PM ASSISTANT SECRETARY HILLEN'S CONSULTATIONS IN

S E C R E T SECTION 01 OF 09 CANBERRA 001804

SIPDIS

NOFORN
SIPDIS

STATE FOR EAP/ANP, S/CT, S/I, NEA AND SA

E.O. 12958: DECL: 11/07/2016
TAGS: PREL MARR MOPS PGOV PINR AS
SUBJECT: PM ASSISTANT SECRETARY HILLEN'S CONSULTATIONS IN
AUSTRALIA: ARTICLE 98, IRAQ, AFGHANISTAN, IRAN, DPRK,
COUNTERTERRORISM, PACIFIC ISLANDS, AUSMIN, TSD, JOINT
STRIKE FIGHTER, GPOI

REF: A. SYDNEY 1432

B. CANBERRA 1765

C. SYDNEY 1451

Classified By: POLCOUNS James F. Cole, for reasons 1.4 (b) and (d).

SUMMARY
--------------

1. (C/NF) A/S Hillen held productive talks with a wide range
of Australian Government officials in Canberra November 2-5.
He secured GOA consent to meet again bilaterally to consider
an Article 98 agreement before the December 12
Australia-United States Ministerial (AUSMIN) consultations.
Australia reconfirmed its commitment to keep its troops in
Iraq without deadline, and agreed to help persuade the UK to
support poppy eradication in Afghanistan. The two sides
discussed Iran, counterterrorism, MANPADS, and security
issues in North Asia and the Pacific, as well as possible
increased U.S. engagement with New Zealand. The GOA proposed
several new agenda items for AUSMIN and urged an early
rescheduling of the Trilateral Strategic Dialogue (TSD)
Ministerial, originally proposed for January 2007. Defense
officials voiced continued concern about the ultimate cost
and production schedule of the Joint Strike Fighter, and
discussed contingencies in the event of a gap in Australia's
air capability. A/S Hillen signed a Memorandum of
Understanding on the Global Peace Operations Initiative
(GPOI) that will advance cooperation and assign an Australian
officer to the PM Bureau by December 2006. End Summary.

--------------
INDEX
--------------

2. (SBU) Following is an index of topics covered in this
message:

Article 98......................para 3
Iraq............................para 5
Afghanistan.....................para 7
Iran............................para 9
Counterterrorism................para 11
MANPADS.........................para 14
North Korea, China, Japan.......para 16
Pacific Islands.................para 17
East Timor......................para 18
AUSMIN..........................para 19
Trilateral Strategic Dialogue...para 21
Australian Defense Capability...para 22
New Zealand.....................para 23
Joint Strike Fighter............para 24
GPOI............................para 25

--------------
ARTICLE 98
--------------

3. (SBU) During a November 3 roundtable at the Department of
Foreign Affairs and Trade (DFAT),Assistant Secretary Hillen
pressed Australian legal representatives from DFAT and the
Office of the Attorney General (AG) for a resolution of the
Article 98 issue in advance of the December 12
U.S.-Australian Ministerial (AUSMIN) consultations, noting
continued strong U.S. interest, especially from Defense
Secretary Rumsfeld. He cited successful U.S. negotiation of

SIPDIS
101 Article 98 agreements to date, noting that most countries
were able to reach policy decisions that obviated the need
for protracted negotiations to arrive at customized
agreements. He stressed that a firm decision by the GOA was
preferable to a "polite slow roll." Hillen suggested that
lawyers from both countries meet for one more "muscular"
exchange on the issue before the AUSMIN with a view to making
a final determination on the prospect of achieving agreement,
observing that the issue would be raised by the American side

CANBERRA 00001804 002 OF 009


at AUSMIN whether or not it was explicitly included on the
agenda.


4. (SBU) DFAT Senior Legal Adviser Penny Richards responded
that several obstacles prevented the Government of Australia
from agreeing to the latest U.S. proposal, including the
overly broad scope of the agreement; U.S. engagement with
persons already surrendered to third countries; the
non-treaty status of the state-level Australia-New Zealand
extradition arrangement; the lack of reference in the
agreement to the U.S.-Australia Status of Forces Agreement;
re-extradition of persons to third countries that might be in
conflict with obligations not to surrender American citizens
to the International Criminal Court; and the need to
accommodate confidentiality requirements under the Rome
Statute. The Australian side agreed with A/S Hillen's
suggestion for lawyers to meet for a final attempt to resolve
differences before December 12, adding the caveat that the
Minister for Foreign Affairs, the Minister for Defence and
the Attorney General would need to approve any agreement.
Participants did not discuss a date for the next meeting of
the lawyers.

