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Posted in Cablegate, Europe at 6:50 pm by Dr. Roy Schestowitz
“Business secretary Peter Mandelson is slimed by an environmental protestor outside the Royal Society on Carlton House Terrace, Pall Mall after allegations of ‘favours for friends’ over the Heathrow third runway decision” [Courtesy of “Plane Stupid”, via Wikimedia]
Summary: Diplomatic cables mention the acts of Lord Mandelson; we look at those of greater relevance to Techrights
According to the following Cablegate cables, “a recent meeting between Business Secretary Lord Mandelson and Qaddafi’s son Saif al-Islam” took place just 2 years ago (first cable below, dated 24 Aug 2009). For those who lack some context, Peter Mandelson tends to meet Hollywood billionaires and then pass unwanted laws that make those billionaires richer and everyone else furious, especially but not exclusively in the UK. Our technology rights have been eroded almost single-handedly by this man, who summoned harmful digital/technical policies in the UK during his reign. These policies are exceptionally hard to retract now, so we are stuck with an atrocious legacy of Internet spying and potentially disconnection.
We at Techrights decided to see what happens behind the scenes. We tried to find cables on it. Almost 200 Cablegate cables mention “Mandelson” and several are about the policies above. There is one cable about copyright and “IPR”. In relation to China and WTO rules, ¶7 in the second cable below says: “Tanaka explained that METI sees some progress in its dealings with the Chinese government. In recent talks with Chinese Supreme People’s Court and the Procuratorate, the GOJ raised the issue of thresholds and the Chinese acknowledged that the issue is a problem of IPR enforcement. However, the Chinese officials claimed that the issue is not just a matter of law, but more a social problem which needed to be dealt with through public education. Harsh laws would not work, they said, citing a story about the failure of an ancient Chinese emperor which was repeated by other Chinese officials, also. Tanaka pointed out that now the National People’s Congress also wants to insert itself into the discussion and has declared that the Chinese government must consult it when determining the interpretation of its laws.”
“Tanaka asked about the EU’s position on the case and McCoy replied that the EU is studying the issue, and that the final decision will probably be a political decision taken by EU Trade chief Peter Mandelson.”
There is something else which is interesting here.because once again we see Japanese officials pressuring China to change its laws. There are other cables that show this
=> other cables that show this
Another cable (third one below) states in its first paragraph:.”Embassy delivered reftel talking points to Knut Bruenjes, Deputy Director General for Trade Policy, at the Ministry of Economics and Technology, August 11, 2006. Bruenjes said German officials are aware of the seriousness of the IPR violations involving trademarks and copyrights occurring in China, but would prefer to pursue a dialogue with China before seeking consultations at the WTO. He said Germany supported EU Trade Commissioner Mandelson’s timeline for dialogue with China on IPR issues until roughly the end of 2006. He said Germany would urge the Commission to prepare for the likelihood it would have to seek recourse in the WTO after Mandelson’s timeline expires. Bruenjes agreed to put this issue on the EU’s 133 Trade Committee’s agenda in the next few weeks.”
When it comes to Mandelson’s Digital Economy Bill and encounter with Geffen, we were empty-handed (maybe the cables do not go back far enough in time, “Digital Economy Bill” yields zero results/matches), but below are some of the more prominent 14 cables that mention Lord Mandelson. Some of these are interesting reading material in general.
INFO LOG-00 AF-00 AID-00 AMAD-00 INL-00 DODE-00 PERC-00
PDI-00 DS-00 DHSE-00 FBIE-00 VCI-00 H-00 TEDE-00
INR-00 IO-00 L-00 MOFM-00 MOF-00 VCIE-00 NEA-00
DCP-00 NSAE-00 NIMA-00 PM-00 SCT-00 DOHS-00 FMPC-00
SP-00 IRM-00 SSO-00 SS-00 NCTC-00 SCRS-00 PMB-00
DSCC-00 PRM-00 SAS-00 FA-00 PESU-00 /000W
O 241405Z AUG 09
FM AMEMBASSY LONDON
TO SECSTATE WASHDC IMMEDIATE 3245
INFO EUROPEAN POLITICAL COLLECTIVE IMMEDIATE
ARAB LEAGUE COLLECTIVE IMMEDIATE
AMEMBASSY TRIPOLI IMMEDIATE
DEPT OF JUSTICE WASHDC IMMEDIATE
NSC WASHDC IMMEDIATE
FBI WASHINGTON DC IMMEDIATE
CIA WASHINGTON DC IMMEDIATE
C O N F I D E N T I A L LONDON 001946
NOFORN
DEPARTMENT FOR EUR/WE AND NEA/MAG
E.O. 12958: DECL: 08/24/2019
TAGS: PREF [Refugees],
PTER [Terrorists and Terrorism],
UK [United Kingdom], LY [Libya]
SUBJECT: SCOTTISH PARLIAMENT HOLDS EMERGENCY SESSION AS
DEBATE OVER MEGRAHI DECISION REACHES FEVER PITCH
REF: A. LONDON 1925 AND PREVIOUS
B. STATE 80743
Classified By: Ambassador Louis B. Susman, reasons 1.4 (b/d).
¶1. (C/NF) Summary. The Scottish Government severely
underestimated the both USG and UK public reaction to its
decision to grant compassionate release to convicted Pan Am
103 bomber Abdel Basset al-Megrahi on August 20. Scottish
First Minister Alex Salmond has privately indicated that he
was "shocked" by FBI Director Mueller's public letter. The
media continue to report U.S. anger over the decision, and
concern Scotland will be targeted economically, through
reduced U.S. tourism and whiskey boycotts. The media
speculate that the UK Government had a hand in the deal to
maintain good diplomatic relations with Libya and secure oil
and gas deals, which the UK Government has denied as
"completely wrong" and "offensive." Today (August 24), the
Scottish Parliament meets to hear Scottish Justice Minister
Kenny MacAskill's explanation of his decision. The media
speculates that Scottish opposition parties, all of which are
on record condemning the decision, may move against the
Scottish National Party's (SNP) minority government in a vote
of no confidence, though the two-thirds majority required to
secure such a move would be very difficult to obtain. Prime
Minister Gordon Brown has not yet made a statement on
Megrahi's release, with other Cabinet members maintaining
that it was a decision for the devolved Scottish Government.
Given growing discontent and speculation about a UK
Government hand in the deal, Brown may have to make a
statement soon. Meanwhile, local Scottish opposition
politicians are using the issue to call into question the SNP
government's credibility and competence. End summary.
Reaction to USG Statements
¶2. (C/NF) The UK media have widely reported on FBI Director
Mueller's letter to MacAskill and Chairman of the Joint Chief
of Staff Admiral Mullen's comments on the Scottish
Government's decision to grant compassionate release to
convicted Pan Am 103 bomber Abdel Basset al-Megrahi.
Washington-based Scottish Government Representative Robin
Naysmith told CG Edinburgh Sunday, August 24 that Scottish
First Minister Salmond was "shocked" by Mueller's comments,
which were "over the top" given that President Obama had
already commented on the decision. Naysmith underscored that
Scotland received "nothing" for releasing Megrahi (as has
been widely suggested in the UK and U.S. media), while the UK
Government has gotten everything - a chance to stick it to
Salmond's Scottish National Party (SNP) and good relations
with Libya. (NOTE: We expect Naysmith to be engaging heavily
in Washington on these issues. END NOTE.)
¶3. (C/NF) The media have also reported growing concerns that
American anger over the decision will translate into a
boycott of Scottish whiskey and reduced American tourism in
Scotland, an approximately USD 416 million business annually.
In a previous meeting with CG Edinburgh on Friday, August
21, Salmond reiterated that he and his government "had played
straight" with both the USG and UK Government, but implied
that the UK Government had not. During the meeting, which
occurred before the Mueller and Mullen statements, he said he
wanted to move beyond the Megrahi issue and deepen Scotland's
relationship with the USG. He said the Libyan Government had
offered the Scottish Government "a parade of treats," all of
which were turned down. (NOTE: Roughly fifty percent of
Scottish exports go to the U.S., and over 450 U.S. businesses
employ over 100,000 Scots in Scotland. END NOTE.)
¶4. (SBU) Scottish Government statements, including those from
Salmond, have acknowledged the "strongly-held views of the
American families," but underscored that those views are not
shared by all of the victims' families (referring primarily
to the British families). Salmond defended the decision,
saying it was "right in terms of (the Scottish) legal system"
and "what (they) are duty-bound to do." Salmond is also
reported in the media to have said that the USG had made
clear that, while it opposed Megrahi's release, it regarded
freeing him on compassionate grounds "far preferable" to a
transfer under the Prisoner Transfer Agreement (PTA). (NOTE:
While indicating the USG's preference for compassionate
release over a PTA transfer, as described in reftel B,
Salmond's statement does not mention the USG's strong
opposition to any release, particularly one that would allow
Megrahi to travel outside of Scotland. END NOTE.)
Scottish Parliament Holds Emergency Session
¶5. (SBU) The Scottish Parliament holds an emergency session
Monday at 1430 local time (August 24), calling on Scottish
Justice Minister Kenny MacAskill to explain his decision.
All three opposition parties in Scotland (Labour,
Conservatives, and the Liberal Democrats) have condemned the
minority Scottish National Party (SNP) government's decision
to release Megrahi. The media openly speculate that a vote
of no confidence will occur if MacAskill does not resign, but
it would be difficult for opposition parties to garner the
two-thirds majority required (87 of the 129 seats), if the
SNP is able to maintain control of its 47 Members of Scottish
Parliament (MSPs).
¶6. (SBU) Scottish opposition political figures, like Scottish
Labour leader Iain Gray and former Scottish First Minister
Jack McConnell, have condemned the decision to release
Megrahi, calling it a "grave error of judgment." Scottish
Liberal Democrat leader Tavis Scott said, "The SNP's
credibility at home and abroad is in tatters. Scotland's
must not be allowed to follow with it."
Compassionate Release for Oil and Gas?
¶7. (SBU) The UK media widely speculates that the UK
Government had a hand in the decision to release Megrahi in
order to maintain good diplomatic relations with the Libyans
and to secure oil and gas deals, citing the now infamous 2004
"deal in the desert" between former PM Blair and Libyan
leader Qaddafi, recent meetings and correspondence between PM
Brown and "Muammar," a recent meeting between Business
Secretary Lord Mandelson and Qaddafi's son Saif al-Islam, and
other high-level trade delegations. Qaddafi's personal
thanks to Brown, the Queen, and the British Government after
embracing Megrahi in a televised statement have fanned the
flames and increased calls for Brown to explain the UK's
involvement in the decision-making process. Mandelson
insisted to the media that it is "completely wrong" and
"offensive" to suggest that Megrahi's release was linked to
trade deals. A Foreign Office contact reiterated to Poloff
August 24 that such speculation is "completely absurd." He
acknowledged that the Libyans had raised Megrahi at every
turn in their burgeoning diplomatic relationship, but said
that Megrahi's release was "never directly or implicitly"
linked to any deal.
UK Government Reaction
¶8. (C/NF) Prime Minister Gordon Brown, who is currently on
holiday in Scotland, has refrained from comment. Acting PM
Chancellor Alistair Darling has said, "you either devolve the
responsibility for criminal justice or you don't," a position
that Foreign Secretary Miliband supported in interviews on
Friday, August 21. Miliband affirmed that "the sight of a a
mass-murderer getting a hero's welcome in Tripoli is deeply
upsetting, deeply distressing." Conservative leader David
Cameron has sent Brown a public message condemning the
decision and calling on Brown to "make clear his own views"
on the decision.
UK-Libya
¶9. (C/NF) Foreign Office North Africa team leader Rob Dixon
told Poloff August 24 that the UK has been telling the Libyan
Government, through Saif al-Islam and the Foreign Ministry,
that the Libyan Government's handling of its September 1
national day festivities will determine the future of the
UK-Libya bilateral relationship. Dixon explained that the UK
has explicitly told the Libyans that Megrahi should not be
featured in any high-profile way. He said that the UK has
also told the Libyans that Qaddafi's personal thanks to PM
Brown and the Queen were "unhelpful" and the UK Government's
"unhappiness" had been communicated "in clear terms." Dixon
said the Foreign Office will take stock after the September 1
festivities.
UK-Scotland
¶10. (C/NF) Dixon termed "absurd" MacAskill's comment (in his
original August 20 statement about Megrahi's release) that
the UK Government's refusal to make representations was
"highly regrettable." Referring to MacAskill's welcoming of a
public inquiry into the case, Dixon said such an undertaking
would be "nearly impossible" given the way devolution works.
Dixon implied that the comments were designed to blame the UK
Government for putting the Scots in a position to have to
make a decision. Dixon told Poloff on August 24 that the
Foreign Office had had no contact with the Scottish
Government since the decision was announced.
Comment
¶11. (C/NF) It is clear that the Scottish Government
underestimated the blow-back it would receive in response to
Megrahi's release and is now trying to paint itself as the
victim. It seems likely, especially given the increasing
speculation that the UK Government had a hand in the
decision, that Prime Minister Brown will have to address the
issue publicly. Meanwhile, local Scottish opposition
politicians are trying to undercut the SNP minority
government's credibility as much as possible.
¶12. (U) Tripoli minimize considered.
Visit London's Classified Website:
http://www.intelink.sgov.gov/wiki/Portal:Unit ed_Kingdom
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STATE FOR EAP/CM, EAP/J AND EB/IPE, E -FELSING
USTR for China Office, Japan Office, IPR Office,
Commerce for National Coordinator for IPR
Enforcement - Cisrael
LOC for Marla Poor
USPTO for LBoland
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: KIPR [Intellectual Property Rights],
ETRD [Foreign Trade], WTRO [World Trade Organization],
CH [China (Mainland)], JP
SUBJECT: Japanese Government, Industry reluctant to back WTO case
against China on IPR
REF: TOKYO 2326, TOKYO 1270
TOKYO 00003873 001.2 OF 003
¶1. (SBU) Summary Japanese officials, particularly in the Trade
Ministry, responded coolly to USTR's request that Japan join the
United States in an IPR case against China in the next few months,
saying that the GOJ was still studying the issue and could not
respond until the fall at the earliest -- probably after the new
government is in place. Foreign Ministry officials advised USTR
that nothing can be done until Trade Minister Nikai leaves, and that
the USG needs to raise its request at the political level.
