US embassy cable - 05TAIPEI315

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 000315 
 
SIPDIS 
 
STATE PASS AIT/W 
 
E.O. 12958: DECL: 01/25/2015 
TAGS: PREL, PGOV, TW, Cross Strait Politics 
SUBJECT: TAIWAN LOSING CARIBBEAN TO PRC CHECK BOOK DIPLOMACY 
 
REF: BRIDGETOWN 00185 
 
Classified By: AIT Director Douglas Paal; Reasons: 1.4 (B/D) 
 
 1. (C) Summary.  Beijing's efforts in the Caribbean resulted 
in another victory in the check-book diplomacy battle on 
Thursday January 20, when the PRC announced it had 
established diplomatic relations with Grenada.  While Taiwan 
Ministry of Foreign Affairs (MOFA) officials say they have 
not officially been informed of the change, they admit 
Grenada has been lost to the PRC.  MOFA officials are also 
worried that Grenada's switch could mean Taipei's diplomatic 
partner St. Vincent and the Grenadines could be next in the 
Caribbean to recognize the PRC.  The Dominican Republic and 
Haiti are also being heavily targeted by Beijing.  The PRC 
has adopted a focused yet patient campaign in the Caribbean 
to take "one country at a time" from Taipei.  National 
Security Council (NSC) officials assert that they will not 
engage Beijing in a bidding war and cannot offer Grenada or 
other diplomatic partners additional economic aid.  They 
state that Taiwan has adopted a more accountable foreign aid 
system focused on real assistance and will no longer offer 
blank checks to leaders in exchange for recognition. 
Nevertheless, past bad behavior is haunting Taiwan's 
relations with Central American partners Nicaragua, Costa 
Rica, and Panama.  Taiwan officials seem resigned to the fact 
that there is little Taipei can do in the face of Beijing's 
willingness and ability to outbid Taipei in the Caribbean. 
End summary. 
 
Grenada Already Gone 
-------------------- 
 
2. (C) The announcement on Thursday that Grenada's Prime 
Minister (PM) Keith  Mitchell had established formal ties 
with the PRC was not a surprise in Taipei.  MOFA officials 
had been expecting the move after PM Mitchell announced he 
was shopping for additional aid after Hurricane Ivan struck 
the island last year.  NSC Deputy Secretary General Parris 
Chang told AIT that Taiwan was willing to help and offered 
Grenada a USD 40 million aid package, but PM Mitchell told 
Taipei's Ambassador in St. George that the sum amounted to 
"chicken feed." Chang also said that PM Mitchell told Taiwan 
that he must help his people and was going to do whatever was 
necessary.  According to Chang, the PRC viewed this as a 
golden opportunity and pounced.  In December, PM Mitchell 
traveled to Beijing and in exchange for derecognizing Taipei, 
the PRC offered him a major assistance package with 
high-profile infrastructure projects including replacing 
Grenada's heavily damaged national stadium before the 2007 
Cricket World Cup.  Chang told AIT that PM Mitchell tried to 
play both sides after his trip to Beijing.  Taipei protested 
this policy, but was not in a position to offer enough aid to 
keep Granada from straying. 
 
St. Vincent and the Grenadines Next? 
------------------------------------ 
 
3. (C) Some Taiwan officials are worried that the loss of 
Grenada will lead to more losses in the Caribbean and could 
signal the beginning of a gradual domino effect.  MOFA 
Section Chief for Eastern Caribbean Affairs, Luis Yang, told 
AIT that if Grenada switched diplomatic ties to the PRC, then 
St. Vincent and the Grenadines would also soon follow and 
derecognize Taiwan.  While Yang did not speculate on a 
timeline for this move, he cited Kingstown's close economic 
and political ties to Grenada as the major factor.  Yang said 
that Beijing's diplomats have been active throughout the 
Caribbean and have been lobbying Taipei diplomatic partners 
with promises of aid and assistance if they switch to the 
PRC.  He lamented that Beijing could probably offer an 
incentive package to St. Vincent and the Grenadines that 
Taiwan could not match. 
 
Full Court Press in the Dominican Republic 
------------------------------------------ 
 
4. (C) Taipei is also concerned over the number of recent 
delegations Beijing has sent to the Dominican Republic to 
pressure the Fernandez government.  According to Hsie 
Miao-hung, MOFA's Section Chief for Central America and the 
Western Caribbean, the PRC has offered to buy government 
bonds and build infrastructure projects such as hospitals and 
roads.  In addition, Beijing recently established a trade 
office in Santo Domingo which the PRC is using to pressure 
the government to sever ties with Taiwan.  Hsie said that 
Beijing's representative is particularly active and managing 
a high-profile campaign complete with press coverage to 
encourage Santo Domingo to derecognize Taiwan.  Hsie lamented 
that Taipei has been forced do more and more to maintain 
official ties with the Dominican Republic and that the 
situation is becoming more worrisome. 
 
