(C) PRC/AFRICA: ETHIOPIA AND ERITREA AT THE

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 024348

SIPDIS

SIPDIS

DEPT FOR AF, EAP, EAP/CM
INR FOR GILLES

E.O. 12958: DECL: 12/06/2026
TAGS: PREL PGOV AGOA ECON EAID CH
SUBJECT: (C) PRC/AFRICA: ETHIOPIA AND ERITREA AT THE
CHINA-AFRICA SUMMIT

REF: A. BEIJING 22370


B. BEIJING 23548

C. BEIJING 23695

Classified By: Political External Unit Chief Edgard Kagan. Reasons 1.4
(b/d).

Summary
--------------


1. (C) President Hu Jintao met with both Ethiopian Prime
Minister Meles Zenawi and Eritrean President Isaias Afwerki
during the Beijing Summit of the Forum for China-Africa
Cooperation (FOCAC)(Ref A),according to MFA contacts, who
added that the two African leaders did not meet each other
while in Beijing. Hu and Meles discussed bilateral trade,
with Meles pushing for greater Chinese investment in
Ethiopia. Hu pledged to accelerate negotiations on an
infrastructure loan to Ethiopia worth over USD 1 billion. Hu
and Isaias discussed regional security, including Sudan and
Somalia. Isaias expressed concerns about the Ethiopian
military presence in Somalia, an MFA contact said. PRC
Foreign Minister Li Zhaoxing may travel to Eritrea in
January, our contact noted. End Summary.


2. (C) Poloff discussed Ethiopia and Eritrea's participation
at the FOCAC Beijing Summit separately with MFA African
Department Deputy Division Director Zhang Bin, MFA African
Department Official Wang Guofei, Ethiopian Political Minister
Counsellor Eyassu Dalle (protect) and Ethiopian Commercial
Officer Melaku Legasse (protect).

Meles, Hu Discuss Trade and Loans
--------------


3. (C) China and Ethiopia enjoy excellent bilateral
relations, MFA African Department Deputy Division Director
Zhang Bin said. PM Meles held separate, brief bilaterals
with President Hu Jintao and Premier Wen Jiabao during his
November 3-5 visit to Beijing in his capacity as co-Chair of
the recent FOCAC Beijing Summit. The meetings took place on
November 4 and each lasted approximately twenty minutes and
covered the same substantive ground, Zhang said, noting that
President Hu held approximately 40 bilateral meetings with
African presidents during and immediately before and after
the Beijing Summit. PM Meles was the only non-President to
receive a bilateral with President Hu, due primarily to his
role as the Beijing Summit's co-Chair, Zhang added.


4. (C) PM Meles and President Hu discussed bilateral trade,
which grew to nearly USD 400 million through the first three
quarters of 2006, a 20 percent year-on-year increase,
according to Zhang. PM Meles expressed satisfaction with
zero-tariff treatment for some Ethiopian products (under
previous FOCAC arrangements) that have doubled Ethiopia's
exports to China. In response to Meles' push for more
Chinese investment, Zhang said that President Hu told the PM
that the PRC will accelerate the construction of a previously
agreed agricultural polytechnic in Ethiopia and that Beijing
will move faster on Addis Ababa's request for an
infrastructure development loan worth over USD 1 billion.
Commenting that the PRC Export-Import bank would likely issue
the loan, Zhang expressed optimism that the loan agreement
will be concluded in the near future. Due to the limited
time, the two sides did not discuss regional security or
other foreign policy matters, Zhang added.

Isaias, Hu Discuss Regional Security
--------------


5. (C) Zhang told us that Eritrean President Isaias had a
twenty-minute bilateral meeting with President Hu on November
6, the day after the conclusion of the Beijing Summit.
According to Zhang, President Isaias briefly offered his
views on Sudan, Somalia and Ethiopia. Isaias insisted the
Ethiopian military is operating in Somalia and hurting the
prospects for peace. Hu responded China follows developments
in Somalia closely and has helped bring international
attention to the crisis. China supports the efforts of the
international community and the parties involved to find a
peaceful solution, Hu added, Zhang said. Regarding the
Eritrea-Ethiopia border dispute, Zhang said Hu told Isaias
that China is friends with both countries and stands for
peaceful resolution in accordance with the Algeria peace
agreement. The boundary commission held consultations
earlier this year and China hopes both sides will find a
mutually satisfactory solution, Hu said, according to Zhang.

