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06USUNNEWYORK2272 2006-12-21 16:10:00 CONFIDENTIAL USUN New York
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DE RUCNDT #2272/01 3551610
P 211610Z DEC 06
					  C O N F I D E N T I A L SECTION 01 OF 02 USUN NEW YORK 002272 



E.O. 12958: DECL: 12/20/2016

REF: A. USUN 02262

B. USUN 02244

Classified By: Classified By: Amb. Mark Wallace
Reasons 1.4 (b) and (d).

1. (C) SUMMARY AND COMMENT: On December 19, per the explicit
request of the Japanese and European Union (EU) members (UK,
Germany, Finland, France), Ambassador Wallace chaired and
facilitated an informal meeting to discuss Fifth Committee
issues and the scale of assessments at the Japanese Mission
in New York. Although no consensus on the base period was
reached, all sides agreed that China should be approached for
possible persuasion to make voluntary contributions to the UN
to offset any change on scale assessments for Japan and the
EU. However, China declined to meet with the group. The EU
and Japanese reps fought over the base period, with neither
side bending on the issue and the EU sticking to its proposal
of a five-year base period. (Note: The U.S., G-77, Mexico
and Japan are in agreement on a shorter base period. End
Note). Although USUN has been diligently mediating between
the largest donors over the past few weeks, a solution to the
impasse over scales appears far from over as long as the EU
remains wedded to the longer base period. With informal
consultations to resume tomorrow, December 20, a sudden
change in tactic by the EU appears unlikely. END SUMMARY AND



2. (SBU) On December 19, Ambassador Wallace met with
Japanese Ambassador Deputy Permanent Representative (DPR)
Kodera and DPR Special Ambassador Shinyo (commonly referred
to by his first name "Takahiro"), and European Union (EU)
representatives Ambassador Pierce of the United Kingdom, EU
Presidency Ambassador Gronberg of Finland, DPR Michael von
Ungern-Sternberg of Germany, and French DPR Jean-Pierre
Lacroix. Thomas Thomma of Germany, Wasim Mir of the UK,
Takeshi Matsunaga of Japan, and USUN management and reporting
officers were also in attendance.

Pre-Meeting with U.S. and Japan


3. (C) Before meeting with the EU representatives,
Ambassador Wallace met with Japanese Permanent Representative
Ambassador Kodera and DPR Ambassador Takahiro to discuss
Fifth Committee issues and the scale. Kodera called the EU
compromise base period proposal of five years "ridiculous."
He said EU Presidency Ambassador Gronberg (Finland) was a
long-time friend who confided in him that he knew Japan would
not go beyond 4.5 years on the base period, and was hoping
the EU would come around to Japan's position on the issue.
On stepped gradients for the low per-capita income adjustment
(LPCIA), Japan was hoping to lure China into paying more,
perhaps up to three percent, but not necessarily five percent
as that would allow China to potentially qualify for the
G-77's phased scale increase proposal, if that proposal
indeed passed.

4. (C) Kodera called the UN a "nut house ruled by the G-77
and China," and hoped that with CANZ and EU support Japan and
the U.S. might be able to get the G-77 to compromise on the
scale. Of course, however, that would depend on having a
united front for the rest of the scales negotiations, he
said. Wallace noted the fight might have been lost on the
stepped gradient for LPCIA, due to infighting by the largest
donors, but he reminded Japan that an exit strategy was still
needed to mend the divide. Kodera and Takahiro agreed that
if the current methodology was kept it should not be assessed
again for another three years. Wallace said he hoped, like
Russia (ref a), China might also be amenable to increasing
its contribution. Matsunaga said Japan approved of the
G-77's proposal for phased scale increases. He wondered if
the EU would also accept the proposal since several its
members stood to benefit from it.

