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Cablegate: Sma Negotiations Round Vi: One Last Push

VZCZCXYZ0000
OO RUEHWEB

DE RUEHUL #4116/01 3350021
ZNY CCCCC ZZH
O 010021Z DEC 06
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1614
INFO RUEHKO/AMEMBASSY TOKYO PRIORITY 1733
RHHMUNA/CDR USPACOM HONOLULU HI PRIORITY
RUEKJCS/CJCS WASHINGTON DC PRIORITY
RHMFISS/COMUSFK SEOUL KOR PRIORITY
RUEKJCS/JOINT STAFF WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHINGTON DC PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RUEKJCS/SECDEF WASHINGTON DC//OSD/ISA/EAP// PRIORITY

C O N F I D E N T I A L SEOUL 004116

SIPDIS

SIPDIS

DEPARTMENT PLEASE PASS TO PM SENIOR ADVISOR LOFTIS

E.O. 12958: DECL: 11/30/2016
TAGS: KS PM PREL MARR MASS MCAP
SUBJECT: SMA NEGOTIATIONS ROUND VI: ONE LAST PUSH

REF: SEOUL 03468

Classified By: POL/MC JOSEPH Y. YUN. REASONS 1.4 (b/d).

1. (C) SUMMARY: In a small group meeting and plenary
session that followed, Ambassador Loftis and his ROK
counterpart, Ambassador Cho Tae-yong, presented their
respective negotiating positions on the 2007-2008 Special
Measures (burden-sharing) Agreement (SMA). The ROKG proposed
a contribution of 725.5 billion won in 2007. For 2008, they
offered that amount plus an increase tied to the 2006
Consumer Price Index, which is expected to be approximately 3
percent. The ROK offer included the addition of 45 billion
won over their earlier proposal, designed to make up for the
equivalent shortfall in Korean labor costs resulting from the
previous SMA. Ambassador Cho explained he could sell such an
increase to the National Assembly, but said it would be
extremely difficult to secure ROKG approval for anything
beyond the figures he proposed. Ambassador Loftis responded
by pointing out that the ROK proposal falls short of the USG
"red line" of 752 billion won, and far short of our goal that
the ROK pay 50 percent of USFK's non-personnel stationing
costs. Both sides reviewed the draft SMA agreement. Each
delegation suggested minor changes to the text which will now
be reviewed by our respective legal experts. During a
one-to-one meeting on November 30, Ambassador Cho told
Ambassador Loftis that 725.5 billion won offer was predicated
on the ROKG's assumption that, if accepted by the U.S., there
would be no/no significant or visible adjustments to U.S.
force posture. Ambassador Loftis responded that there could
be no such guarantees. Ambassadors Loftis and Cho agreed to
report the current status of the negotiations to their
superiors and defense colleagues, and to meet again (via DVC)
on December 5 at 6 p.m. (Washington time) to provide the
response of their respective governments. END SUMMARY

NOVEMBER 29 SMALL GROUP MEETING
-------------------------------

2. (C) The Sixth Round of Special Measures Agreement (SMA)
burden-sharing negotiations began with a small group meeting
on November 29, 2006 at the Ministry of Foreign Affairs and
Trade (MOFAT). During that opening session, both sides
stated their negotiating positions. Ambassador Cho Tae-yong,
the South Korean delegation head, summarized the ROKG
proposal as follows:

-- The ROK believes a short-term (no more than 2 year)
transitional agreement with no increase is warranted because
this is a transitional period in the U.S.-ROK Alliance, owing
to U.S. military transformation and the drawdown of USFK
troops on the Korean Peninsula.

-- Having learned of the negative impact on USFK caused by
the shortfall resulting from the previous SMA agreement,
however, the ROK has decided to increase its proposal by
approximately 45 billion won.

-- That additional amount is designed to make up for the
shortfall in Korean labor costs that occurred as a result of
the previous agreement.

-- The ROK proposal would "maintain present funding" levels
in the other three SMA categories.

-- The overall ROK proposal now totals 725.5 billion won in
2007.

-- For 2008, they offer that amount plus an increase tied to
the Korean Consumer Price Index (CPI). (NOTE: The 2006 CPI
would be used when it becomes available in January 2007. The
2005 CPI was approximately 3 percent. END NOTE).

3. (C) Ambassador Cho characterized the ROK proposal as his
"final offer," stressing that it had been approved only after
weathering considerable dissent in the ROK inter-agency
principals committee (PC). He explained that he sold the
additional 45 billion won amount to the PC, and would be able
to sell it to the ROK National Assembly as well, because it
directly affects Korean laborers. He cautioned, however,
that it would be extremely difficult for him to secure the
approval of the executive and legislative branches of his
government for anything beyond the 725.5 billion won figure
he proposed.

