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C O N F I D E N T I A L SEOUL 004116 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT PLEASE PASS TO PM SENIOR ADVISOR LOFTIS 
 
E.O. 12958: DECL: 11/30/2016 
TAGS: KS PM PREL MARR MASS MCAP
SUBJECT: SMA NEGOTIATIONS ROUND VI: ONE LAST PUSH 
 
REF: SEOUL 03468 
 
Classified By: POL/MC JOSEPH Y. YUN.  REASONS 1.4 (b/d). 
 
¶1.  (C) SUMMARY:  In a small group meeting and plenary 
session that followed, Ambassador Loftis and his ROK 
counterpart, Ambassador Cho Tae-yong, presented their 
respective negotiating positions on the 2007-2008 Special 
Measures (burden-sharing) Agreement (SMA).  The ROKG proposed 
a contribution of 725.5 billion won in 2007.  For 2008, they 
offered that amount plus an increase tied to the 2006 
Consumer Price Index, which is expected to be approximately 3 
percent.  The ROK offer included the addition of 45 billion 
won over their earlier proposal, designed to make up for the 
equivalent shortfall in Korean labor costs resulting from the 
previous SMA.  Ambassador Cho explained he could sell such an 
increase to the National Assembly, but said it would be 
extremely difficult to secure ROKG approval for anything 
beyond the figures he proposed.  Ambassador Loftis responded 
by pointing out that the ROK proposal falls short of the USG 
"red line" of 752 billion won, and far short of our goal that 
the ROK pay 50 percent of USFK's non-personnel stationing 
costs.  Both sides reviewed the draft SMA agreement.  Each 
delegation suggested minor changes to the text which will now 
be reviewed by our respective legal experts.  During a 
one-to-one meeting on November 30, Ambassador Cho told 
Ambassador Loftis that 725.5 billion won offer was predicated 
on the ROKG's assumption that, if accepted by the U.S., there 
would be no/no significant or visible adjustments to U.S. 
force posture.  Ambassador Loftis responded that there could 
be no such guarantees.  Ambassadors Loftis and Cho agreed to 
report the current status of the negotiations to their 
superiors and defense colleagues, and to meet again (via DVC) 
on December 5 at 6 p.m. (Washington time) to provide the 
response of their respective governments.  END SUMMARY 
 
NOVEMBER 29 SMALL GROUP MEETING 
------------------------------- 
 
¶2.  (C) The Sixth Round of Special Measures Agreement (SMA) 
burden-sharing negotiations began with a small group meeting 
on November 29, 2006 at the Ministry of Foreign Affairs and 
Trade (MOFAT).  During that opening session, both sides 
stated their negotiating positions.  Ambassador Cho Tae-yong, 
the South Korean delegation head, summarized the ROKG 
proposal as follows: 
 
-- The ROK believes a short-term (no more than 2 year) 
transitional agreement with no increase is warranted because 
this is a transitional period in the U.S.-ROK Alliance, owing 
to U.S. military transformation and the drawdown of USFK 
troops on the Korean Peninsula. 
 
-- Having learned of the negative impact on USFK caused by 
the shortfall resulting from the previous SMA agreement, 
however, the ROK has decided to increase its proposal by 
approximately 45 billion won. 
 
-- That additional amount is designed to make up for the 
shortfall in Korean labor costs that occurred as a result of 
the previous agreement. 
 
-- The ROK proposal would "maintain present funding" levels 
in the other three SMA categories. 
 
-- The overall ROK proposal now totals 725.5 billion won in 
¶2007. 
 
-- For 2008, they offer that amount plus an increase tied to 
the Korean Consumer Price Index (CPI).  (NOTE:  The 2006 CPI 
would be used when it becomes available in January 2007.  The 
2005 CPI was approximately 3 percent.  END NOTE). 
 
¶3.  (C) Ambassador Cho characterized the ROK proposal as his 
"final offer," stressing that it had been approved only after 
weathering considerable dissent in the ROK inter-agency 
principals committee (PC).  He explained that he sold the 
additional 45 billion won amount to the PC, and would be able 
to sell it to the ROK National Assembly as well, because it 
directly affects Korean laborers.  He cautioned, however, 
that it would be extremely difficult for him to secure the 
approval of the executive and legislative branches of his 
government for anything beyond the 725.5 billion won figure 
he proposed. 
 
¶4.  (C) Cho warned that time was running out to get the 
agreement through the National Assembly by the end of the 
year.  He said the ROK therefore sought to conclude the 
negotiation within the next week to allow sufficient time for 
gaining legislative branch approval.  To hasten the process, 
Cho said he had decided to drop the ROK request for 
consideration of its in-kind contributions.  He claimed that 
with time running out his latest proposal was, in fact, the 
ROK bottom line, and not merely a negotiating tactic.  "I 
have no other offers up my sleeve," Cho insisted. 
 