--------------
IRAQ: GOA Reaffirms Commitment to Stay "For the Long Haul"
--------------

5. (C) Senior officials, including Defence Minister Brendan
Nelson, Chief of the Defence Force (CDF) Angus Houston and
DFAT Deputy Secretary David J. Ritchie, reaffirmed to A/S
Hillen on several occasions Australia's commitment to Iraq,
including provision of military forces without a timetable
for withdrawal. DFAT Deputy Secretary David J. Ritchie,
during a November 3 roundtable, told Hillen that there was
"no daylight" between U.S. and Australian views of Iraq and
stated flatly that there was "no current thinking of pulling
out," although Australia may make some adjustment to its
tasks, as needed. CDF reassured A/S Hillen that Australia
was in Iraq for "the long haul," but expressed concerns about
the commitments of other Coalition members. ADOD Secretary
Ric Smith added that the issues had become "highly
politicized" and that there was pressure to show progress
before the next election. Ritchie reaffirmed that any
withdrawal of Australian forces would depend on circumstances
on the ground; Australia would not set a timetable, despite
strongly negative domestic views about the deteriorating
situation in Iraq and the continued involvement of Australian
troops. He said polls showed Australians wanted Australian
troops to be withdrawn from Iraq "but not precipitously."
Public opinion was partly driven by U.S. views, but also by
public perceptions that Iraq was in chaos, the Coalition was
bogged down, and the war was "unwinnable." Ritchie urged
close, advance consultation on any planned changes in U.S.
tactics, establishment of benchmarks or milestones for the
Iraqi Government, or plans for withdrawal of U.S./Coalition
forces, asserting that "We want to make sure we aren't
surprised."


6. (S/NF) A/S Hillen underlined the need for Coalition
partners to remain engaged in Iraq to prevent the greater
chaos that would attend a precipitous withdrawal. He assured
his Australian hosts that domestic political shifts in the
United States would not affect the President's overall
strategy in Iraq over the next two years, predicting that
Congress would continue to support U.S. troops there
regardless of the results of the mid-term elections. He took
on board the GOA wish for continued close consultations on
any planned changes in Iraq. CDF Houston expressed "grave
concern" about the Maliki Government's inability, and
unwillingness, to reign in the Shi'ite militias. Maliki's
blatantly partisan tactics of dealing with the militias
threatened the legitimacy of the unity government, Houston
said, and patience within the international community was

CANBERRA 00001804 003 OF 009


wearing thin. He asked if the U.S. had any plans to deal
with the militia problem itself. A/S Hillen stated that U.S.
intervention was among the range of possible options, but the
expectation was that the Iraqis would address the militia
issue themselves, with Coalition assistance.

--------------
AFGHANISTAN: The Long View
--------------

7. (C/NF) A/S Hillen outlined coalition objectives in
Afghanistan, noting the importance of putting in place
programs and systems of sustainable governance in areas where
the insurgency was being effectively tamped down. Overall,
there was no reason for pessimism about Afghanistan's future.
The United States took the long view, cognizant that
assisting the new democracy would be a 10-20 year project.
He disclosed that the United States was planning to announce
a large reconstruction program, focused mainly on
infrastructure, i.e., roads and the electricity grid. It was
important to help President Karzai shift his focus to needs
outside Kabul. While the resurgence of the Taliban in some
areas was discouraging, on the positive side, the Taliban was
not attempting to establish alternative government
structures. Hillen assessed that NATO was doing well overall
but lacked capacity to integrate military and civil aspects
of their operation. A/S Hillen noted that the opium trade
remained the greatest threat to security, as drug smuggling
provided the Taliban with a continual source of income. He
said that the key to stopping the drug trade was finding
viable livelihood alternatives; a difficult task when the
best case scenario projected that eight years from now,
former poppy farmers would only be making 35% of what they
currently earn growing poppies. A/S Hillen expressed
frustration that the British were slow to acknowledge the
link between the opium trade and Taliban resurgence. A/S
Hillen asked the Australians to weigh in with the British to
convince them to aggressively pursue eradication.


