Cablegate: Somalia - Chinese Engagement

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RR RUEHWEB

DE RUEHNR #0165/01 0430756
ZNR UUUUU ZZH
R 120756Z FEB 10
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 0824
INFO RUEHNR/AMEMBASSY NAIROBI

<<248522>>
02.12.2010 07:56
10NAIROBI165
Embassy Nairobi
UNCLASSIFIED//FOR OFFICIAL USE ONLY
10STATE10152
VZCZCXYZ0007
RR RUEHWEB

DE RUEHNR #0165/01 0430756
ZNR UUUUU ZZH
R 120756Z FEB 10
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 0824
INFO RUEHNR/AMEMBASSY NAIROBI
TAGS: PGOV PREL EFIN ECON EAID XA SO
SUBJECT: SOMALIA - CHINESE ENGAGEMENT
REF: STATE 10152

Unclas nairobi 000165

Sensitive, sipdis

Af/e for pfierst, af/rsa for lmazel, lgriesmer, rbowles
treasury for rebecca klein
commerce for robert telchin

E.o. 12958: n/a
Tags: pgov, prel, efin, econ, eaid, xa, so
Subject: somalia - chinese engagement

Ref: state 10152

1. (U) The following cable provides responses to action request in
reftel on Chinese engagement in Somalia.

Chinese Engagement in Trade and Investment

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2. (SBU) The Sino-Somali relationship has remained strong since
the establishment of diplomatic relations in December 1960. During
the Siad Barre regime China was very active in Somalia, initiating
several large infrastructure projects. In past years, the Chinese
government has made no significant infrastructure improvements and
it has launched no "showpiece" projects in the country.

3. (SBU) Chinese interest in Somalia has historically been in the
trade of basic commodities. Somalia's Transitional Federal
Government (TFG) maintains no trade statistics, but reporting from
the Chinese government indicates that in 2002, the total trade
volume between the two countries was USD 3.39 million. By 2005,
Somalia-China bilateral trade was estimated at USD 19.64 million.
Although more recent statistics are unavailable, current and former
TFG officials estimate that this trade volume has significantly
increased in the last few years. Somali businessmen (and
businesswomen) make regular trips to China to purchase basic
foodstuffs, textiles, clothes, and other goods. These imports most
often arrive in Somalia by ship and with favorable pricing as a
result of Somalia's informal tariff structure. Most goods are
distributed in the sub-region.

4. (SBU) Somalia's rapidly growing telecommunications sector is
powered predominantly by Chinese equipment. Chinese companies
provide "soft loans" to the telecom operators to purchase
equipment. Our contacts shared some details of a deal that was
signed in 2008 for approximately USD 25 million. They told us that
this scale of business deals is common. Chinese companies are some
of the few that are willing to send technicians into Somalia to set
up and maintain the equipment. Anecdotal reports indicate that
there are often Chinese businesspersons within the country and most
are associated with large telecommunications projects.

5. (SBU) China is especially interested in potential opportunities
for petroleum exploration. China is reported to have secured the
rights to oil blocks in the Puntland region. Media reports
indicate that in January, the acting TFG Minister of Petroleum met
with the Chinese Minister of Petroleum in Khartoum to discuss an
upcoming mission to Somalia. While no formal engagements have been
reported, we understand that Chinese officials and businessmen are
laying the groundwork for trade and investment in the oil and gas
sectors, primarily through informal relationships with local and
regional authorities.

Political Engagement

-----------------------------

6. (SBU) China was one of the earliest supporters of the TFG when
it was established in October 2004. In December 2004, China
donated computers and office equipment to the TFG and in December
2005, signed several agreements providing over USD 6 million in
economic assistance to Somalia. At the signing ceremony, the
Chinese government granted an additional USD 100,000 in cash to the
Somali government. We understand that China made additional
periodic cash contributions to President Yusuf. Our contacts told
us that the support was always in cash payments and that most of it
was disbursed within the TFG cabinet.

7. (SBU) Between 2004 and 2007, President Yusuf and the TFG
maintained a close relationship with China. The Chinese government
funded the construction of a canal in Jowhar, the city which was

Yusuf's base. The canal provides irrigation for agricultural
development in the area and prevents flooding during the rainy
season. China made a USD 500,000 donation to the World Health
Organization to support projects in Somalia. In 2008, the Chinese
government pledged to contribute USD 2 million to rehabilitate
Villa Somalia, the presidential palace in Mogadishu. We understand
that USD 1 million was transferred to the TFG for Somali
contractors to do the renovations but it is unclear if this project
was ever completed. The Chinese government also pledged to
renovate the national stadium and theater in Mogadishu.

8. (SBU) During the Beijing Summit of the Forum on China-Africa
Cooperation (FOCAC) in November 2006 Chinese President Hu Jintao
promised President Yusuf that China would support the TFG's peace
and reconstruction efforts. However, China has had little direct
involvement with political issues in Somalia. xxxxxxxxxxxx told us that "China is not concerned with
politics, only economics, and is positioning itself for commercial
advantages in post-conflict Somalia." China gave the Somali
Mission to Kenya two vehicles for official and personal use. The
TFG Ambassador to Kenya regularly drives one of the Land Cruisers
and his Deputy Chief of Mission drives the other.

9. (SBU) The Chinese government has continued the tradition of
support to the TFG with President Sharif's government. In
September 2009, China provided direct bilateral assistance through
a USD 500,000 contribution that the TFG dispersed trough the
PriceWaterhouseCoopers financial management and oversight
mechanism. TFG and Puntland officials tell us that China's
priority area of engagement remains its quest for natural
resources, especially oil.

10. (SBU) China does not have a permanent mission in Somalia and
conducts diplomatic relations through a liaison office in Nairobi.
With a staff of approximately four, the Chinese "Somalia Unit" is
led xxxxxxxxxxxx. Through the Embassy of Somalia in Beijing, China
provides scholarships to students for study to China and more
recently, sponsored study tours for Somali journalists.

U.S. - China Collaboration

------------------------------------

11. (SBU) There is little direct engagement, cooperation, or
coordination between the American and Chinese Missions on Somalia.
In 2007, the Chinese Ambassador to Somalia travelled to Mogadishu
in support of the National Reconciliation Congress. While the
mission indicated China's willingness to support Somalia's
political progress, there was no official Chinese presence during
the subsequent Djibouti Process.

12. (SBU) Chinese activities in Somalia are not directed through
the international donor groups that meet regularly to share
information and coordinate activities across the Somali territory.
With a demonstrated interest in rehabilitation of key locations,
infrastructure development may be an area that would benefit from
increased bilateral cooperation. At present, there are no examples
of U.S.-China coordination in Somalia. U.S. Mission efforts to
contact the Chinese "Somalia Unit" in Nairobi have not to date been
successful.
Ranneberger

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