¶5.  (C) Ambassador Loftis thanked the ROKG for its 
willingness to raise its proposal from its previous offer of 
680 billion won to 725.5, but pointed out that the new 
proposal still falls short of the USG "red line" of 752 
billion won, and far short of reaching 50 percent of USFK's 
non-personnel stationing costs. 
 
¶6.  (C) Ambassador Loftis also informed Cho that he had 
already run the new ROK proposal (which Cho had previewed to 
him on November 23) by his superiors in the Department, and 
his colleagues at DOD, but that he was not authorized to 
finalize anything less than USFK's red line.  He warned Cho 
that USFK would have to compensate for any SMA shortfall, 
including the possibility of moving part of our force 
structure off the peninsula.  Although no decisions have been 
made, the ROKG should be aware that such moves could/could 
include combat units.  He stated that the current ROK 
proposal does not meet the U.S. goal of achieving an 
equitable arrangement, and asked Cho to take the ROK proposal 
and USG response back to his government for further 
consideration. 
 
NOVEMBER 29 PLENARY MEETING 
--------------------------- 
 
¶7.  (C) During the follow-on plenary session later in the 
day, Ambassadors Loftis and Cho summarized their 
aforementioned negotiating positions in front of the members 
of both delegations.  Ambassador Cho stated that although the 
task was not an easy one, an agreement could be reached if 
approached with "a common attitude."  Ambassador Loftis 
responded that he too hoped the two delegations would reach a 
conclusion soon, but added that in getting to that point the 
importance of the U.S.-ROK alliance and the U.S. ability to 
defend the ROK ought to be remembered as well. 
 
¶8.  (C) Expressing regret for the lack of U.S. enthusiasm for 
his proposal, Ambassador Cho stated that while the difference 
between the ROK proposal and USFK red line (a gap of 
approximately 27 billion won) "may not be small, it was also 
not very big."  He said he was therefore "not convinced" that 
cuts being considered by USFK to address an SMA shortfall 
would be visible or substantial.  Ambassador Loftis and USFK 
Assistant Chief of Staff Major General Duane Theissen 
reminded the ROK side that the actual difference was 106 
billion won, far greater than 27 billion won mentioned by the 
ROK.  Every dollar or won not contributed to USFK by the ROK 
would compel the Command to cut equivalent costs somewhere 
else, they explained, pointing out that the repercussions of 
a ROK shortfall could go beyond the sum of 27 billion won. 
Loftis stated it was not clear what the Command would cut 
because no decisions had been made, but that the ROK should 
understand that the Commander could not, under any 
circumstances, allow the stationing of hollow forces on the 
Peninsula. 
 
¶9.  (C) Ambassador Cho responded by once again reiterating 
the domestic political difficulties he would face in 
attempting to gain approval from the National Assembly for a 
better offer. 
 
REVIEW OF THE SMA DOCUMENT 
-------------------------- 
 
¶10. (C) During the plenary meeting, the two delegations 
reviewed the text of the draft SMA agreement.  Each side 
suggested minor changes to the language and agreed that 
although the revisions appeared to be non-substantial, the 
new text would have to be reviewed by their respective legal 
experts. 
 
 
SONG MIN-SOON SEEKS A BETTER PROCESS 
------------------------------------ 
 
¶11.  (C) In both the small group and plenary sessions, 
Ambassador Cho stated that the ROKG preferred no more than a 
two-year SMA agreement.  Cho explained that Foreign 
Minister-designate Song Min-soon "felt very strongly" that a 
new process needed to be developed in order to spare the 
Alliance from the "always painful" SMA negotiations.  Song 
wants the U.S. and South Korean governments to begin 
discussing how to reform the process in January 2007, reach 
agreement on new procedures by the end of that year, and 
utilize those new procedures, starting in 2008, to negotiate 
the next SMA. 
 
¶12.  (C) Ambassador Loftis responded by noting that if the 
ROK regards the next SMA as a transitional document, it would 
be more logical to reach three-year agreement, because U.S. 
military transformation on Peninsula (and the construction 
needed to carry it out) will not be completed in less than 
three years.  He also pointed out that because Song Min-soon 
would be in office for, at most, the remaining 15 months of 
the current Roh Administration, he will have left ROK 
government service before the next SMA negotiation, even if 
only a two year agreement is reached this time around. 
 
