested in maintaining strong U.S.-Greek
mil-to-mil relations as we continue to have differences with
the GOG over Macedonia and a "business as usual" approach to
Russia. Greece is a key buyer of U.S. military equipment,
though recent procurement decisions tend to be based on
political and seek a balance with the U.S., the EU, and
Russia. END SUMMARY.

¶2. (S) U.S.-Greece defense cooperation has a long history
rooted in the Marshall Plan and the Truman Doctrine.
Currently, some of Greece's key current contributions in the
military sphere include:

-- Souda Bay: Souda Bay is the U.S. Navy's most important
strategic location in the Eastern Mediterranean. A large
number of U.S. and NATO operations in the Middle East and the
Mediterranean depend on this facility in Crete. The Greeks
do not place any restrictions on access, overflight, or
deployment of even the most sensitive military assets at
Souda Bay.

-- Flight Clearances/OEF and OIF Support: Since 9/11, the
Greek Ministry of Defense granted blanket overflight
clearances for all U.S. military aircraft that pass through
Greek airspace in support of operations in Afghanistan and
Iraq.

--KFOR: Greek military forces are important contributors to
maintaining stability in Kosovo with approximately 600
personnel deployed in NATO's KFOR mission.

--OAE: Greece is one of the top three contributors to
Operation Active Endeavor (OAE) - NATO's Article V
counter-terrorist operation in the Mediterranean.

--Ship visits: The GOG has supported fully a robust
ship-visit program allowing close to 300 U.S. naval vessels
to visit 12 Greek ports over the last two years.

¶3. (S/NF) General Grapsas is open, but a staunch defender of
Greece's interests. He is positively disposed towards the
U.S., and he has pressed the Greek military to emulate
American planning, transformation, training, and procurement.
He is suspicious of Russia and resisted efforts to procure
Russian defense articles. He told the U.S. Defense Attach
that he regrets Greece's recent purchase of Russian BMP-3's.
Similarly, he has said he would support providing Greek
forces for Iraq and increase Greek forces in Afghanistan, to
include lifting the regional caveat restricting Greek
personnel to the Kabul region. However, General Grapsas has
little influence on defense policy and procurement decisions.
The Greek constitution places strong restrictions on the
role of military officers in participating in policy
development.

¶4. (SBU) Greece has had plenty of high-level NATO visits.
Recently, General Craddock (20-22 July), Admiral Fitzgerald
(2-3 April), Lt Gen McFann (2 July), and LTG Eikenberry (3
July) visited Athens and met with Grapsas. Although the
discussions have been frank, all four visits were cordial
resulting in agreement to continue cooperative dialogue on
NATO issues. Additionally, the Joint Staff Talks and the
U.S./Greece High Level Consultative Committee (HLCC) will
meet in D.C. October 22 and October 24.

¶5. (C) Although the broader U.S./Greece relationship is not
always smooth, the U.S.-Greece military-to-military
relationship is strong, and we believe it pays important
strategic dividends to the national security of the United

ATHENS 00001294 002.2 OF 003


States. We can advance our security agenda wit Greece
through General Grapsas' visit and upcoming bilateral
mil-to-mil contacts.

----------
Key Issues
----------

¶6. (C) Among the key issues likely to come up are the
following:

-- Macedonia: At the April NATO Summit, Greece blocked the
invitation of Macedonia into the Alliance -- a top U.S.
priority because of a lack of agreement on changing the
country's name. We continue to urge both Athens and Skopje
to work rapidly for a solution. Greek/Macedonian relations
have been soured by a recent tart exchange of letters between
Macedonian PM Gruevski and Greek PM Karamanlis on questions
related to the "Macedonian minority" in Greece. Ultimately
Athens is insisting on a solution that would:
-- indicate that "Macedonia" is a broader region than the
country in question (hence Greece's support for a geographic
qualifier such as "Northern" or "Upper" before Macedonia),
and
-- be used broadly for all international use.

-- Greece-Turkey: The Greek/Turkish bilateral relationship
has improved in recent years. The GOG remains supportive of
Turkey's EU accession. There has, however, been no angibe
progress on long-standing diputes over ontinental shelf and
the tatus of islands n the Aegean. The Greeks are plased
with he momentum on Cyprus, sending psitive signals about
the September 3 start of UN-brokered talks, but strongly
question Ankara's commitment to -- and potential to spoil --
progress on reaching a negotiated solution on Cyprus.

-- Aegean Exercises: The Greeks were deeply disappointed by
the NATO decision not to support NOBLE ARCHER 2008. General
Grapsas will want to discuss how NATO might craft an exercise
in the future that would overfly Agios Efstratios, an island
whose status as "demilitarize" is disputed between Greece and
Turkey. General Grapsas feels that NATO's invocation of
"neutrality" -- which results in a decision not/not to
overfly any area under dispute -- always favors Turkish
interests. The Greeks argue that the Turkish claim that
Agios Efstratios is demilitarized is specious and not a valid
justification for excluding the island from NATO exercises.
Unlike many of his predecessors, General Grapsas has not gone
to the press.

-- Russia/Georgia: PM Karamanlis has expanded Greece's
relationship with Russia. This is in no small measure due to
historical and religious ties and strong domestic political
support for strengthening relations. The Russia/Georgia
crisis is a challenge for Greece. The GOG supports Sarkozy's
efforts, and FM Bakoyannis has said the right things on
Georgian territory integrity and the withdrawal of Russian
troops. PM Karamanlis has also publicly stated that violence
is not the appropriate response and has emphasized
"territorial integrity." Greece has pledged two monitors for
the initial OSCE mission in Georgia and already pledged or
delivered well over 469,500 Euros worth of in-kind and
financial humanitarian assistance to Georgia.

At the same time, Greece has pursued "business as usual" with
Russia, with meetings with Russian defense industry officials
and Parliamentary ratification in September of the
Southstream gas pipeline agreement. The Embassy has pushed
the GoG hard to cancel or delay these ill-advised moves.
Grapsas' visit will provide another opportunity to pass the
message to the Karamanlis government that they need to
actively support Georgia and avoid business as usual with
Russia.

-- Kosovo: Greece does not appear likely to recognize Kosovo
in the immediate future, but is playing a reasonably
constructive role behind the scenes. Beyond its over 600
forces in KFOR, the Greeks are providing personnel to the EU
Rule of Law Mission (EULEX), the OSCE Mission, and the
International Civilian Office (ICO) in Kosovo. It has also
been among the most active players in the EU in engaging with
Serbia post-Kosovo independence and in encouraging Serbia's
European and Euro-Atlantic perspective.

ATHENS 00001294 003.2 OF 003


SPECKHARD

August 28 2008

21:51

TFGG01: GREECE'S BUSINESS-AS-USUAL WITH RUSSIA

C O N F I D E N T I A L ATHENS 001216

SIPDIS

E.O. 12958: DECL: 08/28/2018
TAGS: PREL PGOV GG GR RS
SUBJECT: TFGG01: GREECE'S BUSINESS-AS-USUAL WITH RUSSIA
UNDERMINES STRONG NATO STATEMENTS

REF: A. ATHENS 1188
¶B. ATHENS 1183
¶C. 07 ATHENS 2375
¶D. SECSTATE 91894

Classified By: CHARGE D'AFFAIRES DEBORAH MCCARTHY. REASONS 1.4 (B) AND
(D).

¶1. (C) SUMMARY: Despite strong statements at NATO and the EU
by FM Bakoyannis supporting Georgian territorial integrity
and condemning Russia's recognition of South Ossetia and
Abkhazia as independent states, the GOG at the same time is
moving ahead with several "business-as-usual" events with
Russia, including a visit this week of a Russian defense
industry team to discuss arms purchases, the impending
Parliamentary ratification of the South Stream gas pipeline
deal with Russia, and co-sponsorship with Russia of a major
cultural event marking 180 years of Greek-Russian diplomatic
relations. Embassy will continue to press the GOG to delay
or cancel these events to avoid undercutting NATO and EU
positions. END SUMMARY.