8. (C/NF) The GOA welcomed A/S Hillen's announcement of plans
for an infrastructure package. Deputy Secretary Ritchie,
Defence Secretary Smith, and DFAT Secretary L'Estrange agreed
to help persuade the UK about the nexus between terrorism and
narcotics. Smith and Ritchie noted they would have an
opportunity to raise the issue with the British at their
annual Pol-Mil talks with the UK the following week.
Secretary Smith suggested that the best solution to opium

SIPDIS
cultivation might be to mirror farmer subsidy programs,
whereby the Coalition forces would purchase the poppy crops.
The Australians agreed with A/S Hillen's overall assessment
of the situation in Afghanistan, including the need for
President Karzai to extend his writ beyond the capital. The
Afghan people were frustrated over the lack of services and
the government's failure to provide them, Ritchie told him;
thus the focus should remain on reconstruction. Ritchie gave
an upbeat readout of Australia's cooperation with the Dutch
in Oruzgan Province, adding that the new Australian Embassy
would be collocated with that of the Dutch in Kabul. He
agreed with A/S Hillen's negative assessment of President
Musharraf's peace deal with Waziristan's tribal elders,
adding that Pakistan needed to do more against the Taliban.
Ritchie commented that Afghanistan enjoyed wide bipartisan
support in Australia, and the Australian Government was also
somewhat optimistic about its future. Australian troops
deployed there were committed for two years but the GOA
expected to have forces beyond that time frame.

--------------
IRAN: Australia "Deeply Worried"
--------------

9. (C/NF) Diverging from the prepared agenda at Australia's
request, A/S Hillen outlined the four-pronged U.S. strategy
towards Iran, including pressure to end its nuclear program.

CANBERRA 00001804 004 OF 009


Iran, whose success would encourage other states with nuclear
ambitions, was more problematic than North Korea, he
observed. Unlike the latter, Iran was not surrounded by
strong states with the will and ability to apply pressure on
it to denuclearize. The United States remained concerned
also over Iran's continued belief in the efficacy of
supporting sub-national or non-state actors. On Iran's
relationship to Iraq, the United States wanted Iraq to be
strong enough to resist Iran but not so strong that it could
threaten its neighbors. A/S Hillen concluded by noting U.S.
efforts to restrain Israel from reacting rashly to Iranian
behavior.


10. (S/NF) David Ritchie said Australia was deeply worried
about Iran. Iran saw itself as part of the Persian Empire,
rather than of the Arab world, and aspired for dominance
among the Shia and pre-eminence in the region. Iran had
calculated that it was prepared to live with some level of
sanctions over its nuclear program, Ritchie commented, adding
that the GOA and the U.S. needed more intelligence on Iran's
clandestine weapons and nuclear program. Financial
intelligence showed the varying ways in which Iran was using
the banking system. Ritchie underlined the need for the
international community to confront President Ahmadinejad's
"fake argument" that Iran's nuclear program was designed to
meet its energy needs. He worried that mild sanctions
against Iran would only reinforce the notion that there was
little cost in proceeding with nuclearization. First
Assistant Secretary for the Americas Division Les Luck
interjected that like-minded states should involve China,
along with Russia and the Europeans, more deeply in
confronting Iran. Ritchie countered that the Europeans were
weak on Iran. Vice Chief of the Australian Defence Forces
(VCDF) Ken Gillespie stated that Iran wanted to cause the
U.S. as much "grief" in Iraq as possible, but that the
Iranians didn't actually want Iraq to collapse. A/S Hillen
agreed, noting that Iran preferred the "status quo" of an
Iraq simmering with insurgency, but not imploding into
full-scale civil war. A/S Hillen stated that the Arab
nations remained extremely worried about Iranian regional
hegemony and needed continued assurances that the U.S. was
not going to abandon them.