¶2. (SBU) Lack of support for a WTO case among Japanese business is
adding to GOJ hesitation. Japanese industry groups told USTR that
most of their members did not support the proposed WTO case because
they prefer a more "cooperative" approach towards China for now --
in other words, they fear a backlash from the Chinese government.
Japanese copyright companies are more concerned about market access
than the black market in China for now.
End Summary.
Background
¶3. (SBU) USTR's Chief Negotiator for IPR Enforcement, Stanford McCoy
met with officials of the Ministry of Foreign Affairs (MOFA), the
Ministry of Economy, Trade and Industry (METI), the Intellectual
Property Strategy Headquarters (IPSH), and with private sector
representatives at the Japan External Trade Organization (JETRO) and
the Japan Intellectual Property Association (JIPA) in Tokyo on June
13 and June 14. USTR had held an earlier set of meetings in Tokyo
with GOJ officials in late February 2006. The proposed WTO case
would focus on the fact that thresholds for criminal penalties in
Chinese law are set too high to capture much of the IPR-infringing
commercial activity in China. For McCoy's discussions with the same
officials on a proposed Anti-Counterfeiting Trade Agreement see
Tokyo 2567.
METI stalls
¶4. (SBU) Opening a joint METI-MOFA meeting, Shigehiro Tanaka,
Director of METI's WTO Affairs office, stressed that Japan needed
more time to study the issue and gather information from industry,
and could not decide whether to join as a co-complainant before the
fall. They will "decide on basis of what is the most effective way
to proceed." Tanaka added that if the United States initiates WTO
consulations in July, Japan was likely to be a supportive third
party. He said that he did not want to leave the U.S. with false
expectations and that the GOJ was proceeding with an open mind.
¶5. (SBU) In response to McCoy's question asking whether the
political level had already looked at the issue, Tanaka responded
that the Minister was aware of the situation and that METI needed to
prepare a thorough analysis which would not be ready until the fall.
Tadaatsu Mohri, Principal Deputy Director of MOFA's International
Trade Division, added that MOFA was in the process of preparing a
briefing for FM Aso which would cover both the IPR and auto parts
cases.
¶6. (SBU) Tanaka noted that Trade Minister Nikai had raised the
thresholds issue in a letter to Chinese Commerce Minister Bo,
pointing out that as currently written the thresholds for criminal
penalties appeared to be inconsistent with WTO rules.
¶7. (SBU) Tanaka explained that METI sees some progress in its
dealings with the Chinese government. In recent talks with Chinese
Supreme People's Court and the Procuratorate, the GOJ raised the
issue of thresholds and the Chinese acknowledged that the issue is a
problem of IPR enforcement. However, the Chinese officials claimed
that the issue is not just a matter of law, but more a social
problem which needed to be dealt with through public education.
Harsh laws would not work, they said, citing a story about the
failure of an ancient Chinese emperor which was repeated by other
Chinese officials, also. Tanaka pointed out that now the National
People's Congress also wants to insert itself into the discussion
TOKYO 00003873 002.2 OF 003
and has declared that the Chinese government must consult it when
determining the interpretation of its laws.
¶8. (SBU) Tanaka asked about the EU's position on the case and McCoy
replied that the EU is studying the issue, and that the final
decision will probably be a political decision taken by EU Trade
chief Peter Mandelson.
MOFA more supportive, more candid
¶9. (SBU) Before the joint meeting with METI, MOFA's Mohri forewarned
that METI was insisting that nothing could happen with respect to
Japan's participation as a co-complainant until fall, but offered no
explanation to MOFA on why. MOFA concluded that METI would not be
able to make any decision on the proposed WTO case until Trade
Minister Nikai leaves when the new Japanese government is chosen in
September. (Comment: Nikai is considered the Japanese cabinet
minister with the best relationship with China and someone who wants
to keep the warm Japan-China business relationship on an even keel
despite frosty relations in some other areas. End Comment.)
¶10. (SBU) Mohri also cautioned that selling a WTO case on IPR was
going to be even tougher within the GOJ than the WTO auto parts case
because private industry was not on board and was more concerned
about a Chinese backlash than the issues in the case. (Note: Japan
declined to join the U.S. and EU in an auto parts case against
China, but signed on as a Third Party. End Note.)
¶11. (SBU) Both METI and MOFA officials underscored that there is
stronger support among Japanese industry for GOJ action on
trademarks and counterfeits, and much less on copyright piracy than
among U.S. industry. Moreover, Japanese industry is less concerned
about criminal thresholds and prefers to focus on administrative
penalties, according to Tanaka. McCoy pointed out that the
threshold problem affects both copyright and trademark industries
and that USTR had hoped that by working together Japan could bolster
a joint U.S.-Japan case with information on both copyright and
trademark infringement in China.
Main obstace is lack of industry support
¶12. (SBU) At a follow-up meeting, METI and MOFA attorneys agreed
that the lack of industry support was the main obstacle to Japan
joining the United States in a WTO case. Major Japanese companies
like Toyota and Panasonic deal with whole manufactured products, not
parts, and are not particularly interested in the issue. Smaller
companies don't really understand how the legal issues affect them,
they explained.
¶13. (SBU) METI attorneys also pointed out that the Japanese
copyright industry was just starting out in China and worried about
getting Chinese government permissions and did not want to rock the
boat. As a result, the GOJ would have to convince the copyright
industry to support a WTO case. Further complicating the situation
is the fact that METI does not cover the copyright industries; the
Agency for Cultural Affairs does. Thus, METI has no Copyright
industry constituency coming to them with complaints.
IPR Industry Group does not back WTO case
¶14. (SBU) Japan Intellectual Property Association (JIPA)
representatives stated clearly that they did not support a WTO case
against China. Taisuke Kato, Toshiba's General Manager for
Intellectual Property, told the U.S. delegation that JIPA is working
with Chinese officials to improve their enforcement capacity. e.g.
training Chinese Customs officers to recognize fakes. JIPA, which
is working closely with METI and JETRO on IPR problems in China,
feels that Japan has asked China to take certain measures and now
must wait to see how the Chinese respond. For them, it is not the
right time to take a case against China at WTO, he asserted.
¶15. (SBU) Kato also launched into a mini-lecture, stating that "Each
TOKYO 00003873 003.2 OF 003
side, each country has to take action in its own way." "The
Japanese style is that is it better to discuss and exchange
information with China," he explained. Kato said that they
"understand that the United States thinks it needs to do something
as soon as possible, but that Japan sees it differently." "Japan is
asking China to live up to its WTO obligations" and that "China has
said they will try to improve." Therefore JIPA and the Japanese
government are JIPA waiting to see what the Chinese response will be
over the next one to two years, according to Kato.
No support from JETRO either
¶16. (SBU) JETRO's Director-General for Economic Research Shiro Mori
stated forthrightly that the GOJ and industry do not want to add
more friction to an already difficult political relationship with
China or harm Japan's business interests. Japanese companies worry
most about Chinese government interference and retaliation and don't
want to risk damaging their relationship with the Chinese
government, Mori acknowledged. This is especially true for new
entrants to the Chinese market. As a result, Japan is reluctant to
take actions that might seem confrontational and prefers to look for
ways to cooperate and assist China to improve IPR enforcement, Mori
explained. He admitted that some Japanese companies do want GOJ to
take a harder line, but many others oppose that.
¶17. (SBU) For Japan's copyright industry, the Chinese market is
still insignificant, Mori added. Their first priority is gaining
market access. Mori said that he had not yet heard any complaints
about the thresholds issue from Japanese industry. JETRO has only
recently started to promote Japanese content into the Chinese market
and is not yet far enough along to be concerned about the black
market.
¶18. (SBU) Comment: GOJ officials do not want to say no outright to
the U.S., but seem to want to buy time before making a decision on a
WTO case against China. It is possible that the dynamics could
change with a change in government in the fall, with a Trade
Minister less personally invested in relations with China.
High-level U.S. engagement would increase the pressure and could
make a difference. However, given the GOJ's current policy of
engagement with the Chinese government on IPR issues and the lack of
support from Japanese industry, it appears that the GOJ would have a
hard time gathering the support internally and among Japanese
industry for joining the United States anytime soon.
¶19. (U) This cable has been cleared by Standford McCoy, USTR Chief
Negotiator for IPR Enforcement.
SCHIEFFER
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USTR FOR POSNER (OGC), WINTER (CHINA) AND MCCOY (IPR) AND
STATE FOR EAP/CM CRANE, EB/TPP/BTA SAEGER AND EB/TPP/IPE
FELSING, USDOC FOR ISRAEL
E.O. 12958: N/A
TAGS: KIPR [Intellectual Property Rights],
ECON [Economic Conditions], ETRD [Foreign Trade],
AORC [International Organizations and Conferences],
WTRO [World Trade Organization], GM [Germany]
SUBJECT: DEMARCHE ON WTO DISPUTE ON CHINA IPR: GERMANY
PREFERS DIALOGUE FIRST
REF: SECSTATE 126703
¶1. Embassy delivered reftel talking points to Knut Bruenjes,
Deputy Director General for Trade Policy, at the Ministry of
Economics and Technology, August 11, 2006. Bruenjes said
German officials are aware of the seriousness of the IPR
violations involving trademarks and copyrights occurring in
China, but would prefer to pursue a dialogue with China
before seeking consultations at the WTO. He said Germany
supported EU Trade Commissioner Mandelson's timeline for
dialogue with China on IPR issues until roughly the end of
for the likelihood it would have to seek recourse in the WTO
after Mandelson's timeline expires. Bruenjes agreed to put
this issue on the EU's 133 Trade Committee's agenda in the
next few weeks.
¶2. In response to our inquiry about concrete complaints from
German firms, Bruenjes said he would poll Germany's large
companies and industrial associations about specific IPR
violations. He noted that companies like Puma and Adidas, as
well as the Federation of German Industry (BDI) and German
International Chamber of Commerce (DIHK), could well have a
record of such incidents. Bruenjes thought such concrete
examples would help provide substance for an eventual phone
conversation on the issue between Commerce Secretary
Gutierrez and Minister Glos. He underlined the importance of
long-term U.S.-German cooperation on IPR in China, pointing
to our current common approach on automotive parts in the
WTO. Bruenjes agreed with our suggestion the DIHK-sponsored,
"2006 Hamburg Summit - China Meets Europe" in Hamburg on
September 13-15, would provide an occasion for high-ranking
German government officials to address China's IPR
enforcement policies with their Chinese counterparts (Note:
Chinese Prime Minister Wen Jiabao is expected to attend the
Summit on September 13-14, before traveling by train to
Berlin on September 14, where he will meet with Chancellor
Merkel. End Note).
Business Associations: Prefer EU's Go Slow Approach
¶3. Representatives from the German International Chamber of
Commerce DIHK) and the Federation of German Industry (BDI)
echoed the cautious approach of the German government on
bringing the IPR complaint before the WTO, citing the fear of
losing contracts and business opportunities in China.
According to Doris Moeller, Head of DIHK's Intellectual
Property Office and Board Member of the German Economic
Action Committee Against Product and Trademark Piracy (APM),
DIHK has received numerous complaints from German businesses
operating in China regarding IP and technology transfer
violations. She noted, however, there are few companies
willing to raise their complaints in a forum like the WTO for
fear of losing potential business in China. Moeller said
DIHK supported the EU's dialogue proposal and would prefer to
see if it brings any results before taking action at the WTO.
¶4. Although industry and government currently prefer a
cautious approach, Moeller noted that DIHK is taking
significant steps to systematize and document IP violations
occurring in China. Within the next two months, DIHK plans
to release a questionnaire to all its members, as well as
post it on its webpage, asking for information from companies
on specific IP violations they have experienced. To date,
information has apparently been anecdotal. The point of this
exercise is to provide the German government with concrete
examples of copyright, trademark, and technology transfer
violations that have occurred in China. Moeller promised to
share the results with us, as companies responded to the
survey.
¶5. Christina Rentzmann, Country Director for China at BDI,
underlined the cautious approach of German business when
addressing IP violations in China. Due to the many contracts
German companies have with the Chinese government, German
businesses are reluctant to speak out publicly on IP
violations. According to Rentzmann, German firms and their
business associations are not ready to embrace a more
aggressive approach to halting IP violations in China, i.e.
WTO consultations, and would rather allow the programs in
place, e.g. exchanges, training of judges and lawyers, to
continue. Given business' passive attitude, Rentzmann was
BERLIN 00002397 002 OF 002
skeptical about the amount of information companies would be
willing to provide DIHK on IP violations. She also noted
that German businesses and the government tended to
differentiate between technology/know-how transfer violations
and IP violations involving copyrights and trademarks in
general, and focused their efforts more on preventing the
former. That said, she agreed these issues are closely tied
together and strengthening enforcement and regulations to
prevent IP trademark violations in China would also help stop
illegal technology transfers.
KOENIG
VZCZCXRO0105
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHPW RUEHROV RUEHSL RUEHSR
DE RUEHLO #2499/01 3091547
ZNY CCCCC ZZH
O 051547Z NOV 09
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3897
INFO RUCNAFG/AFGHANISTAN COLLECTIVE PRIORITY
RUCNDSC/DISARMAMENT CONFERENCE COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHBUL/AMEMBASSY KABUL PRIORITY 0859
RUEHMO/AMEMBASSY MOSCOW PRIORITY 2992
RUEHNO/USMISSION USNATO PRIORITY 1298
C O N F I D E N T I A L SECTION 01 OF 04 LONDON 002499
NOFORN
SIPDIS
DEPARTMENT FOR EUR/WE, NEA, SCA, PM, T, S/SRAP
E.O. 12958: DECL: 09/22/2019
TAGS: PREL [External Political Relations],
PGOV [Internal Governmental Affairs],
KPAL [Palestinian Affairs], ETRD [Foreign Trade],
KNNP [Nuclear Non-Proliferation],
PARM [Arms Controls and Disarmament],
SENV [Environmental Affairs],
MARR [Military and Defense Arrangements],
MNUC [Military Nuclear Applications],
ECON [Economic Conditions],
PHUM [Human Rights], RS [Russia; Wrangel Islands],
IS [Israel], IR [Iran], GG [Georgia], AF [Afghanistan],
UK [United Kingdom]
SUBJECT: MILIBAND'S RUSSIA TRIP AIMS TO MOVE BILATERAL
RELATIONSHIP FORWARD
REF: LONDON DAILY 11/3/09
Classified By: Deputy Chief of Mission Richard LeBaron,
reasons 1.4 (b,d).
