(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