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  기 밀 SEOUL 001753


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  외국전파금지¹⁾


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  국방부망 배포²⁾


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  행정명령 12958: 비밀해제: 09/04/2018


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  태그: PGOV³⁾, MARR⁴⁾, KS⁵⁾


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  제 목: 한미 방위비 분담 특별협정 협상 3라운드


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  분류자: 정치 공사 참사관 조셉 윤⁶⁾. 근거 1.4 (b/d).


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  번역자: PoirotKr(트위터 사용자명) — Micheal H. Rhee 2012/09/02 02:53

C O N F I D E N T I A L SEOUL 001753
 
NOFORN
SIPDIS
 
E.O. 12958: DECL: 09/04/2018
TAGS: PGOV MARR KS
SUBJECT: ROUND III OF US-ROK SMA NEGOTIATIONS
 
Classified By: POL M/C Joseph Y. Yun. Reasons 1.4 (b/d).
 
¶1. (C/NF) SUMMARY: At the third round of SMA negotiations
(August 28-29) the ROK lead negotiator, Ambassador Cho
Byung-jae, restated the position he had put forth in the
previous round on July 21. He said the ROKG would seek an 8
percent reduction in the overall SMA contribution and wanted
rapid (1-2 year) movement from cash to in-kind construction
programs. With USFK's approval, Ambassador Jackson McDonald
stated that the U.S. was willing to consider a graduated
shift from cash to in-kind (up to 60 percent over 5 years)
provided the ROKG agreed to a process for execution of
in-kind construction that maintained the USFK Commander's
control over the selection, design and prioritization of the
construction projects. Cho repeatedly emphasized the ROKG's
need to reduce the "political liability" of the SMA,
especially in the wake of the anti-U.S. beef protests over
the summer. McDonald cautioned that before the U.S. could
seriously consider a major increase in the in-kind program,
the ROKG would need to find a way to resolve a problem with
execution of the previous in-kind Combined Defense
Improvement Projects (CDIP) program. Cho said that he
appreciated the U.S. willingness to discuss moving from cash
to in-kind but pushed back on the CDIP problem, claiming that
it fell outside of his mandate. (Note: During a one-on-one
breakfast requested by Cho, he confided to Ambassador
McDonald that CDIP was a very "hot" issue within the ROKG
that could end up in an audit or investigation into MND's use
of these funds.) Cho demonstrated no flexibility on the
total amount of the SMA contribution and pressed for rapid
acceleration of the in-kind program to 90 percent by 2010.
The two delegations agreed to meet again September 24-25 for
further talks in Washington. In the interim, they concluded
that relevant officials from USFK, the Embassy, MOFAT and MND
would meet to develop procedures the U.S. would require
before agreeing to a significant increase in the in-kind
category. In a one-on-one dinner requested by Cho after the
talks, he told McDonald that the ROKG would need to "find a
way" to resolve the CDIP problem outside of the SMA and
telegraphed that he would increase the total amount of the
ROK proposal in future rounds. END SUMMARY.
 
------------------
SAME OPENING NOTES
------------------
 
¶2. (C) Ambassador Cho opened the negotiations noting the
lack of progress on the ROKG's proposed increase of in-kind
contributions and lack of consensus on total funding levels
for 2009. Cho repeated the ROKG's domestic political
concerns about as yet unspent SMA funds totaling
approximately USD 1 billion. He also repeated that the ROKG
did not accept USFK's position that SMA funds could be used
for implementation of the Land Partnership Plan (LPP).
(Note: In private, Cho and other ROKG officials have made it
clear that they will in fact not/not challenge the U.S. on
that point.) Cho stressed that political realities made it
very difficult to explain to the public why the ROK must
provide more funds to USFK when USD 1 billion in ROK
contributions remain unspent. Cho noted that the ROK could
show more flexibility in the future if these political
liabilities were removed. He agreed that a shift to an
increase of in-kind contribution would require time to
develop, but said he could not accept the U.S. position that
it would take five years or more to move to a largely in-kind
contribution system. Cho also offered to form a working group
to further study the formula for determining USFK's
non-personnel stationing costs (NPSC) which is the basis for
calculating the percentage of the ROK SMA contribution.
 
