SCENESETTER FOR CODEL PRICE

C O N F I D E N T I A L SECTION 01 OF 04 NAIROBI 001579

SIPDIS

E.O. 12958: DECL: 02/12/2018
TAGS: OREP PREL PGOV KDEM KE
SUBJECT: SCENESETTER FOR CODEL PRICE

Classified By: Ambassador Michael E. Ranneberger, reasons 1.4 (b,d).


1. (C) Summary: Welcome to Kenya. Your visit comes six
months after the disputed December 2007 general elections,
when the controversial announcement of the victory of
incumbent President Kibaki led to widespread violence, the
deaths of 1,500 people and displacement 600,000 Kenyans.
Kenya now stands at a major crossroads as it recovers from
the aftermath of the crisis. While allegations of electoral
fraud sparked the violence, the crisis revealed serious flaws
in the institutions of governance and deep-seated tensions
among Kenya,s ethnic groups. The situation has calmed
considerably since a power-sharing agreement led to the
formation of a Grand Coalition government in March. However,
tensions in some areas remain high; tens of thousands of
displaced people are still living in temporary camps, and
reconciliation and reconstruction efforts in the areas
hardest hit by the post-election violence are just beginning.
The still fragile coalition government must undertake a
series of institutional reforms to create a stable framework
for governance over the long term. Kenya,s economy took a
serious hit as a result of the crisis, especially in the
agriculture and tourism sectors. As a longstanding partner of
Kenya, the U.S. has been instrumental in advancing political
dialogue, responding to the humanitarian crisis, and
supporting the new Grand Coalition government. Prime
Minister Odinga,s recent visit to Washington highlighted
U.S. support and provided an important boost to the
still-nascent office. Our continued support for the
stabilization, reform, and reconciliation process will be
critical over the next two years. The United States played a
decisive role in helping Kenyans to resolve the crisis, and
the Kenyan people -- as well as both Kibaki and Odinga -- are
extremely appreciative of the role we played. End summary.

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Flawed Elections Ignite an Ethnic Tinderbox
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2. (SBU) Six months before Kenya's December 2007 presidential
and parliamentary elections, incumbent President Mwai Kibaki
was widely perceived to be the front runner. However, by the
fall, opposition campaigns began to coalesce and public
opinion polls revealed a surge in support for Orange
Democratic Movement (ODM) candidate Raila Odinga. As voting
day neared, the only sure bet was that the race between
Kibaki and Odinga would be very close.


3. (C) Voter turnout on election day was impressive, and
Embassy, other international and domestic election observers
deployed countrywide returned with largely positive reports
of Kenya,s exercise in democracy. While the results of
local council and parliamentary elections were deemed
credible by both domestic and international observers,
trouble arose during the tallying of the presidential
election results. Voting results were likely altered at
tallying centers in party strongholds on both sides around
the country. More worryingly, credible allegations emerged
after the polls closed of vote fixing at the headquarters of
the Electoral Commission of Kenya (ECK) in Nairobi, where the
final tallying and announcements of results were made.
Subsequent investigations by a number of neutral observers
(including the Embassy) concluded that the level of cheating
on both sides was high enough to throw Kibaki,s declared
victory (by a narrow 230,000 vote margin) into question. It
remains uncertain as to who won the election, and we will
likely never know for sure.


4. (C) Fueled by the perception (right or wrong) that their
candidate had been cheated of victory, Odinga supporters,
largely of his Luo ethnic group, began violent demonstrations
in parts of Nairobi and in ODM strongholds in Western Kenya
even before Kibaki was announced the official winner and then
quickly sworn in. The Kibaki government denied allegations
of electoral fraud and the police were called out to prevent
large demonstrations in downtown Nairobi.


5. (C) As time progressed, however, the violence became more
widespread and appeared increasingly disconnected from the
election results themselves. In the Rift Valley, indigenous
Kalenjin militias began targeting ethnic Kikuyu settlers
(members of President Kibaki,s tribe and the backbone of the

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ruling Party of National Unity (PNU) coalition). Kikuyus
were chased from their farms and businesses, many of which
were subsequently burned. Kikuyu militias subsequently
attacked Kalenjins and Luos in other parts of the country,
raising the specter of an ethnically-based civil war. So
far, over 1,500 Kenyans have died and an estimated 600,000
have been displaced as a result of the conflict.