--------------
COUNTERTERRORISM: GOA's Highest Priority
--------------

11. (C/NF) DFAT Assistant Secretary for Counterterrorism
Perry Head summarized recent Australian initiatives in
countering terrorism, which he termed the GOA's highest
priority. The GOA had enhanced its CT presence in Southeast
Asia and provided new resources for DFAT, enabling it to
create new offices for coordination and policy. Surveying
Australia's most significant CT challenges in the region,
Head listed terrorism in the Philippines as a major concern,
along with the difficulty of achieving effective CT
coordination with the GRP. While the terrorism threat from
JI in Indonesia remained high, Australia was pleased with the
level and pace of its CT cooperation with the Government of
Indonesia, which Head characterized as proceeding as well as
could be hoped. Ritchie interjected that Australia expected
to sign the Framework Agreement for Security Cooperation with
Indonesia on November 13. Malaysia was "still doing a good
job" on CT, with bilateral cooperation proceeding
satisfactorily. In Thailand, unrest in the South appeared to
be more the result of local grievances rather than agitation
by international jihadists. Ritchie noted that prospects for
addressing terrorism in southern Thailand appeared to be
better with the post-coup leadership of the Thai Government.
In addition to promoting regional CT cooperation, Australia
was engaging extremist ideology in the "Battle of Ideas."
Head cited several examples of cooperation with Indonesia on
this front, including collaborating with the GOI on a film

CANBERRA 00001804 005 OF 009


featuring victims of terrorism. Head drew attention to
Foreign Minister Downer's November 1 speech "Terrorism:
Winning the Battle of Ideas" (Ref C),which outlined the GOA
strategy to retake the high ground in this area. First
Assistant Secretary for International Security David Stuart
commented that resolution of the Israeli-Palestinian conflict
would remove a rallying point for extremists. David Ritchie
observed that Australia had had little success engaging India
on CT cooperation, adding that Australia was worried also
about Bangladesh.


12. (C/NF) Referring to the recently concluded Trilateral
Counterterrorism meeting in Tokyo, Perry Head said the GOA
remained concerned that Japan lacked effective internal
coordination, which did not auger well for progress in
cooperating on CT. It was important to try to make progress
with Japan in this area. Ritchie suggested that the
Trilateral Strategic Dialogue (TSD) table the issue of
Japanese coordination at the TSD Ministerial in early 2007.


13. (C/NF) Referring to countering extremist ideology, A/S
Hillen foreshadowed renewed energy on the part of the United
States in addressing the Israeli-Palestinian problem. He
concurred that the United States and others needed to be more
effective in the battle of ideas. Hillen praised Indonesian
cooperation on counterterrorism, pointing to the large number
of arrests of terrorist suspects, and hinted that the
President likely would visit Indonesia on the margins of
APEC. He agreed with the GOA's view of the difficulties in
eliciting cooperation from the Philippines, ruefully
observing that, while there had been little return on the
U.S. investment in the RP, the opportunity costs were too
high for the U.S. not to be engaged. A/S Hillen agreed with
the concerns Australia expressed about Japan, underscoring
the importance of getting trilateral cooperation "out of the
gate."

--------------
MANPADS
--------------

14. (C) A/S Hillen, referring to the USG Deputies Committee
decision to make MANPADS a global priority, noted that, of
the estimated 50,000 loose MANPADS, about 19,000 had been
destroyed or secured with another 5,000 targeted for
destruction. Key target countries were Yemen, Afghanistan
and Iraq. He mentioned that the United States had quadrupled
spending on the manpads issue, and planned to appoint a
special representative on manpads. Hillen added that he
headed a task force to coordinate efforts from the
intelligence community, Customs, State Department, and other
agencies. The U.S. planned to conclude agreements with
producers and would look at buying out some state producers,
such as Bulgaria.


15. (C) David Stuart said the recent MANPADS conference in
Washington, D.C. had been useful. The Australia Government
wanted to be able to announce progress on airport security
and stockpile security, and hoped to make a solid
announcement at APEC.

--------------
NORTH KOREA, CHINA AND JAPAN
--------------

16. (C) ADOD Deputy Secretary Mike Pezzullo stated that
Australia would interdict North Korean vessels traveling
within its jurisdiction, and were exploring options for
interdictions outside of Australian jurisdiction. He said
that pressure needed to be placed now on the "like-minded"
community to take action against the DPRK, before the
momentum created by UNSCR 1718 begins to dissipate. Pezzullo
added that this crisis was the "perfect alignment" needed to
get the Japanese to push past their Constitutional reluctance