5. (C) While MOFA officials believe Santo Domingo will 
continue to recognize Taiwan in the short run, they privately 
admitted to AIT that the PRC has been gaining ground and are 
worried about the situation.  Last fall President Leonel 
Fernandez announced that the Dominican Republic would open a 
commercial office in Beijing.  In Hsie's mind, the first 
steps have been taken by the government to switch ties.  Hsie 
told AIT that many officials in the Dominican Republic want 
to enhance relations with the PRC to reduce Santo Domingo's 
dependency on the U.S.  Hsie claimed that she and her 
colleagues are not worried about an imminent switch, but 
expressed concern that in the long run "we can never tell 
with Beijing." (Note: MOFA is clearly preoccupied about the 
Dominican Republic because Hsie canceled two planned meetings 
with AIT and complained about her excessive work load of 
urgent meetings and a flurry of cables between her office and 
Taipei's Embassy in Santo Domingo.  End comment). 
 
MOFA's Counter Attack 
---------------------- 
 
6. (C) Hsie said that MOFA is working on several fronts to 
counter Beijing's efforts in the Dominican Republic.  She 
told AIT that Taiwan's foreign aid agency, the International 
Cooperation Development Fund (ICDF), has various humanitarian 
projects in the country and it may consider stepping up aid 
projects there.  Taipei is also providing financial aid to 
stabilize Santo Domingo's fragile economy and recently Taiwan 
constructed a new hospital for the country.  Hsie added that 
the Fernandez government has asked for more aid, which Taipei 
government is considering.  Hsie asserted that for several 
decades, Taiwan has been a stable supporter and ally of the 
Dominican Republic and it was her hope that Santo Domingo 
would take this into consideration. 
 
Haiti Also a Target 
------------------- 
 
7. (C) Hsie told AIT that the PRC has also turned up the heat 
on Haiti.  Beijing, she said, has a delegation in Haiti right 
now that is putting pressure on the interim government, 
throwing into question Interim President Boniface Alexandre's 
commitment to continue to recognize Taipei.  While President 
Boniface has refused to meet with the delegation, Hsie said 
MOFA is concerned that such visits allow the PRC to build 
support for increasing ties with Beijing once the interim 
government transfers power.  Hsie believes Beijing has 
adopted a coordinated long-term campaign to gradually build 
support in Haiti to convince the next government to 
derecognize Taiwan. 
 
But No Bidding War 
------------------ 
 
8. (C) Grenada is the second Caribbean setback in the past 
year (Dominica switched in March, 2004).  Both Hsie and the 
NSC's Chang maintained that the PRC has embarked on a patient 
yet aggressive campaign to take countries that still 
recognize Taiwan "one country at a time." Officials at both 
NSC and MOFA say they are adamant that Taiwan cannot and will 
not engage in check-book diplomacy.  Chang told AIT that 
recent aid scandals involving Nicaragua, Costa Rica, and 
Panama have had an impact on Taipei's approach.  He added 
that there is more oversight in the aid process and that lump 
sums are not given out as freely to leaders as before. 
Rather, Taiwan's future foreign aid system will be more 
focused on real assistance that can make a difference in the 
country.  Chang added, however, that, in any case, the PRC 
has more resources for check-book diplomacy than Taiwan. 
MOFA's Hsie offered a similar assessment, and added that 
Taipei is also trying to convince its partners of Beijing's 
unreliability versus Taiwan's steadfastness, and to highlight 
the differences between the PRC and Taiwan, such as Taipei's 
democratic values and experience in providing humanitarian 
aid.  She said that the PRC often promises a lot, but cannot 
deliver in the long run. 
 
Comment:  An Unwinnable War? 
---------------------------- 
 
9. (C) Whether Taipei's strategy to portray Beijing as an 
unreliable ally and emphasize Taiwan's attributes of 
democracy and humanitarian assistance will be effective is 
yet to be seen.  Taiwan does have much to offer in the 
technical and financial assistance arena, but new strategies 
that promote this experience are not likely to be effective 
with its diplomatic partners.  The majority of nations that 
recognize Taiwan are not concerned about technical assistance 
or Taiwan's democratic values.  More often than not, the 
biggest factor in the recognition game is simply money and 
how much of it flows into the leadership's pockets.  As long 
as Taipei continues to rely on a policy of focusing on 
micro-state nations that are typically poor and corrupt it 
will continue to lose the check-book diplomacy battle. 
PAAL