1-ON-1 DISCUSSIONS 
------------------ 
 
¶13.  (C) Ambassador Cho and Loftis met for a heads of 
delegation session over breakfast on November 29.  Ambassador 
Cho reiterated that he was unable to go beyond his "final 
offer" of 725.5 billion won.  Moreover, the ROKG assumes that 
if the U.S. accepts the ROKG offer, there would be no need to 
make any visible or substantive cuts to the U.S. force 
structure.  In particular, they would not want to see any 
further reductions to U.S. combat forces beyond those already 
agreed.  Ambassador Loftis responded that the ROKG should not 
operate on this assumption.  At 725.5 billion won of SMA, 
there would be a shortage of funds that would have to be 
addressed.  While stressing that no decisions had been made, 
the U.S. was looking at all of its options, and those options 
included the possibility of taking some combat forces or 
capabilities out of Korea.  The ROKG should not be surprised 
by this statement, as it had been made in several SPI 
sessions, during the SCM/MCM and during Congressional 
testimony by senior DOD officials.   Ambassador Cho said that 
some in his government would ask why the ROKG should offer 
any increase, seeing that the U.S. could be pulling assets 
off the peninsula.  Why not simply offer a rollover? 
Ambassador Loftis noted that pulling back the Korean offer 
would be very poorly received in Washington, and would 
certainly result in the U.S. having to make even greater 
adjustments.  He concluded that the USG was not trying to 
embarrass the ROKG, but we simply have to face fiscal 
realities. 
 
PREPARING FOR THE END GAME 
-------------------------- 
 
¶14.  (C) Ambassadors Loftis and Cho agreed to report the 
outcome of the 6th round of SMA negotiations to their 
superiors and defense colleagues.  They agreed to meet again 
(via DVC) on December 5 at 6 p.m. (Washington time) to 
provide the responses of their respective governments. 
 
¶15.  (C) COMMENT:  We do not anticipate that the ROKG will 
come in with a higher figure, as Cho indicated that some 
senior ROKG officials had "hardened" their stance against an 
increase in response to the potential movement of assets. 
Ambassador Loftis recommends that we use the December 5 video 
conference to accept the ROKG offer as presented by Cho and 
finalize the SMA.  This will give Cho barely enough time to 
complete his domestic requirements and send the SMA to the 
National Assembly before the end of the year.  In accepting 
the ROKG offer, however, we would not/not accept the ROKG,s 
assumption that there be no changes to the U.S. force 
structure.  END COMMENT. 
 
PARTICIPANTS: 
------------ 
 
¶16. (SBU) U.S. Delegation: 
 
Ambassador Robert Loftis, Senior Advisor, Bureau of 
Political-Military Affairs (PM) 
Major General Duane Thiessen, Assistant Chief of Staff J5, 
USFK 
Commander Thomas Herold, Judge Advocate General's Corps 
Mr. David Wolff, Political Military Chief, U.S. Embassy 
Seoul, DOS (Small group notetaker) 
Colonel Christopher Dinenna, Chief of J5 Strategy and Policy 
Division, USFK 
Mr. Andrew Hyde, ROK Unit Director, EAP/K, East Asian and 
Pacific Affairs Bureau, DOS 
LTC Mike Finnegan, Office of the Assistant Secretary of 
Defense for International Security Affairs, DOD 
Lieutenant Colonel Phillip Janzen, Military Advisor, PM, DOS 
Lieutenant Colonel William Conwell, Chief of J5 Policy 
Analysis Branch, USFK 
Dr. Warren Switzer, International Relations Officer, J5 
Policy Analysis Branch, USFK 
Mr. Mark Shoemaker, International Relations Officer, US SOFA 
Secretariat, USFK 
 
SIPDIS 
Ms. Shawn Duncan, Pol-Mil Officer, U.S. Embassy Seoul, DOS 
(Plenary notetaker) 
 
ROK Delegation: 
 
Ambassador Cho Tae-yong, Director General, North American 
Affairs Bureau, MOFAT 
Mr. Lee Jeong-kyu, Director, North America Division (NAD) 
III, MOFAT 
Mr. Chun Young-hee, First Secretary, NAD III, MOFAT 
Mr. Nam Dae-hyun, Advisor, NAD III, MOFAT 
Mr. Kim Jung-han, First Secretary, Bilateral Treaties 
Division, MOFAT 
Ms. Kim Sin-sook, Deputy Director, U.S. Policy Division, MND 
Colonel Lee Jong-sik, Assist. Secretary to the President for 
National Security Policy 
 
Small Group Participants: 
 
Ambassador Robert Loftis, Senior Advisor, Bureau of 
Political-Military Affairs, DOS 
Ambassador Cho Tae-yong, Director General North American 
Affairs Bureau, MOFAT 
Major General Duane Thiessen, Assistant Chief of Staff J5, 
USFK 
Mr. David Jonathan Wolff, Political-Military Affairs Chief, 
Embassy Seoul 
Mr. Lee Jeong-kyu, Director, North America Division III, MOFAT 
LTC Mike Finnegan, Office of the Assistant Secretary of 
Defense for International Security Affairs, DOD 
Mr. Chun Young-hee, First Secretary, NAD III, MOFAT 
Ms. Kim Sin-sook, Deputy Director, U.S. Policy Division, MND 
 
¶16. (U) Ambassador Loftis has cleared this cable. 
VERSHBOW