US embassy cable - 05RANGOON62

C O N F I D E N T I A L SECTION 01 OF 05 RANGOON 000062 
 
SIPDIS 
 
STATE FOR EAP AND INL; DEA FOR OF, OFF; 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 01/13/2015 
TAGS: SNAR, KCRM, PREL, PGOV, PINS, ASEC, BM 
SUBJECT: BURMA: IMPLICATIONS OF OPERATION WARLORD 
INDICTMENTS 
 
REF: A. DEA NEW YORK 14548 DTG 261754 Z AUG 04 
     B. DEA NEW YORK 22213 DTG 142016 Z DEC 04 
     C. 12/15/04 MARTINEZ-GAGNON E-MAIL 
     D. 8/31/04 MCMULLEN-GAGNON E-MAIL 
     E. 5/25/04 MARTINEZ-STROTZ E-MAIL 
     F. RANGOON 11 AND PREVIOUS 
     G. 04 RANGOON 1605 AND PREVIOUS 
     H. 04 RANGOON 1451 
     I. 04 RANGOON 221 
 
Classified By: COM Carmen Martinez for Reasons 1.4 (B,D) 
 
1. (SBU) Summary: Imminent U.S. Attorney indictments of UWSA 
leaders, seven of which are scheduled to be unsealed in New 
York on January 24, are the product of a DEA-led law 
enforcement investigation ("Operation Warlord") that will 
disrupt drug activities of key traffickers and producers. 
Unsealing the indictments at any time will have certain 
implications for U.S. Burma policies and objectives, and 
careful consideration should be given to all possible 
ramifications.  The scheduled January 24 unsealing of the 
indictments coincides with other developments in Burma and 
could have additional implications for several bilateral and 
multilateral initiatives.  End Summary. 
 
Operation Warlord 
----------------- 
 
2. (SBU) In August 2004 the U.S. Attorney's Office, Eastern 
District of New York (EDNY) handed down sealed indictments 
for 17 top leaders of the United Wa State Army (UWSA) as the 
result of a DEA-led investigation (dubbed "Operation 
Warlord;" refs A-E).  An additional four individuals were 
indicted in December 2004.  All 21 individuals are charged 
with violations for having conspired to possess, manufacture, 
or distribute heroin and methamphetamines, knowing these 
controlled substances would be unlawfully imported into the 
United States. 
 
3. (SBU) According to DEA, the indicted individuals include 
notorious drug lord Wei Hsueh Kang, a member of the UWSA's 
central executive committee and the subject of a 1993 U.S. 
indictment, and his two brothers, Wei Hsueh Lung and Wei 
Hsueh Ying (AKA Yun); UWSA Commander Pao Yu Hsiang and his 
two brothers, Pao Yu Yi and Pao Yu Hua; and UWSA Deputy 
Commander Li Tzu Ru (Li Ziru).  Also according to DEA, 
indictments against these seven individuals, plus one other 
person, will be unsealed on January 24 at a press conference 
in New York. 
 
4. (C) Note: According to press reports, and verified by 
Embassy sources, UWSA Deputy Commander Li Tzu Ru died in the 
Wa capital of Pang Hsang from a heart attack in the early 
morning hours of January 9.  As reported in ref F, other 
sources indicate that UWSA Commander Pao Yu Hsiang (AKA Bao 
You Xiang or Pao Yu Chang) recently relocated to Yunnan 
Province for medical care to address a serious neurological 
infection.  End Note. 
 
Bound the Get Their Attention 
----------------------------- 
 
5. (SBU) The UWSA, as an organization, was placed on the 
Kingpins List in 2003.  That action, from our perspective, 
has not significantly disrupted Wa narcotics activities in 
Burma nor has it garnered any notable reaction from UWSA 
leaders or members of the Burmese regime.  The same can be 
said of a 1993 indictment of Wei Hseug Kang and his placement 
on the Kingpins List in 2000.  However, a sweeping indictment 
of the individuals who comprise the top Wa leadership, as 
envisioned by the scheduled unsealing of the seven 
indictments, is likely to get considerable attention in Burma 
and in the region. 
 