4. (C) Cho warned that time was running out to get the
agreement through the National Assembly by the end of the
year. He said the ROK therefore sought to conclude the
negotiation within the next week to allow sufficient time for
gaining legislative branch approval. To hasten the process,
Cho said he had decided to drop the ROK request for
consideration of its in-kind contributions. He claimed that
with time running out his latest proposal was, in fact, the
ROK bottom line, and not merely a negotiating tactic. "I
have no other offers up my sleeve," Cho insisted.

5. (C) Ambassador Loftis thanked the ROKG for its
willingness to raise its proposal from its previous offer of
680 billion won to 725.5, but pointed out that the new
proposal still falls short of the USG "red line" of 752
billion won, and far short of reaching 50 percent of USFK's
non-personnel stationing costs.

6. (C) Ambassador Loftis also informed Cho that he had
already run the new ROK proposal (which Cho had previewed to
him on November 23) by his superiors in the Department, and
his colleagues at DOD, but that he was not authorized to
finalize anything less than USFK's red line. He warned Cho
that USFK would have to compensate for any SMA shortfall,
including the possibility of moving part of our force
structure off the peninsula. Although no decisions have been
made, the ROKG should be aware that such moves could/could
include combat units. He stated that the current ROK
proposal does not meet the U.S. goal of achieving an
equitable arrangement, and asked Cho to take the ROK proposal
and USG response back to his government for further
consideration.

NOVEMBER 29 PLENARY MEETING
---------------------------

7. (C) During the follow-on plenary session later in the
day, Ambassadors Loftis and Cho summarized their
aforementioned negotiating positions in front of the members
of both delegations. Ambassador Cho stated that although the
task was not an easy one, an agreement could be reached if
approached with "a common attitude." Ambassador Loftis
responded that he too hoped the two delegations would reach a
conclusion soon, but added that in getting to that point the
importance of the U.S.-ROK alliance and the U.S. ability to
defend the ROK ought to be remembered as well.

8. (C) Expressing regret for the lack of U.S. enthusiasm for
his proposal, Ambassador Cho stated that while the difference
between the ROK proposal and USFK red line (a gap of
approximately 27 billion won) "may not be small, it was also
not very big." He said he was therefore "not convinced" that
cuts being considered by USFK to address an SMA shortfall
would be visible or substantial. Ambassador Loftis and USFK
Assistant Chief of Staff Major General Duane Theissen
reminded the ROK side that the actual difference was 106
billion won, far greater than 27 billion won mentioned by the
ROK. Every dollar or won not contributed to USFK by the ROK
would compel the Command to cut equivalent costs somewhere
else, they explained, pointing out that the repercussions of
a ROK shortfall could go beyond the sum of 27 billion won.
Loftis stated it was not clear what the Command would cut
because no decisions had been made, but that the ROK should
understand that the Commander could not, under any
circumstances, allow the stationing of hollow forces on the
Peninsula.

9. (C) Ambassador Cho responded by once again reiterating
the domestic political difficulties he would face in
attempting to gain approval from the National Assembly for a
better offer.

REVIEW OF THE SMA DOCUMENT
--------------------------

10. (C) During the plenary meeting, the two delegations
reviewed the text of the draft SMA agreement. Each side
suggested minor changes to the language and agreed that
although the revisions appeared to be non-substantial, the
new text would have to be reviewed by their respective legal
experts.


SONG MIN-SOON SEEKS A BETTER PROCESS
------------------------------------

11. (C) In both the small group and plenary sessions,
Ambassador Cho stated that the ROKG preferred no more than a
two-year SMA agreement. Cho explained that Foreign
Minister-designate Song Min-soon "felt very strongly" that a
new process needed to be developed in order to spare the
Alliance from the "always painful" SMA negotiations. Song
wants the U.S. and South Korean governments to begin
discussing how to reform the process in January 2007, reach
agreement on new procedures by the end of that year, and
utilize those new procedures, starting in 2008, to negotiate
the next SMA.

12. (C) Ambassador Loftis responded by noting that if the
ROK regards the next SMA as a transitional document, it would
be more logical to reach three-year agreement, because U.S.
military transformation on Peninsula (and the construction
needed to carry it out) will not be completed in less than
three years. He also pointed out that because Song Min-soon
would be in office for, at most, the remaining 15 months of
the current Roh Administration, he will have left ROK
government service before the next SMA negotiation, even if
only a two year agreement is reached this time around.

