TAIWAN LOSING CARIBBEAN TO PRC CHECK BOOK DIPLOMACY

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 000315

SIPDIS

STATE PASS AIT/W

E.O. 12958: DECL: 01/25/2015
TAGS: PREL PGOV TW
SUBJECT: TAIWAN LOSING CARIBBEAN TO PRC CHECK BOOK DIPLOMACY

REF: BRIDGETOWN 00185

Classified By: AIT Director Douglas Paal; Reasons: 1.4 (B/D)


1. (C) Summary. Beijing's efforts in the Caribbean resulted
in another victory in the check-book diplomacy battle on
Thursday January 20, when the PRC announced it had
established diplomatic relations with Grenada. While Taiwan
Ministry of Foreign Affairs (MOFA) officials say they have
not officially been informed of the change, they admit
Grenada has been lost to the PRC. MOFA officials are also
worried that Grenada's switch could mean Taipei's diplomatic
partner St. Vincent and the Grenadines could be next in the
Caribbean to recognize the PRC. The Dominican Republic and
Haiti are also being heavily targeted by Beijing. The PRC
has adopted a focused yet patient campaign in the Caribbean
to take "one country at a time" from Taipei. National
Security Council (NSC) officials assert that they will not
engage Beijing in a bidding war and cannot offer Grenada or
other diplomatic partners additional economic aid. They
state that Taiwan has adopted a more accountable foreign aid
system focused on real assistance and will no longer offer
blank checks to leaders in exchange for recognition.
Nevertheless, past bad behavior is haunting Taiwan's
relations with Central American partners Nicaragua, Costa
Rica, and Panama. Taiwan officials seem resigned to the fact
that there is little Taipei can do in the face of Beijing's
willingness and ability to outbid Taipei in the Caribbean.
End summary.

Grenada Already Gone
--------------


2. (C) The announcement on Thursday that Grenada's Prime
Minister (PM) Keith Mitchell had established formal ties
with the PRC was not a surprise in Taipei. MOFA officials
had been expecting the move after PM Mitchell announced he
was shopping for additional aid after Hurricane Ivan struck
the island last year. NSC Deputy Secretary General Parris
Chang told AIT that Taiwan was willing to help and offered
Grenada a USD 40 million aid package, but PM Mitchell told
Taipei's Ambassador in St. George that the sum amounted to
"chicken feed." Chang also said that PM Mitchell told Taiwan
that he must help his people and was going to do whatever was
necessary. According to Chang, the PRC viewed this as a
golden opportunity and pounced. In December, PM Mitchell
traveled to Beijing and in exchange for derecognizing Taipei,
the PRC offered him a major assistance package with
high-profile infrastructure projects including replacing
Grenada's heavily damaged national stadium before the 2007
Cricket World Cup. Chang told AIT that PM Mitchell tried to
play both sides after his trip to Beijing. Taipei protested
this policy, but was not in a position to offer enough aid to
keep Granada from straying.

St. Vincent and the Grenadines Next?
--------------


3. (C) Some Taiwan officials are worried that the loss of
Grenada will lead to more losses in the Caribbean and could
signal the beginning of a gradual domino effect. MOFA
Section Chief for Eastern Caribbean Affairs, Luis Yang, told
AIT that if Grenada switched diplomatic ties to the PRC, then
St. Vincent and the Grenadines would also soon follow and
derecognize Taiwan. While Yang did not speculate on a
timeline for this move, he cited Kingstown's close economic
and political ties to Grenada as the major factor. Yang said
that Beijing's diplomats have been active throughout the
Caribbean and have been lobbying Taipei diplomatic partners
with promises of aid and assistance if they switch to the
PRC. He lamented that Beijing could probably offer an
incentive package to St. Vincent and the Grenadines that
Taiwan could not match.

Full Court Press in the Dominican Republic
--------------


4. (C) Taipei is also concerned over the number of recent
delegations Beijing has sent to the Dominican Republic to
pressure the Fernandez government. According to Hsie
Miao-hung, MOFA's Section Chief for Central America and the
Western Caribbean, the PRC has offered to buy government
bonds and build infrastructure projects such as hospitals and
roads. In addition, Beijing recently established a trade
office in Santo Domingo which the PRC is using to pressure
the government to sever ties with Taiwan. Hsie said that
Beijing's representative is particularly active and managing
a high-profile campaign complete with press coverage to
encourage Santo Domingo to derecognize Taiwan. Hsie lamented
that Taipei has been forced do more and more to maintain
official ties with the Dominican Republic and that the
situation is becoming more worrisome.


