SCENE SETTER-CDR GEN D. MCNABB VISIT TO AUSTRALIA

S E C R E T CANBERRA 000402


SIPDIS

DEFENSE FOR GEN.DUNCAN MCNABB FROM AMBASSADOR ROBERT D.
MCCALLUM JR
STATE FOR EAP AND PM

E.O. 12958: DECL: 01/15/2019
TAGS: PREL OTRA AS
SUBJECT: SCENE SETTER-CDR GEN D. MCNABB VISIT TO AUSTRALIA
JAN 23, 2009 - C O R R E C T E D C O P Y CLASSIFICATION

REF: CANBERRA 56

Classified By: Ambassador Robert D. McCallum, Jr. for reasons 1.4(b)
and (d)

SUMMARY
--------------

1. (C/NF) Australia is the closest of our five treaty allies
in the Asia-Pacific region and has deployed forces with the
United States in every major military engagement since World
War I, including most recently in Afghanistan and Iraq.
Relations intensified dramatically in the wake of the 9/11
attacks in the United States, which prompted President Bush
and then Prime Minister John Howard to invoke the mutual
defense provisions of the 1951 ANZUS Treaty. In national
elections in November 2007, the Australian Labor Party swept
John Howard's Liberal/National coalition from power after
more than 11 years in office. The new government, led by
Kevin Rudd, moved quickly to reaffirm its commitment to the
U.S. alliance as the first pillar of its foreign policy,
ahead of its two other major policy goals: greater
commitment to multilateral organizations, and deeper
engagement with Asia. Just 13 months into his
administration, Rudd's government continues to enjoy high
approval ratings, driven by his early action to fulfill
campaign promises, including rolling back the previous
government's controversial industrial relations legislation,
signing the Kyoto Protocol and withdrawing Australian combat
troops from Iraq. Importantly, Rudd has kept combat elements
in Afghanistan and has committed to remaining there for "the
long haul" as the largest non-NATO troop contributor. It was
one of only five countries beside the United States whose
non-combat forces were invited to remain in Iraq beyond the
expiration of the UNSC mandate on December 31, 2008. Rudd
commissioned a comprehensive defense review that is due for
public release by mid- 2009, but we expect the result will
broadly endorse our bilateral defense cooperation.


2. (C/NF) The economy is in its 17th year of straight growth
but will likely slide into recession later this year as a
result of the global financial crisis. Compounding these
financial pressures are concerns of unemployment and possible
high costs associated with a greenhouse gas emissions trading
scheme. Prime Minister Rudd made some initial foreign
relations missteps, notably with India and Japan, but also in
his dealings with The White House. His failure to consult
with international stakeholders, including the United States,
before announcing major foreign policy initiatives on
regional architecture and nonproliferation generated
additional criticism. He signaled a determination during the
election campaign to be a more critical partner of the United
States than his predecessor, tapping into widespread unease
over the extent of U.S. influence on Australia's foreign
policy, particularly over Iraq. An advocate of "middle
power" diplomacy, Rudd can be expected to continue to
challenge the U.S. to do more on climate change, arms control
and disarmament. Policy differences aside, Rudd is strongly
committed to Australia's alliance with the United States, and
his endorsement of ongoing collaboration with us across the
broad range of shared issues highlights Australia's
determination to be a reliable partner. End Summary
Qdetermination to be a reliable partner. End Summary

U.S. ALLIANCE
--------------

3. (SBU) Support for the U.S. alliance, underpinned by the
1951 Australia-New Zealand-United States (ANZUS) Treaty, is
foremost among the three pillars of Rudd's foreign policy
(the others are cooperative engagement with multilateral
organizations such as the UN, and deeper engagement with
Asia). Rudd has made clear Australia's commitment to the
alliance, and was quick to reach out to the United States in
his election victory speech - the only foreign country he
mentioned. One of Rudd's first visits abroad was to the
United States in March, where he met the President, Secretary
Rice, Secretary Gates, Secretary Paulson and many other
senior level officials. In these meetings, and in a
telephone call with President-elect Obama soon after the U.S.
election, he reaffirmed the primacy of the relationship with
the United States.