GREECE'S EVOLVING POSITION
--------------------------

¶2. (C) The Georgia/Russia crisis has put Athens in a tight
spot due to its historically close ties to both countries.
Wary of alienating Moscow but spooked by Russian actions and
the international community's tough response, the GOG at
first tried to remain silent on the crisis (indeed, Prime
Minister Karamanlis has still made no public statements on
the situation). Once an EU position began to take shape,
Greece placed itself squarely behind France. At this
writing, the Greek position appears to be further evolving
into one in which they try, under the guise of playing the
role of a "bridge" between East and West, to take positions
on both sides of the issue, making tough political statements
at NATO and elsewhere on Georgia's territorial integrity,
while moving forward with "business-as-usual" on Russian
pipeline, arms deals, and cultural events.

¶3. (C) At the special EU Foreign Ministers' meeting and the
NATO Ministerial, FM Bakoyannis came out for the territorial
integrity of Georgia and the need for the withdrawal of
Russian troops to their pre-crisis positions. She pledged
two Greek monitors to the initial OSCE mission (the maximum
10 percent allowed by OSCE rules of the 20 total monitors),
and we were told the GOG would be willing to send the maximum
of ten to the planned expanded 100-monitor mission. Perhaps
most significantly, Bakoyannis made a statement following
Russian recognition of South Ossetia and Abkhazia as
independent states in which she expressed "regret" for
Russia's step and joined the French Presidency in
"condemning" the Russian decision. She was strongly
criticized in the Greek press by a "Russian diplomat" (in
fact, Russian Ambassador to Greece Vdovin) for using the word
"condemn," which Vdovin noted Greece had not used in the case
of Kosovo's declaration of independence.

¶4. (SBU) Greece also stepped forward early with humanitarian
assistance to Georgia. The GoG told A/EconCouns on August 21
that they have pledged 80,000 euro to the World Food Program
to help procure necessary food aid. According to Hellenic
Aid, the GoG was considering additional humanitarian aid, but
no decisions had yet been made yet. As reported by Embassy
Athens via unclass email to the Georgia Task Force on August
13, the GoG has already delivered one C-130 full of
humanitarian supplies, including 10-person tents (3.5 tons),
blankets (2.5-3 tons), and various medicines and medical
supplies, and 100,000 euro directly to UNHCR for IDPs in
South Ossetia.

DO ACTIONS SPEAK LOUDER THAN WORDS?
-----------------------------------

¶5. (C) The statements above notwithstanding, Greece is moving
forward with several ill-advised moves that contradict, if
not undermine, Greek expressions of support for Alliance
positions:

-- Greece is currently hosting the visit of Russian technical
advisors to discuss Greek purchase of 450 Russian-made
armored personnel carriers (BMPs) -- part of the pipeline and
arms deal signed by Putin and Karamanlis last December (ref
C). Greek officials told us the Russian team would meet only
with "private" Greek defense firms and there would be no
official Greek participation. We believe, however, that the
Russian team is likely to meet Greek MOD officials and that
Greek officials will participate in the Russians' meetings
with defense firms.

-- The Greek Parliament is moving forward (probably in the
next week) with its previously scheduled ratification of the
South Stream gas pipeline deal. On August 28, the Parliament
Committeeon Commerce and Production approved the
ratifiation and sent it to the full Parliament. In a
statement the same day before the Parliament Foreign and
Defense Committee, FM Bakoyannis said Greece would "honor any
commitments it rokered before the Georgia crisis," while
Deveopment Minister Folias stressed to the Commerce and
Production Committee the "geopolitical importance" of South
Stream and Greece's role as a "bridge" linking Eastern
producers and Western consumers.

-- On August 28, Russian Ambassador Vdovin gave a
well-received press confrence announcing that the "Moscow
Virtuosi" msical tour of Europe would begin in Athens onSeptember 5 at the Herodion theater next to the Acropolis.
The event would take place under the auspices of the Greek
Ministry of Culture and the Greek Parliament and was designed
to mark 180 years of diplomatic relations between Russia and
Greece.

EMBASSY PUSHES BACK
-------------------

¶6. (C) Embassy delivered ref D points on Russia's recognition
of South Ossetia and Abkhazia as independent states to MFA
S ecretary General Agathocles and to MFA A5 Directorate for
CIS Countries Counsellor Elisabeth Fotiadou. In addition,
the Embassy has worked hard to convince the GOG not to
continue "business-as-usual" with the Russians by moving
forward with the BMP visit, the ratification of South Stream,
and the cultural event. We raised the issue with PM
diplomatic advisor Bitsios, MFA SecGen Agathocles, Bakoyannis
advisor Haris Lalacos, the CIS Desk at the MFA, the Hellenic
General Staff, the Ministry of Development, the Parliament
leadership, and other Greek government agencies, as well as
with numerous other diplomatic missions, including the
British, French, Canadian, Polish, Finnish, Hungarian,
Latvian, Ukrainian, Georgian, Slovenian, and Estonian
missions. Our diplomatic colleagues all promised to report
the information to their capitals.

¶7. (C) We have heard a generally uniform response from GOG
officials. They argue that the Georgia/Russia crisis and
such developments as the Parliament's impending ratification
of the South Stream pipeline are "not connected in any way,"
and that the latter was scheduled well in advance and should
be seen as "routine." We counter that these events are very
closely connected, that "business-as-usual" at this point
serves to legitimize Russia's actions, and that moving
forward with these events contradicts, if not undermines,
Greece's stated agreement with Alliance and EU positions.

¶8. (C) The South Stream ratification received Committee
approval on August 28, but approval by the full Parliament
has not yet taken place (we expect it very shortly). Thus,
we may still have a window of opportunity to convince the
Greeks to delay. We will continue to press them and to urge
our diplomatic colleagues to do the same. We will also look
for opportunities to urge PM Karamanlis to break his silence
and to come out in favor of Alliance positions.
MCCARTHY

August 27 2008

16:03

INSIGHTS ON ZARDARI'S PLANS FOR THE PARTY,

C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 002850

SIPDIS

E.O. 12958: DECL: 08/27/2018
TAGS: PGOV PK PREL KJUS PTER

SUBJECT: INSIGHTS ON ZARDARI'S PLANS FOR THE PARTY,
COALITION, AND JUDGES

REF: ISLAMABAD 2731

Classified By: Charge d'Affaires Jerry Feierstein for reasons 1.4 (b), (d)


¶1. (C) Summary: Pakistan People's Party Deputy Secretary General Sheik Mansoor admitted August 27 that his party leadership, including those serving in government, would not focus on the extremist threat or other pressing issues until its Co-Chair Asif Zardari was elected Pakistan's president on September 6. Party members were busy securing deals with factions of the Pakistan Muslim League, Karachi's Muttahida Quami Movement, and religious party Jamiat Ulema-e-Islam. Mansoor revealed that, if Zardari becomes president, as expected, party management will pass to his sister, parliamentarian Faryal Talpur, to serve as “executor” for Bilawal (Zardari and Bhutto's son). Mansoor recognized that Zardari would have to make good on his promise to the Army to grant former President Pervez Musharraf immunity, but said such a bill would be presented to the National Assembly only after Zardari became president. Lastly, Mansoor claimed that the PPP's plan to gradually reinstate the deposed judges, minus former Supreme Court Chief Justice Iftikhar Chaudhry, was working, with eight judges returning to the Sindh High Court and possibly a couple of Supreme Court justices also agreeing to the “re-appointment” (septel). End summary.

Distracted
- - - - - -

¶2. (C) PolOff met August 27 with Pakistan People's Party (PPP) Deputy Secretary General Sheik Mansoor. Mansoor began by expressing his regret for the August 26 attack against the U.S. Principal Officer in Peshawar. When asked, however, what response or reaction could be expected from the PPP-led GOP, Mansoor hesitated to commit the government to any action. He predicted PPP leaders would focus on counterterrorism/counterinsurgency issues, even in general terms, only after the September 6 presidential election. “Every PPP official is focused on electing PPP Co-Chair Asif Zardari,” he said.

¶3. (C) Mansoor said the PPP was now in constant contact with leaders of the Pakistan Muslim League (PML) “forward bloc,” a faction of Musharraf's party. Mansoor specifically mentioned PML parliamentarian Mian Manzoor Ahmed Wattoo and his faction as already committed to joining the PPP at the federal level.

¶4. (C) Mansoor admitted that the related PML forward bloc in the Punjab Provincial Assembly, led by Hamid Nasir Chattha, looked likely to align with the predominant Pakistan Muslim League-Nawaz (PML-N) party. But Mansoor revealed that the PPP had informally offered Chattha the Punjab Chief Ministership in an attempt to win him over to the PPP. Because neither Wattoo nor Chattha fit in well with the PML or PML-N, Mansoor predicted that their forward bloc would eventually sit with the PPP at the provincial level. He predicted a PPP/PML-forward bloc Punjab government within a year.