Meeting with U.S., Japan and EU


5. (C) Per the explicit request of the Japanese and EU
representatives (UK, Germany, Finland, France), Ambassador
Wallace chaired and facilitated an informal meeting to
discuss Fifth Committee issues and the scale of assessments.
During the spirited debate Wallace kept both sides focused on
finding solutions to the impasse over scales negotiations set
to restart tomorrow, December 20. He reminded the group that

USUN NEW Y 00002272 002 OF 002

the past few informal negotiations had not been productive,
that infighting between the EU, U.S. and Japan had allowed
the G-77 to become stronger. He believed getting the G-77 to
adopt stepped gradients for LPCIA was slim, and that if there
was no consensus among the largest donors on the base period
then no other proposals would be attainable. All sides began
by agreeing there were essentially three unresolved issues
remaining: the low per-capita income adjustment (LPCIA)
gradients; large scale-to-scale increases; and the base
period, the latter being the most contentious.

6. (C) Takahiro said Japan and the U.S. had common ground on
the base period and LPCIA gradients, but asked the EU reps
where they stood on these issues. He noted Japan had made
compromises, moving on the base period from three to 4.5
years, reiterating that Japan's contribution should not be
more than the P-4 members (ref b). Von Ungern-Sternberg
(Germany) said a compromise of the status quo base period
(4.5 years) was unacceptable as the EU had to protect its
interests. Lacroix (France) told the group how important the
base period was to EU members' national political interests.
If Japan would not bend then there would be "no Western
consensus," he said.

7. (C) Takahiro, angered, asked why the EU would not
compromise on the base period. He told von Ungern-Sternberg
that if there was no move by the EU on the base period, the
largest donors would most likely get nothing from the G-77,
especially on the stepped gradient. Takahiro called the
current EU strategy "dangerous." Ambassador Pierce (UK)
claimed that a high-level Japanese delegate from Tokyo told
her in September the Japan would start from a 4.5-year base
period. She said therefore Japan should see the EU at five
years. Pierce, believing direct and hard pressure on the
G-77 would bend their position, said the G-77 would not have
a "dog in this fight" if the largest donors could agree on a
five year base period. "Ambassador Kumalo (South Africa)
would have to come around," she claimed. She called the EU
base period proposal a "good balance," which would offset any
increase in the scales for both the EU and Japan.

8. (C) Wallace interjected, noting that perhaps the problem
was with exchange rates. He said based on his calculations,
there was a $10 million discrepancy that was causing the EU
and Japan to quarrel, and asked both sides to consider other
solutions. Gronberg replied that the EU looked into the
issue, but found there were no real possibilities to make
adjustments, other than to move forward with a longer base
period. Gronberg continued that the EU stepped gradient
proposal, if passed, would have offset this imbalance as

9. (C) Gronberg believed wedges could be made within the
G-77. He suggested that during future scales negotiations
new stepped gradients for LPCIA could be introduced, perhaps
at 80 and 75, respectively. He believed appealing to the
G-77 through the Development Account might help as well.
Wallace noted it was unlikely the G-77 would compromise on
anything at this point, since attempts by the U.S., Japan and
EU to split the G-77 to date had failed. Although Wallace
noted that his attempts during informal consultations to make
clear how the current LPCIA gradient helped China, Russia,
India and Brazil at the expense of the rest of the G-77
members, there was no evidence that the G-77 was breaking
down over the issue. Takahiro agreed with Wallace, saying
that during his recent discussion with Kumalo, the G-77 would
not budge on the current methodology.

10. (C) Wallace moved the group back on track, getting the
EU and Japan to focus on how to target China to make
voluntary contributions as a way to solve the scales impasse.
He suggested that getting China in the room with the largest
contributors, collectively, might help solve the issue. Mir
(UK) agreed, saying the group should move forward on
Wallace's proposal. Takahiro was amenable to trying, but
believed the negotiation should instead be conducted with
high-level officials outside of New York, since China's
negotiators would never concede on issues at Headquarters.
Wallace said he would invite China to the U.S. Mission to
engage with EU and Japanese reps. However, China later
declined the offer. The parties agreed to meet further to
attempt compromise with the U.S. moderating.