C O N F I D E N T I A L SECTION 01 OF 03 ADDIS ABABA 001612

SIPDIS

SIPDIS

E.O. 12958: DECL: 06/13/2016
TAGS: PREL PGOV KPKO MARR ECON ER ET
SUBJECT: ETHIOPIA: SCENESETTER FOR GENERAL ABIZAID'S VISIT


Classified By: CHARGE D'AFFAIRES A.I. VICKI HUDDLESTON. REASON: 1.4 (B)
AND (D)


1. (SBU) Welcome back to Addis Ababa! Your visit comes as the
country works to rebuild public confidence in democratic
institutions, resume progress on economic reforms and cope
with potential threats on its borders with Eritrea and now
Somalia. Ethiopia remains a strong U.S. partner in the
global war on terrorism, though the ONLF insurgency in the
Ogaden has complicated CJTF-HOA's operations in the region.
CJTF-HOA has recently worked closely with Embassy Addis in
implementing USG support to peace efforts in Darfur. The USG
is currently leading diplomatic efforts to implement the
long-stalled Algiers Accords which brought an end to the
1998-2000 war between Ethiopia and Eritrea. Your visit is an
opportunity to underscore our commitment to helping resolve
problems in the region, including but not limited to
terrorism, to engage in a dialogue on our bilateral military
relationship, and seek a way forward on the Eritrea-Ethiopia
border situation.

--------------
DEMOCRACY AND HUMAN RIGHTS
--------------


2. (U) The U.S. remains at the forefront of trying the
rebuild the democratic process in the wake of the May 2005
elections and the ensuing civil disturbances of June and
November. Following the November street violence, the
Government of Ethiopia (GOE) rounded up most of the
leadership of the country's largest opposition organization,
the Coalition for Unity and Democracy (CUD), as well as
alleged allies in the media and civil society. The
opposition detainees were charged with trying to overthrow
the government by inciting street violence. The GOE's
handling of the ongoing CUD trial, which is being followed
closely by both the Ethiopian public and the international
community, remains a key variable in Ethiopia's fragile
democratization process.


3. (C) After a de fact

o ban of the CUD post-November, party
moderates were able to re-register their organization in
March as the CUDP. Charge Huddleston and European
ambassadors facilitated an ongoing political dialogue between
the ruling party and leaders of two opposition parties that
chose to enter Parliament. Party representatives, supported
by comparative studies funded by the U.S. and other donors,
are discussing how to reform and strengthen democratic
institutions including Parliament, the National Election
Board and the media. The U.S. strategy has been to press
the opposition and government alike to strengthen the
democratic process. These talks are making progress. The
U.S. has also called upon the GOE to improve its protection
of human rights and to ensure a fair and transparent trial
for the CUD leadership and other detainees.

--------------
BORDER DISPUTE
--------------


4. (C) Eritrea and Ethiopia concluded a two-year border
conflict in 2000 with an Agreement on Cessation of
Hostilities (Algiers Agreements). The U.S. was a witness to
the Algiers Agreements. In April 2002, the Eritrea-Ethiopia
Boundary Commission (EEBC), established under the Algiers
Agreements, issued a final and binding decision delimiting
the border. According to the Algiers agreements, both
parties were to facilitate the demarcation of the border by
the Commission, but Ethiopia initially objected to the
decision, then accepted it "in principle" but under the
condition that a broad political dialogue take place to
address root causes of the conflict. Eritrea refused,
stating that the border must be demarcated according to the
EEBC decision without further discussion. After three years
of little progress, Eritrea imposed a series of restrictions
on the UN's border monitoring force (UNMEE), leading to an
increase in military deployments and tension along the
border. In November 2005, the UN Security Council passed a
resolution urging a resumption of demarcation efforts. The
USG has taken the diplomatic lead in support of the EEBC,
which has convened three times this year in London, with
representatives of both Ethiopia and Eritrea, to discuss
steps necessary to resume demarcation of the border. Another
meeting is set for June 15 in The Hague. Ethiopia has dropped
the "in principal," but sticks to its bottom-line that there
must be discussions on where the demarcation line is placed
if lasting peace is to be possible.


5. (C) The U.S. continues to work closely with the parties to

ADDIS ABAB 00001612 002 OF 003


resume demarcation of the border and promote an eventual
normalization of relations. The USG has sought to give
(retired) Gen. Carl Fulford a formal role as a facilitator in
the dispute, but Eritrea rebuffed initial efforts to do so
through the EEBC itself. We are now planning to have the
Witnesses to the Algiers Accords endorse a broader set of
talks under UN auspices with Gen. Fulford's participation.


