ARGENTINA SCENE-SETTER FOR ASSISTANT SECRETARY

C O N F I D E N T I A L BUENOS AIRES 000036

SIPDIS

SIPDIS

FOR A/S TOM SHANNON FROM AMBASSADOR GUTIERREZ

E.O. 12958: DECL: 01/04/2016
TAGS: PGOV PREL ECON PARM AR SNAR
SUBJECT: ARGENTINA SCENE-SETTER FOR ASSISTANT SECRETARY
SHANNON

REF: A. 05 BUENOS AIRES 2345

B. 05 BUENOS AIRES 1936

Classified By: Ambassador Lino Gutierrez for Reasons 1.4 (B) and (D).


1. (C) INTRODUCTION AND SUMMARY: On behalf of Embassy Buenos
Aires, I warmly welcome your visit to Argentina January
11-12. Your visit comes at a critical time for Argentina's
relations with its neighbors, especially Bolivia. As a
result of Kirchner's resounding victory in October 23
legislative elections, Kirchner has tightened his already
firm personal control of foreign, defense, and economic
policy. Argentina's interests in Bolivia are mostly focused
on ensuring a steady supply of affordable gas and preventing
increases in drug trafficking and illegal immigration.
Kirchner's policy towards Bolivia occurs in the context of
increasing economic ties with Chavez, but a fraying
relationship with its other MERCOSUR partners. END
INTRODUCTION AND SUMMARY.


Kirchner's Tightened Political Grip
--------------


2. (C) On November 28, the Casa Rosada named replacements for
several key cabinet positions. The most troubling nominee,
given her history of pro-Chavez and pro-Castro statements,
was former Ambassador to Venezuela Nilda Garre as the new
Defense Minister. A major surprise was the announcement of
Banco Nacion President Felisa Miceli to replace Roberto
Lavagna as Minister of the Economy. Appointing Miceli placed
economic policymaking firmly in the hands of Kirchner, who
has proven to be an unpredictable economic policymaker.
Deputy Foreign Minister Jorge Taiana, Kirchner's chief
foreign policy advisor during the 2003 campaign, was tapped
to be the new Foreign Minister. Last August, Taiana told me
and the DCM that Kirchner would continue to be very focused
on domestic politics for the remaining two years of his term.
Taiana also cautioned us not to expect Kirchner to initiate
a more active foreign policy in the wake of a big election
win. The cabinet changes do not alter our fundamental
strategic interests in Argentina, but they will make it more
difficult for us to pursue them.

Regional Influence
--------------


3. (C) Argentina has played a positive role in promoting
human rights and democratic institutions in the hemisphere,
particularly in Haiti and Bolivia. Kirchner, with nothing to
gain politically, decided in 2004 to deploy 575 peacekeeping
troops in Haiti in support of MINUSTAH. This decision
reflected Argentina's traditionally strong support of UN
peacekeeping operations worldwide (e.g. in Cyprus and Bosnia)
and its specific commitment to Haiti. By all accounts,
Argentine peacekeepers have performed superbly in Haiti, and
we expect the GOA to continue to renew MINUSTAH's mandate -
unless Brazil or Chile pulls out.

Bolivia
--------------


4. (C) Although erratic on Bolivia at the beginning of his
term, Kirchner was a strong supporter of constitutional
democracy over the last several years. Argentina sent a
group of election observers to the December 18 Bolivian
presidential election, headed by former Argentine Vice
President and current Mercosur President, Carlos "Chacho"
Alvarez. In a December 22 meeting, Foreign Minister Taiana
told me that Argentina's policy towards Bolivia mirrors the
U.S. policy of constructively engaging the new GOB and
steering them in a moderate direction.


5. (C) Increasing natural gas availability is a top priority

for the Kirchner administration. Senior administration
officials recognize that energy policy is critical to
sustained economic growth (ref. A) and Planning Ministry
officials have been in active discussions with their Bolivian
counterparts to increase natural gas imports from Bolivia
(ref. B).


6. (C) President-elect Morales, expected visit on January 17
represents an opportunity for Argentina to secure increased
natural gas imports from Bolivia. From 1971 to 1998
Argentina spent more than USD 4 billion on Bolivian natural
gas. In 2003, the two countries signed a natural gas
agreement under which Argentina currently imports nearly 4.5
million cubic meters of natural gas daily. (The Argentines
would like to increase this to 7 million cubic meters per
day.) The development of the Northern Gas Pipeline (GNA) has
the most long-term promise for strengthening that bilateral
relationship and would bolster Bolivia's economic growth.


7. (C) Energy firms and analysts believe that the GNA will
cost approximately USD 1.5 billion and - once started - could
be competed in two years. The price, however, will be an
issue. Vice President-elect Linera said January 5 that the
"solidarity price" for natural gas deliveries to Argentina no
longer existed. Linera announced that the incoming Morales
administration intended to "negotiate a regional market price
that fundamentally benefits Bolivia" during Morales' January
17 visit to Argentina. Potential investors in the GNA are
concerned about political stability and an acceptable
investment framework under Bolivia's Hydrocarbons Law.


8. (C) Aside from maintaining a steady supply of affordable
gas, Argentina has a strong interest in preventing an
increase in the amount of illegal narcotics crossing its
northern border, as well as a potential rise in illegal
immigration in the event of political chaos. Argentine
border police (with DEA assistance) - in their largest
seizure ever - recently captured a 738 kilo shipment of
cocaine in the province of Salta. Argentina has seen larger
flows of cocaine and heroin across its northern border, bound
for Europe, the United States, or simply Buenos Aires.

Venezuela
--------------


9. (C) In Venezuela, President Kirchner played a constructive
role in pressing Chavez to hold a recall referendum in 2004
and met with the Venezuelan opposition on two occasions in

2004. More recently, Argentina has soughQstronger economic
ties with Venezuela. Kirchner met with Chavez in the
Venezuelan city of Puerto Ordaz on November 21 during a trip
that the GOA stressed was all about economics. The
presidents broke no new economic
ground, however, and Kirchner's economy minister was absent
from the delegation. The meeting resulted in a declaration
(the "Orinoco Declaration") to strengthen the countries'
economic relationship, which is not naturally robust.
Historically, Venezuela has absorbed less than one-half of
one percent of Argentina's exports, while Argentina has been
the destination of less than one-tenth of one percent of
Venezuela's exports. From Kirchner's perspective, the most
important element of the trip was that Chavez agreed to
continue Venezuela's purchases of Argentine bonds, which have
totaled approximately USD 1 billion thus far in 2005.

Comment
--------------


10. (C) Although Kirchner may be ideologically sympathetic to
Morales, he may soon find like minds do not always think
alike. Morales - who has already traveled to Caracas, Havana
and is currently in Europe - only recently agreed to add
Buenos Aires in a final stop January 17. Vice-President
elect Linera's announcement that the GOB intended to end its

preferential gas price for Argentina was another indication
that ideology will not carry this bilateral relationship very
far. The example of Uruguay is instructive. After welcoming
fellow leftist Tabare Vazquez's November 2004 election,
Kirchner has found himself embroiled in a bilateral dispute
over two paper mills on the Rio Plata, and now finds that a
senior Uruguayan official is apparently keen on breaking
MERCOSUR unity by negotiating a separate free-trade agreement
with us.


GUTIERREZ