¶5. (C) Mansoor also said that Karachi's Muttahida Quami Movement (MQM) would join PPP in the federal coalition after Zardari's election. (Note: MQM is already aligned with the PPP in the Sindh provincial government.) MQM could expect to get three or four “good” ministries if it supported Zardari's candidacy, Mansoor mentioned.

¶6. (C) Mansoor added that Jamiat Ulema-e-Islam's (JUI-F) Fazlur Rehman was trying to shake down Zardari for “more of everything.” But this was Rehman's modus operandi, said Mansoor, and the PPP expected it, explaining why the JUI-F may have only gotten a couple ministries when it first joined the coalition government. (Note: Following Rehman's August 25 statement that perhaps PPP leader Zardari could not be trusted, Zardari dispatched the GOP Information Minister to win Rehman back to the PPP fold.)

Party leadership
- - - - - - - - -

¶7. (C) Mansoor further revealed that Zardari sister and parliamentarian Faryal Talpur would take over management of the PPP once Zardari was elected president. (Note: As president, a constitutionally non-political position, Zardari would have to resign as PPP Co-Chair.) Mansoor elaborated, a “steering committee” would be set up to run the party “for Bilawal.” It would include Talpur, but also possibly estranged party Vice Chair Makhdoom Amin Faheem. Talpur, though, would serve as the day-to-day “executor” of Bilawal's inheritance.

Musharraf's Immunity
- - - - - - - - - - -

¶8. (C) Mansoor swore that an immunity package for former President Pervez Musharraf would be presented to the National Assembly after Zardari's election. He dismissed recent news articles reporting the PPP was instead considering following up on the charge sheet against Musharraf. He blamed the party's Senate leader Mian Mohammad Raza Rabbani for advocating Musharraf's prosecution, but said Rabbani was a minority within the PPP Central Executive Committee.

¶9. (C) Mansoor claimed Law Minister Farooq Naek was already drafting this immunity package, though Mansoor was not very convincing in his claims. He recognized that Zardari would have to deliver on this issue because of his promise to Chief of Army Staff (COAS) General Ashfaq Kayani (and us).

Gradual Reinstatement of Judges
- - - - - - - - - - - - - - - -

¶10. (C) PolOff also asked about Naek's draft 80-part 18th Amendment, which was proposed in order to curb the president's powers and to bring back the judges deposed by Musharraf last year. Avoiding the specific question, Mansoor only repeated that the judges would be restored to the bench, noting that eight Sindh High Court judges would be “re-appointed” (septel). He added that up to three former Supreme Court justices were also willing to come back.

¶11. (C) The PPP, Mansoor insisted, was being consistent in its legal interpretation that Musharraf's November 3, 2007, actions were later legally sanctioned. (Note: This legal view was crafted by PPP Senator Latif Khosa, appointed Pakistan's new Attorney General earlier this week.) Consequently, the deposed judges could be restored, with their seniority intact, and placed back on the bench once they took a new oath of office. Mansoor added that none of the post-November 3 judges would be dismissed from the (expanded) courts.

¶12. (C) This “consistent stance” also fit nicely with Zardari's desire to keep former Supreme Court Chief Justice Iftikhar Chaudhry off the bench, Mansoor mentioned. Chaudhry would never accept the terms of “re-appointment,” Mansoor was confident. Plus, Zardari did not want him back, supposedly, because he had become “too political,” making statements against the PPP.

¶13. (C) Comment: Mansoor exuded confidence over how his party chief Asif Zardari is handling the affairs of the PPP party structure, the federal coalition and the Pakistani public (on such popular issues as the judges' restoration). While it is possible that Zardari can continue to juggle all these issues, there are increasing rumblings about many of Zardari's so far unfulfilled promises. He also faces growing opposition within his PPP ranks. End comment.
FEIERSTEIN

August 22 2008

20:55

TFGG01: RUSSIA-GEORGIA CONFLICT: ATHENS DIPLOMATIC

S E C R E T ATHENS 001188

NOFORN
SIPDIS

E.O. 12958: DECL: 08/22/2018
TAGS: GR PGOV PREL MARR RU GG
SUBJECT: TFGG01: RUSSIA-GEORGIA CONFLICT: ATHENS DIPLOMATIC
PUSH

REF: A. STATE 89769
¶B. 07 ATHENS 2375
¶C. ATHENS 1183

Classified By: CHARGE D'AFFAIRES DEBORAH MCCARTHY. REASONS 1.4 (B) AND
(D).

¶1. (C) SUMMARY: Greek MFA and MOD officials are saying the
right things on Greece's support for Georgia's territorial
integrity and the early withdrawal of Russian forces from
Georgia. At the same time, a team of Russian defense
industry experts is scheduled to visit Athens next week to
discuss Greek purchase of Russian armored personnel carriers
(BMPs), and the Greek Parliament is scheduled to ratify the
Southstream pipeline project with Russia in September. We
are working to turn off both these ill-advised moves, but are
getting mixed signals from Greek officials. Further
discussions on these issues with Greek diplomats in Brussels
and Washington could be helpful. END SUMMARY.

¶2. (C) Charge delivered ref A points on the Russian-Georgia
conflict to Constantinos Bitsios, diplomatic advisor to PM
Karamanlis, and to Aristides Agathocles, MFA Secretary
General. She urged Greece's continued support of the common
NATO position and the withdrawal of Russian forces from
Georgian territory to their pre-crisis positions. Charge
also encouraged continued Greek humanitarian assistance to
Georgia and expressed U.S. appreciation to Greece for its
decision to send two monitors for the OSCE mission. Bitsios
assured us that Greece firmly supported Georgia's territorial
integrity and noted that he had personally pressed Russian
representatives in Athens firmly on the immediate withdrawal
of Russian troops from Georgian territory. At the same time,
Bitsios said Greece was wary of starting down a path toward a
new Cold War by isolating Russia. A better path, he argued,
was one of dialogue and negotiations. We pushed back, noting
that while no one wished to see a new Cold War, Russia needed
to repair the damage it had done.

¶3. (C) Agathocles likewise underscored Greece's full support
for Georgia's territorial integrity and said Greece would not
accept changes to borders. He explained that it was a matter
of principle for them, both in the case of Georgia and in the
case of Kosovo, whose independence Greece has not yet
recognized. Agathocles said they had told the Russians
"strongly" that any attempt to revise borders would be
unacceptable. He had asked the Russians why they were not
withdrawing more quickly. They had responded that, first,
they had found ammunition dumps in the captured territories
and had to destroy them to keep them from falling into the
hands of gangs. Second, the Russians claimed there were no
law-enforcement authorities in Gori and they could not leave
the area unattended. Agathocles was unpersuaded by these
arguments. Like Bitsios, however, Agathocles also argued
that it was not in the interests of the West to isolate
Russia at this time.

RUSSIAN TECHNICAL TEAM TO ATHENS FOR BMP NEGOTIATIONS
--------------------------------------------- --------

¶4. (C) Greek press reports Thursday indicated that a team of
Russian technical experts was scheduled to travel to Athens
next week for discussions on Greek procurement of 450
Russian-made armored personnel carriers (BMPs). NOTE: This
is part of a larger arms purchase agreement that PM
Karamanlis signed with President Putin late last year. Ref
¶B. END NOTE.) We raised the issue with Bitsios and
Agathocles, noting that such a visit now would be unhelpful
@h undercut and be inconsiQupport of the NATO posQitarian
assistance e& was important not to
allow Russia to think it was "business as usual" as long as
Russia had troops occupying Georgian territory. Bitsios
appeared to take these arguments on board but had no direct
response. Agathocles thanked us for this information and
said he understood that such a visit would not be helpful at
this point and that they would "turn it off." A/Polcouns
also discussed the issue with former Foreign Minister and
reported Karamanlis confidante Antonis Samaras, who agreed
"absolutely" that the optics of such a visit now would be bad
and promised to make sure "those who needed to know" would be
told.

