INTERAGENCY UNSCR 1874 MEETING WITH CHINESE

S E C R E T SECTION 01 OF 05 BEIJING 001845 SIPDIS E.O. 12958: DECL: 07/01/2034 TAGS: PREL PARM PGOV ECON MNUC CH JA KN KS SUBJECT: INTERAGENCY UNSCR 1874 MEETING WITH CHINESE OFFICIALS Classified By: Acting DCM William Weinstein. Reasons 1.4 (b) and (d). Summary -------------- ¶1. (S) Chinese MFA Director General for International Organizations Wu Hailong, leading an interagency delegation made up of representatives of all Chinese agencies tasked with implementing UNSCR 1874, told Ambassador Philip Goldberg in a 3 hour 45-minute meeting on July 2 that China was committed to working with the United States to bring North Korea back to the negotiation table. The Chinese were serious and non-polemical in their discussion of ways to implement the resolution and committed to future exchanges with the United States. The interagency nature of the Chinese delegation reflected high-level intervention from President Hu Jintao himself, according to Chinese sources. DG Wu Hailong, read China's "initial" views on implementation, telling the U.S. delegation that more detailed positions were being developed. The Chinese were focused throughout the meeting, turning frequently to specific issues related to inspections and financial measures in the resolution. End Summary. ¶2. (SBU) July 2, 2009; 3:00 p.m.; Beijing, Diaoyutai State Guest House. ¶3. (SBU) Participants: UNITED STATES AMB Philip S. Goldberg, UNSCR 1874 Implementation Coordinator Rebecca K.C. Hersman, DASD for Countering WMD Danny Glaser, DAS, Department of the Treasury Charles D. Lutes, Director for Nonproliferation, NSC William Weinstein, ADCM Sydney A. Seiler, Deputy DNI North Korea Mission Manager COL Frank Miller, Joint Staff J-5 North East Asia Division Chief Jennifer Fowler, Department of the Treasury Mark Lambert, Notetaker Laura Stone, Notetaker Nancy Leou, Control Officer Gao Danfei, Interpreter CHINA DG Wu Hailong, Department of International Organizations, MFA DDG Li Junhua, Department of International Organizations, MFA DDG Zhi Guanglu, Department of Maritime Affairs, Ministry of Transport DG Tang Xu, Counter Money Laundering Bureau, PBOC DDG Jin Zhongxia, International Department, PBOC DDG Li Wei, Department of Supervision, General Administration of Customs DDG Song Yanchao, Asian Bureau, FAO, Ministry of National Defense Director Lu Wei, Banking Regulatory Commission First Secretary Dong Bo, Department of Asian Affairs, Ministry of Commerce DDG Wang Jing, Department of Arms Trade and Foreign Affairs, State Administration of Science, Technology and Industry for National Defense Counsellor Wang Xioning, Department of Arms Control, MFA Counsellor Zhou Jian, Department of Treaty and Law, MFA Counsellor Xiao Jianguo, Department of Boundary and Ocean Affairs, MFA Director Ren Faqiang, Department of North American Affairs, MFA Deputy Director Bao Xuhui, Department of Asian Affairs, MFA Deputy Director Shen Bo, Department of International Organizations, MFA Third Secretary Yang Zhiyu, Department of International Organizations, MFA Attache Jiang Bo, Department of International Organizations, MFA Yuan Mu, Interpreter, MFA China Committed to Work with the United States -------------- - ¶4. (S) MFA Director General for International Organizations Wu Hailong began a 3 hour 45 minute long meeting with Ambassador Philip Goldberg by pledging China's commitment to continuing to consult and cooperate with the United States in BEIJING 00001845 002 OF 005 implementing UNSCR 1874. Citing the exchange of letters on the subject between President Obama and Chinese President Hu Jintao and the phone call between the Secretary and FM Yang Jiechi, Wu assured Goldberg that China had a constructive attitude about finding effective means to implement all resolutions aimed at bringing North Korea back to the negotiation table. Six Key Principles -------------- ¶5. (S) Wu characterized the June 13 adoption of UNSCR 1874 as a "strong response to North Korea's nuclear test and pursuit of nuclear weapons" that drew the attention of all parties concerned with the long-term peace and stability of Northeast Asia. Wu maintained that despite North Korea's pledge to react against the resolution, the DPRK had not completely closed the door to a resumption of negotiations. Wu then outlined six principles guiding China's actions in implementing 1874: 1) The "explicit implementation" of UNSCR 1874 would require that all relevant provisions be "accurately and seriously implemented" to send a clear signal to the DPRK to not engage in proliferation activities; 2) Sanctions per se were not the goal of UNSCR 1874, only a means. The ultimate goal of the resolution was to safeguard the peace and stability of the Korean Peninsula and pull the DPRK back to the negotiation table. 3) All parties to the resolution should remain calm and exercise restraint while refraining from any "willful interpretation" of the resolution. Parties should avoid confusing measures taken by individual countries with those taken under the aegis of UNSCR 1874. Parties should avoid using force or the threat of using force lest the situation worsen. 4) UNSCR 1874 is targeted at the DPRK's nuclear and missile programs and is not "comprehensive." Implementation should not affect the development of the DPRK or the ordinary lives of North Korean citizens. 