4. (C/NF) Rudd stressed during his election campaign that he
would be more independent from the United States than his
predecessor, John Howard, who was seen by the Australian
public to have been in lockstep with President Bush over such
unpopular issues as Iraq and the five-year confinement
without trial in Guantanamo of Australian citizen David
Hicks. While Rudd withdrew 550 soldiers comprising the
Overwatch Battle Group from Iraq by June 2008, he did so only
after consultation with the Iraqi, U.S. and UK governments.
Since the expiration on December 31, 2008 of the UNSC mandate
and the signing of a Memorandum of Understanding with the
Iraqi Government, Australia has reduced troop levels to 120
embedded and administrative officers. Australia was selected
by the Iraq government as one of only five countries other
than the United States permitted to have a military role in
Iraq after the UNSC mandate expired. One area where the Rudd
government's policy diverges from the Bush Administration's
is climate change, a topic that resonates strongly in
Australia where many see a direct causal link with a series
of recent, very severe droughts. PM Rudd ratified the Kyoto
Protocol within hours of being sworn in, and his government
in December as promised announced an emissions cap and trade
system that, despite the global economic downturn, is due to
be implemented in 2010. The plan has been praised by
industry and criticized by environmental groups for only
requiring a 5% cut from 2000 emissions levels by 2020.


5. (SBU) Rudd's extended political honeymoon with the public
was given new life by his decisive response to the global
financial crisis, particularly his pledge that the government
would guarantee all bank deposits, regardless of size, for a
three-year period, and the distribution of more than A$10
billion to families with children, pensioners and other
struggling groups. At the same time, the Opposition has
started to right itself after the election defeat. While
Rudd still holds a commanding lead as preferred prime
minister, the recently installed Opposition Leader, Malcolm
Turnbull, has begun to claw back some ground.

ECONOMY
--------------

6. (SBU) With the sharp downturn in the global economy
following the intensification of the global financial crisis,
Rudd's principal economic challenge is trying to prevent a
recession in Australia. Australian banks remain sound, and
Standard & Poor's have said Australia's AAA rating is not in
jeopardy; Rudd's government extended deposit and wholesale
funding guarantees in response to similar moves in other
countries. But Australia's commodities-based export sector
and its overall economy are heavily exposed to recessions in
key trading partners like the U.S., Japan, and New Zealand,
and the dramatic slowdown in growth in its number one export
market, China. The Reserve Bank of Australia, turning
quickly from its early 2008 concern about rising inflation in
a then-over-heating economy, aggressively slashed Australian
interest rates from 7.25% to 4.25% (an all-time low) between
September 2 and December 2. In October, Rudd and Treasurer
Wayne Swan announced an A$10.4 billion fiscal stimulus
package aimed at families and pensioners; this package, equal
to 1% of GDP, was distributed to Australians in early
Qto 1% of GDP, was distributed to Australians in early
December. Key economic indicators such as business and
consumer confidence, unemployment, and job advertising are
sharply worse in late 2008 over 2007. The Rudd Government is
now considering another stimulus package, and are preparing
the public for the idea that because of necessary stimulus
spending and reduced revenues, Australia will soon have a
budget deficit; initial predictions for FY2008-09 were for an
A$22 billion surplus. Australia has not had a recession
since 1990-91; even if it manages to avoid one in 2009,
growth will be sharply down.


7. (SBU) Rudd was aggressive in pushing for a G-20 response
to the global financial crisis. He clearly sees Australia as
having a role to play in the international effort. There
have been no serious calls in Australia for raising
protectionist barriers due to the global financial crisis;
the GOA even rejected calls to delay a scheduled cut in
automobile tariffs despite the problems of its domestic auto
industry.


8. (SBU) The United States and Australia enjoy very close
economic relations. The centerpiece is the U.S.-Australia
Free Trade Agreement, which went into effect in January 2005.
In 2008 the U.S. enjoyed a trade surplus with Australia of
over $10 billion. We are Australia's third largest trading
partner (after China and Japan),and by far the largest
foreign investor in Australia. Australia is our
14th-largest trading partner, and we are Australia's top
overseas investment destination. We concluded an Open Skies
civil aviation agreement with Australia, which was signed
during Prime Minister Rudd's visit to Washington last
March/April.