¶3. (C) Ambassador McDonald expressed regret that Cho had
chosen to rehash the same complaints delivered at the
previous SMA round in Washington on July 21. McDonald
rebutted Cho's points, noting that the USG had made it clear
from the outset that it would use SMA funds for LPP. He said
the U.S. shared the ROK'S dissatisfaction that SMA funds had
not yet been spent but pointed out that those delays were due
primarily to the inability of the ROKG to make the land
available to USFK in a timely manner. Ambassador McDonald
said he could guarantee that those funds would be
significantly drawn down over the next two years as
construction of the new expanded U.S. Army Garrison (USAG)
Humphreys got underway.
 
¶4. (C) In response to Cho's claim about the NPSC formula,
McDonald emphasized that it had been in use for many years
and that the use of such a formula was a U.S. legal
requirement that could not be ignored. He said the U.S
would, however, be happy to explain the figures used to
determine the NPSC in greater detail to the ROK. Cho replied
that the ROKG welcomed the formation of a working group to
discuss the NPSC formula, asking that the USG work with his
staff to identify ways to better capture the full measure of
the ROK's in-kind contributions.
 
--------------------
ROK PUSH FOR IN-KIND
--------------------
 
¶5. (C) Throughout the discussions, Ambassador Cho pressed
hard for a significant shift from cash to in-kind
contributions. He defined in-kind contributions as providing
needed facilities to USFK through ROK financed construction
projects under the SOFA. "In the end you want the
facilities," he said, citing the Japan Facilities Improvement
Program (JFIP) as a model that the ROK would like to adopt.
Cho proposed a one-year period to develop and draft a plan to
transition to 90 percent in-kind and 10 percent cash
contributions starting in 2010. Asked why he felt it made a
difference to Korean taxpayers whether their government gave
cash to USFK, which then went to Korean construction
companies, or paid it directly to those same companies, Cho
replied that cash transfers were far more of a political
liability for the ROKG; a political liability he made it
clear he was tasked to address and remove.
 
---------------------------
USFK PRINCIPLES FOR IN-KIND
---------------------------
 
¶6. (C) With USFK's approval, Ambassador McDonald responded
to Cho's need to discuss a shift to in-kind construction by
sketching out the possibility of a graduated increase in the
amount of in-kind from 15 to 60 percent over a five-year
agreement (2009-2013). He then outlined various principles
that would need to be incorporated into the new in-kind
procedures. First, he said that in-kind contributions would
continue to fall under the SMA, and not under the SOFA, as
the ROKG had proposed. Second, the U.S. would select and
prioritize the construction projects that would be funded
based on USFK's military needs. Third, the U.S. would also
be responsible for the project design and would provide those
designs, along with a list of eight to ten pre-approved
contractors from which the ROKG could select. Payment for
design, supervision, and oversight would not be handled
through in-kind but, instead, would remain a cash
contribution as is the case today. Fourth, if the winning
contractor was able to complete the project under bid, the
savings would be rolled over into other projects, rather than
being returned to the ROKG. Fifth, the ROKG would need to
develop a system that would allow rollover of unused funds to
prevent a loss of funds due to the one-year Korean government
budget system. Finally, the USG and ROKG would have to
develop a system to review the execution of the in-kind
program with the option to revert to cash contributions if
the program is deemed successful.
 
¶7. (C) Cho elected not to respond to the principles as laid
out by Ambassador McDonald but said he would take them on
board and study them. He did, however, express concern that
the proposal was far from ROK expectations for a rapid shift
to in-kind and queried when the U.S. proposed that the ROK
would reach the 90 percent in-kind level. Cho also repeated
the ROK assertion that in-kind construction projects could
and should be handled under the SOFA rather than through the
SMA.
 
