ARTICLE 98: GOE AWARE OF NETHERCUTT-BACKS

C O N F I D E N T I A L SECTION 01 OF 02 QUITO 003256 SIPDIS E.O. 12958: DECL: 12/16/2014 TAGS: PREL MASS MARR PGOV EC KICC SUBJECT: ARTICLE 98: GOE AWARE OF NETHERCUTT-BACKS REF: A. QUITO 3151 ¶B. QUITO 3150 Classified By: Ambassador Kristie A. Kenney, Reasons 1.4 (b),(d) ¶1. (C) SUMMARY: Word of the Nethercutt Amendment, which mandates reductions in Economic Support Funds (ESF) available to non-Article 98 signers, has reached GoE leaders, and they are worried. In a pull-aside at a diplomatic reception recently, the foreign minister requested clarification and inquired about the possibility of a waiver for Ecuador. The Ambassador, expressing USG frustration over Ecuador's refusal to negotiate Article 98 seriously, suggested an alternative strategy: that the GoE's new Ambassador in Washington engage U.S. Article 98 interlocutors immediately, in hopes of finding mutually acceptable language. END SUMMARY. ¶2. (U) On December 16, the Ambassador joined third-country counterparts at a GoE-hosted diplomatic corps lunch. President Gutierrez and Foreign Minister Patricio Zuquilanda cornered her at its conclusion, seeking a discreet pull-aside. The foreign minister did most of the talking. ¶3. (C) Zuquilanda was troubled over news of Congressional passage of the Nethercutt Amendment, which President Bush recently had signed into law. The legislation forced ESF reductions, if not complete cutoffs, to nations, like Ecuador, not having entered into Article 98 agreements with the United States. According to the Ecuadorian embassy's analysis, which the FM requested the Ambassador peruse, Nethercutt's impact on Ecuador could reach $13 million. The reduction's effects on USAID Quito's Northern Border program worried Zuquilanda the most. Ecuador's precarious security situation and compelling needs mandated a Nethercutt waiver, the FM asserted. ¶4. (C) The Ambassador agreed that ESF cutbacks might occur, were Ecuador not to sign Article 98, but cautioned Zuquilanda that Washington had not yet fully analyzed the implications for Ecuador. She emphasized that waiver relief was not possible, since the total of Article 98-signing nations was nearing 100. Besides, USG frustration over Ecuadorian intransigence was growing -- any request for special treatment, as long as the GoE refused to engage in good-faith Article 98 negotiations, would fall on deaf ears in Washington (DCM had transmitted same message in a December 16 lunch with GoE Chief of Staff Xavier Ledesma). ¶5. (C) Instead, the Ambassador suggested the GoE consider an alternate track. Roberto Betancourt, Ecuador's U.S. ambassador-designate (Ref B),was well-versed in Article 98, owing to his short-lived role as the MFA's point of contact for negotiations with the Embassy. Upon arriving in Washington, the Ambassador offered, Betancourt should engage State, DoD, even U.S. Congress contacts, to begin negotiations of an accord. To be taken seriously, however, Betancourt must be prepared to talk specifics -- no "we're continuing to analyze various texts" or "we're seeking our legislature's green light to negotiate" allowed. Neither Zuquilanda nor the president responded substantively. ¶6. (C) COMMENT: We are impressed that the GoE's Washington embassy did its homework on Nethercutt Amendment implications to USAID's Ecuador program. A week ago, Zuquilanda's cryptic public comments regarding $4 million in imminent U.S. assistance cutbacks left us wondering whether he referred to ASPA's military assistance reductions (actually closer to $7 million) or to possible, Nethercutt-related sanctions. Now we know. But we are left questioning the real reasons for Zuquilanda's concern. Do the ESF cutbacks represent threats to important GoE initiatives on the northern frontier, thus spurring the MFA to engage constructively on Article 98? Or does Zuquilanda simply want confirmation of Nethercutt assistance reductions, in order to polish a strategy to temper negative Ecuadorian media coverage that undoubtedly awaits? ¶7. (C) We lean toward the latter, unfortunately. Recent press on Article 98 has been uniformly negative, with journalists demanding the GoE not barter Ecuador's sovereignty for $7 million in U.S. military assistance. News of the potentially graver ESF cutbacks, rather than push the MFA to the table, might actually raise further hackles. We understand the Department is analyzing the Nethercutt Amendment and soon will issue guidance to embassies. Until then, we will answer private and public inquiries by noting that Nethercutt is U.S. law, adding that Washington agencies continue to study its implementation and effects on foreign nations. END COMMENT. KENNEY