This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 SINGAPORE 000109 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PREL PGOV PTER ECON SN
SUBJECT: SEN. BAUCUS' MEETING WITH LEE KUAN YEW 
 
¶1. (SBU) Summary: During a January 12 meeting with Senator 
Max Baucus (D-MT), Minister Mentor Lee Kuan Yew discussed the 
rise of China and its generally successful efforts to improve 
ties with its neighbors.  China's economic success had also 
spurred reform in India; the only question now was how fast 
India could go, commented Lee.  Turning to Islamic terrorism 
and Iraq, Lee stressed the importance of the United States' 
prevailing in Iraq.  A victory for the terrorists in Iraq 
would embolden them and lead to a surge of terrorism around 
the world and affect Singapore.  End Summary. 
 
¶2. (U) During his January 12-13 visit to Singapore, Senator 
Max Baucus (D-MT), accompanied by the Ambassador, met with 
Minister Mentor (MM) Lee Kuan Yew on January 12.  Senate 
Finance Committee staff members Brian Pomper and Demetrios 
Marantis and poloff (notetaker) also attended the meeting. 
 
China 
----- 
 
¶3. (SBU) MM Lee Kuan Yew told the Senator that Singapore was 
very conscious of sitting at the confluence of two big and 
rising powers: China and India.  China was focused on 
economic growth and wanted to spend the next few decades 
becoming a more prosperous and modern society.  It did not 
want to be sidelined by problems with its neighbors or the 
United States.  China had been working hard with its 
neighbors, such as Russia and South Korea, to improve 
relations, although it hadn't made any progress with Japan, 
Lee remarked.  He asserted that President Hu Jintao had 
"given up" on Prime Minister Koizumi and was waiting for his 
replacement, who could be "just as bad" from China's 
perspective.  China's leadership could not afford to let 
Taiwan break away and seek independence.  They were 
confident, however, that growing economic integration and 
greater personal contacts would ensure that Taiwan would 
"come back" to China in 30-40 years. 
 
U.S. Trade Deficit 
------------------ 
 
¶4. (SBU) MM Lee noted that the United States' growing trade 
deficit with China was a concern for both countries.  China 
was interested in gaining greater access to high technology 
goods from the United States, which could reduce the deficit. 
 A revaluation of the renminbi of 5-10 percent would have 
little practical impact, but would be psychologically good 
for reducing trade tension.  China was still not comfortable 
making these types of monetary policy changes and was moving 
cautiously, according to Lee.  China knew it had to 
strengthen its currency, but wanted to minimize any domestic 
dislocations that would cause and any chance for speculators 
to make a profit, he asserted. 
 
North Korea 
----------- 
 
¶5. (SBU) Asked about China's influence over North Korea, MM 
Lee responded that it was limited.  China could deny North 
Korean leader Kim Jong-il the food aid and energy supplies he 
needs, but this would cause his regime to implode rather than 
give up its only leverage -- its nuclear weapons program. 
Then, China would end up with "South Korea and the United 
States on the Yalu River."  China would like a non-nuclear 
but independent North Korean state. 
 
India 
----- 
 
¶6. (SBU) MM Lee lamented that he had been disappointed many 
times in the past with India's failure to open up its economy 
to the outside world.  China's tremendous economic success 
and a fear of being left behind, however, had spurred India 
to act.  Now, there was a consensus across the political 
spectrum in India on the need for more reform.  The only 
question was how fast India could go.  Given India's poor 
infrastructure and the difficulty in overcoming old mind 
sets, it could only reach 60-80 percent of China's growth 
rate.  Nevertheless, there was nothing that China was doing 
economically that India couldn't do as well, he said. 
 
Islam and Iraq 
-------------- 
 
¶7. (SBU) Senator Baucus asked MM Lee about how the West 
should deal with Islam and jihadists.  Lee responded that he 
had been concerned about this for many years, even before 
9-11.  The Israeli-Palestinian conflict was not the cause of 
Islamic terrorism, according to MM Lee.  Rather, among 
Muslims, especially in the Middle East, there was a profound 
belief that "their time has come" and the West has put them 
down for too long.  While pan-Arab nationalism failed to 
unite the Muslim world in the 1950s and 1960s, Islamic fervor 
has become an alternative unifying force.  Furthermore, Arab 
oil wealth had affected Muslims in Southeast Asia through 
funding for mosques and educational exchanges, he averred. 
This had led to increased religious fervor among Southeast 
Asia's Muslims. 
 
¶8. (SBU) The recent wave of terrorism will ebb, as long as 
the terrorists don't win in Iraq, MM Lee stated.  If they do 
win, there will be a surge of terrorism around the world and 
"I'll have my Jemaah Islamiya chaps coming from Indonesia to 
blow me up."  He suggested that the Sunnis faced two choices 
in Iraq.  They could work within the framework established by 
the United States of one man, one vote.  While this would 
reduce the power they historically wielded, they might be 
willing to accept it if the United States could guarantee 
their access to at least 20 percent of Iraq's oil wealth and 
maintain forces in the region to assure compliance. 
Alternatively, they could reject the U.S. model and the 
country would be plunged into chaos and warring militias.  It 
was important for the United States to prevail in Iraq and 
leave only once a functioning government was in charge of a 
unified state, he stressed. 
HERBOLD