VZCZCXYZ0007
RR RUEHWEB

DE RUEHNR #0165/01 0430756
ZNR UUUUU ZZH
R 120756Z FEB 10
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 0824
INFO RUEHNR/AMEMBASSY NAIROBI

UNCLAS NAIROBI 000165 
 
SENSITIVE, SIPDIS 
 
AF/E FOR PFIERST, AF/RSA FOR LMAZEL, LGRIESMER, RBOWLES 
TREASURY FOR REBECCA KLEIN 
COMMERCE FOR ROBERT TELCHIN 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EFIN ECON EAID XA SO
SUBJECT: SOMALIA - CHINESE ENGAGEMENT 
 
REF: STATE 10152 
 
¶1. (U) The following cable provides responses to action request in 
reftel on Chinese engagement in Somalia. 
 
 
 
Chinese Engagement in Trade and Investment 
 
--------------------------------------------- ----------------- 
 
 
 
¶2.  (SBU) The Sino-Somali relationship has remained strong since 
the establishment of diplomatic relations in December 1960.  During 
the Siad Barre regime China was very active in Somalia, initiating 
several large infrastructure projects.  In past years, the Chinese 
government has made no significant infrastructure improvements and 
it  has  launched no "showpiece" projects in the country. 
 
 
 
¶3.  (SBU) Chinese interest in Somalia has historically been in the 
trade of basic commodities.  Somalia's Transitional Federal 
Government (TFG) maintains no trade statistics, but reporting from 
the Chinese government indicates that in 2002, the total trade 
volume between the two countries was USD 3.39 million.  By 2005, 
Somalia-China bilateral trade was estimated at USD 19.64 million. 
Although more recent statistics are unavailable, current and former 
TFG officials estimate that this trade volume has significantly 
increased in the last few years.  Somali businessmen (and 
businesswomen) make regular trips to China to purchase basic 
foodstuffs, textiles, clothes, and other goods.  These imports most 
often arrive in Somalia by ship and with favorable pricing as a 
result of Somalia's informal tariff structure.  Most goods are 
distributed in the sub-region. 
 
 
 
¶4.  (SBU) Somalia's rapidly growing telecommunications sector is 
powered predominantly by Chinese equipment.  Chinese companies 
provide "soft loans" to the telecom operators to purchase 
equipment.  Our contacts shared some details of a deal that was 
signed in 2008 for approximately USD 25 million.  They told us that 
this scale of business deals is common.  Chinese companies are some 
of the few that are willing to send technicians into Somalia to set 
up and maintain the equipment.  Anecdotal reports indicate that 
there are often Chinese businesspersons within the country and most 
are associated with large telecommunications projects. 
 
 
 
¶5.  (SBU) China is especially interested in potential opportunities 
for petroleum exploration.  China is reported to have secured the 
rights to oil blocks in the Puntland region.  Media reports 
indicate that in January, the acting TFG Minister of Petroleum met 
with the Chinese Minister of Petroleum in Khartoum to discuss an 
upcoming mission to Somalia.  While no formal engagements have been 
reported, we understand that Chinese officials and businessmen are 
laying the groundwork for trade and investment in the oil and gas 
sectors, primarily through informal relationships with local and 
regional authorities. 
 
 
 
Political Engagement 
 
----------------------------- 
 
 
 
¶6.  (SBU) China was one of the earliest supporters of the TFG when 
it was established in October 2004.  In December 2004, China 
donated computers and office equipment to the TFG and in December 
2005, signed several agreements providing over USD 6 million in 
economic assistance to Somalia.  At the signing ceremony, the 
Chinese government granted an additional USD 100,000 in cash to the 
Somali government.  We understand that China made additional 
periodic cash contributions to President Yusuf.  Our contacts told 
us that the support was always in cash payments and that most of it 
was disbursed within the TFG cabinet. 
 
 
 
¶7.  (SBU) Between 2004 and 2007, President Yusuf and the TFG 
maintained a close relationship with China.  The Chinese government 
funded the construction of a canal in Jowhar, the city which was 
 
Yusuf's base.  The canal provides irrigation for agricultural 
development in the area and prevents flooding during the rainy 
season.  China made a USD 500,000 donation to the World Health 
Organization to support projects in Somalia.  In 2008, the Chinese 
government pledged to contribute USD 2 million to rehabilitate 
Villa Somalia, the presidential palace in Mogadishu.  We understand 
that USD 1 million was transferred to the TFG for Somali 
contractors to do the renovations but it is unclear if this project 
was ever completed.  The Chinese government also pledged to 
renovate the national stadium and theater in Mogadishu. 
 
 
 
¶8. (SBU) During the Beijing Summit of the Forum on China-Africa 
Cooperation (FOCAC) in November 2006 Chinese President Hu Jintao 
promised President Yusuf that China would support the TFG's peace 
and reconstruction efforts.  However, China has had little direct 
involvement with political issues in Somalia.  The Somali 
Ambassador to Kenya told us that "China is not concerned with 
politics, only economics, and is positioning itself for commercial 
advantages in post-conflict Somalia."  China gave the Somali 
Mission to Kenya two vehicles for official and personal use.  The 
TFG Ambassador to Kenya regularly drives one of the Land Cruisers 
and his Deputy Chief of Mission drives the other. 
 
 
 
¶9.  (SBU) The Chinese government has continued the tradition of 
support to the TFG with President Sharif's government.  In 
September 2009, China provided direct bilateral assistance through 
a USD 500,000 contribution that the TFG dispersed trough the 
PriceWaterhouseCoopers financial management and oversight 
mechanism.  TFG and Puntland officials tell us that China's 
priority area of engagement remains its quest for natural 
resources, especially oil. 
 
 
 
 
 
¶10.  (SBU) China does not have a permanent mission in Somalia and 
conducts diplomatic relations through a liaison office in Nairobi. 
With a staff of approximately four, the Chinese "Somalia Unit" is 
led by a Somali-speaking official who attended university in 
Mogadishu.  Through the Embassy of Somalia in Beijing, China 
provides scholarships to students for study to China and more 
recently, sponsored study tours for Somali journalists. 
 
 
 
U.S. - China Collaboration 
 
------------------------------------ 
 
 
 
¶11.  (SBU) There is little direct engagement, cooperation, or 
coordination between the American and Chinese Missions on Somalia. 
In 2007, the Chinese Ambassador to Somalia travelled to Mogadishu 
in support of the National Reconciliation Congress.  While the 
mission indicated China's willingness to support Somalia's 
political progress, there was no official Chinese presence during 
the subsequent Djibouti Process. 
 
 
 
¶12.  (SBU) Chinese activities in Somalia are not directed through 
the international donor groups that meet regularly to share 
information and coordinate activities across the Somali territory. 
With a demonstrated interest in rehabilitation of key locations, 
infrastructure development may be an area that would benefit from 
increased bilateral cooperation.  At present, there are no examples 
of U.S.-China coordination in Somalia.  U.S. Mission efforts to 
contact the Chinese "Somalia Unit" in Nairobi have not to date been 
successful. 
RANNEBERGER