MISSTEPS ON FOREIGN POLICY
--------------

9. (C/NF) While Rudd served as a diplomat early in his
career, and is fluent in Mandarin, his government has made
some misjudgments in the foreign affairs area. Foreign
Minister Smith angered India -- and raised eyebrows in Japan
and the United States -- with his public announcement,
standing next to his Chinese counterpart, that Australia
would no longer support a Quadrilateral Strategic Dialogue
with India -- a short-lived offshoot of the
U.S.-Japan-Australia Trilateral Strategic Dialogue - in
deference to China's sensitivities. Rudd irritated Japan
with his government's threats to take legal action against
Japanese whaling, coupled with the release of official GOA
photographs of Japan's whaling activities, and his failure to
include Japan, a major security and trade partner, on his
first major overseas trip. He leaked to the press details of
a telephone conversation with President Bush, which resulted
in a story which mischaracterized the President's comments,
and a confidential Bush request to consider resettling a
small number of Uighurs from the Guantanamo Bay detention
facility also ended up in the press. Moreover, Rudd
encountered international criticism for the hasty manner in
which he rolled out two major foreign policy initiatives in
June 2008. His vision for a European Union-style Asia
Pacific Community by 2020, unveiled on June 4, and his June 9
announcement that Australia would establish an International
Commission on Nuclear Nonproliferation and Disarmament to
shape the outcome of the 2010 Nuclear Nonproliferation Treaty
Review Conference, were both launched without internal
vetting or consultation with the stakeholder countries whose
support would be needed for the success of these
undertakings. Senior officials have ascribed the lapse to
Rudd's rush to fulfill foreign policy promises made during
the election campaign and the "talismanic" importance of
nuclear disarmament to the Australian Labor Party, but Rudd's
inclination to rely on his small inner circle of advisors
rather than on his bureaucracy, and his evident need to
dominate the headlines may also explain his actions.

COMMITMENT TO MULTILATERAL ORGANIZATIONS
--------------

10. ( C) To further the GOA's engagement with multilateral
organizations, the second pillar of his foreign policy, PM
Rudd announced Australia would seek a seat on the UN Security
Council for the 2013-2014 term, and he has traveled to
Brussels to reinvigorate Australia's ties with the European
Union. While in opposition, the ALP supported international
military action to overthrow the Taliban in Afghanistan in
2002 but opposed the invasion of Iraq, partly because the
latter action lacked a UN mandate. Rudd's vision for an
Qlatter action lacked a UN mandate. Rudd's vision for an
EU-like Asia Pacific Community by 2020 also builds on his
commitment to address international challenges through
multilateral fora.

COUNTERTERRORISM
--------------

11. (SBU) Australia is a full partner in our
counterterrorism efforts and aggressively leads efforts to
combat domestic and international terrorism, particularly in
Southeast Asia, where addressing the threat of Jemaah
Islamiyah remains our highest common priority. Australia
provides significant assistance to Southeast Asian countries
to improve their CT capabilities, promotes regional capacity
building through the APEC Counterterrorism Task Force (CTTF),
and advocates coordination and expansion of donor CT
assistance in Counter Terrorism Action Group (CTAG) meetings.
On September 5, 2008, Foreign Minister Smith announced the
appointment of former Ambassador to Thailand William (Bill)
Paterson as Australia's Ambassador for Counter-Terrorism.

DEFENSE COOPERATION
--------------

12. (SBU) The Australian Defence Force (ADF) numbers
approximately 52,000 active duty personnel, with planned
increases to 57,000 within the next decade, including an
increase in the Australian Army from 26,000 to 30,000.
Recruitment and retention, especially for technical personnel
with skills also sought by the mining industry, has long been
challenge for the ADF. However, with changes in recruiting
methods and incentives, coupled with rising unemployment as
result of the global financial crisis, recent data show
increases in recruiting and declines in attrition. The GOA
has stated its commitment to three percent annual real growth
in defense spending through 2018 to ensure the ADF is able to
meet capability and interoperability goals.