6. (SBU) Targeting the UWSA leadership for law enforcement 
action is in line with U.S. counternarcotics objectives and 
the DEA has briefed post with the compelling and abundant 
evidence that convinced a grand jury to deliver the 
indictments.  According to explanations offered to us by DEA, 
the timing of the January 24 unsealing of the indictments is 
predicated on a DEA/DOJ assessment that the Burmese regime 
may cooperate by handing over the individuals as a means of 
further discrediting ousted former Prime Minister Khin Nyunt 
as well as to improve the regime's counterdrug image. 
 
Low Expectations for GOB Cooperation 
------------------------------------ 
 
7. (SBU) Unsealing the indictments now could diminish the 
ability of any of the seven individuals to travel in the 
region.  A concurrent effort to seize the assets of the Hong 
Pang Company (Wei Hseuh Kang and the UWSA's most significant 
commercial venture), may also reduce the ability of Wa 
leaders to expand UWSA business holdings.  However, on the 
basis of the regime's antagonistic stance toward the United 
States and the SPDC's long-standing counternarcotics 
shortcomings (documented annually during the certification 
process), we anticipate that the GOB will lack the will and 
the capacity to cooperate fully with Operation Warlord by 
arresting and handing over any of the seven indicted UWSA 
leaders.  This does not preclude benefit that can be derived 
from the indictments, but there should be minimal expectation 
that GOB cooperation will include senior-level arrests. 
 
8. (C) We don't believe the SPDC, if it defied our 
expectations and cooperated in any meaningful way, would be 
motivated by a desire to further discredit Khin Nyunt. 
Although the regime has undertaken a massive purge of the 
Khin Nyunt empire, and the ousted PM did indeed have 
relations with the UWSA, he did so at the behest of the 
regime and in pursuit of an end to years of violent conflict 
(if the indictments reveal a direct narcotics relationship 
between Khin Nyunt and the UWSA, the GOB might react more 
favorably (ref F), but we've seen no conclusive evidence of 
such a smoking gun).  Nor would the SPDC view cooperation as 
an opportunity to improve its image; the regime has 
consistently concluded that the domestic political 
implications of handing over powerful drug lords outweigh any 
potentially favorable international reaction. 
 
Wider Implications 
------------------ 
 
9. (C) The following are additional issues that will 
influence regime's short- to medium-term reaction to the 
indictments.  Several of these issues could in turn be 
affected by the imminent unsealing of the indictments: 
 
--UWSA POLITICS:  As we have reported, the core leadership of 
the UWSA has been struggling with internal tensions for 
several months (ref G).  The death last week of Deputy 
Commander Li Tzu Ru and the unresolved illness of Commander 
Pao Yu Hsiang exacerbate turf battles arising from 
senior-level financial and policy disagreements.  Many 
observers believe that Wa territory, home to a formidable and 
well-equipped (formerly insurgent) army of over 20,000 
troops, is a powder keg.  The SPDC is unlikely to undertake 
any abrupt moves against the Wa leadership, which could 
ignite internal Wa strife or, worse from the regime's 
perspective, unite the Wa to mount a military resistance to 
SPDC intrusion.  While the regime will be careful to distance 
itself from Wa drug activities, it possible that the SPDC 
will characterize the indictments as interference in Burma's 
internal affairs. 
 