¶1. (C/NF) Summary. The Foreign Office's Russia Directorate
briefed November 4 that the visit by Foreign Secretary David
Miliband to Russia November 1-3 aimed to move forward a
bilateral political relationship that has been beset by
irritants and disagreements for three years. Discussions
focused on multilateral issues over which there was broad
agreement: Afghanistan, disarmament, the Middle East, and
Iran, and issues where there was still bilateral
disagreement: extradition, European security/NATO, human
rights, Georgia, and climate change. Joint statements and
discussions recommitted the two countries to common positions
in support of peace, stability, and prosperity in
Afghanistan, support for the electoral process, and a
condemnation of the Taliban; a lasting two-state peace
settlement of the Middle East conflict; and recognition of
the vital global security role of nuclear non-proliferation
and disarmament. Russian Foreign Minister Lavrov expressed
predictable concern over Europe's evolving security
architecture and NATO enlargement while appreciating NATO
SecGen Rasmussen's "transparency" on the NATO Strategic
Concept Review. Miliband and Lavrov "agreed to disagree" on
the interpretations of the reasoning behind Russian military
interventions into Georgia in August 2008. Miliband
expressed hope that Russia would show more visible evidence
of progress on human rights and rule of law, and heard only a
"standard Russian reply" to requests for movement on the UK's
extradition request of Andrei Lugovoi (wanted in connection
with the murder of Kremlin critic Alexander Litvinenko in
London in 2006). Miliband pushed Lavrov for an increased
commitment of Russian emission reductions in advance of
Copenhagen, and heard optimistic predictions of three percent
economic growth in Russia in 2010 by First Deputy Prime
Minister Igor Shuvalov. Shuvalov expressed willingness to
maintain momentum on Russia's WTO accession negotiations but
complained he had "gotten no response" when he raised the
issue in Washington this autumn. In a separate November 3
readout with the DCM, the newly-installed FCO Political
Director Geoffrey Adams said that HMG was very satisfied with
the visit. Reading from a UK Embassy Moscow report, he noted
Lavrov had "gone out of his way" to be hospitable, hosting a
small informal dinner with Miliband the evening before the
official schedule began. The media response to the visit was
low-key and generally positive, he added. End summary.
Visit's Goals and Objectives
¶2. (C/NF) Michael Davenport, Director of the Foreign and
Commonwealth Office's Russia, South Caucasus, and Central
Asia Directorate briefed members of London's diplomatic corps
November 4 on Foreign Secretary David Miliband's November 1-3
trip to Russia. The objective of Miliband's visit was to
"take forward" the top-level bilateral political dialogue
which Prime Minister Brown started with President Medvedev at
the G8 last year, and which were furthered by Business
Secretary Lord Mandelson, Secretary of State for Energy and
Climate Change Ed Miliband, and the Duke of York on various
visits to Russia. Miliband and Russian Foreign Secretary
Lavrov agreed on three joint statements on Afghanistan,
non-proliferation, and the Middle East Peace Process. The
visit also demonstrated that Russia and the UK were able to
cooperate on multilateral and bilateral priorities while
engaging on what Davenport termed "hard-headed" issues such
as the extradition of Andrei Lugovoi. Texts of the joint
statements can be found at http://ukinrussia.fco.gov.uk
/en/working-with-russia/visits/david-miliband .
Iran
¶3. (C/NF) FS Miliband noted the need for the international
community to begin considering next steps to increase
pressure on Iran with sanctions should there be no progress
on Iran's response to concerns over its nuclear ambitions.
Lavrov expressed concern that unilateral sanctions often had
LONDON 00002499 002 OF 004
a seriously negative impact on Russian companies, to which
Miliband responded that this was more reason to consider
coordinated, multilateral sanctions if required. Davenport
said that Miliband came away from the discussion with the
impression that Russia was pressing Iran to be responsive to
the international community but that Lavrov believed that it
was premature to discuss sanctions in detail.
Afghanistan
¶4. (C/NF) Davenport indicated that Lavrov supported NATO's
role in Afghanistan and that Russia wanted NATO to stay
engaged there. The Russians were optimistic over NATO's role
in the process of reintegration but more skeptical on the
potential for reconciliation there. Lavrov agreed on the
importance of President Karzai as a genuinely national
leader. A joint statement issued after the discussions
recommitted the UK and Russia to the security, stability, and
prosperity of Afghanistan; condemned Taliban efforts to
destabilize the electoral process; underscored interest in
prompt completion of the electoral process; and reaffirmed
support for Afghanistan in confronting the threat posed by
the illicit narcotics trade.
Disarmament and Missile Defense
¶5. (C/NF) FM Lavrov was optimistic that the successor treaty
to START would be ready by December 5 and indicated to
Miliband that he was looking forward to working with the U.S.
on next steps. Lavrov expressed Russia's desire to see the
disarmament discussion widened to include conventional
weapons and to include countries beyond the P-5, particularly
those vulnerable to becoming more "weaponized." On missile
defense, Lavrov told Miliband he welcomed the U.S. decision
and that he looked forward to working with us on next steps.
European Security / NATO
¶6. (C/NF) Discussions on European security architecture,
Davenport said, were in the context of the NATO-Russia
dialogue on Afghanistan. Lavrov said he saw the debate (on
the future of European security) as a litmus test of Western
willingness to meet European security responsibilities. He
welcomed NATO SecGen Rasmussen's willingness to be frank and
transparent with Russia over NATO's Strategic Concept Review
and looked forward to Rasmussen's upcoming trip to Russia to
further engage on the issue of security. Lavrov raised with
Miliband the view that Russia hoped to see the future of
European security arrangements enshrined in a treaty with
Russia, "either through the OSCE or the Corfu process."
Miliband demurred, indicating that the discussions should be
open and frank while cautioning that a treaty would not be
the "end-all-be-all" solution; things must move forward
incrementally, he said. On NATO enlargement specifically,
Lavrov replayed traditional Russian arguments about the West
"not keeping its word" in the 1990s not to expand the
alliance and pointed to this grievance in support of a new
treaty to govern Europe's new security architecture Lavrov
promised that Russia would come to the next NATO-Russia
Council meeting with more concrete proposals on Russian views
for Europe's new security architecture, but Davenport
expressed the view that HMG had "heard this before."
President Medvedev and Prime Minister Brown were expected to
meet in Berlin next week where the issue would likely be
discussed further.
MEPP
¶7. (SBU) The Middle East Peace Process was the subject of a
joint statement by Lavrov and Miliband -- recommitting Russia
and the UK to a "comprehensive, just, and lasting peace
settlement" of the conflict; and Davenport said there was
agreement that the Palestinians needed a "credible route to a
credible state."
LONDON 00002499 003 OF 004
Georgia
¶8. (C/NF) Miliband and Lavrov agreed to disagree on
different interpretations of what occurred in Georgia in
August 2008. Miliband reasserted the view that sovereign
states had the right to determine their security arrangements
and alliances, and Davenport assessed that Russia was
prepared to "play its part" in Geneva. Russian Deputy
Foreign Minister Karasin was expected in London on December
19, during which these discussions would continue.
Human Rights / Rule of Law
¶9. (C/NF) Miliband welcomed President Medvedev's commitments
on human rights and the rule of law, but expressed to Lavrov
that HMG hoped to see more evidence of these commitments
being put into practice. Miliband noted that the issues
impact the investment climate and hoped more could be done
with a public face. Davenport noted that the EU-Russia
dialogue on human rights was underway this week and the
UK-Russia bilateral human rights dialogue would also
continue, with an invitation extended to Russia to
participate in dialogue talks in London in early 2010.
Davenport, in response to a question, confirmed that HMG had
no current plans to re-open the British Council office in St.
Petersburg, but that the Russian MFA was supportive of the
Council's work in country.
Extradition in Litvinenko Case
¶10. (C/NF) Turning to the key bilateral irritant, Miliband
raised the extradition case of Andrei Lugovoi, wanted in
connection with the 2006 murder in London of Alexander
Litvinenko. Miliband said that it was unacceptable that no
satisfactory cooperation from Russia on the UK's concerns and
questions had been forthcoming. Lavrov, Davenport said,
offered the "standard Russian reply."
Copenhagen - Climate Change
¶11. (C/NF) Miliband urged Lavrov to look again at Russia's
negotiating position in advance of Copenhagen, noting that
planned Russian reductions of 10-15 percent in carbon
emissions by 2020 from a 1990 base year were insufficient,
given the already huge reductions that occurred because of
Russia,s economic decline in the 1990s. The Foreign
Secretary urged Lavrov and First Deputy Prime Minister
Shuvalov that increasing Russia's reduction pledge would send
the right message to other countries.
Economics / WTO
¶12. (C/NF) Shuvalov was upbeat about Russia's economy,
Davenport reported, and said that he predicted three percent
growth in 2010. Shuvalov also indicated that Russia wanted
to press ahead on with Russia's WTO accession negotiations,
but had "gotten no response from Washington" when he was
there this autumn.
Visit Atmospherics
¶13. (C/NF) In a separate November 3 meeting with the DCM,
the new FCO Political Director, Geoffrey Adams, shared a
readout from the UK Ambassador in Moscow, who noted that
Lavrov had "gone out of his way to be hospitable" and had
hosted an informal dinner on November 1 where the discussion
was wide-ranging and relaxed. Davenport echoed that the
atmospherics of the visit were "pretty good," despite
criticism in the UK media of the Foreign Secretary having
LONDON 00002499 004 OF 004
been "snubbed" on Litvinenko. Formal discussions were
"business-like and productive" with promises of follow-up,
though Adams expressed some disappointment that a planned
meeting with Russian President Medvedev and Miliband had not
materialized. Adams, when questioned by DCM said there was
no clear solution in sight regarding the Litvinenko case.
The FCO assesses that the visit was a step forward in the
UK's bilateral dialogue with Russia, and while there remained
important areas of disagreement, the channels would stay open
and the discussion of these issues would continue.
Visit London's Classified Website:
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VZCZCXRO8631
PP RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR
DE RUEHLO #3042/01 3391657
ZNY CCCCC ZZH
P 041657Z DEC 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 0586
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
C O N F I D E N T I A L SECTION 01 OF 03 LONDON 003042
SIPDIS
NOFORN
E.O. 12958: DECL: 12/03/2018
TAGS: PGOV [Internal Governmental Affairs],
ECON [Economic Conditions],
PREL [External Political Relations],
PINR [Intelligence], UK [United Kingdom]
SUBJECT: (U) QUEEN OPENS PARLIAMENT WITH A THIN LABOUR
LEGISLATIVE AGENDA, BUT POLITICAL AND MEDIA FOCUS REMAINS
ON MP RAID UPROAR
Classified By: PolMinCouns Greg Berry, reasons 1.4 (b/d).
¶1. (C/NF) Summary. The Queen laid out Gordon Brown's
legislative plans for the coming year in the annual Queen's
Speech at the December 3 State Opening of Parliament, but
most of the political and media attention was not on PM
Brown's legislative agenda (much of which had been released
already) but on the future of the Speaker of the House of
Commons Michael Martin. Martin was forced to read a
statement to his colleagues, immediately following the
Queen's departure from Westminster, in which he explained why
police were allowed to conduct a November 27 raid of
Conservative MP Damian Green's parliamentary offices as part
of a Scotland Yard investigation into the unauthorized
disclosure of confidential government documents that had
embarrassed the government. Despite the Queen's announcement
that 13 new bills would be introduced to help stabilize the
rapidly declining UK economy, including a plan to allow
homeowners to defer mortgage payments for up to two years if
they lose their jobs or become severely ill, MPs from all
parties were focused on the search of Green's office and what
they called an infringement of the ancient parliamentary
privilege of confidentiality; the future of Speaker Martin
dominated much of the media reporting following the speech.
Tory leader David Cameron criticized PM Gordon Brown's
legislative agenda for focusing on short-term political gain
rather than the long-term national interest. There were no
foreign policy announcements in the speech, although Cameron
in his statement after the speech noted President-elect
Obama's intention for a "troop surge" in Afghanistan and
surmised the Prime Minister will come under pressure to
provide more troops. Cameron pressed Brown to obtain further
troop commitments from NATO members before agreeing to
increase Britain's troop presence. Labour's emphasis on
populist, short-term economic measures, at the expense of
what political critics of Labour claim is broader economic
and social needs, suggests to many observers that Brown is
considering calling a general election earlier than May 2010.
End summary.
A Slimmed Down Legislative Program...
¶2. (SBU) Prime Minister Gordon Brown had already revealed
much of the content of the Queen's Speech in an unprecedented
release of a draft of the speech last summer. The speech,
however, had required almost wholesale re-working in the last
several weeks to address the global economic downturn and as
the UK prepares for recession. The government pared down its
agenda significantly to focus tightly on the economy, and the
previously announced 18 draft bills were replaced by a mere
12 draft pieces of new legislation in what is the slimmest
legislative program since Labour took power in 1997. Some
controversial legislation has been put on hold, such as the
Communications Data Bill, which would have allowed a national
database of phone calls and e-mails to be established, and
the Constitutional Renewal Bill, which Brown trumpeted as
increasing powers for MPs, specifically giving them the final
say over the country's decision to go to war. Also postponed
was a "UK Bill of Rights," a proposal Brown had given much
attention to upon becoming Prime Minister last year. These
measures will now, however, only be introduced "when time
allows." The Political Parties and Elections Bill, which
aims to introduce greater transparency in political party
donations, will be carried over into this year's legislative
agenda from last year. There were no foreign policy
announcements in the speech, although Opposition Leader David
Cameron noted President-elect Obama's intention for a "troop
surge" in Afghanistan and surmised that the Prime Minister
would likely come under pressure to provide more troops.
Cameron pressed the Prime Minister to obtain further troop
commitments from other NATO members before agreeing to
increase Britain's troop presence.