5) All parties should implement the resolution firmly, but take into account differences in national characteristics, domestic laws and geographic situations. 6) As a P-5 member, China always takes a responsible attitude towards implementing UN Security Council resolutions. China will set into place a comprehensive program of action and implementation suitable for its own particular circumstances. China will also maintain regular contact with other concerned parties, including the United States. The U.S. Objective -------------- ¶6. (S) Noting the impressive unity and determination exhibited by the international community in response to North Korea's provocations, Ambassador Goldberg assured Wu of the USG's commitment to the Six-Party Talks and to achieving our agreed goal of the verifiable denuclearization of the Korean Peninsula in a peaceful manner. Goldberg underscored several times the importance of having effective transparent means to demonstrate to North Korea that the only viable path forward was through a return to peaceful dialogue. In order to achieve this goal and to preserve the credibility of UNSCRs 1718 and 1874, it was incumbent on China and all Member States to ensure their effectiveness, as well as to prevent dangerous proliferation activities by the DPRK from continuing. ¶7. (S) Goldberg emphasized the need for close Sino-U.S. information sharing and collaboration noting that, if China and the United States could jointly manage the situation, they would demonstrate to the DPRK that there was a peaceful path open to the DPRK if it fulfilled its commitments and returned to the Six-Party Talks. Ambassador Goldberg added that, given North Korea's past behavior and disregard for its commitments, the international community bore an increased burden to "shine a light" on DPRK activities by exercising greater care in examining Chinese cargo and financial transactions. Goldberg agreed that the overall goal of the UN resolutions was not to punish the North Korean people but, rather, to return Pyongyang to a responsible path. The United States remained committed to the verifiable denuclearization of the Korean Peninsula and non-proliferation, however, it was important for China and the United States to demonstrate resolve and show the DPRK BEIJING 00001845 003 OF 005 that the situation had changed because of North Korea's behavior. Transhipments -------------- ¶8. (S) DASD Hersman and NSC's Lutes underscored for the Chinese that the most effective action to prevent prohibited transfers to or from North Korea by ocean vessels was to require shippers to be transparent about all shipments in port. While UNSCR 1874 called for inspections in the territory of a State based on information that provided reasonable grounds to inspect cargo, they noted that any nation might require any measures of transparency it deemed appropriate without regard to any "reasonable grounds" test. Given the history of DPRK behavior, the U.S. officials emphasized the importance of setting up monitoring mechanisms to verify bills of lading, manifests and cargo. They also explained to the Chinese that international standards permitted a "hail and query" on the high seas allowing voluntary inspections. COL Miller from JCS noted that PLA Navy ships presently operating off the Gulf of Aden were presently using "hail and query" inspections there to combat piracy. ¶9. (S) Noting that, in the past, North Korean vessels suspected of carrying banned goods had used bunkering services outside of territorial waters to avoid inspection, the U.S. delegation suggested that rigorous enforcement of UNSCR 1874's prohibitions on providing bunkering services could prevent North Korean efforts to evade inspection and detection of possible cargoes of proliferation concern. Chinese Queries -------------- ¶10. (S) Evidently unaware of previous U.S.-China intelligence sharing efforts, DDG Li Wei from Chinese Customs asked whether the USG could share with his office specific examples of cases where DPRK transport companies had shipped illicit cargo in the past. Lutes pointed out the need not to become bogged down by hypothetical situations but, rather, asked the Chinese to focus on making sure that North Korean shippers did not use subterfuge to evade enforcement efforts supporting UNSCR 1874. Goldberg added that UNSCR 1874 and repeated North Korean violations put the onus on the DPRK to provide transparency. ¶11. (S) DDG Li observed that both UNSCR 1874 and 1718 set forth as a precondition for inspection a reasonable suspicion and firm evidence of illicit activity. Referring to the recent case of illegal North Korean shipments to Syria, Li asked whether under UNSCR 1874 the burden to produce a bill of lading would rest with Syria or with North Korea adding that nothing in the resolution required North Korea to present bills of lading. Turning to air cargo, Li asked whether, on a DPRK flight from North Korea to a third country that flew over China, the PRC would be expected to provide an airway bill specifying the cargo. Goldberg assured Li that a reasonable test would be used on specific cases underscoring again that the burden was now upon the DPRK to show the international community that its shipments were secure and legal. DASD Hersman told the Chinese that the resolutions provided useful tools to promote transparency but did not prevent states from using there own laws in a non-provocative way to deny overflight rights to