Cablegate: Ambassador Meets with New Gvn Office of the Government Vice

DE RUEHHI #2045/01 2230947
P 110947Z AUG 06





E.O. 12958: N/A

1. (SBU) Summary: On August 7, the Ambassador met with Office of the
Government Vice Chairman Nguyen Xuan Phuc, the new number two
official in the Prime Minister's office. During the broad-ranging
conversation, the Ambassador pressed for: quick resolution of the
proposed Boeing, Liberty Mutual and SSA Marine commercial deals in
time for the President's November visit; GVN willingness to sign a
country agreement establishing a Peace Corps program with at least
30 volunteers (vice ten); and Vietnamese agreement to a nuclear fuel
exchange at the Dalat experimental reactor. The Ambassador also
pressed for GVN agreement to quickly finalize details for
acquisition of property in Hanoi for a new embassy compound (NEC).
Finally, the Ambassador briefed Phuc on plans for the continuation
of the very successful USAID "STAR" project to assist Vietnam's
legal reforms in line with its WTO accession agreements. In
response, the Vice Chairman: assured the Ambassador that the Prime
Minister's office will look positively and quickly at the proposed
commercial deals; will look at the request for a country agreement
on the Peace Corps and for a larger program; will examine our
interest in a quick resolution to the Dalat reactor fuel issue; will
support our request to finalize the NEC deal; and, will instruct the
Government to present a STAR II proposal in the near future. End

2. (SBU) On August 7, the Ambassador met with Office of the
Government (OOG) Standing Vice Chairman Nguyen Xuan Phuc. Although
the Ambassador had met Vice Chairman Phuc before in his previous
incarnation as Quang Nam People's Committee Chairman, this was the
Ambassador's first meeting with Phuc in his new position.

Commercial Deals

3. (SBU) The Ambassador noted that the President's upcoming visit in
November will be a good chance to showcase the strength of our
bilateral commercial relationship through the GVN's conclusion of
several important trade deals with U.S. firms. These include the
proposed acquisition of additional Boeing aircraft by Vietnam
Airlines, the issuance of an insurance license to Liberty Mutual,
the granting of final clearances to allow SSA Marine to undertake
its proposed developments at the Cai Mep and Cai Lan ports and a
proposed power project with AES, as well as a proposed Gannon power
project in Dong Nai Province. The Ambassador also noted that U.S.
firms are increasingly concerned about the sanctity of contracts
under Vietnamese Law, as many U.S. investors report that it is
difficult to get their Vietnamese partners to stick to their agreed

4. (SBU) Phuc noted that the GVN is "trying hard on investment and
business" and the GVN will work on the proposed purchase of ten new
Boeing aircraft, the issuance of the insurance license and the power
projects "in the most positive manner" before the President's visit.
Many localities in Vietnam are calling for foreign investment, but
such investment "must develop according to the law." In the case of
Cai Mep port and the power projects, "we will push on our side, but
you need to push on yours," Phuc said.

Peace Corps

5. (SBU) The Ambassador also noted that another possible success
story that could potentially be highlighted during the President's
visit is the signing of a country agreement to establish a Peace
Corps program in Vietnam. The Peace Corps has been welcomed in
principle in discussions with GVN ministries, but the Ministry of
Education and Training (MOET) has proposed that it be the sole
counterpart of the proposed country agreement. This is not
practical, as the Peace Corps works in a variety of areas including
health, environment or education. Instead, the agreement should be
with the Ministry of Foreign Affairs (MFA) or the Office of the
Government -- bodies which are more general in scope. In addition,
we have disagreed to date on the initial number of volunteers.
Because of the administrative and logistic investment required --
normally USD one million dollars -- the smallest Peace Corps
programs begin with 30 volunteers. In the case of Vietnam, we would
hope that these volunteers would serve in a number of Vietnam's
provinces. However, the GVN will only agree to an initial ten
volunteers limited to serve in Hanoi and Ho Chi Minh City. It is
hard to justify opening a program with just ten volunteers, the
Ambassador noted.

6. (SBU) Phuc promised to ask the PM to reply to our concerns about
the Peace Corps program as soon as possible and to address these
concerns in time for an announcement in conjunction with the
President's visit. The OOG will ask the MFA to report their
opinions to the PM on the issues of the program's scope, number of
volunteers and appropriate level of country agreement.

Dalat Reactor

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7. (SBU) The Ambassador noted that the Department of Energy (DOE)
and the Ministry of Science and Technology (MOST) have held
technical discussions related to nuclear nonproliferation and, among
several proposed activities, the swapping of high-enriched uranium
fuel for low-enriched uranium fuel at the Dalat Nuclear Research
Reactor, at no cost to Vietnam, under the Russian Research Reactor
Fuel Return (RRRFR) program. The proposal has the blessing of the
MOST, the Vietnam Atomic Energy Commission and the Dalat Nuclear
Research Reactor, but is waiting for the OOG's approval. On May 5,
the Embassy delivered to the MFA draft copies of a bilateral
government-to-government agreement on nuclear nonproliferation and a
department-to-ministry level agreement. The GVN's remaining concerns
over signing this agreement seem to be purely technical, the
Ambassador added. The GVN should push "the technical people" to
accept the deal in time for the President's visit.

8. (SBU) Phuc noted that the GVN shares our views on
nonproliferation and promised to repeat our concerns about the Dalat
reactor to the relevant technical ministries. The GVN will never
allow nuclear materials to fall in the hands of terrorists, he


9. (SBU) The Ambassador underscored that we look forward to working
with the OOG and with OOG Vice Chairman Nguyen Quoc Huy on the
follow-on STAR II project. The original STAR project, coordinated
by the OOG, was instrumental in helping Vietnam implement the
Bilateral Trade Agreement and in assisting Vietnam in completing a
number of steps necessary to join the World Trade Organization.
STAR II should be equally helpful to assist in many of the
implementing steps after WTO accession and in developing the human
resource capacity of the government to manage Vietnam's growing
economy, the Ambassador added.

10. (SBU) Phuc stated that the OOG will task the relevant ministries
to prepare a proposal for STAR II soon. The GVN considers technical
assistance on post-WTO accession very important for Vietnam's future

New Embassy

11. (SBU) The Ambassador noted that we have been working with the
GVN to address our need for a new U.S. Embassy for over ten years.
The GVN also needs a new facility in Washington. We have now found
the right piece of land for our new facility, and the Ambassador's
recent meeting with the Hanoi People's Committee (HPC) Chairman set
the stage for a deal. The main issues remaining are the length of
lease and an agreement on price and terms of payment. If these
issues can be resolved, the resulting deal will pave the way for the
United States to build an embassy that adequately reflects the
improved state of the bilateral relationship, he stressed.

12. (SBU) Phuc said that the GVN sees no legal impediment to
resolving the two remaining issues and fully supports our desire to
conclude this deal soon. He promised that the OOG will push the HPC
to report to the PM on the quick resolution of these remaining


13. (SBU) Just as the OOG was a key player in the run-up to the
Prime Minister's visit last year, the OOG and Vice Chairman Phuc
will be well placed to advance issues of interest to us that have
gotten stuck in bureaucratic tangles or are held up because of turf
battles -- especially in the run-up to the President's visit. While
it remains to be seen if Phuc can translate his "can-do" attitude
into results, we hope that his influence can help resolve a number
of important and thorny issues over the next several months. End


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