...With a Focus On the Economy
¶3. (SBU) The Queen told Parliament that "fighting the
economic downturn" was the government's "overriding priority"
for the year ahead. A Banking Bill, which has already been
introduced by the government and was carried over into this
session, will seek to improve financial stability through
measures to minimize existing liabilities in the banking
sector by allowing the Treasury and the Financial Services
Authority to intervene earlier if banks find themselves in
difficulty, as well as strengthening protection for
depositors if banks do fail. The headline proposal in the
Speech was the government's proposal to allow homeowners who
fall behind on mortgage payments due to a loss of job,
sickness, or a large fall in income to be able to request a
LONDON 00003042 002 OF 003
two year hiatus on their mortgage payments, with the deferred
payments guaranteed by the government. Details of the
program have yet to be worked out, but Britain's eight
largest mortgage lenders representing 70% of the mortgage
market have agreed to support the new program, according to
Downing Street. Under the program, deferred payments will be
added to the principal with the borrower paying this off when
his/her financial circumstances improve, maintaining an
affordable monthly payment by extending the term of the
mortgage. Deferred amounts not repaid would be reimbursed to
the lenders by the government. The program, entitled the
Homeowners Support Mortgage Scheme, requires no primary
legislation and officials estimate government guarantees may
amount to about 1 billion of which perhaps 100 million
would be paid out. The program will also have the effect of
eliminating many non-performing loans from the lenders,
portfolios, thereby freeing up reserves to support new
lending. The announcement received positive media coverage
and was welcomed by opposition parties.
And Other "Populist" Measures
¶4. (SBU) Many of the measures on the government's legislative
agenda have a populist tone and reflected what several
political observers suggested was "positioning" by the Brown
government to hold a general election in 2009, rather than
wait till May 2010, the deadline for an election. A welfare
reform bill will aim to crack down on those cheating the
benefits system and get more single parents back to work once
their children pass the age of one. Migrants wanting to
settle in the country will face more legal obstacles if they
have committed crimes or failed to integrate into UK society
under the proposed "Borders, Immigration and Citizenship
Bill." Police accountability will be stepped up with the
creation of directly elected representatives to police
authorities; and lap dancing establishments will face tighter
controls under the Policing and Crime Bill. All these issues
are hot-button for Middle Britain and give Labour some
deliverables to campaign on, especially if the economy
remains in the doldrums at the time of any election.
The Spotlight Turns to the Speaker
¶5. (C/NF) On a day normally preoccupied with high ceremony
followed by intense debate over HMG's legislative agenda, the
media and political spotlight was, however, quickly turned
toward Speaker of the House of Commons Michael Martin, who
has faced a flurry of sharp and increasing criticism for his
decision to allow police to conduct a November 27 raid of
Tory Shadow Minister for Immigration Damian Green's
parliamentary offices. Martin attempted to deflate criticism
from Opposition MPs and calls for his resignation by reading
a statement, immediately following the Queen's departure from
Westminster, on his role in the incident and by allowing
Members to debate the Green affair. In his statement Martin
blamed House of Commons Sergeant at Arms Jill Pay for
allowing the search, which was part of an investigation into
Green's disclosure of confidential information that had
embarrassed the government. Martin claimed he did not know
that the police did not possess a warrant for the search, but
did admit that the police had told him a week earlier that
they were considering a search of Green's parliamentary
offices. Members of Parliament from all parties expressed
outrage at what they called an infringement of their ancient
parliamentary privilege of confidentiality and an attack on
their independence; Opposition MPs called for the Speaker's
resignation. One shadow Tory secretary told Poloff that
Martin was notoriously thin-skinned and unpredictable, and
that Opposition MPs have begun questioning his independence
from the Government (Embassy comment. Unlike his U.S.
counterpart, the Commons Speaker's role is non-partisan --
he/she routinely does not vote on legislative matter as a
reflection of this tradition -- and the job is seen as
requiring strong independence from the Government in order to
reflect the interests of the Commons as a whole. End
comment.) Home Secretary Jacqui Smith is reportedly preparing
a statement on the Home Office's role in the raid, which may
keep the issue in the press for the next day or two, and
Speaker Martin is clearly not out of the woods yet, but Labor
MPs remain loyal. Several political pundits have said they
doubt the Speaker will be forced to resign.
What About Green?
¶6. (SBU) Parliamentary outrage over the raid on Green's
office has taken attention off the reason the raid occurred.
Police arrested MP Green as part of an investigation into
LONDON 00003042 003 OF 003
leaks of sensitive information from a junior Home Office
civil servant, Christopher Galley, who had been feeding
information to Green. Green released information to the
press and in the process had embarrassed the government. One
of the leaks highlighted that more than 5,000 illegal
immigrants were working as security guards, with one employed
in Parliament. Police say they arrested Green, who was later
released after questioning, on suspicion of "conspiring to
commit misconduct in a public office" as well as "aiding and
abetting, counseling or procuring misconduct in a public
office." Such a raid and arrest of a member of parliament
was unprecedented and MPs are arguing that leaking
information embarrassing to the government, as long as it was
not damaging to national security, is a vital way of holding
the executive to account. In comments after the Commons
debate on the raid and the Speaker's actions, Tory leader
David Cameron expressed "shock" that police were allowed into
the Commons without a warrant, and said he was "disappointed"
that Gordon Brown was reportedly not certain whether a
warrant was even necessary for the search to occur. Cameron
reasserted his support for Green and underscored the role of
Her Majesty's Loyal Opposition to hold government to account,
dismissing government and police claims that the unauthorized
disclosure of Home Office information had contained anything
of a national security nature.
Comment
¶7. (C/NF) In part because of the Martin affair, and because
there were few surprises in the Queen's Speech, there has
been little media or political debate over Labor's rather
light legislative agenda. Some insiders have suggested to us
that Labor has slimmed down its plans and focused on
populist, short-term economic measures in the hope of keeping
options open to call a general election earlier than the June
2010 deadline. One Tory MP tells us that this would be
possible only if Brown saw polling figures tip Labor's way
definitively in the spring of next year. If there were to be
an early election, Brown wants to avoid previewing the move
publicly to avoid embarrassment should it not then occur and
would share the decision only with insiders such as
(Secretary of State for Business) Lord Mandelson and
(Secretary of State for Children, Schools and Families) Ed
Balls. For now, both are mum about any such plans when asked
by the UK media.
Visit London's Classified Website:
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TUTTLE
VZCZCXRO3367
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DE RUEHBJ #2617/01 2541157
ZNY CCCCC ZZH
O 111157Z SEP 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6024
INFO RUEHOO/CHINA POSTS COLLECTIVE IMMEDIATE
RUEHRL/AMEMBASSY BERLIN IMMEDIATE 1822
RUEHLO/AMEMBASSY LONDON IMMEDIATE 3603
RUEHFR/AMEMBASSY PARIS IMMEDIATE 4638
RUEHKO/AMEMBASSY TOKYO IMMEDIATE 0031
RUEAIIA/CIA WASHINGTON DC IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 002617
SIPDIS
E.O. 12958: DECL: 09/10/2029
TAGS: PREL [External Political Relations],
PGOV [Internal Governmental Affairs],
PHUM [Human Rights],
KIRF [International Religious Freedom],
ECON [Economic Conditions], CH [China (Mainland)],
FR [France; Corsica], JA [Japan; Okinawa; Ryukyu Islands],
GM [Germany], UK [United Kingdom]
SUBJECT: BEIJING-BASED G-5 CHIEFS OF MISSION ON JAPANESE
ELECTION, CLIMATE CHANGE AND FRANKFURT BOOK FAIR.
Classified By: Political Minister Counselor Aubrey Carlson.
Reasons 1.4 (b/d).
Summary
¶1. (C) At the regular meeting of G-5 Ambassadors in Beijing
on September 11, Japanese Ambassador Miyamoto stated that
while the recent elections in Japan were "significant," he
does not expect major changes in Japan's foreign policy.
British Ambassador William Ehrman said the United Kingdom was
"dismayed" by Premier Wen Jiabao's recent statement on
China's unwillingness to comply with carbon emission
reduction caps. German Ambassador Michael Schaefer reported
that PRC Vice President Xi Jinping will visit Germany in
mid-October. French Ambassador Ladsous reported that in a
recent Sino-French informal "strategic dialogue," PRC Foreign
Minister Yang Jiechi indicated that China was reluctant to
see action on UN Security Council reform at the current UNGA.
End Summary.
Participants
¶2. (C) French Ambassador Herve Ladsous hosted the DCM,
Japanese Ambassador Yuji Miyamoto, German Ambassador Dr.
Michael Schaefer and UK Ambassador Sir William Ehrman
September 11 for the regular gathering of Beijing-based G-5
Chiefs of Mission.
Japanese Elections
¶3. (C) Ambassador Miyamoto commented that the recent election
results in Japan were the "first real change in government"
since the 1993 elections. Ambassador Miyamoto described
incoming Foreign Minister Katsuya Okada, a regular visitor
with personal ties to China, as a "man of principle" and a
"fundamentalist." He indicated that the full impact of the
election results on relations among the United States, China
and Japan was unclear, but he did not expect drastic foreign
policy changes with the new government. Okada was expected
to visit China September 27 to meet with PRC Foreign Minister
Yang Jiechi.
VFM Wu Dawei's visit to Japan
¶4. (C) Ambassador Miyamoto reported that PRC Vice Foreign
Minister Wu Dawei traveled September 7 - 10 to Japan as
China's leading "Japan expert" to oversee initial discussions
with the new government on bilateral relations. He added
that the substance of the "strategic, mutually beneficial
relationship" between the two countries might be "altered."
According to Ambassador Miyamoto, VFM Wu did not discuss DPRK
security issues with his interlocutors during his trip.
Sino-UK relations
¶5. (C) British Ambassador William Ehrman noted the recent
visits to Beijing of Foreign Secretary David Miliband and
First Secretary of State Lord Mandelson. He further reported
that there were "no surprises" during Foreign Office Minister
Ivan Lewis' recent visit to Tibet and that State Councilor
Dai Bingguo was expected to visit the UK in late October.
Commenting on bilateral market access as well as cooperation
between insurance and banking industries in the UK and China,
Ambassador Ehrman reported that PRC Vice Premier Wang Qishan
recently approved a merger deal between the Bank of China and
Standard Life Insurance.
Copenhagen and Climate Change
¶6. (C) Touching on climate change issues and the December
2009 UN Conference on Climate Change in Copenhagen,
Ambassador Ehrman commented that China did not support
specific numerical caps on carbon emissions, calling them
"unrealistic". The UK was dismayed by PRC Premier Wen
Jiabao's recent statements that foreign countries "should not
expect" China to abide by proposed treaty limits on emissions
by 2020. Ambassador Ehrman questioned China's commitment to
dialogue and discussion in Copenhagen, given that the PRC
appeared to have already taken a firm policy stance. French
BEIJING 00002617 002 OF 002
Ambassador Ladsous disagreed, suggesting that China should
make known its environmental position public before the
conference.
Sino-German relations
¶7. (C) Ambassador Schaefer reported that around 1,500
visitors from China, including the author Dai Jing, would
participate in the October 14-18 Frankfurt Book Fair, the
world's largest. The German government was not concerned
about problems arising from the possible attendance at the
fair by the Dalai Lama, who apparently was a close friend of
Frankfurt's provincial governor and transited through the
city frequently. Vice President Xi Jinping was expected to
arrive in Germany on October 13.
Sino)French relations
¶8. (C) Ambassador Ladsous reported that France and China had
just completed their "informal" strategic and economic
dialogues. French President Sarkozy's Diplomatic Adviser
Jean-David Levitte had led the French side, and in
discussions with PRC Foreign Minister Yang Jiechi, Yang had
indicated that China did not support reaching final decisions
on UN Security Council reform during the upcoming UN General
Assembly (UNGA) and wished to wait until "next time" for a
decision. He further noted that PRC President Hu Jintao and
President Sarkozy had scheduled bilateral discussions on the
margins of UNGA, and that President Hu was expected to visit
Paris in 2010, with a return visit by President Sarkozy after
the Shanghai World Expo.
¶9. (C) Ambassador Ladsous raised the issue of nuclear power
plant security in China. France's Prime Minister Francois
Fillon was expected to visit a nuclear power plant in
Guangzhou when he visited China. Ambassador Ladsous reported
upcoming visits by two senior French financial ministers and
French Environment Minister Jean-Louis Borloo, who planned to
visit China toward the end of October.
HUNTSMAN
VZCZCXRO1390
OO RUEHCN RUEHGH RUEHVC
DE RUEHBJ #2062/01 2010931
ZNY CCCCC ZZH
O 200931Z JUL 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5284
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHLO/AMEMBASSY LONDON PRIORITY 3589
RUEHFR/AMEMBASSY PARIS PRIORITY 4623
RUEHRL/AMEMBASSY BERLIN PRIORITY 1811
RUEHKO/AMEMBASSY TOKYO PRIORITY 2690
RHEHNSC/NSC WASHDC PRIORITY
RUEAIIA/CIA WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 002062
SIPDIS
E.O. 12958: DECL: 07/20/2029
TAGS: PREL [External Political Relations],
PGOV [Internal Governmental Affairs],
PHUM [Human Rights],
KIRF [International Religious Freedom],
ECON [Economic Conditions],
CH [China (Mainland)], FR [France; Corsica],
JA [Japan; Okinawa; Ryukyu Islands],
GM [Germany], UK [United Kingdom]
SUBJECT: BEIJING-BASED G-5 CHIEFS OF MISSION ON XINJIANG,
RIO TINTO, SINO-FRENCH, UK, AND JAPAN RELATIONS, TAIWAN
PARTICIPATION IN BOOK FAIR
Classified By: Acting Deputy Chief of Mission William Weinstein.
Reasons 1.4 (b/d).
Summary
¶1. (C) At the regular meeting of G-5 Ambassadors in Beijing
July 17, French Ambassador Ladsous reported that during
French National Day, he spoke with a Chinese Vice Minister
who said Xinjiang was "just like Tibet" and implied France
"best keep quiet." On Rio Tinto, Ladsous reported that he
heard the Chinese had conducted large-scale efforts to gain
information on the negotiations, so their hands "were not
clean." British Ambassador Sir William Ehrman reported that
Rio Tinto was a British company with HQ in London and that
Rio Tinto had decided to pursue the incident on a consular
basis, leaving Australia in the lead. On Sino-French
relations, French Ambassador Ladsous reported that President
Sarkozy met with State Councilor Dai Bingguo at the G-8
summit in Italy and suggested a possible visit by Hu Jintao
to Paris next year. Japanese Ambassador Yuji Miyamoto
reported that the Chief of Staff of the Maritime Self-Defense
Force Admiral Keiji Akahoshi would visit China on August 13,
at which time Japan hoped to establish a naval hotline.
German Ambassador Dr. Michael Schaefer reported that a
dispute had emerged over Taiwan's participation in the
October 14-18 Frankfurt Book Fair under the name "Taiwan"
and, until China and Taiwan resolved the issue, China's
participation in the book fair was uncertain. End Summary.