--SPDC-UWSA RELATIONS:  Widespread speculation among Burma's 
17 cease-fire groups (CFGs) that the SPDC intends to expand 
central control over the border regions (ref H) has fueled Wa 
distrust of the regime following the ouster of Khin Nyunt, 
envoy to the Wa since 1989 and architect of the cease-fire 
agreement.  Following Khin Nyunt's departure, the SPDC 
quickly dispatched a series of senior representatives to 
assure the UWSA that the regime has no intention of 
disrupting the Wa's limited autonomy and lucrative economic 
concessions.  The regime is not likely to support indictments 
that would tarnish this charm offensive.  If the SPDC 
actually cooperates with the indictments and seeks to arrest 
key UWSA leaders, the regime can expect a quick, and possibly 
military, reaction from the Wa. 
--NATIONAL CONVENTION (NC): The SPDC announced this week that 
it will reconvene the NC on February 17 and proceed with 
efforts to secure a new constitution.  Smooth completion of 
the NC is currently perhaps the regime's most pressing 
domestic priority.  The only wild card in this otherwise 
rubber stamp process, leading to a preeminent governing role 
for the Burmese military in any future government, is the 
unresolved participation and acquiescence of Burma's ethnic 
cease-fire groups.  The UWSA sent five delegates to the 2004 
session of the National Convention.  In addition, the Wa 
National Development Party (WNDP), a registered political 
party affiliated with the UWSA, sent five delegates.  The 
indictments have the potential to encourage the UWSA to 
boycott the Convention altogether for fear of arrest(s).  If 
the Wa take a pass on the Convention, other CFGs could follow 
suit.  The SPDC would view such a development as a major 
disruption to the NC process and we could expect implications 
for several U.S. bilateral activities (see para 10). 
 
--BURMA-PRC RELATIONS:  The Wa are heavily influenced by the 
Chinese (specifically Yunnan Province), politically and 
socially.  Wa territory is heavily Sino-fied and most 
residents speak Mandarin, get their electricity and 
consumables from Yunnan, rely on Chinese telecommunications, 
and use the yuan/renminbi as a de facto currency.  The SPDC, 
the benefactors of growing Chinese assistance, are unlikely 
to make a move against the UWSA unless the PRC does as well. 
To a lesser extent, corresponding actions taken by the RTG in 
Thailand could also be a prerequisite for a desirable GOB 
response. 
 
--UWSA POPPY-FREE PLEDGE:  Years ago, the UWSA pledged to 
implement a comprehensive ban throughout Wa territory on the 
cultivation of poppy.  After several postponements, the 
poppy-free ban is scheduled to go into effect in June 2005. 
Although there are many signs that it will be difficult for 
the UWSA to implement a full ban in the face of defiant 
farmers and opium traffickers, poppy cultivation in Shan 
State has declined by more than 70 percent over the last 
eight years.  The UWSA could use the indictments, just months 
prior to implementation of the much-anticipated ban, as an 
excuse to claim an inability to bring the ban into force. 
 
Issues that Hit Home 
-------------------- 
 
10. (C) The indictments, once made public, are also likely 
have an immediate impact on the following bilateral and 
multilateral activities: 
 
--JOINT OPIUM YIELD SURVEY:  Ten U.S.-Burma joint opium yield 
surveys have been conducted since 1993.  We submitted a 
request to the GOB to begin the 2005 survey on February 25, a 
significant portion of which is envisioned to take place, as 
in previous years, within Wa territory, the heart of poppy 
cultivation in Burma.  Unsealed indictments are unlikely to 
yield appropriate UWSA cooperation with GOB authorities in 
executing the survey, including providing necessary security. 
 Therefore, if the GOB even agrees to carry out the joint 
survey this year, we would insist, for security reasons, that 
U.S. survey team members limit their travel to sites outside 
of Wa territory. 
 
--RECOVERY OPERATIONS: U.S. operations for the recovery of 
WWII remains of U.S. servicemen in northern Burma have 
previously been facilitated by Khin Nyunt's now-defunct 
office of military intelligence (the same office that has 
traditionally organized the joint opium surveys).  In the 
wake of the PM's ouster, U.S. mission elements responsible 
for carrying out the next phase of operations, scheduled to 
commence the end of January, are having significant 
difficulty obtaining cooperation from GOB authorities. 
Should the GOB react negatively to the indictments, we expect 
that efforts to secure cooperation for recovery operations 
will be even more difficult. 
 
