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

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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

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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

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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

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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