Participants
¶2. (C) Japanese Ambassador Yuji Miyamoto hosted German
Ambassador Dr. Michael Schaefer, UK Ambassador Sir William
Ehrman, French Ambassador Herve Ladsous and Acting DCM July
17 for the regular gathering of Beijing-based G-5 Chiefs of
Mission.
Xinjiang
¶3. (C) French Ambassador Ladsous reported that during French
National Day he spoke with a Chinese Vice Minister who said
Xinjiang was "just like Tibet" and implied France "best keep
quiet." German Ambassador Dr. Michael Schaefer confirmed
that protestors had thrown Molotov cocktails at the Chinese
consulate in Munich, causing minor damage to the building but
burning the Chinese flag. China had made representations
urging Germany to take all necessary measures to ensure the
safety and dignity of Chinese diplomats and bring the
perpetrators to justice. Schaefer said China alleged that a
Uighur tour group in Germany had been attacked by a Chinese
tour group, but Germany was un-able to verify this
information.
Rio Tinto
¶4. (C) French Ambassador Ladsous reported that he heard the
Chinese had conducted large-scale efforts to gain information
on the negotiations, so their hands "were not clean." He
said that he would consult with the Australian Embassy,
because they were concerned about the naturalized Chinese
staff in police custody. British Ambassador Sir William
Ehrman reported that Rio Tinto was a British company with
Headquarters in London. In a meeting with the company's CEO
in London, Ehrman said that Rio Tinto told him they had
decided to pursue the incident on a consular basis, with
Australia taking the lead.
Sino-French relations
¶5. (C) Ambassador Ladsous reported that President Sarkozy
met with State Councilor Dai Bingguo at the G-8 summit in
Italy and suggested a possible visit by Hu Jintao to Paris
next year. The French Minister for Budget Eric Woerth was
recently in China and signed the first agreement on
cooperation for anti- money laundering efforts. The French
Ambassador also reported several upcoming visits including:
the President's Chief Diplomatic Adviser Jean-David Levitte
who planned to meet with State Councilor Dai Bingguo on
September 2, French Economy, Industry and Employment Minister
Christine Lagarde who planned to visit China before the G-20
in Pittsburgh and French Environment Minister Jean-Louis
Borloo who planned to visit China in the fall. Ladsous also
reported that French Secretary for Human Rights Rama Yade was
BEIJING 00002062 002 OF 002
scheduled to meet with the Dalai Lama when he next visits
France.
Sino-UK relations
¶6. (C) British Ambassador Sir William Ehrman reported that
Foreign Secretary David Miliband, Secretary for Energy and
Climate Change Ed Miliband, and First Secretary of State Lord
Mandelson all planned to visit China in the first week of
August. Chief of the Air Staff Sir Glenn Torpy planned to
visit China in October, while Trade Minister Lord Davies,
Special Representative for Climate Change John Ashton,
Permanent Secretary of HM Treasury Sir Nicholas Macpherson,
and Head of the Diplomatic Service Sir Peter Ricke all
planned to visit China in the fall.
Sino-Japanese relations
¶7. (C) Japanese Ambassador Yuji Miyamoto announced that the
scheduled trilateral meeting between the leaders of Japan,
South Korea, and China was cancelled due to elections in
Japan. He also reported that the Chief of Staff of the
Maritime Self-Defense Force Admiral Keiji Akahoshi would
visit China on August 13, at which time Japan hoped to sign
an agreement to establish a naval hotline. The Japanese
Ambassador also announced that he will take the first
official trip by a Japanese Ambassador to Tibet in August.
Taiwan Participation in Frankfurt Book Fair Under Dispute
¶8. (C) German Ambassador Dr. Michael Schaefer reported that
a dispute had emerged over Taiwan's participation in the
October 14-18 Frankfurt Book Fair, the world's largest such
fair, under the name "Taiwan." Currently the organizers had
places such as Catalonia and Taiwan listed as stand alone
entries. Until China and Taiwan resolved the issue, China's
participation in the book fair including a visit by Vice
President Xi Jinping was uncertain.
GOLDBERG
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R 291825Z JAN 09
FM AMEMBASSY LONDON
TO SECSTATE WASHDC 1242
INFO AMEMBASSY BERLIN
AMEMBASSY BEIJING
AMEMBASSY MOSCOW
AMEMBASSY OTTAWA
AMEMBASSY PARIS
AMEMBASSY ROME
AMEMBASSY TOKYO
DEPT OF TREASURY WASHDC
USEU BRUSSELS
USMISSION GENEVA
C O N F I D E N T I A L LONDON 000271
NOFORN
FOR INR/B AND EUR/WE
E.O. 12958: DECL: 01/29/2019
TAGS: ECON [Economic Conditions],
PGOV [Internal Governmental Affairs],
PINR [Intelligence], UK [United Kingdom]
SUBJECT: (C/NF)SHRITI VADERA - BROWN'S OUTSPOKEN CONFIDANT
AND ADVISOR
REF: A. 07 LONDON 4389
B. 07 LONDON 1525
C. 08 LONDON 260
Classified By: Econ Minister Counselor Mark Tokola for Reasons 1.4 (b)
and (d)
¶1. (C/NF) Summary: Shriti Vadera, junior minister at the
Department for Business, Enterprise and Regulatory Reform
(BERR), catapulted into the spotlight on January 14 with a
roundly-criticized comment that she saw potential "green
shoots" of economic recovery. The comments sparked a series
of press profiles focusing on her close relationship with PM
Brown, her private sector background, and her reported
abrasiveness with the civil service. Vadera bears watching
as she has long been a close advisor of Gordon Brown, and is
particularly active in developing responses to the economic
crisis, as seen by her presence at the small meeting Brown
held with Federal Reserve Chairman
Bernanke on January 13. End Summary.
Green Shoots
¶2. (SBU) Vadera's comments on January 14 drew immediate and
fierce criticism. Asked specifically when the UK could
expect to see some "green shoots" amid the economic downturn,
she replied that would not want to predict, but added "I am
seeing a few green shoots, but it's a bit too early to say
exactly how they'd grow." Conservatives called the remarks
"insensitive and out of touch" coming, as they did, on a day
when UK firms announced large-scale job losses and share
prices slumped by almost 5 percent. In her own defense,
Vadera said she had been referring to improvements in the
credit market, saying she was aware of a company that managed
to raise hundreds of millions of pounds in the capital
markets, which would not have been possible even two months
ago. The gaffe forced the PM to issue a statement that he is
"never complacent" about the economy. Business Secretary
Lord Mandelson defended Vadera, saying she is "the least
complacent" member of his team, although he added that she
failed to grasp the political implications. The "green
shoots" phrase became politically toxic when then Chancellor
Norman Lamont used it in 1991, more than a year before the UK
came out of its last recession.
Outspoken
¶3. (SBU) The press took the opportunity of Vadera's gaffe to
profile her. BBC's Radio 4 Today program described her as
Gordon Brown's "most trusted economic advisor" and someone
everyone should know, saying she is known in the "Westminster
Village" as "Gordon Brown's representative on Earth." As
part of the interview, former business minister Digby Jones
described her as an, "intensely loyal person who (Brown) can
totally rely on." Peter Jones, millionaire businessman, said
she "listens, takes advice, but more importantly, delivers."
Other press reports said she can be abrasive, but gets the
job done. She was also described as extremely good at her
job, and relentlessly hard working.
¶4. (C/NF) We understand she speaks to the Prime Minister
almost daily by phone, often de-briefing him on her meetings,
advising on political strategy, and offering economic advice.
In meetings with USG officials while at the Department for
International Development (DFID), (e.g. Ref A) Vadera was not
shy about offering to have "Gordon" make a call if it was
necessary to make something happen. Although more in the
shadows since moving to BERR, Vadera clearly remains one of
Brown's closest advisors. She joined the Prime Minister,
Chancellor Darling, and G8 Sherpa Jon Cunliffe in the January
13 meeting with Federal Reserve Chairman Bernanke; she
interrupted the PM on several occasions to make a point about
the economic crisis.
¶5. (C/NF) Others profiles were less sympathetic. Press
stories picked up what civil servants have reportedly coined
as Vadera's nicknames "Shrieky" and "Darth Vadera," and
Vadera herself has been quoted as saying she finds working
with the civil service "challenging." The press has noted
the high turnover of officials in her private office. One
Private Secretary told us Vadera would regularly scream from
her desk, "Get me a cup of coffee" with a string of
expletives attached, something almost unheard of in the
polite British civil service and prompting three scheduling
assistants to leave her office in three months. She also
reportedly had screaming matches in front of subordinates
with Development Secretary Douglas Alexander while she was at
DFID. Insiders tell us she was moved from DFID at
Alexander's request, though the move was billed as a
promotion to the media. It is worth noting that Vadera can
also be charismatic and charming, especially with external
visitors. She is also very active in trying to bolster her
international image, including visits to Washington and
questioning USG visitors for information on other key USG
decision makers she should meet.
¶6. (C/NF) HMG officials universally recognize Vadera's
intelligence and ability to implement policy. During her
short time in DFID, she completely re-vamped the Country
Action Plan (CAP) process, one of the most bureaucratic acts
of HMG's most bureaucratic department, and gave DFID's
strategic planning a crisp, business-like approach. She also
has an insatiable appetite for details, constantly asking
officials for longer briefings and more explanation. The
model briefing from her DFID Private Office contained over
130 pages. In meetings with USG officials while at DFID,
Vadera enjoyed brainstorming with visitors, and her meetings
invariably started late and ran long. She often mentioned
her private sector roots, and, at least at DFID, she focused
on getting the private sector more involved in government
work.
Biographic Details
¶7. (C/NF) Brown recruited Vadera in 1999 following her
efforts to eradicate debt in her native Uganda as part of the
14 years she spent as an investment banker for UBS Warburg.
As an advisor to then Chancellor Brown at HM Treasury from
1999-2007, she helped develop the poverty reduction and debt
programs that were the centerpiece of the 2005 G-8 Gleneagles
summit. She was also a Trustee of Oxfam between 2000-2005.
Most recently, the BBC profile credited Vadera with having a
hand in the nationalization of Northern Rock, bank
recapitalizations and efforts to guarantee loans to small
business -- and described her as Brown's "economic
deal-maker."
¶8. (C/NF) Shriti Vadera has been a junior minister at the
Department for Business, Enterprise and Regulatory Reform
(BERR) since January 2008, where she is currently
Parliamentary Under-Secretary of State for Competitiveness
and Small Business (jointly with Cabinet Office). As one of
Brown's insiders (Ref B), she first became a government
minister when Brown became Prime Minister -- as Parliamentary
Under Secretary of State for the Department for International
Development from June 2007 to January 2008. Since she is not
an MP, to become a minister she had to be elevated to the
House of Lords, with the title of Baroness, a title her
staffers have told us to avoid using with her. At DFID, she
was responsible for Brown's first key development initiative
as Prime Minister, the Millennium Development Goals Call to
Action, and in particular, focused on engaging business (Ref
C).
Visit London's Classified Website:
http://www.intelink.sgov.gov/wiki/Portal:Unit ed_Kingdom
TUTTLE
VZCZCXRO1043
PP RUEHIK
DE RUEHLO #2427/01 3000947
ZNR UUUUU ZZH
P 270947Z OCT 09
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 3815
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHBL/AMCONSUL BELFAST PRIORITY 1426
RUEHED/AMCONSUL EDINBURGH PRIORITY 1221
UNCLAS SECTION 01 OF 03 LONDON 002427
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ECON [Economic Conditions],
EFIN [Financial and Monetary Affairs],
ETRD [Foreign Trade],
EINV [Foreign Investments],
UK [United Kingdom]
SUBJECT: UK STILL IN RECESSION AND FACING SLOW,
VOLATILE RECOVERY
REF: London 2307 and London 2357
LONDON 00002427 001.3 OF 003
¶1. (SBU) Summary: The UK economy is still in recession and faces a
slow, patchy recovery. According to official data released October
23, output in the third quarter was significantly weaker than
expected. Economists at Oxford Economics and Morgan Stanley expect
the UK to emerge from recession in the fourth quarter, in line with
Chancellor Darling's forecast that growth will return by the end of
the year, but have not ruled-out a "double-dip" recession. Weak
sterling may improve the prospects of an export-driven recovery.
Poor credit availability and mounting public debt pose significant
risks to recovery. While the Bank of England's quantitative easing
program could affect credit conditions, the Bank faces difficult
decisions about when to start unwinding its position. Unemployment
is set to stabilize next year, at a peak of approximately 9 percent.
Inflation is likely to remain below the Bank of England's two
percent target in the medium term. End summary.
UK Faces Bumpy Recovery
¶2. (SBU) The UK economy is still in recession, with a 0.4 percent
contraction of GDP in the third quarter, according to data released
by the Office for National Statistics on October 23. Output was
significantly weaker than expected, with many analysts previously
forecasting mild growth (of approximately 0.2 percent) which would
have kick-started the recovery. The UK has now had six consecutive
quarters of contracting output, the longest period of contraction
since quarterly records began in 1955. It has been one of the
global economic stragglers, with an emergence from the recession
only expected in the fourth quarter, according to Andrew Goodwin, a
consultant for Oxford Economics, a forecasting firm. During a
macroeconomic briefing, Goodwin said the UK remains a long way
behind most G7 countries, only performing better than Canada in the
second quarter. He blamed this on sluggish domestic demand as
consumers and businesses deleverage. Andrea Boltho, an Oxford
University professor, said "spring is in the air," but the UK will
not see a return to business as usual for a long time. He said it
would take approximately 12 quarters for UK GDP growth to return to
peak levels.
¶3. (SBU) Oxford Economics expects growth in the fourth quarter of
0.5 percent, slightly more pessimistic than Morgan Stanley's
forecast. Melanie Baker, Morgan Stanley's chief UK economist, told
us she expects 0.8 percent growth in the final quarter of 2009. She
forecasts strong end of year growth driven by money from HMG's car
scrappage scheme and increased consumer spending resulting from the
imminent reversal of the value-added tax (VAT) cut (in January 2010
VAT will return to 17.5 percent after a year at 15 percent). She
believes, however, 2010 will be a subpar year. Household savings
rates are likely to increase, with consumer spending slowing as
consumers deleverage. Business investment, likely to be low because
of spare capacity, will not be a driver of recovery.