CANBERRA 00001804 006 OF 009


and to take a more active role on the world stage. North
Asia First Assistant Secretary Peter Baxter welcomed the
successful U.S.-China collaboration in getting North Korea to
agree to return to the Six Party Talks (6PT). "When the cost
went up, China finally used the muscle it had always had," he
observed. Australia was pleased with Japan's overture toward
China. Baxter characterized Prime Minister Abe's recent
visit to Beijing as more useful than his visit to Seoul.
South Korea was the "weak link," he added; it already was
looking at resumption of the 6PT as an excuse to review its
commitment to implementing UNSCR 1718. GOA relations with
Japan were moving quickly; Australia wanted to position
itself as Japan's natural partner, after the United States,
he said. Australia was negotiating a framework agreement on
security cooperation with Japan, and had provided the text to
Tokyo. This would build on the 1996 Joint Declaration
between the two countries. In a subsequent meeting, DFAT
Secretary L'Estrange also commented favorably on the changing

SIPDIS
mood between Japan and China, and Japan's willingness to take
a hard line on the DPRK. He marveled that his Japanese
interlocutors were prepared to give their personal views
along with the GOJ policy line during his most recent trip to
Japan, which had never happened previously.

--------------
PACIFIC ISLANDS: Beset by Problems of Governance and Stability
--------------

17. (C/NF) Deputy Secretary David J. Ritchie and First
Assistant Secretary of the Pacific Division David A. Ritchie
(different middle initial) briefed A/S Hillen on key issues
and trouble spots in the Pacific. In broad strategic terms,
the situation in the Pacific was in a trough. Governance was
an issue throughout Melanesia. It was important for Pacific
countries to understand that it was not just Australia but
the international community that was concerned about good
governance. The Deputy Secretary echoed DFAT Secretary
L'Estrange's and Deputy Defence Secretary Pezullo's separate
appeals for support for Australia's message in this regard,
including a request that the United States weigh in with
Taiwan, and to a lesser extent China, on the need to avoid
using assistance in ways that undercut good governance and
sustainable development. Taiwan's motivation in conducting
checkbook diplomacy was political recognition. FM Downer's
focus was on Taiwan, rather than China for which the GOA had
less evidence of outright funding of politicians.

-- SOLOMON ISLANDS: The GOA noted Taiwan was blatantly
bankrolling Solomon Islands (SI) politicians, and there were
signs Taiwan was preparing to fund an alternative to RAMSI's
police function. The SI had invited Taiwan to provide forces
for the police or army. PM Sogavare was anti-Australia and
trying to do away with RAMSI. Anti-Australian sentiment was
growing in the Solomon Islands. Sogavare had physically
threatened Deputy Secretary Ritchie when the latter had
called on him to protest the expulsion of Australia's High
Commissioner. The Pacific Island Forum had been useful in
getting a consensus that protected RAMSI, at least
temporarily. Australia's strategy was to work below the
radar in maintaining RAMSI until Sogavare was voted out of
office. Sogavare's chief worry was that Australia would
expose corruption and begin arrests of SI politicians, up to
and including the Prime Minister.

-- FIJI: CDF Houston stated that, at this time, Australian
military planning for Fiji was limited to evacuation of
Australian citizens. In the event of a coup, he said,
Australia would seek to work through means other than
military intervention to stabilize the country. Houston
added that, with 4,000 good Fijian soldiers on the ground,
any intervention by an outside force would be "a tough nut to
crack." Other interlocutors noted GOA intelligence showed
that Fiji Defense Chief Frank Bainimarama had been planning a

CANBERRA 00001804 007 OF 009


coup for some time. He was expected to transit Los Angeles
on/about November 4 en route to Suva. Australia hoped the
United States would be able to give him a strong warning
against mounting a coup during his U.S. transit. To Brig.
General Toolan's question about the legal or financial
consequences of a coup, the GOA confirmed that there would be
consequences, but, unlike the United States, there was no
mechanism for an automatic cutoff of funding. The Australian
side suggested there might be some leverage over Fiji through
its extensive involvement in peacekeeping operations.

-- PAPUA NEW GUINEA: (C/NF) Defence Intelligence
Organisation Director Major General Maurie McNarn described
the looming AIDS crisis in PNG, which threatens to
destabilize the nation. He said that the rate of AIDS
amongst the population could reach 2.5 percent, which would
cause hospitals to collapse. MG McNarn also predicted that
the food supply could experience significant disruptions, as
the bulk of subsistence agriculture in PNG was done by women,
and women were being infected with AIDS at a greater rate
than men. McNarn added that Australia could be the first
Western nation to have a major AIDS crisis directly on its
border. He said that Australia was providing aid to PNG, but
given the rampant corruption of the PNG government, there was
a limit to how much the GOA could do.

