PULP MILL DISPUTE: ENOUGH IS ENOUGH - VAZQUEZ

S E C R E T MONTEVIDEO 000964

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E.O. 12958: DECL: 11/09/2017
TAGS: PGOV PREL ECON EINV SENV UNGA AORC UY
SUBJECT: PULP MILL DISPUTE: ENOUGH IS ENOUGH - VAZQUEZ
GIVES BOTNIA PLANT THE GREEN LIGHT

REF: A. BUENOS AIRES 1707


B. BUENOS AIRES 1776

C. MONTEVIDEO 0376

Classified By: Ambassador Frank E. Baxter,
for reasons 1.4 (b) and (d).


1. (C) Summary: On November 8, President Vazquez gave the
order to allow the Botnia pulp mill plant to commence
operations. The order came during the Ibero-American Summit
in Santiago, Chile. During the summit, on November 7,
Vazquez met with the Spanish facilitator Juan Antonio Yanez
Barnuevo in an attempt to reach an agreement that could be
rolled out during the summit. According to anecdotal and
media reporting, Vazquez was dissatisfied with the results of
this meeting, and on November 8 called his chief of staff
Gonzalo Fernandez and instructed him to inform Botnia that
the plant could begin operations. Contributing to Vazquez'
frustration appears to be a sense that Spain was not
operating as an honest broker throughout the process, perhaps
due to its large investments in Argentina. The public
release of the decision was timed to coincide with Vazquez's
speech at the summit, which concluded with a warm embrace
with both Kirchners that occurred at the same time that his
staff was sending the message to Botnia to begin activities.


2. (S) It is probable that President Kirchner's meeting in
Santiago with Argentine environmentalists exacerbated the
situation and contributed to Vazquez's decision to finally
move forward. Vazquez had been caught off-guard a week
earlier, while in California with Ambassador Baxter, when
Botnia's planned opening ceremony was postponed by Uruguayan
Environment Minister Mariano Arana, after he may have
received a call from Spanish FM Moratinos. This latest
iteration of the conflict comes on the heels of weeks of
public backtracking after a solution was thought to have been
reached at a secret meeting in Anchorena, Uruguay. On
November 9, Ambassador and A/DCM met with Frente Amplio
Senator Carlos Baraibar (please protect) to discuss military
issues. Baraibar indicated that closer military relations
between Uruguay and the U.S. "might not be such a bad idea"
given that, "we have been at odds with our bothers across the
river in every way short of armed conflict". Tensions remain
high in Fray Bentos, where the GOU is stepping up security
measures to protect Botnia and the city of Fray Bentos. The
bottom line is that the plant is now operational and Uruguay
is awaiting the Argentine response. End Summary.

Dr. Vazquez goes to Chile
--------------

3. (C) On November 7, President Vazquez departed one day
early for the Ibero-American Summit in Santiago to meet with
Spanish facilitator Juan Antonio Yanez Barnuevo and seek an
agreement that could be rolled out during the summit. Prior
to his departure, Vazquez stated that Botnia's authorization
to commence operations was still imminent, and that final
authorization would be issued once "we see how all events
unfold in Santiago".


4. (C) Anecdotal and media reporting indicated that Vazquez
was unsatisfied with the results of the meeting in Santiago.
There has been a growing sense within the GOU that the
involvement of the Spanish crown was beginning to become part
of the problem, rather than the solution. GOU contacts
within the President's office indicated to Emboffs that Spain
was no longer seen as an honest broker, as originally
promised, but rather as siding with Argentine business and
government interests. Of particular concern were the sizable
Spanish investments in Argentina and the possibility that

Argentina would leverage those investments against Spain in
order to pressure them into supporting the Argentine position
on Botnia.


5. (C) According to media reports, Vazquez called his chief
of staff Gonzalo Fernandez on November 8, and instructed him
to notify Botnia that it could start operations immediately.
Fernandez related this to Environment Minister Mariano Arana,
who is responsible for formally notifying Botnia on behalf of
the GOU. Arana was on his way to the theater when the order
came in from Vazquez and resorted to notifying Botnia by fax.
This sequence of events and the way the GOU ultimately
informed Botnia is in sharp contrast to the ceremony and
press event that was supposed to take place a week earlier
(para 6) and demonstrates the suddenness of Vazquez's
decision. It seems clear that Vazquez was expecting the
Spaniards to facilitate a public agreement with Argentina
during the summit. His decision to give Botnia the green
light was probably a combination of his frustration over the
lack of progress during that meeting, combined with his
agitation with Kirchner's expressions of support for the
Argentine protesters during the summit.