¶4. (SBU) The exact shape of the recovery is unknown. Baker said
there is great uncertainty around all forecasts because of continued
uncertainty around the fiscal outlook. While most analysts expect
significant fiscal tightening following the election, the speed of
this tightening will depend largely on the governing political
party. She said people will remain concerned about the potential
for a "double-dip" or "W-shaped" recession through next year.
Echoing concern about a W-shaped recession, Goodwin said that while
growth could be boosted by inventory rebuilding through the
remainder of 2009, final demand may remain weak as banks and
households deleverage. This would result in sluggish growth through
2010 and 2011, despite an initial bounce-back in the second half of
Possible Export-Driven Recovery
¶5. (SBU) The UK's economic recovery is expected to be slow and
patchy, largely because it is difficult to detect a sustainable
driver of growth. Both Goodwin and Baker expect fiscal policy will
be limited in its ability to support economic recovery. There is no
money left, they say, for further fiscal stimulus, despite media
speculation that Chancellor Darling could announce further stimulus
in his pre-Budget report. Baker told us consumer spending also will
remain subdued, domestic business investment will likely be weak in
the near term, and the bulk of government spending has already
played through. While loose monetary policy may drive growth in the
near term, she said it is not a viable foundation for sustained
economic recovery. One possible driver, however, is exports. Baker
said exports are likely to be buoyed by sterling's weakness. The
weak pound will place the UK in good stead to benefit from eventual
growth in the eurozone. Her comments were echoed by Andy Scott,
Director of International and UK Operations for the Confederation of
British Industry (CBI). During an evidence session with the House
LONDON 00002427 002.3 OF 003
of Commons Business, Innovation and Skills Committee, Scott said the
UK recovery will be supported by a strong export market. As the
UK's domestic market "evaporates," companies are increasingly
looking at overseas opportunities. Sterling's weakness, he said,
will improve their competitiveness.
¶6. (SBU) However, there is reason to remain skeptical about the
possibility of an export-driven recovery. Adam Marshall, Director
of Policy at the British Chambers of Commerce, told the Committee
that many companies have been driven to export markets looking for a
quick fix. He said that while established companies will benefit
from a weak sterling, companies new to exporting will find it more
difficult. Costs of establishing in a foreign market, particularly
the cost of foreign trade shows, will be heightened by the weak
sterling. Oxford University's Boltho was also skeptical about
relying on exports for recovery. He said Ireland, the UK's fourth
largest export market, is still suffering from problems in its
housing market, and is unlikely to be a large importer of UK goods
and services.
Credit Conditions Pose Risk to Recovery
¶7. (SBU) A lack of bank lending poses a serious risk to recovery,
according to Boltho. Prior to the crisis, he said, "banks would
lend any amount to anyone, now they won't lend anything to anyone -
regardless of how meritorious the project." Goodwin agreed credit
is still scarce for consumers and businesses. Lending hasn't
returned following its "spectacular collapse" in the second half of
2008 and first half of 2009 and lending is becoming more expensive
as banks increase their margins. Morgan Stanley's Baker disagreed
with their analysis. She told us that banks are showing signs of
willingness to increase credit availability and are improving credit
terms. She said demand for credit has not returned, particularly in
the large corporate sector, where companies have just started
raising funds in the capital markets. She acknowledged, though,
there is unmet demand for credit among small companies. She said
this problem requires a government solution and cannot be solved
through further loosening of monetary policy. (Note: HMG has put
significant pressure on British banks to lend. It set 2009 lending
targets for two partly nationalized banks, the Royal Bank of
Scotland (GBP 25 billion) and Lloyds Banking Group (GBP 14 billion)
in return for their participation in the asset protection scheme.
Chancellor Darling and Business Secretary Lord Mandelson have also
made public comments that banks should increase lending or HMG will
be forced to take further action.)
¶8. (SBU) All three analysts believed the Bank of England's
quantitative easing (QE) program is beginning to work and could
eventually improve credit conditions. Goodwin said interbank
spreads are back to normal levels and gilt yields are low, despite
spiraling government borrowing. Money growth (M4), which was
negative from October 2008 to May 2009, moved out of negative
territory in July, although it is too early to tell whether this
growth is durable. Goodwin thought there was a 50 percent chance
the Bank of England would extend its QE program in November,
alongside the publication of its inflation report. If it does
extend the program, however, Goodwin thinks it will only be by GBP
25 - GBP 50 billion.
¶9. (SBU) Unwinding the Bank's position will be difficult and timing
will be crucial. Goodwin said the Bank, HM Treasury and the Debt
Management Office (which auctions UK government bonds) must work
together to maintain stability in the gilt market once the Bank
begins to dispose of its assets. He warned that the Bank will start
selling its gilts at the same time HM Treasury increases its gilt
auctions to finance borrowing. Therefore, he argued, gilt yields
are likely to rise in the next six to twelve months. He said the
Bank needs to be careful about the timing of the gilt sales,
particularly needing to avoid choking off recovery by tightening
monetary policy too soon.
Public Finances: Debt to Reach Almost 100 Percent of GDP
¶10. (SBU) Alongside poor credit conditions, weak public finances
are cited as a risk to UK economic recovery. Public debt rose to 59
percent of GDP in September, as HMG borrowed GBP 77.3 billion in the
first half of the fiscal year - the highest borrowing level for the
period since 1946. Goodwin expected UK debt to reach almost 100
percent of GDP by 2010. He said social security payments are rising
while income tax revenue is falling, so the fiscal deficit will
continue to climb, particularly in the next six to twelve months.
He said the massive fiscal deficit needs to be addressed. He
expected an extended period of austerity - with potentially ten
years of tax increases. His comments reflect wider concern
regarding the UK's public purse. In its 2009 Sustainability Report,
the European Commission said the UK is at high risk of running an
LONDON 00002427 003.3 OF 003
unsustainable deficit. It said the UK will suffer a "sustainability
gap" of 12.4 percent - meaning tax increases or spending cuts of
approximately GBP 200 billion a year will be necessary. The
National Institute for Economic and Social Research warned about the
sustainability of UK debt, saying fiscal consolidation will be
expensive, but the faster it happens, the lower the rise in debt.
Unemployment Up, Inflation Down
¶11. (SBU) Public finances will be significantly impacted by further
rises in unemployment until next year. Baker told us unemployment
will stabilize next year, with a peak of around 9 percent (from a
current rate of 7.9 percent). It will then begin to decline, but it
is unlikely that there will be any rapid improvement. Goodwin also
expects unemployment to peak towards the end of 2010. Opinion is
divided on what will happen to CPI inflation in the short term, but
there is consensus that it will remain below the Bank of England's
two percent target in the medium term. Goodwin expected a prolonged
period of below target inflation through 2012. Baker thought
inflation would bounce back at the beginning of next year, above
target, and then fall below target in 2011. She expected domestic
inflationary pressure to remain subdued.
¶12. (SBU) Comment: Despite encouraging signs the UK is emerging
from recession, there are still questions about the strength and
sustainability of any recovery. Mounting public debt will remain an
enormous drag on the economy and could undermine any recovery in the
fourth quarter. Both the Labour and Conservative Parties will need
to form credible, comprehensive plans to address mounting public
debt in the run up to the next general election (see reftels).
However, these plans will be contingent on the UK emerging from the
downturn and embarking on a path of steady, sustainable growth.
Implementing any fiscal tightening before the recovery is assured
could risk choking off growth and pushing the economy back into
recession.
SUSMAN
VZCZCXRO4349
PP RUEHIK
DE RUEHLO #2307/01 2801346
ZNR UUUUU ZZH
P 071346Z OCT 09
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 3681
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHBL/AMCONSUL BELFAST PRIORITY 1412
RUEHED/AMCONSUL EDINBURGH PRIORITY 1210
UNCLAS SECTION 01 OF 02 LONDON 002307
SIPDIS
E.O. 12958: N/A
TAGS: ECON [Economic Conditions],
EFIN [Financial and Monetary Affairs],
ETRD [Foreign Trade], EINV [Foreign Investments],
UK [United Kingdom]
SUBJECT: LABOUR PARTY OUTLINES ECONOMIC STRATEGY IN RUN-UP TO NEXT
GENERAL ELECTION
LONDON 00002307 001.3 OF 002
¶1. (U) Summary: The Labour Party's last conference before the
general election saw ministers attempt to draw a dividing line
between Labour and Conservative economic policy. Chancellor Darling
acknowledged spending cuts and tax rises would be necessary to
return public finances to a sustainable path. The Labour Party will
halve the deficit within four years by raising taxes on the highest
earners and cutting lower-priority public budgets. On financial
services, the Labour Party will introduce legislation to curb bank
bonuses and ensure the financial sector does not return to "business
as usual." To stress the importance of climate change and green
technology in Labour's new economic model, the Prime Minister
committed to attend the Copenhagen climate conference. Business
Secretary Lord Mandelson demonstrated Labour's commitment to the
UK's manufacturing sector by extending the car scrappage scheme and
pledging support to Vauxhall workers. Finally, Gordon Brown
announced the Labour Party will introduce legislation committing HMG
to raise its spending on aid to 0.7 percent of national income. End
summary.
"Difficult Decisions" Remain on Spending Cuts and Tax Rises
¶2. (U) The UK economy is showing signs of recovery, but the
recovery remains fragile and uncertain, declared Business Secretary
Lord Mandelson in his remarks at the Labour Conference. His
comments were echoed by Chancellor Darling who stood by his March
Budget forecast that the UK economy will emerge from recession by
the beginning of 2010. Darling said as the economy recovers, it
will become increasingly important to set UK public finances on a
sustainable path.
¶3. (U) Once economic recovery is ensured, difficult decisions will
have to be made to reduce the budget. The PM declared Labour's
intent to halve the budget deficit over four years, through cutting
waste, costs, and lower-priority budget items. It will remove tax
relief on pension contributions for higher earners, raise the top
rate of tax to 50 percent for the highest incomes, introduce
realistic public sector pay settlements, raise National Insurance by
0.5 percent in 2011 and continue to crack down on offshore tax
havens. The Chancellor said he will introduce a new Fiscal
Responsibility Act requiring the government to reduce the budget
deficit year-on-year, to ensure the national debt remains
sustainable in the medium term.
¶4. (U) In often strong terms, the Prime Minister outlined a clear
dividing line between Labour and Conservative policy on reducing the
deficit. He said the Conservatives had gotten the crisis wrong;
they had made the wrong choices, the wrong recommendations, and
would do the same again. He said the Conservative approach is to
cut front line public services, while Labour would maintain and
improve these services and increase taxes on the wealthiest.
Chancellor Darling launched a personal attack on Shadow Chancellor
George Osborne over the public finances debate, saying there has
been little that is "grown-up" about his performance so far. He
said voters face a clear choice between a Labour government
committed to public services and a "return to the Tory dark ages"
-with Conservative MPs relishing the chance to swing the axe at the
services millions rely on.
Financial Services - No Return to Business as Usual
¶5. (U) Chancellor Darling said he will introduce legislation in the
next few weeks to end the "reckless [bonus] culture that puts
short-term profit over long-term success" and ensure there will be
no return to business as usual in the financial sector. During his
conference speech, Darling said he will end automatic bank bonuses
and immediate pay-outs for senior management and will ensure bonuses
are paid out over years, so they can be clawed back if not warranted
by long-term performance. Prime Minister Gordon Brown said the new
law will intervene on bankers' bonuses whenever they pose a risk to
the economy. He said any bank directors who are negligent will be
disqualified from holding any directorships in the future.
Climate Change - UK's Economic Future Must Be Green
¶6. (U) A key component of the UK's economic recovery will be a
focus on green technology and a low carbon economy. Noting that the
UK is already a global leader in wind power, green cars, clean coal
and carbon capture, the Prime Minister said it will lead again with
new designated low carbon zones around the UK. He said a quarter of
a million new green British jobs will be created, ensuring the UK's
future economy is a green economy. To stress the importance of
climate change in Labour's new economic model, the Prime Minister
committed to attend the Copenhagen climate conference, a move
welcomed by Climate Change Secretary Ed Miliband who, in his
remarks, said Copenhagen is in peril and requires leadership. In
LONDON 00002307 002.3 OF 002
his conference speech, Miliband announced GBP 10 million for a green
neighborhoods program and GBP 20 million to support research and
development in low carbon industries, including renewables. He said
climate change is too big to reject nuclear options, so the Labour
government will continue to develop plans for new nuclear power,
including reforming planning laws which currently limit the speed of
nuclear development. Miliband stressed the importance of carbon
capture and storage, saying the industry could create 30,000-60,000
jobs in the UK. In the next Parliamentary session, HMG will propose
to raise billions of pounds to invest in clean coal technology.
Lord Mandelson Calls for "Innovation Nation"
¶7. (U) Recovery in the manufacturing sector remains particularly
fragile, noted Business Secretary Lord Mandelson in his remarks. As
such, the Labour Party remains committed to supporting the UK's car
industry. To great applause, Mandelson announced an extension of
the car scrappage scheme, with extra money for an additional 100,000
cars and vans. He said HMG will stand behind Vauxhall workers
during the sale of GM Europe to Magna. Mandelson called attention
to Labour's vision for Britain's industrial future, not just
post-industrial. Britain, he said, must be a nation of both R and D
market.
Britain must become an "innovation nation," with further investment
in research and development and a focus on hi-tech advanced
manufacturing. In support of this idea, the Prime Minister said HMG
will create a new national investment corporation to provide finance
for growing manufacturing and other businesses.
No Cross-Party Consensus on International Development
¶8. (U) The Labour government will introduce legislation that
commits it to raise spending on development assistance to 0.7
percent of national income. In his conference speech, Gordon Brown
said Labour would keep its promises on international development and
will enshrine them in UK law. Development Secretary Douglas
Alexander said there is no real cross-party consensus on
international development, despite Conservative promises to
ring-fence the aid budget. He said 96 percent of Conservative
Parliamentary candidates in the upcoming election believe the aid
budget should not be protected. He compared Labour's trebling of
the aid budget since 1997 with the Tories halving the budget during
their last period in government.
Conservative Response
¶9. (U) David Cameron and Shadow Chancellor George Osborne remained
notably silent on the policies unveiled, and personal attacks made,
at the Labour Party conference. However, Eric Pickles, the
Conservative Party Chairman, told the media that Brown's speech had
no vision and no argument. He criticized Brown for continuing to
"treat people like fools" and failing to acknowledge the mistakes
the government has made over the past 12 years. He condemned the
speech as little more than a "long shopping list with no price tag"
and said it was full of the same old political attacks.