13. (SBU) The Royal Australian Navy's (RAN) front-line fleet
currently includes 12 frigates, including four of the
Adelaide class and eight Australian-built ANZAC class. In
August 2004, Australia selected the Aegis Combat Control
System for its three air warfare destroyers (AWD),which will
start coming into service in 2014. A decision on a fourth
AWD is expected in early 2009. The F/A-18 fighter, built in
Australia under license from the U.S. manufacturer, is the
principal combat aircraft of the Royal Australian Air Force,
backed by the U.S.-built F-111 strike aircraft. In October
2002, Australia became a Level III partner in the U.S.-led
Joint Strike Fighter (JSF) program. Additionally, the
Australian Government signed the JSF Production, Sustainment
and Follow-on Development MOU in 2006. Australia is projected
to buy up to 100 JSF aircraft with deliveries starting in
2013 and running through 2020, with its decision on the JSF
expected in June 2009. The F-111 strike aircraft are
scheduled to exit service by 2010 and will be replaced by 24
Boeing F/A-18F Super Hornet fighters, with deliveries
commencing in 2010, to provide interim strike capability
until the arrival of the JSFs. The Royal Australian Air
Force (RAAF) took delivery of four Lockheed C-17 strategic
airlift aircraft in 2007-2008. In addition, Boeing has
agreed to provide the Commonwealth of Australia's RAAF with
the "Wedgetail" Airborne Early Warning and Control (AEW&C)
system based on the Next-Generation 737-700 aircraft as the
airborne platform, although the project has been plagued by
delays and cost overruns. Recent U.S. sales to the
Australian Army include the M1A1 AIM tank, as well as
Hellfire and JAVELIN munitions. Future opportunities include
CH-47 helicopter replacements, navy helicopter replacements,
light and medium cargo aircraft replacements and artillery
systems.

DEFENCE WHITE PAPER
--------------

14. (C/NF) The Rudd government has ordered a comprehensive
review of Australia's defense policy, including review of
some major defense acquisitions from the United States, that
has slowed or postponed bilateral cooperation in some areas,
such as missile defense. While the Defence White Paper will
not be completed until at least April 2009, we have been
assured privately not to expect surprises in the overall
strategic assessment, and we expect defense cooperation to
proceed with little interruption. We can expect Australia's
Qproceed with little interruption. We can expect Australia's
continued contributions to military operations targeting the
Taliban and al-Qaeda in Afghanistan, and a continued
non-combat role in Iraq. The small size of its military and
demands of deployments elsewhere mean Australia will be hard
pressed to increase substantially the level of its
deployments for some time to come. We believe it could
deploy up to 1000 additional troops to Afghanistan, although
public support for Australia's involvement in Afghanistan has
gradually begun to erode. Despite this, we are confident
Australia will remain one of our closest allies and most
reliable security partners for the foreseeable future, and we
expect the GOA to remain the largest consumer of U.S. defense
hardware and technology in the Asia-Pacific area.

DEFENSE TRADE COOPERATION TREATY
--------------

15. (SBU) The U.S.-Australian Defense Trade Cooperation
Treaty is awaiting approval by the U.S. Senate. In a letter
to Secretary Rice in September, Senators indicated that
questions remain about the agreement and accompanying
Implementing Arrangements. The Australian Defence Materiel
Organisation estimates a 50 percent reduction in export
licenses required following treaty implementation.

ENHANCED DEFENSE COOPERATION
--------------

16. (S/REL AUS) As discussed between President Bush and
former PM Howard on the margins of APEC in Sydney in
September 2007, and as reconfirmed during the February 2008
AUSMIN meeting, our two governments have agreed to strengthen
combined capabilities in three areas: enhancing the Joint
Combined Training Capability; prepositioning equipment for
Humanitarian Assistance and disaster relief (HA/DR)
operations in the region; and strengthening Intelligence,
Surveillance and Reconnaissance (ISR) access and cooperation.
Subsequent discussions have made significant progress in
joint cooperation on the JCTC and increasing ISR initiatives.
The idea to preposition HA/DR equipment concept was shelved
in favor of improving HA/DR combined C2 capability and access
to HA/DR asset information.