6. (C) As the unrest continued, the economy suffered a major
body blow. Tourism, a major foreign exchange earner and job
provider, dropped by 90 percent. Agriculture and commerce in
the breadbasket Rift Valley region was crippled by improvised
roadblocks that hindered the movement of goods and people.
Many farmers missed harvesting their crops and failed to
plant new crops, threatening Kenya,s food security. Unrest
in western Kenya cut off manufacturers and distributors from
40 percent of their domestic market. Workforces were divided
by tribal tensions. Trucks carrying fuel and goods to
Uganda, Tanzania, Rwanda, Burundi, and the DRC were forced to
travel in convoys with military or police escorts.

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Power Sharing Agreement Critical First Step
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7. (SBU) Following the disputed election results, there were
calls for a re-tally of votes or even a new election to solve
the crisis. This sentiment, however, gave way to the more
pragmatic realization that the ECK was not capable of
organizing another credible election, and that a recount
would likewise lack legitimacy given that the paper trail for
ballots has likely been compromised. As such, a consensus
emerged that the only way out of the current political crisis
was negotiations between the GOK and the ODM on a power
sharing arrangement, to be followed by institution reforms,
including a new constitution and implementing land reform.


8. (SBU) The crisis revealed the dire need to strengthen
Kenya,s institutions and acknowledge the deep social
grievances that exist between communities. Pundits have
(accurately) observed that because Kenya,s politicians have
a history of using state power to distribute benefits to
their ethnic kin, the consequences of a lost election (and
the tension over a close election) are more stark and
therefore fuel ethnic tensions.

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The Political Environment
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9. (SBU) While the post-election violence revealed stark
weaknesses in Kenya,s political and social fabric, the
reaction to it from many ordinary Kenyans revealed its
strength. Media and civil society distinguished themselves
by promoting peace and reconciliation, and businesses banded
together to encourage an agreement between the feuding
political parties. These interventions were critical in
encouraging political leaders to come to an agreement.


10. (SBU) Under the Kofi Annan-brokered power sharing
agreement, President Kibaki maintained his position and the
newly-elected parliament amended the constitutional to create
a position of Prime Minister, filled by Orange Democratic
Movement (ODM) leader Raila Odinga. A coalition cabinet )
with a record number of 40 ministers ) gave President
Kibaki,s Party of National Unity and Prime Minister
Odinga,s ODM an equal share of portfolios.


11. (SBU) The new Grand Coalition Government,s task is to
undertake a wide range of reforms to address the root causes
of the post-election violence. Constitutional, electoral and
land reform all rank high on the list. The Government will
also need to pay close attention to the reintegration of
internally displaced persons to avoid re-ignition of the
conflict. So far, it has failed at this. Encouraging
displaced persons to return to their homes without providing
return packages or fostering dialogue with rival ethnic
groups has been a gamble on the government,s part. While
the return process has not ignited new conflict, the risk is
present. Once again, local leaders and civil society have
stepped in to encourage dialogue and healing between rival
groups: progress will be slow, but the efforts in many places

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are genuine.


12. (SBU) The Grand Coalition government is fragile: not only
do senior members from both of the main political parties
frequently posture against one another over sensitive
post-crisis issues such as amnesty for those accused of
committing violence, there is also considerable jockeying for
influence within each of the parties themselves. Since this
is President Kibaki,s final presidential term, rivalries
within his Party of National Unity are particularly strong.
The negative effect of the public sniping is mitigated
somewhat by the good working relationship between President
Kibaki and Prime Minister Odinga.


13. (SBU) The December 2007 elections ushered in major
changes in Parliament: only 30 percent of the MPs from the
previous parliament were re-elected. Since the 42-member
cabinet (drawn from the ranks of MPs) is filled with many old
party loyalists, opportunities for leadership within the
still-developing parliamentary committee system are available
for newer MPs. This new parliament will be responsible for
passing much of the reform legislation (including major
amendments to the constitution). By all reports, what the
new parliament lacks in experience they make up for with
enthusiasm.


14. (SBU) There have been calls by some in parliament to form
a Grand Opposition to the Coalition Government. The
initiative has some momentum in Parliament, although neither
Kibaki nor Odinga supports it. While some of the MPs who
support the idea of an opposition appear to be driven by
genuine concern over the lack of a watchdog in Parliament,
others appear to be motivated by bitterness that they were
left out of the (already too-large) cabinet. We are not
convinced that the benefits of creating an opposition would
outweigh the costs, not least because of the legal and
political difficulties that would arise from a sub-group of a
political party forming an opposition against itself.