--------------
RESOLVING CDIP
--------------
 
¶8. (C) Ambassador McDonald, with support from USFK, made it
clear to the Korean delegation that before the U.S. could
consider a large increase in the in-kind portion of the SMA
contribution the ROK would need to find a way to make good on
the USD 200 million unexecuted CDIP funds from CY02-06 that
it has thus far failed to deliver. McDonald emphasized that
the U.S. was reluctant to increase in-kind contributions if
that serious problem remained unresolved. (Note: Needed
projects the USG plans to execute with these funds include a
second runway at Osan Air Base and improvements to the
Hardened Tactical Air Coordination Center (HTACC), also at
Osan.)
 
¶9. (C) Cho pushed back on addressing the CDIP issue, stating
that he had no mandate to discuss it. He suggested that it
was unwise to link CDIP to SMA discussions and argued that
the problems with CDIP were not typical of past in-kind
projects and that ROK has had many successes in providing
in-kind facilities to USFK. Members of the U.S. delegation,
including the lead USFK engineer disputed that, pointing out
that there had been significant problems with three out of
the four current in-kind programs.
 
¶10. (C) Cho stated that the issue should be resolved outside
of the SMA framework between USFK and MND and called on
Ambassador McDonald to work with him to create a new
mechanism to better manage future in-kind programs. He
suggested that the CDIP problem would more appropriately be
addressed at the Security Policy Initiative (SPI) talks
scheduled for September 10. McDonald replied that Ambassador
Cho himself did not need to solve the problem if he did not
wish to, but that someone in the ROKG would have to do so.
He pointed out that, as part of the existing SMA, CDIP
clearly did fall within their mandate but acknowledged that
the USG would accept if the problem were resolved through the
SPI. He warned that if the problem was only referred to at
SPI but was not resolved it would most likely be elevated to
the ministerial-level Security Consultative Meeting (SCM) on
October 17. Ambassador McDonald and General Panter expressed
USFK's willingness to show some flexibility on the CDIP issue
but insisted that it be seriously addressed by the ROKG.
 
-------------------
TOTAL FUNDING LEVEL
-------------------
 
¶11. (C/NF) Cho displayed little flexibility or willingness
to increase the overall funding level of the ROK proposal for
2009 and beyond, stating that he thought it was more
important at this stage to discuss how to structure future
in-kind programs. (Note: At the subsequent, one-on-one
dinner, however, he intimated that he was prepared to
increase the ROK offer somewhat in due course). In front of
his colleagues, Cho argued that the ROK sought to pay "a fair
share" and not necessarily an "equitable" one. He cited
significant ROK investments in YRP, LPP, preparations for
OPCON transfer and the ROK defense budget as other forms of
Alliance burden sharing where South Korea was making
significant contributions. Cho stated that although Japan
might pay 75 percent of its SMA, he noted that Japan's
economy was much larger than Korea's. In relative terms,
Korea does not pay less than Japan, he argued. Citing ROK
domestic constraints, Cho argued that the U.S. must help to
create a more favorable political and economic environment
before expecting the ROK to contribute significantly more.
He said that if the U.S. would adopt a more rapid shift to
in-kind contributions, it would reduce the political
liabilities associated with the SMA.
 
¶12. (C) Cho stated that the ROK position on the 2009 funding
level was not final and would depend on the amount of
flexibility shown by the U.S. on in-kind contributions. Cho
questioned why USFK wanted a gradual shift to in-kind and
advocated the ROK's expectation for a rapid shift to in-kind
contributions.
 
--------
DURATION
--------
 
¶13. (C) Cho insisted that extension of the current SMA for
one year (2009) would allow sufficient time to negotiate a
new in-kind arrangement that would transform the current 90
percent cash/10 percent in-kind arrangement to a 10 percent
cash/90 percent in-kind structure by 2010.
 
----------------------
DATES SET FOR ROUND IV
----------------------
 
¶14. (C) The two delegations agreed to reconvene on September
24-25 in Washington for a fourth round of negotiations. In
the interim, they agreed that relevant officials from USFK,
the Embassy, MOFAT and MND would begin exploring the
appropriate mechanisms and procedures that would allow for
increased in-kind contributions that meet U.S. requirements.
 
¶15. (U) This message has been cleared by Ambassador McDonald.
VERSHBOW