1-ON-1 DISCUSSIONS
------------------

13. (C) Ambassador Cho and Loftis met for a heads of
delegation session over breakfast on November 29. Ambassador
Cho reiterated that he was unable to go beyond his "final
offer" of 725.5 billion won. Moreover, the ROKG assumes that
if the U.S. accepts the ROKG offer, there would be no need to
make any visible or substantive cuts to the U.S. force
structure. In particular, they would not want to see any
further reductions to U.S. combat forces beyond those already
agreed. Ambassador Loftis responded that the ROKG should not
operate on this assumption. At 725.5 billion won of SMA,
there would be a shortage of funds that would have to be
addressed. While stressing that no decisions had been made,
the U.S. was looking at all of its options, and those options
included the possibility of taking some combat forces or
capabilities out of Korea. The ROKG should not be surprised
by this statement, as it had been made in several SPI
sessions, during the SCM/MCM and during Congressional
testimony by senior DOD officials. Ambassador Cho said that
some in his government would ask why the ROKG should offer
any increase, seeing that the U.S. could be pulling assets
off the peninsula. Why not simply offer a rollover?
Ambassador Loftis noted that pulling back the Korean offer
would be very poorly received in Washington, and would
certainly result in the U.S. having to make even greater
adjustments. He concluded that the USG was not trying to
embarrass the ROKG, but we simply have to face fiscal
realities.

PREPARING FOR THE END GAME
--------------------------

14. (C) Ambassadors Loftis and Cho agreed to report the
outcome of the 6th round of SMA negotiations to their
superiors and defense colleagues. They agreed to meet again
(via DVC) on December 5 at 6 p.m. (Washington time) to
provide the responses of their respective governments.

15. (C) COMMENT: We do not anticipate that the ROKG will
come in with a higher figure, as Cho indicated that some
senior ROKG officials had "hardened" their stance against an
increase in response to the potential movement of assets.
Ambassador Loftis recommends that we use the December 5 video
conference to accept the ROKG offer as presented by Cho and
finalize the SMA. This will give Cho barely enough time to
complete his domestic requirements and send the SMA to the
National Assembly before the end of the year. In accepting
the ROKG offer, however, we would not/not accept the ROKG,s
assumption that there be no changes to the U.S. force
structure. END COMMENT.

PARTICIPANTS:
------------

16. (SBU) U.S. Delegation:

Ambassador Robert Loftis, Senior Advisor, Bureau of
Political-Military Affairs (PM)
Major General Duane Thiessen, Assistant Chief of Staff J5,
USFK
Commander Thomas Herold, Judge Advocate General's Corps
Mr. David Wolff, Political Military Chief, U.S. Embassy
Seoul, DOS (Small group notetaker)
Colonel Christopher Dinenna, Chief of J5 Strategy and Policy
Division, USFK
Mr. Andrew Hyde, ROK Unit Director, EAP/K, East Asian and
Pacific Affairs Bureau, DOS
LTC Mike Finnegan, Office of the Assistant Secretary of
Defense for International Security Affairs, DOD
Lieutenant Colonel Phillip Janzen, Military Advisor, PM, DOS
Lieutenant Colonel William Conwell, Chief of J5 Policy
Analysis Branch, USFK
Dr. Warren Switzer, International Relations Officer, J5
Policy Analysis Branch, USFK
Mr. Mark Shoemaker, International Relations Officer, US SOFA
Secretariat, USFK

SIPDIS
Ms. Shawn Duncan, Pol-Mil Officer, U.S. Embassy Seoul, DOS
(Plenary notetaker)

ROK Delegation:

Ambassador Cho Tae-yong, Director General, North American
Affairs Bureau, MOFAT
Mr. Lee Jeong-kyu, Director, North America Division (NAD)
III, MOFAT
Mr. Chun Young-hee, First Secretary, NAD III, MOFAT
Mr. Nam Dae-hyun, Advisor, NAD III, MOFAT
Mr. Kim Jung-han, First Secretary, Bilateral Treaties
Division, MOFAT
Ms. Kim Sin-sook, Deputy Director, U.S. Policy Division, MND
Colonel Lee Jong-sik, Assist. Secretary to the President for
National Security Policy

Small Group Participants:

Ambassador Robert Loftis, Senior Advisor, Bureau of
Political-Military Affairs, DOS
Ambassador Cho Tae-yong, Director General North American
Affairs Bureau, MOFAT
Major General Duane Thiessen, Assistant Chief of Staff J5,
USFK
Mr. David Jonathan Wolff, Political-Military Affairs Chief,
Embassy Seoul
Mr. Lee Jeong-kyu, Director, North America Division III, MOFAT
LTC Mike Finnegan, Office of the Assistant Secretary of
Defense for International Security Affairs, DOD
Mr. Chun Young-hee, First Secretary, NAD III, MOFAT
Ms. Kim Sin-sook, Deputy Director, U.S. Policy Division, MND

16. (U) Ambassador Loftis has cleared this cable.
VERSHBOW

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