--------------
EAST TIMOR: Green Versus Blue Helmets
--------------

18. (C/NF) During a November 3 meeting, Secretary of the
Department of Foreign Affairs and Trade Michael L'Estrange
thanked the United States for its assistance to Australian
forces during their intervention in East Timor. He termed
the situation in East Timor "depressing," pointing to
continued political infighting. FRETELIN seemed more
determined than ever to run its own course, and had been
provoking unrest as a means of discrediting Australian forces
in favor of a blue-helmet UN force. Separately, Deputy
Secretary of Defense for Strategy Pezzullo reaffirmed the

SIPDIS
GOA's deep appreciation for U.S. and British support for
maintaining the Australian green-helmet mission in East
Timor. He described working with the UN Department of
Peacekeeping Operations (DPKO) as a "horror," and said that
the UN had done everything possible to denigrate the
Australian green-helmets in favor of promoting the
blue-helmets. He expressed disbelief that the UN refused to
acknowledge that Australia was a competent military force
able to take the East Timor issue "off the hands" of the
overstretched DPKO.


-------------- --------------
AUSTRALIA-UNITED STATES MINISTERIAL CONSULTATIONS (AUSMIN):
Agenda Suggestions and Format
-------------- --------------

19. (C/NF) Over a November 3 working lunch hosted by First
Assistant Secretary for the Americans Division Les Luck, the
Australian side made several proposals for the 2006 AUSMIN
agenda. Deputy Secretary for Strategy Michael Pezullo
suggested adding updates and plans for defense
interoperability, Joint Combined Training Capability (JCTC),
Global Peace Operations Initiative (GPOI),and Missile
Defense (MD),all of which had been agreed at the 2004
AUSMIN. Luck proposed combining A/S Hillen's suggestion that
the Alliance refocus on regional capacity-building, made
during his November 2 address to the Kokoda Dinner, with the
latest U.S. global initiative to combat nuclear terrorism to
identify new measures and outcomes that might build regional
capacity to address nuclear terrorism threats, e.g., from
North Korea. The Australian side also proposed adding
Intelligence, Surveillance and Reconnaissance (ISR);
nation-to-nation training capability; space; International

CANBERRA 00001804 008 OF 009


Traffic in Arms (ITAR) regulations; regional capacity
building; increased use of Australia territory for training;
U.S. Global Defense Posture; intelligence-sharing and
National Disclosure Policy; Trilateral Strategic Dialogue
process and challenges; and Asian architecture, including
APEC and EAS. Expanding on the topic of East Asian
architecture, the Australian side noted that Prime Minister
Howard favored including India in APEC and reaffirmed the
GOA's view of the importance of maintaining the primacy of
APEC as the only vehicle that brings together all of the
heads of government -- including the U.S. President.
Assistant Secretary for the United States Branch, Allaster
Cox, defined the GOA's strategic interest in regional
architecture in terms of ensuring that the United States
remained engaged.


20. (C/NF) A/S Hillen, who had opened the discussion by
inviting suggestions for agenda items in addition to export
controls and Article 98, noted that the PM and EAP bureaus
had been working on the agenda and plans for AUSMIN. He
opined that some items might be incorporated into the joint
communique, for example, reaffirming the ongoing commitment
to Iraq and Afghanistan. Hillen agreed that AUSMIN
represented a way to challenge both parties to move forward,
for example, with the JCTC. He concurred that it would be
important to announce the important progress that had been
achieved in implementing the National Disclosure Policy. DCM
Quinlan interjected that some issues remained regarding
intelligence sharing with some members of the IC. Regarding
the discussion of regional architecture, Hillen reminded the
Australians that any agenda item would need to be tightly
focused, and asked the GOA to provide a preview of what
Australia hoped to accomplish. On process, he said he and
EAP A/S Hill would together agree on the AUSMIN agenda for
the State Department. He took on board the Australia's
strong preference to keep the sides small -- 4 plus 4, if
possible. The Australian side likely would comprise Foreign
Minister Downer, Defence Minister Nelson, Secretary of the
Department of Foreign Affairs and Trade L'Estrange, Secretary
of the Department of Defence Warner, Chief of the Defence
Force Angus Houston, Ambassador Richardson, Secretary of the
Department of Prime Minister and Cabinet Peter Shergold, and
one other. A/S Hillen agreed on the desirability of
discussing at AUSMIN the allies' expectations for Japan, with
a view to considering imposition of deadlines on Japan to
spur it to accomplish specific objectives. This would be
especially important, as Japan planned to create a ministry
of defense and to stand up a new intelligence agency.