¶5. (C) To put greater pressure on the GOG to cancel the
Russian visit and to alert colleagues in the diplomatic corps
to the issue, Embassy officers contacted a number of
third-country embassies in Athens. Georgian Charge Zurab
Aleksidze said our efforts were a good initiative, that he
would report the issue back to Tbilisi, and would take up the

issue himself with Deputy Foreign Ministry Kassimis, who is
heading the MFA's Georgia crisis center. UK PolCouns Lisa
Whanstall also expressed concerned and said she would cable
London for instructions on how to proceed.

CHOD BLASTS RUSSIANS
--------------------

¶6. (S/NF) DATT discussed the Russian BMP visit with Chiefof
Defense General Grapsas. Grapsas at first said he knew
nothing of the visit but confided that if such a visit were
scheduled, he would certainly have it stopped. Shortly after
returning to the Embassy, Major General Reklitis called DATT
and told him that the Russian technicians were coming to
visit Greece but they were not sponsored by anyone in the
Hellenic Ministry of Defense or Hellenic Military and were
only coming to meet with civilian commercial officials.
Therefore, Grapsas could not postpone or terminate the visit.
COMMENT: While it is conceivable that the Russians are
coming to talk to private Greek companies because there are
reportedly offset provisions in the BMP deal, it is highly
unlikely that the Greek Pentagon would not have contact with
such a delegation. Moreover, most of the Greek defense firms
are quasi-state enterprises, so a Russian meeting with
"private" Greek defense firms would still likely involve
Greek officials. END COMMENT.

¶7. (S/NF) Grapsas went on to express very negative views on
the Russians. He opined that Russia was a country that could
not be trusted and that history had proven this fact time and
again. Grapsas underscored his distrust of Russia by
pointing out that it was taking advantage of high oil prices,
a result of terrorist acts, to illegitimately generate wealth
and fund its military buildup and modernization. He said the
U.S. should not allow the Russians to occupy Georgia and
should remove them and push on into Russia to teach them a
lesson. He went on to say that despite its claims, Russia
was not a democracy and the world was naive if it thought
Russia could change from a hegemonic, centrally controlled,
communist state to a true capitalistic democracy in only 18
years. Grapsas reiterated that Greece had historical ties
with Georgia and would do whatever was required to help them.
He opined that the U.S., NATO, and the EU would have to
rebuild Georgia and Russia would not like it. He pledged
Greek support in the form of military forces, humanitarian
aid and support (i.e. diplomatic clearances for over flights
and sealift), as required.

OTHER DIPLOMATIC CONTACTS
-------------------------

¶8. (C) A/Econcouns delivered ref A points to Peep Jahilo,
Estonia's Ambassador to Greece. Jahilo indicated that there
was no doubt that Estonia was firmly allied with Georgia and
believed Moscow was in the wrong. He said that Estonia was
one of the first countries to send humanitarian assistance to
Georgia. He shared that Estonia would continue to stand with
NATO and was watching developments closely. Jahilo believed
that Russia had been put on notice by the NATO statements and
the fact that very few countries were supporting its
position. However, he noted, Russia was now taking steps to
help it "save face." For example, according to him, the
Russian military attach in Estonia yesterday demarched the
Estonian military that it was freezing its bilateral military
cooperation with Estonia for the time being. On Greece,
Jahilo indicated that while he was heartened to hear recent
statements by Bakoyannis he was wary of the fact that
Karamanlis had been utterly silent on Russian's actions.

¶9. (C) A/DCM delivered reftel points to Ukrainian Charge,
Taras Malisevski. Malisevski, who appreciated the
information, noted that his embassy had not discussed the
issue with the GoG, in large part because his Ambassador was
to return to post on September 6. He did specifically state
that, while Bakoyannis had made some useful statement on
Georgia, his government had noticed PM Karamanlis had been
"very silent" on the matter.

GEORGIA CRISIS AND GREEK ENERGY POLICY
--------------------------------------

¶10. (C) A/DCM discussed the situation in Georgia and its
impact on Greece's energy policy with Else Loverdou, Energy
Advisor to the Minister of Development, on both August 18 and
August 22. In the first meeting, Loverdou noted that the GoG
was interested in moving forward with the four-way Turkey,
Greece, Italy and Azerbaijan political agreement on the TGI
pipeline. A/DCM welcomed this move and outlined USG policy
on Russia in wake of Georgia: now was not a time for

"business as usual" with Russia, also on the energy sphere.
A/DCM specifically noted that the U.S. would be particularly
concerned by Greek movement on the Southstream pipeline.
The second discussion focused on an article in the August 22
edition of the Greek newspaper Ethnos, reporting that the
Russian Government had just completed ratification of its
bilateral agreement with Greece on Southstream, and that the
GoG would now move forward quickly on its own Parliamentary
ratification. Loverdou did not dispute these facts, but
called the Greek ratification process "routine." She noted
that the Russian Government ratification of the agreement did
not require action by the Duma, but rather by the Russian
Ministerial Cabinet alone. This process, she said, had now` Greek Government had, fe Southstream agreemenQr to
the summer receQg in the queue" for
r`ted that Parliament would@t September 25. "You do Q
ratified their SouthQh Russia..." she
noted. (NOTE: This has also come up in press channels and
Embassy has decided to note privately to our journalist
contacts that now is not the time to move forward with any
Southstream-related agreement. END NOTE.)

COMMENT
-------

¶11. (C) The Georgia crisis has put Greece in a tight spot
because of its historically close ties to both Georgia and
Russia. FM Bakoyannis' statement in Brussels (ref C) and the
statements of other Greek officials (PM Karamanlis has been
silent on the issue thus far) came out strongly for Georgia's
territorial integrity and the early withdrawal of Russian
troops. Greece is also supporting the OSCE monitor mission
with two monitors and promises of ten more later and has
provided funds and materiel for humanitarian assistance. At
the same time, having a Russian technical team visit next
week to discuss an arms purchase and the Greek Parliament
ratifying the Southstream project would send the wrong signal
to Moscow that Greece is still willing to do business as
usual. We have made a push to turn off these ill-advised
moves. Further discussions on these issues with Greek
diplomats in Brussels and in Washington could be helpful.
MCCARTHY

June 24 2008

16:09

U.S./GREECE MIL-TO-MIL COOPERATION: THE GOOD, THE

S E C R E T ATHENS 000896

SIPDIS

C O R R E C T E D C O P Y - CLASSIFICATION UPGRADED


E.O. 12958: DECL: 06/23/2018
TAGS: MASS MOPS MARR PREL PGOV GR
SUBJECT: U.S./GREECE MIL-TO-MIL COOPERATION: THE GOOD, THE
BAD, AND THE NECESSARY

Classified By: Deputy Chief of Mission Tom Countryman.
REASONS 1.4 (B) AND (D).

------------------------
SUMMARY AND INTRODUCTION
------------------------

¶1. (C) The U.S.-Greece bilateral relationship is facing a
particularly difficult time, as Washington and Athens have
differing views on issues such as the Macedonian name, the
independence of Kosovo, and relations with Russia. However,
the U.S./Greek military-to-military relationship and the work
between our law enforcement and security officials has, thus
far, remained strong. Given more difficult bilateral
relations, there is a danger that the mil-to-mil relationship
could become a casualty. We believe our strong mil-to-mil
relationship pays important dividends, and our goal is to
support and strengthen it. Thi message is designed to lay
out the current sate of the mil-to-mil relationship
--listing oth positives and the "irritants" we face. It
also lays out our recommendations for further mil-to-mil
engagement, to try to ensure that this fundamental aspect of
our relationship is undamaged. END SUMMARY AND INTRODUCTION

--------------------------------------------- ------
THE GOOD - POSITIVES IN THE MIL-TO-MIL RELATIONSHIP
--------------------------------------------- ------

¶2. (C) The United States and Greece have a long, shared
history in defense cooperation, rooted in the Marshall Plan,
the Truman Doctrine, and the Cold War when our assistance
helped keep Greece in the West and away from the yoke of
communism. The Greeks currently tend to overstate both their
contributions and their importance to the United States, and
there is no need to accept the Greek hyperbole. But some of
the facts of this cooperation speak for themselves.

¶3. (S) Some of Greece's key contributions are:

--Souda Bay: Souda Bay is the U.S. Navy's most important
strategic location in the Eastern Mediterranean. A wide
variety of U.S. and NATO operations in the Middle East and
the Mediterranean depend on this facility in Crete. The GOG
has proven to be a very cooperative partner at Souda Bay,
though it does not advertise this for domestic political
reasons. We are not aware of any Greek restrictions at any
time on access, overflight, or deployment of even the most
sensitive military assets at Souda Bay.