BEIJING 00024348 002 OF 003




6. (C) On Sudan, Isaias stressed Eritrea's "important role"
in moving the North/South peace process forward and current
efforts to work with the Government of National Unity (GNU)
to help find a solution for Darfur, Zhang said. Isaias
thanked Hu for China's development assistance to Eritrea and
talked broadly about globalization and the need for the
international community to pay attention to Africa, according
to Zhang. No bilateral agreements were signed between China
and Eritrea during the Beijing Summit, Zhang added, noting
that PRC Foreign Minister Li Zhaoxing may travel to Eritrea
in January. FM Li traditionally begins his diplomatic travel
each year with a trip to Africa, MFA officials have told us.

No Meeting Between Meles and Isaias
--------------


7. (C) PRC MFA Africa Department Officer Wang Guofei,
responsible for Ethiopia/Eritrea, and Zhang Bin separately
stated PM Meles and President Isaias did not meet while in
Beijing. Wang noted that both leaders were "happy to come to
China." As FOCAC co-Chair, PM Meles was granted "appropriate
protocol" (implicitly, elevated status),Wang added. Eyassu
and Melaku also separately said that Meles and Isaias did not
meet during the Beijing Summit. PM Meles arrived November 3
and departed November 5 shortly after the Beijing Summit
concluded, both noted.

Ethiopia Not Satisfied
--------------


8. (C) Ethiopia was not wholly satisfied with the substantive
outcomes of the Beijing Summit, according to Ethiopian
Embassy Political Minister Counselor Eyassu Dalle, who worked
extensively on the event (which was technically co-hosted by
Ethiopia). Providing us with a readout of the Beijing
Summit, Eyassu said President Hu's eight-point plan to
enhance Chinese aid and trade with Africa (Ref B) is short on
specifics and quite small when considered against the needs
of the 48 African countries with which Beijing has diplomatic
relations. Specifically, the value of the PRC pledge to
double PRC assistance to Africa over the next three years is
questionable because Beijing has not provided African
countries with baseline assistance figures for 2006 or shown
how current assistance is distributed. Similarly, PRC
promises to provide USD 3 billion in preferential loans and
USD 2 billion of preferential buyer's credits to Africa over
the next three years may not be so generous on closer
scrutiny, Eyassu said.


9. (C) According to Eyassu, Chinese preferential loans are
granted through the PRC Ex-Im bank and "carry high-interest
rates," which may run afoul of African governments'
commitments to other international financial institutions.
Buyer's credits similarly may largely benefit Chinese
companies seeking to invest in Africa, rather than African
companies. The PRC has not provided any details on President
Hu's offers but the arrangements will be worked out
bilaterally, so that a given African country likely will not
have the advantage of knowing the terms and conditions
granted to other African countries. Eyassu noted that prior
to the Beijing Summit, Ethiopia began courting Beijing for a
loan facility in excess of USD 1 billion for infrastructure
development, but the deal has yet to be concluded.


10. (C) The Beijing Summit was useful in that it served as an
opportunity to bring African development concerns and
challenges to the world stage, Eyassu and Melaku separately
said. PM Meles' address at the Opening Ceremonies of the
Beijing Summit was well-received by other African delegations
because it reaffirmed African concerns that were not
otherwise included in the Beijing Summit's operative
documents or discussions, such as Africa's commitment to
pursue good governance, Eyassu added. PM Meles also
highlighted the need to balance China-Africa trade. While
the PRC publicly repeats that it maintains a trade deficit
with Africa, Eyassu said African countries are not fooled by
the rhetoric and know that once oil is removed from the
equation, China enjoys an enormous trade surplus. Oil
revenues only benefit a few African countries, Eyassu added.