SUSMAN
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FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 2718
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 03 BAGHDAD 001045
SENSITIVE
SIPDIS
AIDAC
E.O. 12958: N/A
TAGS: EAID [Foreign Economic Assistance],
EFIN [Financial and Monetary Affairs],
ECON [Economic Conditions],
ETRD [Foreign Trade], PGOV [Internal Governmental Affairs],
IZ [Iraq]
SUBJECT: WORLD BANK MEETS DONOR COUNTRY REPRESENTATIVES
SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY.
¶1. (SBU) Summary: On April 7, Daniela Gressani, World Bank Vice
President of Middle East and North Africa Region, recently discussed
her organization's Iraq strategy and exchanged views on the Bank's
role in Iraq with donor country representatives. Donors requested a
larger World Bank presence to more effectively monitor its programs
and provide analytical and technical advice to the government of
Iraq (GOI). The drop in oil prices has created a greater sense of
urgency for the GOI to seek foreign investment in Iraq. Gressani
later met separately with EMIN Wall and indicated that she faced
difficulties recruiting senior World Bank officials with the right
skills to come to Baghdad. PM Maliki has sent the World Bank a
letter requesting assistance with developing a national energy
strategy and in reforming the institutional framework for its oil
and gas sector. End Summary.
World Bank VP Visits Iraq
¶2. (SBU) World Bank Vice President of Middle East and North Africa
Region Daniela Gressani discussed her organization's new Iraq
strategy with donor country representatives based in Iraq on April
¶7. Gressani was accompanied by World Bank Executive Director Merza
Hasan, Multilateral Investment Guarantee Agency (MIGA) CEO James
Bond, International Finance Corporation (IFC) Middle East and North
Africa Department Director Michael Essex, and Iraq Country Director
Hedi Larbi. The World Bank's goal over the next two years is to
assist Iraq in reaching its next phase of development by supporting
a strong framework for private sector development, private
enterprise and joint-venture establishment.
Donors Urge Stronger
World Bank Presence
¶3. (SBU) EMIN said that the World Bank's focus on the private sector
and public finance management is the right approach, welcomed the
involvement of the International Bank for Reconstruction and
Development (IBRD), IFC, and MIGA, and urged a stronger World Bank
presence with more staffing in Iraq. All donor representatives
concurred with his call for a larger Bank presence. Italian
Ambassador Maurizio Melani suggested MIGA and the IFC engage with
Iraq to help it develop its infrastructure. He commented that the
World Bank's commitment of $500 million loans for investment
projects for FY 09-FY11 was too little. World Bank officials
responded that they based this decision on the fact that $850
million in the Iraq Trust Fund has not yet been disbursed. This
raised the issue of Iraq's absorption capacity. If Iraq were to
draw down those funds and the $500 million, the Bank would have a
case to increase its lending. Ilkka Uusitalo, EC Mission Head to
Iraq, expressed concern over the World Bank's slow start of its
Public Finance Management Program.
¶4. (SBU) Danish Ambassador Mikael Winther, speaking as the IRFFI
Chairman, said donors and the World Bank should engage more with the
GOI and help define GOI policies on donor assistance. The World
Bank needs a stronger presence to lead the way in discussions with
the GOI on coordinating donor assistance. Australian Ambassador Bob
Tyson echoed the call for a robust World Bank presence and the need
for the GOI to rely more on the private sector rather than public
service sector.
¶5. (SBU) Richard Hogg, Head of the UK Department for International
Development (DFID) Office in Iraq, said that the GOI now seeks
concessional financing and will look towards the World Bank for
assistance. Moreover, Hogg continued, Iraq not only needs the World
Qassistance. Moreover, Hogg continued, Iraq not only needs the World
Bank's analytical and intellectual skills, but will look to the
World Bank to play a role in donor coordination.
¶6. (SBU) Japanese Minister Counselor Kansuke Nagaoka said that
despite progress in its political and economic development, Iraq
still lacks basic services in many areas. In March 2008, Japan
signed its first project, the Umm Qasr Port Rehabilitation Project.
Since establishing a monitoring committee with participation of the
Prime Minister's office, progress has been swift. He noted that
Japan anticipates disbursing $100 million for the project this year.
Nagaoka pointed out that the improved security situation has led to
an expansion of its presence, including a senior Japan International
Cooperation Assistance (JICA) official joining Japan's mission this
month and a JICA office opening in Erbil.
No Timeline Given
¶7. (SBU) Gressani responded that the World Bank has over 30 staff,
including Iraqi locals, working in Iraq but that most of them work
outside Baghdad. She acknowledged that the security situation has
improved and that the GOI is focusing on long-term plans. She said
that the World Bank will eventually increase staff in Baghdad, but
BAGHDAD 00001045 002 OF 003
provided no timeline and remarked that overall World Bank staff is
limited.
World Bank: Current Role in Iraq
¶8. (SBU) Hedi Larbi, Country Director for Iraq, said that in
addition to focusing on developing capacity building and the private
sector, the World Bank will analyze four ministries and come up with
an action plan to improve their capacities. This process will take
time, but Larbi predicted that it would lead to concrete results.
The Bank's Third Interim Strategy Note (ISN) identifies agriculture,
electricity, public financial management and bank restructuring as
priority sectors on which the World Bank will focus. Larbi
mentioned that the World Bank's two agricultural projects are
progressing rapidly. The World Bank has already disbursed $10
million on its electricity project, but remains unsure whether to
continue in this area. Larbi noted that the World Bank just
negotiated the Banking Restructuring Project, which he expected to
be signed in two to three weeks. It also expects to negotiate a
Public Financial Management Project on April 18 with a signing
possible in May.
¶9. (SBU) Larbi said that given the limited capacity of the Iraqi
government, a monitoring committee for all the donors may be needed
to examine the implementation of programs. Jean-Michel Happi,
resident World Bank Country Manager, added that the GOI is creating
a single National Development Plan and that the first critical
element is to align the World Bank's program with the GOI's National
Plan. Donor coordination should be led by the GOI, and the World
Bank should facilitate donor coordination.
More Investment Needed
¶10. (SBU) EMIN said that the GOI is interested in attracting foreign
investment and that the oil and gas sector and the financial sector
have particular promise. He noted prospects for investment from the
Middle East, including Iraqi expatriate funds. He cited the
potential for investing in independent electricity generation, but
this needs further clarification from the GOI. Italian Ambassador
Melani suggested investment in areas of agribusiness, food
processing, and manufacturing but noted that Iraq's transportation
infrastructure still needs rehabilitation. Italy has financed an
agriculture and irrigation project via a soft loan of EU 100 million
($133 million). The project is making progress.
¶11. (SBU) Australian Ambassador Tyson mentioned that Australia and
Iraq recently signed several Memoranda of Understanding (MOUs),
including one on investment in Iraq's trade sector. DFID's Hogg
added that Lord Mandelson led an investment delegation recently to
Iraq, which included construction, architectural, and financial
companies. Japan's Nagaoka said that Japanese investors are
interested in rehabilitating facilities, such as refineries, that
they had constructed in Iraq in the 1970s. He noted that
state-owned enterprise reform seems more difficult as investors
cannot ensure their profitability after investing in the companies.
World Bank Executive Director Hasan said that there is a growing
interest in investing in Iraq, but the GOI must better communicate
its investment strategy to potential investors.
Export Credit Insurance
¶12. (SBU) James Bond, CEO of the Multilateral Investment Guarantee
Agency (MIGA), said that his agency supports private sector
development and provides insurance against political risk. Since
Iraq became a member of MIGA last year, MIGA wants to support
QIraq became a member of MIGA last year, MIGA wants to support
private business in Iraq. Bond said that export credit insurance
can be supported by either MIGA or the IFC; MIGA provides assistance
for those seeking coverage for more than a year while the IFC
provides for less than a year. MIGA also extends assurances for
Iraqi joint-venture companies who have partners in the region.
IFC's Essex warned that the joint-ventures must be viable and
sustainable to qualify for financing. Since the World Bank is
sensitive to corruption, the financing cannot go to projects or
companies that involve political leaders or "politically exposed
persons."
Staffing and National Energy Strategy
¶13. (SBU) In a separate meeting with World Bank officials on April
7, EMIN asked Gressani about the Bank's staffing difficulties.
Gressani responded that the World Bank is aware of donors' concerns
about staffing and has a new strategy supported by the Board of
Directors. Gressani acknowledged that World Bank staff are
interested in coming to Iraq, but she faced difficulties finding
BAGHDAD 00001045 003 OF 003
senior people with the right networking capability and maturity
skills. She plans to send more senior high-level missions to Iraq,
and hopes this will attract more qualified senior staff to take
positions in Iraq.
¶14. (SBU) Gressani said that the World Bank avoided engaging Iraq on
its oil sector in the past because it is expensive, time-consuming
and the GOI did not seem interested in the type of market-oriented
advice that the Bank would provide; however, things now seemed to
have changed. Country Director Larbi added that Prime Minister
Maliki sent a letter requesting the World Bank's assistance on
developing a national energy strategy. (Comment: World Bank Senior
Public Sector Specialist Yahia Said told emboffs on April 15 that in
the letter, the GOI asked for World Bank assistance to "reform
everything." End Comment.) The GOI asked for assistance in
reforming the institutional framework for its oil and gas sector,
re-establishing the Iraq National Oil Company, and technical
assistance in ending natural gas flaring which would make additional
gas available to meet Iraq's power generation needs.
¶15. (SBU) MIGA's CEO Bond noted that the oil sector policy is not
focused, and that the electrical power sector requires tariff reform
before investors will come. So far, the GOI is only focused on the
technical side and not on the institutional framework, impeding
investor interest. Executive Director Hasan commented that only
partnerships with foreign oil companies will give Iraq the
technology it needs to extract the oil and repair the damage to its
oil reserves. The Bank is not yet sure that GOI officials
responsible for this sector have grasped that essential fact.
¶16. (SBU) Comment: The GOI's invitation to the World Bank to
assist in developing a national energy strategy comes out of the
internal debate underway on the GOI's approach to developing the oil
and gas sector. We hope the World Bank will move quickly to take
advantage of this opening. We also hope it will take steps to
respond to the concerns of donors here to play a stronger role in
Baghdad. End Comment.
Butenis
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TO RUEHC/SECSTATE WASHDC 0850
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEHLO/AMEMBASSY LONDON 0064
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHBC/REO BASRAH 0887
UNCLAS SECTION 01 OF 02 BASRAH 000018
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ECON [Economic Conditions],
EINV [Foreign Investments],
ETRD [Foreign Trade], PGOV [Internal Governmental Affairs],
MASS [Military Assistance and Sales],
EAIR [Civil Aviation], EWWT [Waterborne Transportation],
UK [United Kingdom], IZ [Iraq]
SUBJECT: BASRAH: UNITED KINGDOM HOSTS INVESTMENT CONFERENCE
REF: A. BASRAH 17
B. BASRAH 16
C. BASRAH 15
D. BASRAH 14
BASRAH 00000018 001.2 OF 002
¶1.(U) Summary. UK Secretary for International Trade and
Investment Lord Peter Mandelson led a UK delegation of business
heavyweights to Basrah on April 7. Over 150 top Basrawi
business and political figures attended the conference, which
was also attended by local US diplomatic and military officials.
UK delegates reported a sense of guarded Basrawi optimism and a
realistic view of business opportunities in the region.
Conference organizers focused on the relative strength of the
province, namely oil, gas, ports, and aviation. While good
relationships were established or strengthened, now it is up to
Basrah, and the GOI in general, to follow up and provide
reasonable security, and a transparent business environment.
End summary.
Lord Mandelson brings UK business heavyweights to Basrah
¶2. (SBU) Over 150 Iraqi business and political figures attended
this April 7 Basrah Investment Conference, which also brought
together 23 UK-based companies. Several of them are household
names, including Rolls Royce, Shell, BP and HSBC. According to
Basrah HMG officials, UK delegates were able to establish or
strengthen relationships with key business figures in Basrah,
and also give Iraqi participants an idea of which sectors UK
investors were particularly interested in. Basrah HMG officials
told REO staff that UK delegates left with a sense of renewed
optimism and a realistic view of business opportunities in
Southern Iraq. Another such conference, scheduled for April 30
in London, is seen as a good follow-on effort.
All-star attendance
¶3. (SBU) Attendees included Basrah Governor Wa'eli, most members
of the incoming Provincial Council including the two reported
favorites to become the next governor and/or chairman (Da'wa
Party Central members Dr. Shiltagh and Dhya'a Jabar), and the
Directors Generals of the major investment sectors, including
South Oil and South Gas Companies, Iraqi Ports, and Basrah
International Airport. Michael Wareing, the British Co-Chair of
the Basrah Development Commission (BDC), also participated.
Also in attendance were several local high-level Iraqi military
officials, who provide security for the province. UK Force
Commander Tom Beckett and several Basrah-based UK military
officials also attended.
U.S. participation
¶4. (SBU) USG representatives included the US Commander of MND-S,
US REO Director, and Basrah PRT Team Leader. At this event, as
at other gatherings, several local business and political
leaders again expressed their desire to see U.S.-based
businesses, along with their expertise and capital, come to the
region (ref D).
British and Basrawis pitch security, ports, aviation, oil, gas
¶5. (SBU) Lord Mandelson opened the conference by looking back at
the UK's long relationship with Basrah, and looked forward to
closer economic cooperation ahead. Michael Wareing, the British
Co-Chair of the BDC, spoke of the UK's role in developing
business in Basrah. General Mohammed, who commands Iraqi
Security Forces in the Province, spoke confidently about perhaps
the most important issue for any prospective investor: security.
Mohammed noted the dramatic decrease in violence just in the
last nine months, while acknowledging that hard work was needed
to continue this trend. The speeches were followed by short
presentations by the respective Directors General for ports,
airport (ref B), oil and gas. Dr. Haider Ali, Chairman of the
Basrah Investment Commission (which has been heavily supported
by the BDC and UK) spoke about the general investment climate.
Timed to UK military exit and incoming Basrah Provincial Council
¶6. (SBU) Following the 31 March transition from UK to US
military control (MND-SE to MND-S), UK officials hoped to
demonstrate to Basrawis that while their military was drawing
down, the UK's commitment to Basrah continued. In the run-up to
the formation of the new Provincial Council (ref C), UK
officials said they hoped the conference would promote the
importance of international investment to economic growth in
Basrah.