--Blanket overflight clearances: In the aftermath of 9/11,
the Greek Ministry of Defense has granted blanket overflight
clearances for all U.S. military aircraft that pass through
Greek airspace in support of operations in Afghanistan and
Iraq. Over the last two years the total number of overflight
clearances has averaged 28,000 per year.

--U.S.-Greece Joint Commission: The bilateral committee that
deals with political-military issues, including relations
between Souda Bay and the GOG, holds professional and
business-like meetings every six months and is co-chaired by
a MFA representative and the Deputy Chief of Mission.

--KFOR: Greek military forces are important contributors to
KFOR; we understand they have volunteered to help patrol in
the North to assuage ethnic Serb community concerns.
According to the latest SHAPE statistics, Greece currently
has 655 personnel deployed in Kosovo.

--OAE: Greece is the one of the top three NATO countries
with troops supporting Operation Active Endeavor (OAE) --
NATO's only Article 5 operation that is patrolling the
Mediterranean to combat terrorism. Greece provides 110 out
of a total 652 deployed on OAE. The Greeks have provided two
frigates, one fast-attack craft, extensive P-3 air support
and significant logistic and staff support at every command
level.

--Lebanon: In 2006, the Greek military was among the first
on the scene with aircraft and ships to help evacuate
expatriates, including Americans, several days before the
U.S. was able to react. In 2007, Greece donated a
significant amount of artillery ammunition to Lebanon valued
at USD 1.2M, in response to an urgent U.S. and Lebanese
request. They have also provided two ships as part of the


UNIFIL Maritime Component.

--ISAF: Besides the 144 servicemen deployed in Afghanistan,
Greece has contributed USD 64M to Afghanistan with another
USD 7.5M allocated.

--Iraq: Though Greece does not have any troops in Iraq, in
2005 and 2006 they donated 100 former East German Qit
program allowing 284



U.S. naval vessels to
visit 12 Greek ports over the last two years.

--------------------------------------------- -----
The BAD - IRRITANTS IN THE MIL-TO-MIL RELATIONSHIP
--------------------------------------------- -----

¶4. (S) Despite the long history between the U.S. and Greece,
there have been several issues which have been a source of
friction:

-- Aegean Issues: The Turks and the Greeks have long
disagreed about the demilitarized status of certain islands
in the Aegean, and both sides use the disputes to seek to
"score points" against the other. In many cases, there are
legitimate legal disputes between Greece and Turkey about a
given island's status, and NATO has rightly taken the
position that it cannot adjudicate a dispute between Allies,
and therefore will not provide NATO support to any planned
exercises in those areas.

More recently, however, Greece has sought to challenge recent
and specious Turkish claims that the island of Agios
Efstratios (AE) is also demilitarized by seeking NATO support
for an exercise including overflight of AE. Septel will
provide additional detail on this issue, but the Greeks
believe the United States' recommendation, when asked for
advice by the NATO SG, not/not to support a planned May 2008
exercise due to Turkish threats to intercept Greek aircraft
fying under NATO command and control -- was the decisive
factor in withdrawal of NATO air support.

-- Macedonia Name: Greeks consider the unmodified use of
"Macedonia" by their neighbor to the north as a usurpation of
their heritage and warn that it could encourage irredentism
towards Greece's northern province of the same name. The
popular perception, including in the government and
throughout the Greek military, is that Skopje has been
"intransigent" in negotiations, as a direct result of
"unquestioned support from Washington." At the NATO Summit
in Bucharest in April, Greece blocked the invitation of
Macedonia into the Alliance. Both the United States and
Greece were left with a disappointment, which has clouded the
general relationship. The common Greek perception is to see
any unwelcome decision from Washington as "punishment" for
the veto, which tends to make MFA and MOD less responsive to
our requests, large and small. To cite one important
example, we suspect PM Karamanlis may defer any decision on
procurement of American military equipment because he would
likely find it difficult to defend such a decision with the
Greek public at this time.

-- Afghanistan: Greece is underperforming in Afghanistan.
Greece's regional caveat, limiting Greek military forces to a
60-kilometer radius from Kabul, is high on SHAPE's list of
impediments to effective NATO operations in Afghanistan. At
every opportunity and level, we have encouraged the Greeks to
contribute more (particularly OMLTs, and helicopters) to the
war effort and to remove the regional caveat. In response,
the Greeks offered an OMLT (limited to Kabul); are
considering how they might support a Provincial
Reconstruction Teams (PRT); have offered to redeploy a
military medical unit; and have expressed willingness to take
over operations of Kabul Airport. These are all positive
steps -- but it is not nearly enough.

-- Russia: Over the last several months, PM Karamanlis has
accelerated his long-term project of developing closer ties
with Moscow. This is evident in recent deals on energy

pipelines, but also in stepped-up high-level visits,
increasing cultural ties, and Greek purchases of Russian
military equipment. The latter includes, most notably,
signature on a deal for Greek purchase of several hundred
Russian armored personnel carriers (BMPs). The BMP purchase
neither advances Greece's NATO interoperability, nor improves
Greek defense capabilities, and was not recommended by the
Hellenic military. The Greek political leadership has often
made procurement decisions on political criteria, so the
purchase of Russian BMPs for criteria other than military
necessity is not unprecedented, but it is disturbing. In
addition to our concerns about NATO interoperability,
however, we are also concerned that GOG moves toward Russia
may draw Greece into a relationship that it is ill-equipped
to manage.

--IMET: The Greeks are disappointed that U.S. International
Military Education and Training (IMET) funds for Greece have
been drastically reduced from USD 540,000 in 2008 to USD
100,000 in 2009. U.S. military training is a highly valued
commodity with Hellenic armed forces personnel and is
probably the most effective of our defense cooperation
activities. We expect Greece to send more military personnel
to other countries for training, with a probable concomitant
increase in those nations' influence with the Greek armed
forces.

----------------------------------
THE NECESSARY - FURTHER ENGAGEMENT
----------------------------------

¶5. (C) From our perspective, our mil-to-mil relationship --
although imperfect -- does yield results. Our goal is to
support it and strengthen it. In a Greek context, this means
increased engagement, preferably on a personal level. In
many fields, our cooperation with the Greeks depends more on
personal relationships than any institutional ties we might
develop. Getting the Greek3 to "yes" on difficult issues
generally requires a good argument coupled with cajoling and
schmoozing. The Greeks are susceptible to flattery and quick
to be offended by a perceived slight. As a result, we
recommend further engagement in a few key areas:

--High-Level Consultative Committee (HLCC): Under the terms
of the Mutual Defense Cooperation Agreement -- the
U.S.-Greece Agreement defining the terms of our military
presence in Greece -- we should hold an HLCC annually to
conduct a comprehensive, political-level review of our
defense relationship and address any issues that have been
unresolved by the working-levels. The last HLCC was held in
Greece in 2006. It is our turn to host, and the Greeks have
made clear their interest in this political-level meeting.
Although we are skeptical that the next HLCC will result in
any major breakthroughs in any of our outstanding issues, it
can set the stage for progress and will provide great benefit
by demonstrating to the Greeks that we do value our
partnership with them -- something that they seek and that we
can provide at little cost. Furthermore, there is a real
opportunity to resolve outstanding operational issues (such
as obtaining the permits to allow construction of an updated
jet fuel pipeline at Souda Bay).

--Joint Staff and Other Mil-to-Mil Talks: The Greek military
is probably the most pro-American institution in Greece, due
to our shared history and extensive ties. Greek military
officers relish encounters with U.S. counterparts and often
want to have "deliverables" for such encounters. We
understand that the Joint Staff has proposed talks with Greek
counterparts. We want to commend his initiative and
encourage additional simila contacts. We understand that
Greek CHOD Genral Grapsas also seeks to visit Washington in
the Fall. How he is received could go a very long way in
advancing our mil-to-mil relatioship and agenda with the
Greeks.

SPECKHARDBT

February 15 2008

21:52

GREEK MFA ON RUSSIA/ABKHAZIA AND GREECE/RUSSIA

C O N F I D E N T I A L ATHENS 000217

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/15/2018
TAGS: GR PGOV PREL GG RU KNAR
SUBJECT: GREEK MFA ON RUSSIA/ABKHAZIA AND GREECE/RUSSIA

REF: SECSTATE 14840

Classified By: A/POLCOUNS JEFF HOVENIER. REASONS 1.4 (B) AND (D).