suspect North Korean flights. ¶12. (S) Counsellor Wang Xioning from MFA's Department of Arms Control, expressed concern about "Hail and Query" modalities. He asked, in light of UNSCR 1874's clear mandate to avoid confrontation, what course of action would be available to a government requesting a "Hail and Query" inspection that was ignored by the North Koreans. Hersman reassured Wang that the non-confrontation clause would prevail but suggested that a North Korean refusal would increase suspicion that the ship was carrying contraband Financial Sanctions -------------- ¶13. (S) Treasury DAS Daniel Glaser noted that the financial measures contained in UNSCRs 1718 and 1874 constituted both enhanced implementation of general pre-existing international BEIJING 00001845 004 OF 005 financial transparency standards, as well as new proactive targeted measures. He passed cleared sanitized documentation listing North Korean entities of concern operating in China, asking that Chinese financial institutions exercise extreme caution when dealing with these entities. He raised the specific cases of Korea Kwangson Bank's Dandong, China branch, Namchongang Tradition trading company, and Hong Kong Electronics. ¶14. (S) People's Bank of China (PBOC) Anti-Money Laundering Affairs DG Tang Xu, noting the inherent complexity in addressing financial crimes, stated that China had adopted a "serious attitude" towards building a financial supervisory framework in line with international standards. He promised to speak to the Chinese banks and require them to enhance their level of scrutiny. ¶15. (S) DG Tang said that if the UN lists Kwangson Bank, China will treat the Dandong branch "appropriately." MFA IO DG Wu promised that if the UNSC adds entities to the sanctions list, China would "act accordingly." (Note: Later the same evening, in a phone conversation with Secretary Geithner, Vice Premier Wang Qishan stated that "if something is listed in the UNSCR," China and its banks would fully implement the sanctions. End note.) Wu said China is studying the U.S. list; China is willing to add entities if there is "concrete and firm evidence" that sanctions should apply. Given that there are many new entities, Wu said it was taking time to evaluate them all and suggested that we make a decision ontheentties on which there is a consensus. For entities where there is a dispute, the UNSC P-5 should "leave it to the future." ¶16. (S) PBOC International Affairs DDG Jin Zhongxia explained that it was difficult to make distinctions between legitimate and illegitimate North Korean transactions, many of which occurred through brokers rather than directly through the North Korean companies. He stated that sanctions should not effect normal transactions and trade with North Korea. Banks should only take action if they had "firm evidence" of illegal--as opposed to humanitarian--activities. MFA IO DG Wu expressed concern about Western news reports that the United States would step up pressure on Chinese banks to forgo contact with North Korea; he said the sanctions should not be allowed to impact China's interests and normal activities, warning that if the United States took unilateral measures against Chinese banks cooperation could be effected. He asked that if the United States has any evidence that Chinese banking institutions are involved in illegal activities, we provide it to the Chinese government. Much Shared Ground -------------- ¶17. (S) Wu found the general principles laid out by the two delegations to be "strikingly similar" and a good foundation for implementing the resolution. He wrapped up by laying out China's basic views on UNSCR 1874 1) Because UNSCR 1874 has explicit language about an arms embargo, China will explicitly implement provisions prohibiting the trade in proscribed items; 2) As a member of the Nuclear Supplier's Group and the Missile Technology Control Regime, China will enforce provisions aimed at prohibiting the proliferation of nuclear weapons and missiles. China's laws are basically in compliance with international standards and China will study proposals to add additional prohibited items. However, the normal development of the DPRK and its normal trade relations should not be affected. Cargo inspections should be made in strict accord with domestic laws affecting Sino-DPRK and trade across China. The Chinese government will notify relevant Chinese companies about their UNSCR 1874 obligations. "Specific and concrete evidence will be needed" for inspection of vessels. 3) Inspections of vessels on the high seas must be conducted with the consent of flag states. UNSCR 1874 excludes the use of force and armed force must be avoided. FM Yang Jiechi and VFM He Yafei have both asked the United States to pay special attention to China's security concerns over the North Yellow Sea and not send USN vessels there. 4) With respect to financial sanctions, UNSCR 1874 is not targeted against the DPRK people and normal life in North Korea should not be disturbed. The legitimate business interests of other countries in North Korea should not be BEIJING 00001845 005 OF 005 disturbed. PRC financial institutions will strengthen actions to prevent the mobility of illicit funds. 5) China will work with the Security Council committee tasked with adding names of proscribed individuals and entities. ¶18. (U) Ambassador Goldberg has cleared this message. GOLDBERG