6. (C) According to press reports, there was an exchange
between Vazquez and Kirchner during the summit, after Vazquez
gave Botnia the authorization to start up. Vazquez was
reported to have said, "let me explain this to you," to which
Kirchner reportedly responded that "you have nothing to
explain. You have stabbed me and the Argentine people in the
back." On a separate occasion during the summit, Vazquez was
quoted as saying, " Uruguay does not need to advise anyone or
ask for anyone's permission (to start the plant). It is a
Uruguayan decision...Argentina wants the issue settled in the
Hague, so it will be settled in the Hague." On November 9,
Foreign Minister Taiana instructed his deputy FM to send a
formal note of protest to the Uruguayan Ambassador in Buenos
Aires and to send the same note to the ICJ. Also on November
9, the Spanish King was reported to be highly upset with
Vazquez's decision and was urgently seeking a meeting with
Vazquez.

Botnia's opening had been postponed last week
--------------


7. (C) A week earlier, Botnia was scheduled to begin
operations while Vazquez was traveling with Ambassador Baxter
in California. The event was being highlighted by a ceremony
and press conference with Environment Minister Arana and the
CEO of Botnia, who had traveled from Finland for the event.
During the event, Arana received a call (its is unclear from
whom) instructing him to postpone the signing of the
authorization. It appears that Argentine FM Taiana called
Spanish FM Moratinos, requesting that he intervene with the
GOU to delay the opening of the plant until after the
Ibero-American summit. It is unclear who Moratinos contacted
within the GOU (probably FM Gargano),but the result of his
call was that the opening was delayed.


8. (S) Post learned from a very reliable source, with first
person access to President Vazquez, that he had "not been
informed" of the GOU's decision to delay the plant's startup.
As a result Vazquez was forced to make it look as though it
was his decision, and the source indicated that Vazquez was
livid that he had not been consulted (please protect).

Senator Baraibar speaks out on Botnia
--------------


9. (S) In a private discussion with A/DCM about a possible

upcoming U.S. Uruguay military exercise, Frente Amplio
Senator Baraibar commented that "the pulp mill dispute with
Argentina has included everything short of armed conflict".
He referred to President Bush's offer to President Vazquez to
"call me if you need me," and said that it "would not be such
a bad idea to strengthen our relations with the U.S.
military." He commented that the pulp mill dispute "would
not be resolved until (Argentine FM) Taiana is replaced". He
also reiterated his assertion (which is shared by many in the
GOU and the general population) that the dispute over Botnia
was Argentina's attempt to block foreign companies from
investing in Uruguay, rather than in Argentina.

Tensions remain high in Fray Bentos
--------------


10. (U) Meanwhile in Fray Bentos, tensions over Botnia's
operations remain high, amid concerns over the potential
activities of Argentine protesters in response to the plant's
opening. On November 6, the GOU announced that it is
adopting preventive measures to guarantee security in the
city of Fray Bentos and at the Botnia plant. In response to
an announcement by the Gualeguaychu Assembly (Argentine side
of the river) to hold a "nautical march on the Uruguay
River," as well as the "use of 20 aircraft", the GOU's
Vice-Minister of Defense Jose Bayardi indicated that the GOU
would adopt "appropriate measures to protect Botnia's
infrastructure...including an air exclusion zone over
Botnia's plant." Bayardi added that the Air Force would use
radar to monitor Uruguayan airspace. On November 9, ODC
Commander and DATT met with MOD Berrutti, who had just come
from a meeting with her generals over the heightened state of
alert in Fray Bentos.

11. (U) The GOU is also ramping up its security measures on
the ground, given GOU concerns about the possibility of
radical Argentine environmentalists taking direct, violent
action against Botnia's plant. Press reports on November 5
indicated that the National Coast Guard, the Rio Negro Police
Department, and the National Directorate of Intelligence and
Information (DNII) will adopt extreme "control measures" at
Botnia's cellulose plant. The National Fire Directorate is
drawing up a report on what appears to be an act of arson in
the city of Mercedes on several vehicles used to carry Botnia
personnel. Respected daily El Observador also reported that
GOU sources claim to have information about links between
Argentina's Secretariat For State Intelligence and Argentine
environmentalists to carry out propaganda activities against
the plant. Although post has no direct reporting on these
potential threats, the climate of uncertainty and fear is
palpable through these news reports.

Comment - Vazquez has had enough
--------------


12. (C) In Santiago yesterday, Vazquez finally had enough.
His decision to move forward and authorize Botnia's start-up
is a signal that he will may be willing to put Uruguay's
national economic interests and its reputation as an
investment-friendly country ahead of its bilateral
relationships both Argentina and Spain. Recent decisions by
other foreign companies such as Portugal's Portucell to
invest heavily in Uruguay's forestry sector demonstrates that
the international community recognizes the GOU's commitment
to protect foreign direct investment. The real loser could
be Spanish King Juan Carlos, whose efforts to demonstrate
Spain's ability to revolve the conflict have seemingly
failed. Uruguay now braces itself an unpredictable and
perhaps violent reaction from the Argentine side. End
Comment.

Baxter