--------------
COUNTERTERRORISM/CJTF-HOA
--------------

6.(C) Ethiopia is committed to the war on terrorism and is
cognizant of its strategic role in the Horn of Africa. The
Ethiopian National Defense Force (ENDF) has been a solid
partner with the U.S. in the war on terrorism. However,
relations between the ENDF and CJTF-HOA have been complicated
beginning in May by the ENDF offensive to eliminate the
insurgent group Ogaden National Liberation Front (ONLF) in
Ethiopia's Somali region. These operations have prompted the
ENDF to request a temporary curtailment of CJTF-HOA civil
affairs activities in the Ogaden. ENDF Chief of General Staff
Lt. General Samora Yonus has suggested that HOA civil affairs
activities are inadvertently "helping" the ONLF. Somora has
requested that CJTF-HOA temporarily leave the Ogaden region
while the ENDF continues its counter-offensive. GOE officials
have asked for a renewal of dialogue on our bilateral CT
cooperation, including the role of CJTF-HOA in Ethiopia.
Your visit is an opportunity to move this cooperation
forward.

--------------
HEIGHTENED CONCERNS OVER SOMALIA
--------------


7. (C) The GOE has conveyed to post its heightened concerns
over the recent victories of the Islamic Courts Union (ICU)
in Somalia. Vice Minister Tekeda expressed concerns June 12
that USG "feelers" to the ICU in Mogadishu could influence
the posture of other key actors on the ground, including the
Transitional Federal Government (TFG), and enhance the
impression that ICU's consolidation of power in southern
Somalia is a "fait accompli." The GOE, for its part, views
the ICU as extremist and a significant threat to Ethiopia,
though it believes that internal divisions will eventually
weaken the ICU. Tekeda warned against further USG
cooperation with warlord Mohammed Qanyare, claiming that its
own cooperation with him had been frustrating and fruitless.

--------------
ECONOMIC OVERVIEW
--------------


8. (U) Ethiopia remains one of the poorest countries in the
world. Ethiopia's GDP for 2005 is estimated at USD 8.5
billion, with an annual per capita GDP of USD 100. Since the
early 1990's, Ethiopia has pursued a development strategy
based on a mixed economy of both state and private
enterprises. While the private sector role is expanding, the
state remains heavily involved in most economic sectors, and
parastatal and party affiliated companies continue to
dominate trade and industry, hampering full and free
competition. In addition, increasingly frequent cycles of
drought, high population growth, and inefficient agricultural
markets all act as a drag on Ethiopia's economic development.
Agriculture contributes 42 per cent to the GDP and employs
80 per cent of Ethiopia's 74 million people. Almost all
agricultural production is rainfed and thus vulnerable to
drought.Though GOE economic policies have been improving
gradually, greater economic liberalization and reduction of
population growth are critical to reducing poverty and
increasing food security.


9. (U) The economy grew by 7.3 per cent in 2005, and the
inflation rate was 6.8 per cent. In 2005, Ethiopia's exports
grew by over 30 percent, in part due to higher world coffee
prices. Major exports include coffee, oil seeds and pulses,
and hides and skins, though non-traditional exports such as
flowers have increased significantly over the past few years.
Imports increased even faster than exports however,
resulting in a growing trade deficit and increased risk of a
balance of payments crisis. Ethiopia currently has no IMF
program, but the USG has urged that it establish one.
Ethiopia formally applied for WTO membership in January of
2003, but has since moved slowly on the accession process.
The USG, through USAID, is providing technical assistance on
WTO accession and strongly supports the process as a tool to
promote reforms and enhance food security. Ethiopia

ADDIS ABAB 00001612 003 OF 003


participated in the enhanced Highly Indebted Poor Countries
(HIPC) initiative and G8 Multilateral Debt Relief Initiative.
The U.S. and Ethiopia signed a bilateral debt agreement in
2004 that provided 100 percent cancellation of Ethiopia's
debt to the United States.

--------------
DEVELOPMENT ASSISTANCE
--------------


10. (U) In coordination with donors, the GOE is finalizing
its 2006-2010 Plan for Accelerated and Sustainable
Development to End Poverty in Ethiopia (PASDEP). In addition
to continuing poverty reduction strategies in areas such as
human development, rural development, capacity building, and
food security, the new development plan will increased
commercialized agriculture, promote greater private sector
participation in the economy, and scale-up efforts to achieve
the Millennium Development Goals. Ethiopia has also adopted
more effective policies to promote family planning and combat
HIV/AIDS.


11. (U) The United States provides both developmental and
humanitarian assistance to Ethiopia, though we do not provide
direct budget support (DBS). In 2005, we provided USD 465
million in food aid, roughly 200 million for health,
education and governance projects, as well as 70 million
through the President's Emergency Plan for AIDS Relief
(PEPFAR). Our objective is to help the Ethiopian government
and people construct safety nets so that they will be less
vulnerable to drought, disease and famine. USAID last year
developed a new initiative meant to protect the livelihoods
of pastoralists in the Somali region. As a result of
post-election events in Ethiopia, donors providing direct
budget support, including, among others, the World Bank,
European Commission, the UK, and Canada, agreed to suspend
DBS. These funds have been reprogrammed through a new
program, the Protection of Basic Services Grant, which
includes more targeted, tightly monitored aid at the regional
and district level.


12. (U) The USG is cooperating closely with other donors to
strengthen democratic institutions such as Parliament, the
National Electoral Board, the media and civil society.
Current USG resources for this purpose total approximately
USD 4 million. Restoring public confidence in these
institutions will be essential to deepening democracy and
maintaining peace and stability at the heart of the Horn of
Africa.
HUDDLESTON