A/S HILL'S APRIL 13 MEETING WITH FORMER PM LEE

C O N F I D E N T I A L SEOUL 001385

SIPDIS

SIPDIS

E.O. 12958: DECL: AFTER KOREAN REUNIFICATION
TAGS: PREL MNUC ETRD KS KN
SUBJECT: A/S HILL'S APRIL 13 MEETING WITH FORMER PM LEE
HAE-CHAN


Classified By: Amb. Alexander Vershbow. Reasons 1.4 (b/d).


1. (C) SUMMARY: Former PM Lee Hae-chan told visiting A/S
Hill April 13 that in recent discussions, Chinese leaders
sounded disenchanted with Kim Jong-il, skeptical of his
ability to extend the Kim dynasty to the next generation, and
dismissive of Kim's commitment to economic reform. Lee
reaffirmed President Roh's "strong will" to conclude a
bilateral Free Trade Agreement, but warned of the perils of
attempting to include rice in the negotiations. END
SUMMARY.


2. (C) COMMENT: Although Lee Hae-chan stepped down as prime
minister in mid-March as a result of a golfing scandal, he
remains an extremely close personal and political confidant
to President Roh. Lee is widely seen as having been one of
the most powerful prime ministers in ROK history. Once
rumored to be mulling a presidential bid, Lee appears
unlikely to join the race in 2007 due to serious health
concerns (liver disease) and lack of popular appeal. Since
his resignation, he has returned to his seat in the National
Assembly. Lee's comments on his discussions with Chinese
leaders are noteworthy as he is among the ROK political
world's leading China hands. In early 2003, he met Jiang
Zemin and Hu Jintao as then President-elect Roh's special
envoy to Beijing; his daughter completed her undergraduate
studies at Beijing University. END COMMENT.

CHINESE DISENCHANTMENT WITH NORTH KOREA
--------------


3. (C) During an April 13 meeting with EAP A/S Christopher

R. Hill, Rep. Lee Hae-chan expressed disappointment at
Pyongyang's refusal to return to the Six Party Talks. He
recalled that he had recently told the DPRK's Rim Dong-ok
(First Vice Director of the Workers' Party and Vice Chairman
of the Committee for the Peaceful Reunification of the
Fatherland) that Pyongyang's actions were undermining those
in Washington and Seoul who wanted to resolve the nuclear
issue through negotiations. A/S Hill expressed dismay that
Pyongyang would boycott the Six Party Talks because Macao
authorities had frozen USD $24 million in North Korean assets
at Banco Delta Asia (BDA).


4. (C) Lee disclosed that in recent meetings, Chinese
leaders had indicated to him that China assessed that making
money available to build factories in the DPRK was
ineffective as the North Koreans had neither the energy nor
the raw materials to maintain and run the factories over any
period of time. Thus, the Chinese appeared to have decided
that it would be best to concentrate on selling consumer
goods to the North Koreans, rather than investing in
infrastructure. (NOTE: Lee did not specify to which "Chinese
leaders" he was referring. His last official high-level
contact was in November 2005, when he met with President Hu
Jintao and others in Beijing. END NOTE.)


5. (C) Moreover, Lee said, he sensed a change in the
attitude that Chinese leaders held regarding Pyongyang. His
Chinese interlocutors seemed skeptical that Kim Jong-il (KJI)
was serious about economic reform, deriding KJI's recent
visit to Chinese FEZs as a pedestrian tour. The Chinese
leaders had thought that instead of touring Shanghai and
Shenzhen, KJI should have visited places that were more
realistic and practical models for North Korea.


6. (C) According to Lee, Chinese leaders also seemed to
assess that KJI's regime was less stable now than previously
and that the North Korean regime might not have much time
left because KJI had not been able yet to pass power to his
sons. "Once a leader's power begins to weaken," Lee noted,
"the decline is precipitous." In the absence of a clear sign
of who or what would follow KJI, it was advisable to solve
the nuclear issue and establish a peace regime before the
DPRK regime collapsed.


7. (C) Turning to the Six Party Talks, Lee said the North
Koreans appeared shocked by what had happened to their Banco
Delta Asia accounts and were alarmed that other banks were
beginning to distance themselves from North Korea. A/S Hill
warned that the situation would get worse for North Korea,
and that a solution would only be possible if the North
stopped its illicit activities and returned to the Six Party
Talks.

FTA, BILATERAL ISSUES
--------------


8. (C) Lee affirmed that President Roh was determined to

conclude a U.S.-ROK Free Trade Agreement (FTA),despite
significant political challenges. Lee acknowledged that many
in Roh's core support base, including some in the ruling Uri
Party, were opposed to the FTA. However, it had only been
three months since the intent to start negotiations had been
announced, and the party had not yet had a full debate on the
issue. Lee recalled that before stepping down as prime
minister, he had called for a detailed sector-by-sector
analysis of the impact of an FTA, with particular attention
to the automobile, textiles, and health care industries.
Emphasizing Roh's personal commitment to the FTA, Lee stated
that, using such data, the ROKG would undertake to win public
understanding and support for the agreement. He agreed with
Uri Party Chairman Chung Dong-young (SEPTEL),however, that
it would not be possible to mount this public information
campaign until after the May 31 regional elections.


9. (C) Lee stated his belief that the ROK could not become a
first-tier economy without opening its markets, although once
it opened its market, ultimate success would depend on the
efforts of the Korean people. He added that the ROKG would
also stress to the public that the U.S.-ROK FTA would have an
impact beyond the bilateral relationship; it would hone the
ROK's competitiveness, making it more formidable
internationally.


10. (C) President Roh's "strong will" to conclude an FTA was
important, Lee pointed out, but U.S. willingness to make
reasonable concessions would also be key for the FTA's
success. He warned that insistence on including rice in the
FTA negotiations would prove problematic because of the
unique and sacrosanct status of rice in the minds of the
Korean people. The ROKG had been able to address the screen
quota and beef issues for the sake of the FTA, but rice was
different. The ROKG wanted to do what was rational, and the
Korean people were increasingly mature in their attitudes --
except when it came to rice, Lee stressed.


11. (U) A/S Hill has cleared this cable.
VERSHBOW