Trilateral Strategic Dialogue
--------------

17. (C/NF) The Rudd government has reaffirmed its strong
support for the U.S.-Australia-Japan Trilateral Strategic
Dialogue (TSD),which has grown from a deputy secretary/vice
ministerial level exchange of strategic assessments in 2002
to regular ministerial and senior officials dialogue with
separate tracks addressing defense cooperation,
counterterrorism, intelligence, Pacific Islands and
humanitarian assistance/disaster relief (HA/DR). Australia
has engaged actively in the defense cooperation track - the
Security and Defense Cooperation Forum (SDCF) - since its
initiation in 2007, participating in P-3 surveillance
aircraft exercises, HA/DR strategic airlift seminars, and
exchanges on maritime security and peacekeeping. Australia
has used the SDCF to engage Japan more deeply on bilateral
defense cooperation, but shares our frustration at Japan's
political fragility and bureaucratic impediments that made
operational cooperation difficult. SDCF cooperation is also
hindered by issues related to Japan's classified
information-sharing. While the Australian government's
posture on further engagement with the United States on a
ballistic missile defense program will be spelled out in its
forthcoming Defence White Paper, it participated in a TSD
trilateral Ballistic Missile Defense Forum in September 2008
in Honolulu. Japan has expressed some unhappiness with the
GOA's reluctance to move forward more quickly on BMD. The
next SDCF is scheduled for February 5, 2009.

ARMS CONTROL, DISARMAMENT AND NONPROLIFERATION
--------------

18. (U) Australia historically has had a strong record on
arms control and disarmament, and has signed and ratified all
the major regimes, including the Nuclear Nonproliferation
Treaty (NPT); the Comprehensive Test Ban Treaty (CTBT); the
Chemical Weapons Convention (CWC); the Biological Weapons
Convention (BWC); the Ottawa Convention on landmines; and the
Convention on Certain Conventional Weapons (CCW). It was a
founder of the IAEA, and is member of its Board of Governors,
and has been a close partner with the U.S. on export
controls, particularly MANPADS. Australia is a member of the
Zangger Committee, the Nuclear Suppliers Group (NSG),the
Australia Group, the Proliferation Security Initiative (PSI),
QAustralia Group, the Proliferation Security Initiative (PSI),
and the Missile Technology Control Regime (MTCR). Australia
was the 2008-2009 MTCR Chair and hosted the 2008 MTCR Plenary
in Canberra in November.


19. (SBU) In June 2008, in fulfillment of another campaign
promise, PM Rudd announced the establishment of an
International Commission on Nuclear Nonproliferation and
Disarmament, intended to address the deterioration of the NPT
regime, in light of the number of non-NPT states that have
developed nuclear weapons, and to shape a successful outcome
at the 2010 NPT Review Conference. The Commission,
co-chaired by Gareth Evens, a former Australian foreign
minister, and Yoriko Kawaguchi, former foreign minister of
Japan, identified three areas of study for the Commission,
including:

-- strengthening compliance with the NPT by requiring all NPT
signatories to adopt IAEA-designed monitoring provisions
(i.e., Additional Protocols);

-- developing an international system to manage the nuclear
fuel cycle; and

-- adopting a process to bring the Comprehensive Nuclear Test
Ban Treaty (CTBT) into force. (Note: On May 12, Foreign
Minister Smith publicly called for the nine countries that
have not ratified the CTBT, including the United States, to
do so to bring the Treaty into force.)

Former U.S. Defense Secretary William Perry represents the
United States on the Commission, and former Secretary of
State and National Security Adviser Henry Kissinger serves on
the Advisory Board.