¶1. (C) SUMMARY: Greek MFA Russian affairs directorate chief
Ambassador Tsamados said Greece had seen little evidence
indicating Russia was serious about recognizing Abkhazia as
independent and had no interest in altering Soviet-era
borders. The GOG was not pleased by Putin's recent comments
comparing the situation in Kosovo with that in northern
Cyprus. On Greek-Russian relations overall, Tsamados said
they were not driven by ideological or cultural factors, such
as the common Orthodox heritage, but by pragmatism and
commerce, particularly energy pipelines. Putin's
authoritarianism was of concern, but Greece was not a
"Russian Trojan Horse." END SUMMARY.

ABKHAZIA
--------

¶2. (C) On February 15, DepPolCouns delivered reftel points on
possible Russian recognition of Abkhazia to MFA A5
Directorate for Russia and CIS Countries Director Ambassador
Nikolaos Tsamados, A5 First Counsellor for Georgian affairs
Stella Bezirtzoglou, and A5 Counsellor for Russia affairs
Elisabeth Fotiadou.

¶3. (C) Tsamados said his office had seen little evidence that
the Russians were seriously considering recognizing Abkhazia.
In fact, they had noticed an upswing in Russian-Georgian
relations. A UDI by Kosovo followed by recognition by
Western countries could complicate the situation, and Russia
might want to "throw some salt into the wounds."
Nevertheless, Tsamados believed any Russian noise on Kosovo
would represent nothing more than saber rattling since Russia
had little real interest in allowing alteration of old Soviet
borders. Any alteration of Soviet borders, he argued, could
set a precedent not only in Georgia but also for Chechnya,
Dagestan, Yakutia, and other autonomy-minded Russian
provinces.

¶4. (C) Tsamados said Athens took particular note of Putin's
comments comparing the declaration of independence for Kosovo
with a declaration of independence for northern Cyprus. Such
comments, he pointed out, did little to win Greeks over to
the Russian view.

GREECE-RUSSIA
-------------

¶5. (C) Tsamados also took the opportunity to discuss the
broader Greek-Russian relationship. He said the relationship
had little to do with ideology and was not really based on
the Orthodox religion, which often amounted to a common faith
dividing them. Greek-Russian relations, rather, were
"business-like" and focused on pragmatic commercial deals,
such as the pipelines. DepPolCouns noted that PM Karamanlis
had lately been speaking positively about the Russian South
Stream project but had not been as outspoken on the
Turkey-Greece-Italy (TGI) gas interconnector, which could
send investors a wrong signal. Tsamados and Fotiadou
retorted that TGI was already well on its way to completion
while South Stream was much earlier in the planning stages.

¶6. (C) They also characterized the recent Greek agreement to
purchase Russian BMP armored personnel carriers from Moscow
as driven by political factors surrounding PM Karamanlis's
December visit to Moscow -- "any high-level visit needs to
have some deliverables." It was also driven, in part, by the
Greek arms industry, which had been in serious decline
recently but would now participate in manufacturing the BMPs.

¶7. (C) DepPolCouns noted that the U.S. too wanted good,
business-like relations with Russia and welcomed good
Greek-Russian relations, but history demonstrated that an
increasingly authoritarian Russia was an increasingly
dangerous Russia, so commercial deals should be approached
with caution. Tsamados granted the logic of this argument
and said Putin's statements in his annual press conference
yesterday contained some particularly worrisome statements.
Nevertheless, Tsamados argued that Greece kept its national
interests front and center and was not concerned that it was
being drawn into a relationship that it could not control.
"We are not a Russian Trojan horse," he stated.

¶8. (C) Finally, Tsamados noted that Greece and Russia were
close to completing an agreement that would return Jewish
Thessaloniki archives stolen by the Germans and captured by
the Soviets at the end of WW II. He provided no further
details on the archives.
SPECKHARD

January 16 2008

07:04

ECONOMIC EFFECTS OF RECENT VIOLENCE IN PAKISTAN

UNCLAS SECTION 01 OF 02 ISLAMABAD 000228

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON ENRG EINV PREL PK

SUBJECT: ECONOMIC EFFECTS OF RECENT VIOLENCE IN PAKISTAN

REF: 07 Islamabad 5328

¶1. This cable was coordinated with Consulates Karachi, Lahore and Peshawar.
Summary

¶2. (SBU) Summary: The violence following Benazir Bhutto's December 27 assassination cost Pakistan approximately $2 billion dollars in lost tax revenue, foregone production, and infrastructure damage. In addition, there was some U.S. $5.66 billion in capital outflows, not all of which has returned. Some U.S. company facilities suffered damage, mostly in Karachi and Hyderabad. 18 Narcotics Assistance Unit (NAS)-purchased vehicles destined for the Frontier Corps were heavily damaged while en route from Karachi to Peshawar. While the physical damage is considerable but not overwhelming, the damage to Pakistan's investment climate reputation is likely to last longer. End summary.

Violence following Bhutto's suicide costs almost $2 billion

¶3. (SBU) The December 27 assassination of former Prime Minister Benazir Bhutto and ensuing violence has cost the country Rs.115-120 billion ($1.92 - $2 billion), including Rs.35 billion ($583 million) in lost revenues. Rs.64 billion ($1.06 billion) is lost production because of factory and shop closures, and the remainder is the damage to infrastructure, including damage to bank branches, government offices and railway tracks.

¶4. (SBU) Damage to the railways is estimated at 12.3 billion rupees ($201 million), while Rs. 20 billion ($333 million) was lost in bank looting and destruction and 6,000 vehicles were destroyed. Wholesale and retail business losses are estimated at Rs. 10-12 billion ($166 million to $200 million). In addition, Finance Ministry officials estimate that Rs 340 million ($5.66 million) in capital outflows during the four days following the assassination. There was a net portfolio capital outflow of $40.1 million during the period January 1-8. The GoP also expects a dip in both exports and imports for the month of December due to port closings.

¶5. (SBU) The recent violence has also taken its toll on tax collection. According to Dr. Ashfaque Khan, Advisor to the Minister of Finance, the Federal Board of Revenue is unlikely to meet its revenue target of Rs.1025 billion ($17 billion). Business closures during the historically high tax collection month of December will make meeting the revenue target difficult.

Some U.S. Companies hit by violence; NAS vehicles also damaged

¶6. (SBU) U.S. companies did not escape the violence, although we have no evidence that American firms were specifically targeted. Karachi was particularly hard-hit. Kentucky Fried Chicken lost four outlets, which were initially looted and then burned down completely. There was no loss of life, and no staff was present. Only Sindh restaurants were affected. Pizza Hut's and McDonald's Hyderabad restaurants were also burned. 25 of Chevron's retail outlets (Caltex) sustained damages, but no injuries were reported.
Only outlets in Sindh were damaged.

¶7. (SBU) Colgate-Palmolive's detergent and toothpaste factory was looted and burned the morning of December 28. Police and fire assistance did not arrive until after 6 pm that evening. The 12 security and other staff present sustained minor injuries. Colgate-Palmolive does not expect to resume normal operations until sometime in March. The Bristol-Myers Squibb (BMS) head office outside Karachi was attacked by mobs December 27 and 28; damage, however, was relatively minor. Singer's shop and factory outside Karachi was attacked, looted, and burned by a mob December 27. Despite a lack of a response from the law enforcement and fire authorities, the factory was saved.

¶8. (SBU) Of 18 new Narcotics Assistance Unit (NAS) vehicles destined for the Frontier Corps, five were destroyed, and the rest were badly damaged. All of the vehicles were seriously vandalized, but NAS is working with local Toyota vendors to determine if repairs will be cost effective.

¶9. (SBU) Commercial facilities in the Punjab were largely undamaged since violence in this province was limited largely to attacks on election posters and offices of PML-Q. A handful of local stores suffered some damage in Lahore, but most of the damage was cosmetic, and the small traders have since reopened. None of the American business community has reported damage to their Punjab facilities. Economic losses in the Punjab result from the three days that businesses were completely shut down and the loss in investor confidence (plus losses on the Karachi stock exchange). Punjab based businesses with branches, offices, and facilities in Sindh claimed heavy damage to facilities there. Nobody, however, has suggested an ethnic tinge to the attacks - despite political claims to the contrary.