No Consensus On Beijing Action Plan
--------------


11. (C) Eyassu said the PRC has yet to release publicly the
Beijing Action Plan, one of the two operative documents of
the Beijing Summit, because the PRC could not reach consensus

BEIJING 00024348 003 OF 003


with the African countries during the Senior Officials
Meeting and the Ministerial. The document remains in draft
and, from African countries' perspectives, is still subject
to negotiation. According to Eyassu, areas of African
concern include the lack of specifics about implementation of
Beijing's assistance proposals and lack of African
representation on the FOCAC Follow-Up Committee. In the
run-up to the Beijing Summit, many African countries pushed
unsuccessfully to create a joint follow-up committee. The
issue is still under negotiation as far as many African
countries are concerned. An African consensus is building
that African genuine African participation is needed in the
FOCAC Follow-Up Committee, Eyassu underscored.

African Word-Smithing
--------------


12. (C) Though there was agreement on the wording of the
Beijing Declaration, the other operative document from the
Beijing Summit, Eyassu expressed frustration that African
delegations focused excessively on word-smithing the draft
Beijing Declaration during the November 1-2 Senior Officials
Meeting (Ref A),wasting time that could have been better
used to press for greater specificity in the draft Beijing
Action Plan. Eyassu said Egypt and South Africa pushed to
refer to the African Union Act, along with the UN Charter,
China's Five Principles of Peaceful Coexistence and "other
generally recognized norms governing international
relations." Morocco and others opposed and after almost two
days of debate the African Union Act was not included and the
reference to the UN Charter was also deleted. Likewise,
Egypt, Nigeria and South Africa argued to include a call for
"full participation" of African countries in the UN Security
Council and UN agencies. The PRC conceded the point, but
Eyassu noted that "full participation" is still vague.
African countries are convinced that any Security Council
reform must lead to a permanent African seat or seats,
although the Africans are deeply divided over which African
country or countries should hold that seat or seats, Eyassu
said.

Few Ethiopian Business Deals
--------------


13. (C) Eyassu and Melaku Legasse separately said Ethiopia
did not send a large business delegation to participate in
the High-Level Economic Dialogue and Matching Session (Ref C)
because Ethiopia's companies are not yet prepared to compete
in China's market. Ethiopian businesses signed fewer than
five business agreements during the Beijing Summit, Eyassu
said, adding that he only knew of a telecommunications
agreement. Melaku said China and Ethiopia signed a joint
venture agreement to build a cement factory in Eastern
Ethiopia, worth several million dollars. Eyassu noted that
Uganda has entered the retail coffee market in China, but
Ethiopian companies are simply not prepared for a retail
sales push.


14. (C) Melaku and Eyassu separately said Ethiopia currently
receives zero-tariff treatment on approximately 14 of the 190
exports currently eligible for special preferential treatment
(SPT). Sesame exports have greatly benefited from SPT. With
the PRC now increasing eligibility to more than 440 tax
categories, all to be negotiated bilaterally, Ethiopia wants
to expand its access to the Chinese market. Ethiopia is keen
to receive SPT for ground coffee, but the PRC has not
released a list of which African exports will be covered by
the 440 categories, Eyassu said, adding, "we will expect some
tough negotiations ahead." Melaku said Ethiopia hopes the
new SPT schedule will be announced in January, although Zhang
Bin told us the schedule may be announced later in 2007.

Bio Note
--------------


15. (C) Eyassu Dalle said he is a former Member of Parliament
and said he has been in Beijing since 2001 to help Ethiopian
Ambassador Haile Kiros Gessesse Tedla coordinate Ethiopia's
six-year stint as FOCAC Co-Chair. He said he and the
Ethiopian Ambassador worked closely together and participated
together in the Senior Officials and Ministerial meetings in
advance of the Beijing Summit. Melaku said Eyassu and
Gessesse previously knew each other from Parliament.
Randt