VZCZCXYZ0000
OO RUEHWEB

DE RUEHUL #2067 2950820
ZNR UUUUU ZZH
O 210820Z OCT 08
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2026
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 4871
RUEHKO/AMEMBASSY TOKYO PRIORITY 4984

UNCLAS SEOUL 002067 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL ECON OREP ETRD KS KN
SUBJECT: SENATOR HAGEL MEETS PRESIDENT LEE 
 
REF: SEOUL 02052 (SENATOR HAGEL MEETS ROKG OFFICIALS) 
 
¶1. (SBU) SUMMARY:  South Korean President Lee Myoung-bak 
received visiting Senator Chuck Hagel, accompanied by 
Ambassador Stephens, October 15 for a lengthy, cordial 
meeting that exceeded the allotted 30 minutes.  NSA Advisor 
Kim also participated.  President Lee was interested in 
hearing Senator Hagel's assessment of the U.S. financial 
crisis and of prospects for FTA ratification.  Lee expressed 
confidence in underlying U.S. economic strength and 
resilience but said Koreans were "nervous," adding that any 
emerging financial architecture should include Korea.  On 
North Korea, President Lee emphasized his strong support for 
recent U.S. steps in delisting the DPRK and reaching a 
verification agreement, observing that stronger parties 
sometimes have to be more flexible in the short term in order 
to achieve their larger goals.  END SUMMARY 
 
¶2. (SBU) After initial pleasantries, President Lee turned to 
the global financial crisis, noting Korean nervousness about 
the situation and asking Senator Hagel's assessment of the 
expected length and depth of the crisis.  Senator Hagel said 
he thought recent USG actions -- both alone and in concert 
with other governments and allies -- would instill a sense of 
confidence and free up liquidity.  But, he added, a 
regulatory system for the 21st century was needed to address 
fundamental problems, starting with the housing market and 
the sub-prime mortgage problem.  Senator Hagel said the ROK 
would be very important in that regard going forward. 
 
¶3. (SBU) President Lee described the U.S. response to the 
financial crisis as "massive and swift."  But worries in 
Korea were somewhat higher than in China or Japan, or perhaps 
in Europe, he said, because of Korea's financial crisis in 
the '90s.  Expressing confidence that the U.S. recovery would 
be quicker than Europe's, Lee asked how long it would be 
before actions being taken in the U.S. and elsewhere produced 
results.  The U.S. economy's size, flexibility, and 
resilience notwithstanding, the Senator noted the crisis had 
touched everything and would require time -) possibly one to 
one and a half years -) to correct. 
 
¶4. (SBU) President Lee linked the South Korean economy's 
performance to the need to help North Korea; the ROK spends 
billions helping the north, and it needs a strong economy. 
When the U.S. removed the DPRK from its list of state 
sponsors of terrorism, some said the U.S. had given in to 
North Korean brinksmanship.  But in dealing with a weak 
partner like the north, the strong side (the U.S.) needs to 
give two meters in order for the DPRK to give one meter. 
Senator Hagel agreed. 
 
¶5. (SBU) On the KORUS FTA, President Lee said he recognized 
"you will be busy" during the U.S. election season, but that 
he strongly believed the FTA was good for both countries, 
both in terms of trade and the economy and the overall 
relationship.  President Lee said he would continue to work 
for ratification in Korea.  Senator Hagel, noting that he had 
consistently supported the KORUS FTA, said the brief November 
"lame duck" session in Congress was unlikely to take up the 
FTA; while there was always the possibility of earlier 
action, it was more likely to be considered in 2009.  The 
Senator said he was hopeful that out of the financial crisis 
would come a stronger understanding of the importance of 
strong FTAs and of trade relations overall.  President Lee 
reiterated his "deep confidence" that "we will continue to 
have an in-depth discussion on the merits of the FTA." 
 
¶6. (SBU) President Lee concluded by noting to Senator Hagel 
the warm welcome Ambassador Stephens had received from the 
Korean people and the high expectations Koreans had that she 
would contribute to strengthening bilateral cooperation on 
all fronts, including in addressing the problems of North 
Korea. 
 
¶7. (U) CODEL Hagel cleared this message. 
STEPHENS