US embassy cable - 03COLOMBO396

UNCLAS SECTION 01 OF 02 COLOMBO 000396 
 
SIPDIS 
 
DEPT FOR INR/R/MR, I/RW, I/REC; PA 
SA/INS (FOR JWALLER); SA/PAB SA/RA (FOR SCENSNY) 
SA/PD LJIRWIN, WREINCKENS 
 
E.O. 12958: N/A 
TAGS: KPAO, OPRC, KMDR, OIIP, CE, External Relations, ECONOMICS 
SUBJECT: MEDIA PLAY: IRAQ 
 
 
1. Independent English weekly lay out "repercussions to the 
economies in this and many other parts of the world" 
 
On 3/9 an editorial in the SUNDAY TIMES (independent 
English weekly), "Gulf War and US," described the negative 
effects of another Gulf war on the Sri Lankan economy.  The 
editorial follows: 
 
The first blow will be to our tea market, with tea exports 
poised to take a big drop in view of the fact that West 
Asia is our largest regional market, next to the CIS 
countries.  Remittances from migrant workers and of course 
tourist arrivals are also bound to take a dip.  There will 
be still other rollover repercussions, such as 
repercussions to the garment industry as a result of the 
United States and European Union economies slowing down due 
to the probable effects of the war. 
 
There can also be other jolts to the Richter.  A Gulf War 
could lead to the downward revision of corporate earnings, 
even though most companies quoted on the markets are 
reporting good results these days.  These residual fears 
have in fact already affected the stock market, and brought 
down share prices in Colombo as of last week. 
 
Projections will go awry, and a good example is Asia 
Securities.  The estimated earnings of Asia Securities 
would be cut by around 25 per cent for financial year 2004, 
wiping out the 18 per cent forecasted profit growth.  This 
setback is as a result of weaker domestic and export 
markets, to which should also be added higher costs of 
electricity.  The scenario is not rosy, to put it by way of 
understatement, and stockbrokers said that if war does 
break out in the Persian Gulf "it would not be unreasonable 
to expect the All Share Price index to hit the 650 levels." 
Which to the uninitiated layman would mean:  "Not too 
good." 
 
But the impact is going to be multiple, as different 
aspects of the economy are bound to get knocked about.  For 
instance, the global oil market has soared, and further 
increases in the price of petroleum would be a kidney punch 
to a public already reeling from high prices on all 
consumer items.  Spiraling inflation, if not shortages, 
complete the doomsday picture. 
 
The knock-on effects will see pressure on interest rates, 
negating the efforts of government to keep interest rates 
down so that businessmen will be able to borrow more for 
investment.  With borrowing costs climbing, they will have 
to cut back on investment. Consumers and of course, 
industry will be more directly hit - due to the possible 
escalation of costs of transport and electricity which 
would cause across-the-board price increases.  Not that 
President George Bush Jr., would care.  He has asked our 
new Ambassador to Washington DC, Devinda Subasinghe, for 
our support in the days ahead. But who's there to support 
us in this New World Order? 
 
The news is already in, that low grown teas are affected 
due to uncertainty in the Gulf, as these teas which are 
produced by small-holders in the South are in heavy demand 
in Arabia.  The Southern village economy, which provides 
much of the teas to the Arabian states, is already in a 
tail-spin with plummeting prices and resultant cash-flow 
problems.  If this happens, the tea industry would also 
face labor unrest, and the industry is already aware of 
this fact. 
 
In a sense, a war in West Asia is even deadlier for Sri 
Lanka's fragile outback economy -- than a war at home. 
While some matters will be well beyond our control, some 
element of damage-control will be the most we can ask for. 
While there is, no doubt, an awareness about the domestic 
impact, we still see no galvanizing of minds at the higher 
political levels to cushion that impact.  It's not too much 
to ask the Prime Minister to chair some meetings with those 
who matter in the coming weeks. 
 