¶10. (SBU) Damage in the Northwest Frontier Provinces was limited, with only the Sarhad Chamber of Commerce sustaining broken windows. There were no reports of U.S. facilities damaged.

Comment

¶11. (SBU) Comment: While damage to infrastructure, particularly for power generation and gas distribution (septel), was considerable, the real impact of the violence following Bhutto's assassination is likely to be more long-term. While the GOP had difficulties sticking to its fiscal targets prior to these incidents (reftel), it will have even greater difficulties now, once the costs of foregone tax revenue and infrastructure repairs are included. However, the most lasting cost may be the damage to Pakistan's investment climate and increased loan and bond costs as several of the rating agencies are reportedly considering further downgrades to Pakistan's credit rating.

¶12. (SBU) The Pakistan People's Party (PPP) is publicly alleging that the government is arresting its party members on charges of complicity in the violence and damage. PPP leaders have responded that looters and other criminals should be brought to justice, but that PPP members were not responsible for the damage. Ruling political party members counter that their property was targeted in politically motivated attacks by PPP members. With emotions over Bhutto's assassination still running high in the midst of an election campaign, it will be extremely difficult to sort out these charges and counter-charges. End comment.
Bodde

January 11 2008

14:08

GOS “EXPLAINS” DECISION NOT TO DETAIN

S E C R E T SINGAPORE 000040

SIPDIS

SIPDIS

ISN/CPI FOR MATT ZARTMAN

E.O. 12958: DECL: 01/11/2028
TAGS: ETTC EWWT PARM PREL KNNP SN TU PK GM

SUBJECT: GOS “EXPLAINS” DECISION NOT TO DETAIN
PAKISTAN-BOUND SHIPMENT OF PROLIFERATION CONCERN

REF: A. SINGAPORE 013
¶B. STATE 1198
¶C. STATE 772
¶D. ANKARA 016
¶E. BERLIN 014

Classified By: Deputy Chief of Mission Daniel L. Shields.
Reasons 1.4 (b) and (d)

¶1. (S) In response to a request from the DCM for further explanation of Singapore's January 5 decision not to investigate a shipment of proliferation concern bound for Pakistan (ref A), the MFA called us in on January 11 and provided the nonpaper in paragraph 5. Deputy Director Michelle Teo-Jacob (Counter Proliferation and International Security Branch) also read talking points asserting that U.S. officials had failed to provide sufficient documentation to justify further investigation of the shipment. She noted that the computer numerically controlled (CNC) machining center in question was transshipped via a through-bill of lading and that it lacked both a local Singapore consignee and information about the end-user. She said that information available to the GOS indicated the shipment was bound for a Karachi-based company called CEI Logistics Private Ltd, and that we had provided no evidence of a linkage to the Rawalpindi-based entity cited in our demarche. The United States cannot expect Singapore to take action under circumstances where it has no legal basis to do so; this would be tantamount to embarking on a “fishing expedition,” she concluded.

¶2. (S) Econ/Pol Chief countered that the CNC is controlled by the Wassenaar Arrangement and the Nuclear Suppliers Group. Additionally, Singapore, like the United States, should be concerned about any shipment of controlled items bound for Pakistan, a country with active missile and nuclear programs and that does not have full-scope International Atomic Energy Agency safeguards on its nuclear facilities. On its face, the case deserved to be investigated and not dismissed as a “fishing expedition.” Observing that proliferators could be expected to conceal end-user and other incriminating information, he asked what documentation Singapore authorities would require in order to treat such cases as worthy of investigation. Teo-Jacob said she would convey these points to relevant officials for further discussion.

¶3. (S) Begin text of non paper:

The Ministry of Foreign Affairs of Singapore acknowledges receipt of a Non-Paper (releasable to Singapore) of 5 January 2008 from the US Embassy concerning the transhipment of a computer numerically controlled (CNC) five-axis machining centre (Model MC 1020, Sr No ME 10261 with Siemens 840D controller) from Istanbul, Turkey and bound for Karachi, Pakistan.

2 As the US Embassy is aware, Singapore and the US enjoy a substantive working relationship in the field of counter-proliferation activities. Singapore officials have also worked closely with US officials on previous cases of suspect shipments of dual-use item being transhipped through Singapore's ports.

3 The Singapore Government, however, was unable to accede to the US Embassy's request to detain this latest shipment on the basis of the information provided:
(a) First, US officials had alleged that the end-user of the CNC five-axis machine was a Pakistan-based company known as New Auto Engineering. However, documentation that Singapore obtained stated that both the consignee and notifying addressee for this shipment was instead a company named CEI Logistics Private Ltd. Without relevant documentation linking CEI Logistics to New Auto Engineering (which was the subject of proliferation concern named in the Non-Paper), our officials had no basis to hold back the onward shipment of the equipment.
(b) Second, even if the consignee had been New Auto Engineering, US officials were unable to provide any accurate information linking this company and the equipment in question to WMD-related activities despite repeated requests by our agencies. Consequently, our enforcement officials would have been unable to invoke the appropriate provisions of the Strategic Goods (Control) Act to seize and detain the cargo.

4 We further note that the equipment is German-made and its last point of export was Turkey. Both Germany and Turkey are members of international export control regimes, including the MTCR, as well as the Wassenaar Arrangement and NSG under which this equipment is controlled as dual-use. If indeed bound for (or potentially bound for) a programme of proliferation concern in Pakistan, we are puzzled as to how such sensitive equipment could have been exported out of Turkey, or for that matter Germany and the EU to begin with, where it would have been subject to export controls. The US should therefore establish whether the relevant license(s) have been issued for its export so that it can follow up on this issue with the relevant authorities of the origin and exporting countries.

5 As we have highlighted to the US Embassy on previous occasions, we can only take action on the basis of credible, reliable and actionable information on such shipments, as we have done so in the past.

6 The Singapore Government will continue to work closely with the US to counter the proliferation of WMD-related materials.

11 January 2008

End text.

HERBOLD

January 04 2008

16:45

DISCUSSION WITH NAWAZ SHARIF DESIGNEES REGARDING

C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 000061

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/04/2018
TAGS: PREL ASEC PTER CASC PINR PK PGOV

SUBJECT: DISCUSSION WITH NAWAZ SHARIF DESIGNEES REGARDING
SECURITY

REF: ISLAMABAD 04599

Classified By: RSO RANDALL BENNETT, REASONS 1.4 (B) (D)

¶1. (C) SUMMARY: At the request of Nawaz Sharif, RSO Islamabad met January 03, 2008 in Lahore, with three individuals empowered by Nawaz Sharif to discuss his security. RSO duplicated the discussion he had with the security representatives of Benazir Bhutto (see Reftel) and also provided the same names of the three most capable and comprehensively equipped local security contractors who can provide security assessment and protective security services. The RSO made it clear that the success of protective security services is based on appropriate layers of security to include armored vehicles, thoroughly trained protective services (PRS) personnel, strong police support between the protectee and the crowd, and perhaps most of all, a protectee who is willing to listen to and cooperate with the advice of the security professionals regarding all aspects of his personal security. The three representatives seemed to comprehend what was being conveyed, were receptive to it, and left stating that now they were more concerned about proper security than when they arrived. They stated that now they understood the nature of the specialized operational skills of personal protective services. END SUMMARY.

¶2. (C) On January 02, Nawaz Sharif's personnel requested a meeting with the Embassy regarding his personal security. On January 03, as directed by the Ambassador, RSO Islamabad flew to Lahore to meet with three representatives who had been designated by Nawaz Sharif to explore what needed to be done to properly maintain his personal security. The Nawaz team consisted of Sikandar Pasha, the Sharif Family Manager (0300-846-2276), FAX-042-588-6158, email- csm3@wol.net.pk, Colonel Javed Umar (0321-844-6357), and Major Mushtaq Ahmad of the Pakistan Muslim League and Chief of Security (0300-843-2222). In the meeting was also RSO Lahore. The meeting began at 1210 hours and terminated at 1330 hours and was held in the conference room at the Lahore Consulate.

¶3. (C) The RSO began by explaining the various reasons why American (or other foreign) security would be the wrong choice to make. First, legally and without appropriate guidelines, official USG security would violate several considerations. Second, hired professional commercial American security would not only complicate the anti-American politics already in play, but would create a higher target profile for the Protectee, rather than reducing it. And third, that in a foreign country, an indigenous security operation would be preferable for cultural understanding, political awareness, and even geographical familiarity reasons, providing the indigenous company is competent. The RSO assured the three representatives that the choices on the list he had prepared for them were all fully-equipped and capable to professionally carry out protective services.