--UN AND NGO PROJECTS IN WA TERRITORY:  The UNODC has led 
counterdrug programs for several years in Wa territory. 
While these efforts are modest, they represent the 
international community's most significant counternarcotics 
intervention in Burma.  The United States is the largest 
donor, at roughly $700,000 per annum, to the UNODC's Wa 
Project, an alternative development program carried out in 
cooperation with the UWSA and several international NGOs. 
Indictments of UWSA leaders make future U.S. funding for the 
UNODC/Wa Project impractical.  We understand that INL plans 
to request that the earmark for the Wa project be removed; 
the loss of the UNODC's major donor will likely lead to the 
premature end of the Wa Project.  The unsealing of the 
indictments could also pose a security risk to UNODC and NGO 
expatriate staff who live and work in the Wa capital and 
other Wa towns.  The United States has not funded the UNODC's 
only other initiative, the "KOWI" project in the northern Wa 
and southern Kokang region, but the program has 18 UN and 
international NGO partners. 
 
--DIPLOMATS IN WA TERRITORY:  In an annual exercise, the 
UNODC plans to lead two missions in January and February for 
members of the Rangoon diplomatic corps to visit poppy 
growing areas in Wa territory.  The first diplomatic team 
will arrive in Wa territory on January 24, the very day 
scheduled for the unsealing of the indictments.  The visit is 
designed to showcase UNODC counterdrug programs for donors 
and potential donors.  These valuable missions invariably 
include a call on UWSA leaders in the Wa capital of Pang 
Hsang (ref I).  In light of the pending indictments, however, 
no U.S. mission personnel plan to participate in this year's 
UNODC tour.  However, representatives from ten diplomatic 
missions based in Rangoon and Bangkok--including two 
ambassadors (Singapore and Czech Republic) and 
representatives from the British, Japanese, Swedish, and 
German embassies--have signed on to participate.  We have 
requested that DEA provide UNODC with an appropriate briefing 
on the indictments and encourage UNODC to reconsider the 
trip.  In our view, a visit to UWSA territory (at the time of 
the unsealing) places diplomats at potential risk. 
 
--U.S. MISSION SECURITY:  The Rangoon country team has 
assessed the potential impact of the indictments on the U.S. 
mission and concluded that the unsealing is not likely to 
pose a serious threat to official personnel located in 
Rangoon.  However, successful action taken against Hong Pang 
Company holdings outside of Burma would have an impact on the 
conglomerate's interests inside the country and the reaction 
of Wa business operators and their associates are 
unpredictable.  Therefore, official travel to Wa territory by 
USG personnel should be suspended until further assessment 
after the indictments are unsealed.  Post will also recommend 
appropriate changes to the consular information sheet. 
 
Comment:  Consider All the Possibilities 
---------------------------------------- 
 
11.  (C) Ethnic Wa cultivators along the Chinese border now 
account for over 60 percent of Burma's total poppy crop; 
major Wa traffickers continue to operate with impunity; and 
UWSA involvement in growing methamphetamine production and 
trafficking is well documented.  The GOB's unwillingness or 
inability to curb these Wa drug activities is a primary 
explanation the USG provides in failing to certify Burma as 
meeting its international counternarcotics obligations.  The 
indictments, while unlikely to elicit substantial GOB 
cooperation, represent a comprehensive law enforcement effort 
that will disrupt UWSA drug activities and certainly make 
life uncomfortable for complicit Wa leaders.  Unsealing the 
indictments at any time will have certain implications for 
U.S. Burma policies and objectives.  However, as outlined 
above, the January 24 unsealing will have additional 
implications for several bilateral and multilateral 
initiatives.  Careful consideration should be given to these 
implications in proceeding with the unsealing.  End Comment. 
 
Martinez