 
2. Independent Sinhala daily asks whether Iraq war will 
"shatter U.S.-European good will." 
 
On 3/9 an editorial in LAKBIMA (independent Sinhala daily) 
asked, "Will the Iraq crisis shatter the US Euro good 
will?"  Excerpts follow: 
 
The gravest issue: three of the five permanent members 
oppose it....  Russia says it will use its veto power 
against the American resolution ... and France is also 
considering a veto. 
 
"The new American resolution favors only war.  The U.S. 
wants it approved, by hook or by crook.... 
The U.S. is unable to prove Iraqi deception.  It says not 
only that Iraq should disarm but that Saddam should be 
removed.  On what grounds, asks the Canadian Prime 
Minister. 
Even militarily, the U.S.'s hegemonic powers are 
threatened: Turkey's refusal has Americans considering 
other military options. 
 
Let the international community wait and see whether 
America is capable of launching a war while the whole world 
protests against it.... 
 
 
3. SUNDAY ISLAND reprints Byrd's 2/12 Senate speech 
 
On 3/9 the SUNDAY ISLAND (Opposition English weekly) 
reprinted anti-war remarks made on the Senate floor by 
Senator Robert Byrd on 2/12.  The remarks were published in 
the INTERNATIONAL HERALD TRIBUNE on 2/19; they appeared in 
the SUNDAY ISLAND under the headline "We stand passively 
mute."  Excerpts follow: 
 
This nation is about to embark upon the first test of a 
revolutionary doctrine applied in an extraordinary way at 
an unfortunate time. The doctrine of preemption -- the idea 
that the United States or any other nation can legitimately 
attack a nation that is not imminently threatening but may 
be threatening in the future -- is a radical new twist on 
the traditional idea of self defense. It appears to be in 
contravention of international law and the UN Charter. And 
it is being tested at a time of world-wide terrorism, 
making many countries around the globe wonder if they will 
soon be on our -- or some other nation's -- hit list. High 
level Administration figures recently refused to take 
nuclear weapons off of the table when discussing a possible 
attack against Iraq. What could be more destabilizing and 
unwise than this type of uncertainty, particularly in a 
world where globalism has tied the vital economic and 
security interests of many nations so closely together? 
There are huge cracks emerging in our time-honored 
alliances, and U.S. intentions are suddenly subject to 
damaging worldwide speculation. Anti-Americanism based on 
mistrust, misinformation, suspicion, and alarming rhetoric 
from U.S. leaders is fracturing the once solid alliance 
against global terrorism which existed after September 11. 
 
... This Administration has split traditional alliances, 
possibly crippling, for all time, International order- 
keeping entities like the United Nations and NATO. This 
Administration has called into question the traditional 
worldwide perception of the United States as well- 
intentioned, peacekeeper. This Administration has turned 
the patient art of diplomacy into threats, labeling, and 
name calling of the sort that reflects quite poorly on the 
intelligence and sensitivity of our leaders, and which will 
have consequences for years to come. 
 
Calling heads of state pygmies, labeling whole countries as 
evil, denigrating powerful European allies as irrelevant -- 
these types of crude insensitivities can do our great 
nation no good. We may have massive military might, but we 
cannot fight a global war on terrorism alone. We need the 
cooperation and friendship of our time-honored allies as 
well as the newer found friends whom we can attract with 
our wealth. Our awesome military machine will do us little 
good if we suffer another devastating attack on our 
homeland which severely damages our economy. Our military 
manpower is already stretched thin and we will need the 
augmenting support of those nations who can supply troop 
strength, not just sign letters cheering us on. 
 
... to turn one's frustration and anger into the kind of 
extremely destabilizing and dangerous foreign policy 
debacle that the world is currently witnessing is 
inexcusable from any Administration charged with the 
awesome power and responsibility of guiding the destiny of 
the greatest superpower on the planet. Frankly many of the 
pronouncements made by this Administration are outrageous. 
There is no other word. 
 
Wills