¶4. (C) As they began to ask more specific questions such as ones dealing with “jammers”, armored vehicles, and communication systems, the RSO continued to recommend the Pakistani companies that were capable of providing all expertise and equipment. Finally they confessed that they were thinking of putting together their own security force to handle the protection. The RSO suggested that was not a good idea. They stated that each individual they were looking at was experienced with some combat and special forces-type backgrounds. The RSO asked if they also had specific protective services training. They stated no, but that they understood security. At this point, out of concern for what seemed to be their possible dangerous misunderstanding, the RSO decided to use the “sermon on the mount” approach and explain with brief scenario stories to hopefully clarify the specific nature and skill sets required as well as frame of mind that protective services personnel needed. The RSO went through the position by position “single entity” concept, working as one, in an attempt to get them to see that there was more to it than just being accurate with a weapon. As they listened to the specific responsibilities of each position in the multitude of different venues and varying situations/conditions such as elevators, escalators, wide and narrow stairs, exiting and entering cars, hallways, walking diamonds etc...and the many initial months and then years involved in making a truly capable PRS Agent, the light came on and they understood. The Nawaz team stated that they would then provide their team with months of training to bring them to a level of working like a single organism under any situation. The RSO then suggested that they might want to contact a local company to provide the first several months of PRS service while their own team was being “brought up to speed”.

¶5. (C) The Nawaz team requested a number of items to assist with their “in-house” training. They asked for a copy of the DS PRS Training Manual. The RSO stated that this would not be the wisest of options for either of them in the event their team made an error and the question arose as to where they got their training. Neither of our parties would benefit from that scenario or U.S. footprint but that they could again, derive this benefit from the local indigenous company, who would no doubt have professional training materials. They had become enamored (and nervous) by the descriptions of all the various possible “diamond” movement formations and asked if they could get copies of those. The RSO told them yes, but that static pictures would not show what each individual needed to do as the diamonds moved and that only on-site professionals conducting rehearsals with their teams could properly convey that. The Nawaz team also wanted information on companies that could provide “explosives detection” equipment like the DS Ion Itemiser. They also want to create a vehicular security trap at the Protectee's residence drive entry and the RSO will provide the name of the local contractor who built the one at Embassy Islamabad.

¶6. (C) When the meeting concluded they stated that they were more afraid for the security of Nawaz Sharif now than when they first arrived. The RSO told them that it was a healthy attitude because now they knew what they needed to know. In just under 1.5 hours, a lot of information was conveyed and it is hoped that it will act sufficiently as a catalyst to motivate the Nawaz team in the right direction. The RSO concluded by summarizing the key elements necessary for the layers of proper personal protection and again emphasized the critical element of the cooperation of the Protectee. Embassy Islamabad would welcome further guidance (or an alternate view) from the Department on this issue.
PATTERSON

August 09 2007

02:32

PRESIDENT MORALES BLASTS NEOLIBERAL MODEL DURING

UNCLAS LIMA 002708

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL SNAR PINR BO PE
SUBJECT: PRESIDENT MORALES BLASTS NEOLIBERAL MODEL DURING
PERU VISIT


¶1. (U) Summary: During his first visit to Peru as Bolivian
President August 1, Evo Morales met with President Garcia to
discuss bilateral integration, addressed Peru's Congress, and
met with local indigenous and labor leaders. In his speech
to Congress, Morales called for an end to discrimination,
railed against the neoliberal economic model and said he owed
his political ascent to the coca leaf. While public reaction
to Morales' visit was generally muted, his ideologically
no-holds-barred Congressional speech and his call to support
Cuba drew criticism from government and opinion leaders. End
Summary.

Goodwill Invitation
-------------------

¶2. (SBU) Evo Morales August 1 visit to Peru, his first as
President of Bolivia, simultaneously helped overcome and
probably added to the strain in bilateral relations.
According to MFA officials, the third time was the charm as
Morales finally accepted President Garcia's invitation, which
had been extended as a gesture of good will. During their
meeting, the two leaders reportedly discussed ways to enhance
ties through the bilateral integration agreement and also
pledged to strengthen cooperation against narco-trafficking
and terrorism. A Bolivian Embassy official and his MFA
counterpart told us the offical meeting was cordial in tone
and intended to clear the ground for future progress.

Fiery Speech to Congress
------------------------

¶3. (SBU) Morales' interventions in Congress and in public
were less conducive to smooth bilateral relations. During
his speech to Congress, Morales drew a sharp contrast with
his hosts' economic policies by praising the success of
hydrocarbon nationalization in Bolivia. Nationalization, he
said, had created the first fiscal surpluses in decades, and
should be followed by the nationalization of other resources.
He then blasted the neoliberal economic model, which he
argued had plundered the natural resources of whole countries
while benfitting small privileged groups at the expense of
the majority. "It is time to close the open veins of Latin
America," Morales said (quoting the title of Eduardo
Galeano's infamous dependency theory tract).

¶4. (SBU) Morales also lauded Bolivia's coca policy. Calling
the coca leaf an instrument for the sovereignty of the people
and crediting it with his political birth, Morales argued
that the only effective policy involved cooperation with
social sectors rather than forced eradication. Repeating
familiar refrains to the applause of deputies from Ollanta
Humala's Nationalist Party (PNP), Morales called for an end
to a "zero coca" policy in favor of "zero narcotrafficking,
zero cocaine". Morales later encouraged the Humala-led
opposition by saying his own party (the MAS) had taken more
than a decade to grow from four congressmen to the majority
he now controlled.

Meeting with Social Sector Leaders
----------------------------------

¶5. (U) Accompanied by the Cuban and Nicaraguan Ambassadors
and a Venezuelan representative, Morales then met with
Peruvian social movement representatives and labor leaders.
In an impromptu speech at that event, Morales criticized
U.S.-Latin American FTAs and called for continued struggle
against colonialism, imperialism, and neoliberalism. He also
praised Fidel Castro as a "father" and welcomed the presence
of Hugo Chavez's ALBA in Peru.

Subdued Public Reaction
-----------------------

¶6. (U) Public and government reaction to Morales's visit has
been critical but subdued. Local press focused on the
message of cooperation promoted by President Garcia, while
some editorial writers faulted Morales for his openly
challenging and divisive message. Prime Minister Jorge del
Castillo criticized Morales' lack of courtesy, and others
have noted that the kinds of statist policies promoted by the
Bolivian President had destroyed Peru's economy in the 1970s.
President Garcia publicly acknowledged his ideological
differences with Morales but said that both leaders wanted to
reduce poverty and that "the future will tell" which approach
worked faster. He added that radical experiments "will not
last long" and criticized governments that "throw rocks" and
"provoke confrontations."

Comment: Understanding the Context
----------------------------------

¶7. (SBU) The Peruvian leadership's measured response to
Morales' provocations should be understood in context. For
one, Garcia is keenly aware of the Bolivian President's roots
in social protest and sympathizes with his message of ending
poverty, social injustice and exclusion. It's the proposed
solution that causes grief. On this score, Garcia and his
government are like concerned parents listening to the
outraged antics of an adolescent child who is grappling with
the bitter realities of the world and suddenly wielding big
ideas for solving them. They understand but believe they
know better, having learned that much from their own past.
WUNDER
02:13

PENGUIN INFO FOR LISTING UNDER ENDANGERED SPECIES

UNCLAS LIMA 002705

SIPDIS

SIPDIS

DEPT FOR OES/OA

E.O. 12958: N/A
TAGS: KSCA SENV PE
SUBJECT: PENGUIN INFO FOR LISTING UNDER ENDANGERED SPECIES
ACT DELIVERED

REF: STATE 103027

On July 27, Post delivered reftel information and comment
request on the petition to list 12 species of penguin as
threatened or endangered under the U.S. Endangered Species
Act to the following three Peruvian officials: Dr. Angeles
Lazo, Head of the National Institute of Natural Resources
(INRENA); Dr. Doris Sotomayor, Director of Maritime,
Antarctic and Border Issues, MFA; and Elisa Goya, Biologist
with Peru's Maritime Institute (IMARPE). As instructed, the
GOP will reply directly to the Fish and Wildlife Service.
WUNDER
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