5. (C) While MOFA officials believe Santo Domingo will
continue to recognize Taiwan in the short run, they privately
admitted to AIT that the PRC has been gaining ground and are
worried about the situation. Last fall President Leonel
Fernandez announced that the Dominican Republic would open a
commercial office in Beijing. In Hsie's mind, the first
steps have been taken by the government to switch ties. Hsie
told AIT that many officials in the Dominican Republic want
to enhance relations with the PRC to reduce Santo Domingo's
dependency on the U.S. Hsie claimed that she and her
colleagues are not worried about an imminent switch, but
expressed concern that in the long run "we can never tell
with Beijing." (Note: MOFA is clearly preoccupied about the
Dominican Republic because Hsie canceled two planned meetings
with AIT and complained about her excessive work load of
urgent meetings and a flurry of cables between her office and
Taipei's Embassy in Santo Domingo. End comment).

MOFA's Counter Attack
--------------


6. (C) Hsie said that MOFA is working on several fronts to
counter Beijing's efforts in the Dominican Republic. She
told AIT that Taiwan's foreign aid agency, the International
Cooperation Development Fund (ICDF),has various humanitarian
projects in the country and it may consider stepping up aid
projects there. Taipei is also providing financial aid to
stabilize Santo Domingo's fragile economy and recently Taiwan
constructed a new hospital for the country. Hsie added that
the Fernandez government has asked for more aid, which Taipei
government is considering. Hsie asserted that for several
decades, Taiwan has been a stable supporter and ally of the
Dominican Republic and it was her hope that Santo Domingo
would take this into consideration.

Haiti Also a Target
--------------


7. (C) Hsie told AIT that the PRC has also turned up the heat
on Haiti. Beijing, she said, has a delegation in Haiti right
now that is putting pressure on the interim government,
throwing into question Interim President Boniface Alexandre's
commitment to continue to recognize Taipei. While President
Boniface has refused to meet with the delegation, Hsie said
MOFA is concerned that such visits allow the PRC to build
support for increasing ties with Beijing once the interim
government transfers power. Hsie believes Beijing has
adopted a coordinated long-term campaign to gradually build
support in Haiti to convince the next government to
derecognize Taiwan.

But No Bidding War
--------------


8. (C) Grenada is the second Caribbean setback in the past
year (Dominica switched in March, 2004). Both Hsie and the
NSC's Chang maintained that the PRC has embarked on a patient
yet aggressive campaign to take countries that still
recognize Taiwan "one country at a time." Officials at both
NSC and MOFA say they are adamant that Taiwan cannot and will
not engage in check-book diplomacy. Chang told AIT that
recent aid scandals involving Nicaragua, Costa Rica, and
Panama have had an impact on Taipei's approach. He added
that there is more oversight in the aid process and that lump
sums are not given out as freely to leaders as before.
Rather, Taiwan's future foreign aid system will be more
focused on real assistance that can make a difference in the
country. Chang added, however, that, in any case, the PRC
has more resources for check-book diplomacy than Taiwan.
MOFA's Hsie offered a similar assessment, and added that
Taipei is also trying to convince its partners of Beijing's
unreliability versus Taiwan's steadfastness, and to highlight
the differences between the PRC and Taiwan, such as Taipei's
democratic values and experience in providing humanitarian
aid. She said that the PRC often promises a lot, but cannot
deliver in the long run.

Comment: An Unwinnable War?
--------------


9. (C) Whether Taipei's strategy to portray Beijing as an
unreliable ally and emphasize Taiwan's attributes of
democracy and humanitarian assistance will be effective is
yet to be seen. Taiwan does have much to offer in the
technical and financial assistance arena, but new strategies
that promote this experience are not likely to be effective
with its diplomatic partners. The majority of nations that
recognize Taiwan are not concerned about technical assistance
or Taiwan's democratic values. More often than not, the
biggest factor in the recognition game is simply money and
how much of it flows into the leadership's pockets. As long
as Taipei continues to rely on a policy of focusing on
micro-state nations that are typically poor and corrupt it
will continue to lose the check-book diplomacy battle.
PAAL