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The Economic Picture
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15. (SBU) In the culmination of a growth trend that started
in 2002 and ended nearly two decades of economic stagnation,
the Kenyan economy grew by seven percent in 2007, the highest
rate in 30 years. However, the post-election violence
greatly reduced agricultural and tourism sector production in
2008, inflation is high due to reduced food production and
international oil prices, and other sectors will likely
suffer from significant decreases in consumer spending and
investment. Forecasts for economic growth in 2008 are in the
3-4.5 percent range. If the Grand Coalition Government
functions effectively and Kenya receives normal rainfall,
growth in 2009 should return to the 4.5-6 percent range. To
pull the vast majority of Kenyans out of poverty and fully
realize its economic potential, Kenya needs to reduce the
cost of doing business and attract more investment to create
more jobs. This will require Kenya to rebuild the country,s
decrepit infrastructure, improve security, reform the
telecommunications sector, continue to privatize parastatals
and deregulate the economy, and improve economic governance
generally. Kenya continues to benefit from the Africa Growth
and Opportunity Act (AGOA),but must diversify out of the
apparel industry if it hopes to avoid losing out to its
global competitors. In June 2008, the Government announced a
revision of its ambitious &Vision 20308 initiative, which
aims to address the damage done by the violence and the
problems noted above to achieve 10 percent annual growth for
two decades starting in 2012 as a means of achieving newly
industrializing middle-income status by 2030.

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U.S. Interests in Kenya Require Our Active Engagement
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16. (U) The U.S. has spent the last 15 years strengthening
our partnership with Kenya as an emerging multiparty
democracy. The U.S. was instrumental in helping Kenya
progress to multiparty elections in 1992 after years of
single-party rule under ex-President Moi. Since the victory
of then-opposition candidate Mwai Kibaki in 2002, our

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relationship with Kenya has grown stronger, resulting in
assistance, trade, investment and private remittances
totaling at least USD 1.5 billion. The U.S. private sector
now has a robust relationship with Kenya. Bilateral trade in
2006 amounted to USD 800 million. U.S. direct investment in
Kenya totals about USD 285 million. Over 100,000 American
tourists visited Kenya in 2007. About 10,000 Americans live
in Kenya.


17. (C) Prior to the crisis, the Mission,s top priority was
working with the GOK against the threat of terrorism.
Al-Qaeda bombed our Embassy on August 7, 1998. It also
attacked an Israeli-owned hotel and Israeli-chartered
aircraft in Kenya in 2002. Al-Qaeda retains the ability to
operate in and around Kenya. Kenyans (and their government
representatives) have been good partners in the war on
terror, but our progress in encouraging the government to
implement appropriate legislation and build the needed
institutional capacity to fight terrorism has been slow. A
continuation of the current crisis will compound this
difficulty.


18. (U) The U.S. Mission in Kenya serves as a vital regional
platform to promote U.S. interests throughout much of Africa.
It is the largest U.S. diplomatic mission in sub-Saharan
Africa, comprising 19 federal government agencies or offices,
many of which have regional mandates. Among these agencies
are the U.S. Agency for International Development, Peace
Corps, the Library of Congress, the Centers for Disease
Control, and the Departments of State, Defense, Commerce,
Agriculture, Homeland Security, Treasury and Justice. U.S.
Mission Kenya also represents the USG to United Nations
bodies headquartered in Nairobi (UNEP and U.N. Habitat).


19. (SBU) We have leveraged our close partnership with Kenya
to encourage dialogue between Kibaki and Odinga. We have
been clear in delivering the message that the success of our
bilateral relationship currently rests in the success of the
coalition government. Kenyans across the political, social,
and ethnic spectrum continue to express their deep
appreciation of the decisive role the U.S. played in ending
the political crisis.


20. (U) The U.S. has also led the international response to
the humanitarian crisis and has provided over USD 96 million
in humanitarian assistance so far in 2008. Much of this was
for immediate disaster assistance for those affected by the
post-election violence, but also for refugees and those
affected by the current drought. We have provided support to
the Kenyan Red Cross Society, various UN agencies, and
numerous NGOs for rapid response activities, water and
sanitation programs, distribution of emergency relief
supplies, women and children protection programs, nutrition
and health projects, and support for community-based peace
and reconciliation initiatives.

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Comment
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21. (C) At this critical juncture in Kenya,s history, we are
standing together with the Kenyan people and echoing their
calls for peace, reconciliation, and reforms to redress the
structural and social inequalities that fuelled the recent
crisis. The Grand Coalition government has a very narrow
window to work in: if they do not produce serious reforms
within the next year or so, the positive momentum generated
by fear of re-igniting the recent conflict will be lost. The
Administration,s recent request for USD 75 million to
support Kenya,s recovery will be critical to supporting the
Kenyan people through this crucial period. End Comment.
RANNEBERGER