--------------
TRILATERAL STRATEGIC DIALOGUE (TSD): GOA Seeks an Early
Ministerial in 2007
--------------

21. (C/NF) Secretary L'Estrange observed that the TSD in New
York had made practical progress on counterterrorism,
maritime security and disaster relief. The proposed TSD on
the margins of APEC in Hanoi would be too short to allow for
much discussion beyond APEC and North Korea. He expressed
disappointment that the Secretary's proposed January TSD on
the West Coast would slip, adding it would be a pity if it
drifted to the April-May timeframe. (Foreign Minister Downer
said the same thing to us separately.) L'Estrange appealed
for the U.S. side to set a new date for the TSD as early as
possible in 2007, with enough time to cover a longer agenda.
He restated Australia's interest in engaging India in
multilateral discussions -- not in the TSD but perhaps on the
margins of other meetings.

--------------
AUSTRALIAN DEFENSE CAPABILITY: 2007 Strategic Update
--------------

22. (C) Pezzullo mentioned that the GOA would likely come out

CANBERRA 00001804 009 OF 009


with a new strategic update in the first quarter of 2007.
The update would acknowledge that Australia has two major
strategic missions. The first, and primary mission, of the
Australian Defence Force (ADF) would be to take the leading
role to quell conflicts in the immediate region, an area
Pezzullo defined as covering more than 10 percent of the
world's surface. The ADF's secondary mission would be to
make meaningful contributions in global missions outside of
Australia's immediate region. In these conflicts, Australia
would not be a "framework leader."

--------------
NEW ZEALAND: No Free Pass
--------------

23. (C) According to Pezzullo, Australia supports efforts to
ramp up U.S.-New Zealand dialogue and move past the nuclear
debate. He added, however, that New Zealand should have to
pay a "negative premium" for its continued stance on
nuclear-powered ship visits. "New Zealand can't opt out of
the nuclear issue," he said, "and still be full players in
the Alliance." A/S Hillen agreed, and noted that New Zealand
would have to be willing to be a larger player in other
issues, in order to move the nuclear issue "off the center."

--------------
JOINT STRIKE FIGHTER (JSF): Price and Production Worries
--------------

24. (C) Defence Materiel Organisation CEO Stephen Gumley
thanked A/S Hillen for his efforts to address Australian
concerns regarding the technology transfer process, including
the question of dual nationals. Gumley stated that A/S
Hillen's advocacy had gone a long way towards reassuring the
GOA that its companies would not be left at an insurmountable
competitive disadvantage in the Joint Strike Fighter (JSF)
project. Gumley stated, however, that the Australian
government could not agree to buy the JSF until it knows how
much it will cost. Since the ultimate price of the JSF will
be dependent on how many countries agree to buy it, he added,
there will need to be a "hard conversation" in the near
future. Gumley also reiterated that Australia was truly in
the "hot seat" with its "strategic bet" on JSF, because if
JSF fell through, Australia would be left without any air
capability by early in the next decade. If the JSF project
were to be significantly delayed, Chief Capability
Development Group Lt. Gen Hurley said, and if Australia's
ageing fleet of F-111 could not be further maintained,
Australia might need to ask the U.S. for access to its
airplanes, including taking U.S. production slots. Hurley
described this as a "crisis scenario only" fall-back
position, but one for which the U.S. should be prepared.

--------------
GPOI: MOU signed
--------------

25. (C) A/S Hillen and ADOD Secretary Ric Smith signed a
Memorandum of Understanding on joint activities under the
Global Peace Operations Initiative (GPOI) umbrella. As part
of the GPOI MOU, an ADF officer will be assigned to the PM
bureau at State, beginning in December 2006.

MCCALLUM