IRAQ
--------------

20. (C/NF) Fulfilling a campaign pledge, Rudd withdrew
approximately 515 combat troops comprising the Overwatch
Battle Group, plus the 100-strong Australian Army Training
Team, from Iraq in June 2008, leaving in place approximately
1,000 defense personnel, including a 100-man security
detachment for its diplomatic mission in Baghdad, and naval
and air patrol assets based in neighboring countries that
support operations in both Iraq and Afghanistan. Despite the
withdrawal of combat forces, Rudd agreed to allow Australian
forces embedded or seconded to units of other countries
including the U.S. to deploy to Iraq in combat and combat
support roles with those units. The Iraqi government
identified Australia as one of only five countries other than
the United States whose personnel have been permitted to
remain in Iraq after 2008, but under the terms of the
negotiated MOU, only Australian forces embedded with U.S.
forces were provided adequate legal protection, resulting in
a further reduction in the number of personnel in-country to
120 troops. (Of those 120, the approximately 80-strong
Embassy security detachment is considered administrative and
technical staff of the Embassy, and is covered separately
under the Vienna Convention on Diplomatic Relations.)
Australian aircraft operating in Iraq will follow normal air
space procedures and Australia's frigate guarding Iraqi oil
platforms has been redeployed to international waters in the
Gulf. The Australians plan to remain engaged in Iraq in
reconstruction and other non-combat roles, and the GOA is
considering proposals for additional training and technical
assistance. We have asked Australia to contribute
specialists to serve in U.S. PRTs.

AFGHANISTAN
--------------

21. (C/NF) Unlike Iraq, there has been bipartisan political
support in Australia up to now for its troop commitment in
Afghanistan, and the Rudd government has reaffirmed that it
plans to remain in Afghanistan for the "long haul." Support
for Australia's combat role in Afghanistan is linked in part
to the presence of al-Qaeda and the Taliban, who trained
bombers that killed 202 civilians, including 88 Australians,
in Bali in 2002, as well as to the impact of the Afghan drug
trade on Australia, and the fact that the October 2001
incursion was mandated by the United Nations. The Australian
government deployed an Operational Mentoring and Liaison Team
(OMLT) to Afghanistan in November to help train the Afghan
National Army and provides additional civilian development
assistance, but is not currently contemplating increasing its
combat forces. Eight Australian soldiers have been killed in
Afghanistan since 2002, including six within the past 18
QAfghanistan since 2002, including six within the past 18
months. Recent polls show Australian public opinion has
begun to turn, with a slight majority now opposing
Australia's continued military role in Afghanistan.

CHINA
--------------

22. (C/NF) An important dynamic in the U.S. relationship
with the Rudd Labor government is China. China is now
Australia's largest trading partner, and the Chinese export
market is a critical component of Australia's growth now and
well into the future. PM Rudd's background as a
Mandarin-speaking former diplomat who served in Beijing has
led some to believe that he might be overly sensitive towards
China, but he has demonstrated a balanced view. Rudd shares
our position that China needs to be encouraged to be a
responsible stakeholder in the international system, but
cautions that the international community needs to be
prepared for the possibility that China's rise might take a
"malign" turn. Moreover, the GOA shares our concerns about
China's military modernization, lack of transparency about
its military budget, and abuse of human rights. Rudd spoke
out strongly to protest China's crackdown in Tibet during his
first official visit to China. A GOA spokesperson recently
denied a press story alleging that Chinese pressure played a
part in Australia's decision not to accept for resettlement
from Guantanamo a group of Uighurs - Muslims from northwest
China whom Beijing regards as terrorists who should be
repatriated to China.

INDIA
--------------

23. (C/NF) The Rudd government has moved to intensify
Australia's relationship with India, and has signaled its
intent to engage bilaterally on shared strategic interests,
including maintaining stability in the Indian Ocean area and
matching Australian resources to India's energy supply needs.
Australia played a positive role in supporting an exception
for the U.S.-India civil nuclear agreement in the Nuclear
Suppliers Group and the IAEA, but has indicated that it will
not export uranium to India because it has not signed the
Nuclear Nonproliferation Treaty.

INDONESIA
--------------

24. (C/NF) Australia's relationship with Indonesia has
improved markedly in the last few years and it appears to
very satisfied with President Yudhoyono's performance to
date. The GOA consistently portrays the relationship as one
of Australia's most important, encompassing political,
security, commercial, cultural and people-to-people links.
In February 2008, the Lombok Treaty between Australia and
Indonesia came into full force and provides the framework for
bilateral cooperation on counterterrorism efforts in law
enforcement, capacity building, border control, maritime and
transport security, legal assistance, financial monitoring,
defense and management of chemical, biological, radiological
and nuclear terrorist threats.

MCCALLUM