Guarded, yet realistic, optimism
¶7. (SBU) While HMG hosts and local participants expressed a
generally guarded optimism about Basrah's future, such optimism
BASRAH 00000018 002.2 OF 002
at least partly reflects the mood of the city. One year after
the Iraqi Army routed local militias in the Charge of the
Knights Operation (ref A), there is a palpable feeling of
stability. A recent PRT-commissioned poll revealed that over
80% of Basrawi businesses think that the economic environment
has improved in the last year and, more significantly, that it
will continue to improve over the next two years. Participants
openly noted that it will take more than optimism to turn such a
conference into desperately needed real investment and job
creation.
Comment
¶8. (SBU) Hosting a forward-leaning investment conference is a
long way from real investment, but the conference met the
organizers' objective of bringing all the major economic and
political players together in Basrah. The conference also
demonstrated to local players that there are serious and
respected UK multinational companies ready to do business in
Basrah. However, now it is up to Basrah, and the GOI in general
(particularly the respective line ministries, who must play a
central role in approval and oversight of the majority of such
investments), to follow up on the hard part, namely, reasonable
security, and a transparent business environment.
NEGRON
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FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 1276
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUEHBL/AMCONSUL BELFAST PRIORITY 1218
RUEHED/AMCONSUL EDINBURGH PRIORITY 1065
UNCLAS SECTION 01 OF 02 LONDON 000305
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ECON [Economic Conditions],
ELAB [Labor Sector Affairs], ETRD [Foreign Trade],
EINV [Foreign Investments],
UK [United Kingdom]
SUBJECT: Wildcat Strikes Hit UK Energy Plants In Response To Foreign
Workers Dispute
LONDON 00000305 001.2 OF 002
¶1. (SBU) Summary: Workers at the UK's third largest oil refinery
went on strike January 28 in protest at the use of foreign labor for
a new construction project. A wave of wildcat strikes across the UK
followed, with workers demonstrating support for those at French oil
company Total's refinery in Lindsey, in northeast UK. Media reports
indicate the dispute could become a diplomatic incident, with the
Italian government threatening the employment of British workers
there. Business Secretary Lord Mandelson defended EU labor laws
during an emergency session at the House of Lords February 2 and
said Total had given assurances that it did not discriminate against
British workers. Mandelson said the dispute was fuelled by the
"politics of xenophobia." PM Gordon Brown publicly called the
strikes indefensible and counter-productive - a sharp contrast to
his 2007 Labour party conference statement calling for "British jobs
for British workers" (which has become the unofficial slogan of the
strikes), a statement which the opposition Conservative party
attacked as "irresponsible." A trade union official told the
embassy that Total's lack of transparency fuelled concern and
suspicion amongst workers and that Mandelson's comments were
unhelpful. End summary.
Foreign Labor Strikes Spread Across UK
¶2. (U) Workers at the Lindsey oil refinery in North Lincolnshire,
the UK's third largest, walked off the job on January 28 in protest
at the use of foreign labor at the site. This strike began
following a dispute about Total's decision to award Italian company
IREM part of a GBP 200 million contract to build a new hydro
desulphurization facility at the Lindsey refinery. (Note: The main
contract for the hydro desulphurization unit was awarded to Jacobs,
a U.S. company, which sub-contracted some work to IREM. End note.)
Five British companies and two other European contractors bid for
the work before it was awarded to IREM, which at the time of the
tender indicated it would supply its own permanent workforce from
Italy and Portugal.
¶3. (U) Workers and their union representatives accused Total of
discriminating against British workers. Total rejected the
accusation saying: "IREM was selected, through a fair and
competitive tender process, as the most appropriate company to
complete the work." Officials from Unite, the UK's largest union,
said workers were angry that labor was used from outside the UK when
British workers near the refinery were out of work. They dismissed
Total's claim that the foreign labor was in specialist trades and
said most of the work could be done by UK workers.
¶4. (U) Since January 28, workers at energy plants across the UK
have shown support for the action in Lindsey through a series of
wildcat strikes. Workers at Ineos Group Holdings' Grangemouth
refinery in Scotland, BP's terminal at Kinneil in Scotland, and RWE
AG's Didcot power facility in southern England joined a wave of
strikes across the country. Most recently, workers at two nuclear
sites, Sellafield and Heysham, joined the strike action.
Approximately 900 contractors in Sellafield and 300 in Heysham
agreed to walk out for 24 hours in sympathy with the Lindsey
protest.
Economic, Political Consequences
¶5. (U) Despite the walk outs, the UK Department of Energy issued a
statement that it was unaware of any current or potential impacts of
the strikes on gas, electric or fuel supplies. Lord Mandelson
confirmed there was no disruption of production at any of the sites.
The Department for Business asked ACAS, the UK's independent
arbitration service, to meet the employers and unions to examine the
accusations and mediate the dispute. Workers have so far rejected a
February 3 deal proposed in ACAS talks that would have given 25
percent of the new jobs to British workers. Negotiations will
continue.
¶6. (U) Some media commentators note the dispute threatens to
escalate into a major diplomatic incident. The Italian government
has described the strikes as "indefensible" and the Governor of
Sicily warned that the employment of Britons on the Italian island
may be threatened. The British Ambassador in Rome was reportedly
sent to reassure the Italian government that Italians would not face
discrimination in the UK.
Mandelson Warns Against "Politics of Xenophobia"
¶7. (U) Business Secretary Lord Mandelson defended EU labor laws in
a statement to the House of Lords, February 2. He said HMG is
LONDON 00000305 002.2 OF 002
determined to uphold European rules governing the operation of
companies and mobility of labor throughout the EU. In the
statement, he said Total had given assurances that it had not
discriminated against British workers. He highlighted the
importance of Europe to the UK, particularly with regards to trade
and investment, and noted that there are 300,000 UK companies
operating elsewhere in Europe. Separately, Mandelson claimed the
dispute was fuelled by "the politics of xenophobia." He said
protectionism would be a "sure-fire way of turning recession into
depression." Gordon Brown said the strikes were indefensible and
counter-productive. However, the dispute has caused a split in the
Labour party. Two former Cabinet ministers, Peter Hain and Iain
McCartney, led a chorus of Labour MPs who said HMG urgently needed
to recognize there was a problem. Peter Hain said something had
gone "badly wrong" with the UK's labor laws, which did not seem to
have "adequately protected local workers."
Reaction: Tories and Unions
¶8. (U) Gordon Brown's "irresponsible" comments at the 2007 Labour
party conference calling for "British jobs for British workers"
stoked the wildcat strikes, argued Shadow Business Secretary Kenneth
Clarke. (Note: Placards held by striking workers displayed the PM's
statement. End note.) Clarke said understandable worries over the
UK's economic climate have turned into direct action as a result of
the PM's statement. He said: "This was populist nonsense at the
time he used it and part of some curious 'Britishness' agenda...
(he)was more concerned with his job security than anybody else's job
security in this country." He said however aggrieved people felt,
industrial action at power stations and oil refineries at a time of
"national crisis" was not the way forward.
¶9. (SBU) A lack of transparency around the IREM contract fuelled
concern amongst workers, according to the Trades Union Congress'
International Affairs Director Owen Tudor. Tudor told the embassy
that Total's initial reluctance to confirm how many Italian,
Portuguese and British workers would be employed under the new
contract proved unhelpful and increased suspicion. He said Lord
Mandelson's xenophobia comments were equally unhelpful and could
stir up further disagreement. He noted, however, that when members
of the BNP, a far right-wing British political party, turned up at
the Lindsey demonstration, they were turned away by workers. While
the TUC is not sure how long the dispute will last, officials noted
that IREM's work is set for completion in April, so action is
unlikely to continue beyond then. He commented that the strikes in
Sellafield are "mildly ironic" as work in nuclear stations requires
security clearance and the workforce will therefore be 100 percent
British.
¶10. (SBU) Comment: Growing concern about the length and depth of
the UK recession has heightened tension in this foreign labor
dispute. Rising unemployment coupled with slowing output has
sparked concern about the impact of EU labor laws on British
workers. The TUC, which has monitored the effect of the European
Commission directive on the right to move and reside freely since
2004, had only seen sporadic outbreaks of concern regarding foreign
workers until the Lindsey case. As the recession deepens,
industrial action may become more widespread.
TUTTLE
VZCZCXRO3176
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHLO #2683/01 2980940
ZNR UUUUU ZZH
P 240940Z OCT 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 0191
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHBL/AMCONSUL BELFAST PRIORITY 1147
RUEHED/AMCONSUL EDINBURGH PRIORITY 1005
UNCLAS SECTION 01 OF 02 LONDON 002683
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ECON [Economic Conditions],
EFIN [Financial and Monetary Affairs],
ETRD [Foreign Trade], EINV [Foreign Investments],
UK [United Kingdom]
SUBJECT: HMG ACKNOWLEDGES UK ECONOMY ENTERING RECESSION
LONDON 00002683 001.2 OF 002
¶1. (SBU) Summary: This week, officials publicly acknowledged that
the UK is likely to be entering a recession. For months, prominent
public figures refused to mention the 'R' word, in favor of talking
up the underlying strength of the UK's economic position. However,
Mervyn King, Governor of the Bank of England, broke the silence and
explicitly acknowledged that the UK is likely to enter a recession.
His comment was soon echoed by PM Brown and supported by independent
forecasts. Such a bleak horizon has pushed sterling to a five-year
low against the dollar while equity prices continue to fall.
Despite a record public deficit, HMG has announced that it will
borrow more to invest in projects that will help stimulate the
economy. The opposition has accused PM Brown of presiding over a
decade of heavy borrowing and lax regulation which has aggravated
the impact of the credit crunch. End Summary.
Governor King Uses The 'R' Word As GDP Growth Turns Negative
¶2. (SBU) The UK economy is likely to be entering a recession,
according to Mervyn King, Governor of the Bank of England, in his
gloomiest assessment of the UK outlook since becoming Governor in
was negative 0.5 percent in the third quarter. King told business
executives that the credit crunch, combined with a fall in real
disposable incomes, poses the risk of a prolonged slowdown in
domestic demand. Additionally, the trauma of the banking crisis is
likely to damage business and consumer confidence. His comments
were echoed by the Prime Minister who said Britain's economic
downturn is likely to cause a recession. Lord Mandelson, the new
Business Secretary, acknowledged that it is now 'unavoidable' that
the UK economy will contract and added that many small and
medium-sized businesses might go bankrupt.
¶3. (SBU) Ernst & Young's ITEM Club agrees with recession
predictions. In its quarterly macroeconomic forecast, the Club says
it expects UK GDP to shrink by 1 percent next year, followed by a
modest recovery in 2010 with GDP growth of 1 percent. If the Club
is correct, 2009 will be the first full year of shrinking output
since the last recession in 1991, when output fell by 1.4 percent
over the year prior. The report also says that the credit crunch
will hit the economy hard even if wholesale markets reopen and
equity markets stabilize. It suggests that the downward momentum in
the housing market will be difficult to arrest and that it is
spreading to other sectors. While the recent government rescue
package may have pulled the economy back from a depression, the
report says the financial system remains in an enfeebled state.
(Note: The financial sector accounts for approximately 10 percent of
UK GDP and nearly 20 percent of tax receipts. End note.)
¶4. (SBU) NIESR, an influential UK think tank, agrees that the
country is on the brink of recession. It forecasts that the British
economy will suffer more than any other G7 country in 2009, with the
economy shrinking by 0.9 percent, consumer spending falling by 3.4
percent, business investment down 3.8 percent and private housing
investment 17.1 percent lower. Its forecast assumes that the Bank
of England will cut the Bank Rate to 4 percent in early 2009. NIESR
thinks that if the government's banking bail-out does not succeed,
the recession will be deeper and longer than currently anticipated.
The NIESR report also predicts that trend growth is now only 2.2-2.3
percent and said that this will have serious implications for HM
Treasury revenue forecasts in the Pre-Budget Report that is expected
in November.
Sterling At Five-Year Low On Recession Warnings
¶5. (SBU) Following Mervyn King's statement, the pound fell to a
five-year low against the U.S. dollar. On October 22 sterling fell
five cents or 3 percent against the dollar and also declined versus
the euro, the lowest level since 2003. This was the steepest one
day decline in 16 years. Simon Derrick, Chief Currency Strategist
in London at Bank of New York Mellon Corp said "These are...moves
that come along once in a decade...King certainly acted as a
catalyst, but in fairness, risk aversion had been kicking around
long before that."
Public Finances To Support Economy
¶6. (SBU) PM Brown told the House of Commons on October 20 that HMG
will increase borrowing to support the economy. Despite public
finances reaching a record deficit in the first six months of the
financial year (which begins in April), Brown said increased
borrowing is a viable option because of the strength of the UK's
economic indicators. HMG will support mortgage holders, small firms
and employees through "carefully targeted, rigorously worked through
investments." HMG will also bring forward construction projects on
schools and hospitals, the Chancellor told the Sunday Telegraph.
LONDON 00002683 002.2 OF 002
¶7. (SBU) Spending plans will be formally announced in the
Chancellor's Pre-Budget Report. Speculation is rife that the
Chancellor will have to announce an amendment to HMG's sustainable
investment rule, implemented while Gordon Brown was Chancellor,
which limits national debt to 40 percent of GDP. The Chancellor
will also have to concede that the Treasury's economic forecast in
the March Budget was too optimistic.
¶8. (SBU) In public comments, Opposition leader David Cameron
accused the PM of aggravating the credit crunch by overseeing a
decade of heavy borrowing and lax regulation. He said the
government has presided over ten years of irresponsible capitalism
and that the 'complete and utter failure' of their economic record
is now clear. The Conservatives favor measures giving small
businesses the chance to defer value-added tax (VAT) bills for up to
six months to offset cash flow problems posed by tight credit
conditions. They also advocate cutting the payroll taxes for firms
with fewer than five employees by 1 percent.
¶9. (SBU) Comment: The UK's slide into recession was not unexpected.
The OECD predicted almost two months ago that the UK was the most
likely among G7 countries to experience such an economic downturn.
Sterling's plummeting value vis-`-vis major economies will
exacerbate pressures on exporters, who already have seen their
access to credit dry up. While accelerated spending plans will give
a shot-in-arm to the economy, no one expects any type of recovery
until the latter half of 2010.
LEBARON
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