VZCZCXRO7865
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBD #0059/01 0830754
ZNR UUUUU ZZH
R 240754Z MAR 09
FM AMEMBASSY BANDAR SERI BEGAWAN
TO RUEHC/SECSTATE WASHDC 4460
INFO RUEHKL/AMEMBASSY KUALA LUMPUR 0714
RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS SECTION 01 OF 02 BANDAR SERI BEGAWAN 000059 
 
SENSITIVE 
 
SIPDIS 
 
DEPARTMENT FOR EAP/MTS/MGCOPPOLA 
 
E.O. 12958: N/A 
TAGS: PGOV PINR PHUM ECON BX
 
SUBJECT: BRUNEI-MALAYSIA TERRITORIAL SETTLEMENT OVERSHADOWED BY 
LIMBANG CLAIMS 
 
SUMMARY 
-------- 
1.(SBU) On March 16, The Sultan of Brunei and Malaysia's Prime 
Minister Abdullah Badawi signed a 'Letter of Exchange' (LOE). The 
LOE specified the final delimitation of maritime boundaries, the 
establishment of Commercial Agreement Areas (CAA) in oil and gas, 
the modalities for the final demarcation of land boundaries, right 
of passage for Malaysian vessels across Brunei waters, and setting 
up of the joint Brunei-Malaysia technical committee.  The joint 
committee is tasked with finalizing the details of demarcating the 
boundary issues.  Over the past two weeks, the LOE signing has been 
overshadowed by a public row over any final settlement regarding 
Limbang, an area in the Malaysian state of Sarawak that Brunei has 
long claimed as its own territory.  Senior Bruneian officials stated 
Limbang was not/not part of the settlement talks. Overall Bruneians 
have expressed mixed feelings on the settlement. Local bloggers have 
supported the process whereas the National Development Party (NDP) 
will be disappointed if Brunei government does not claim Limbang as 
Brunei territory.  The development of new, and once disputed, areas 
for oil and gas exploration is seen as the key factor for a lasting 
final settlement.  End Summary. 
 
BRUNEI-MALAYSIA LONG NEGOTIATIONS 
--------------------------------- 
2.(U) The negotiations over the agreement began in 1995 and it has 
taken 39 rounds of talks to finalize the LOE.  The dispute over 
Limbang started in 1890 with the cession of the territory by Brunei 
to Sarawak's James Brooke which resulted in a significant reduction 
of Bruneian territory. (NOTE: Limbang is located on the banks of 
Sungai Limbang between the two halves of Brunei with a population 
over 40,000. END NOTE.) 
 
3.(U) The maritime boundaries dispute started in 2003 when Shell and 
Total's exploration work at Block J and K was suspended following an 
incident where Total exploration was chased away by Malaysian patrol 
boats.  The Malaysian claimed it had extended its territorial claims 
into seas, which Brunei replies are in its Exclusive Economic Zone 
(EEZ).  Brunei awarded offshore Blocks J and K to consortia led by 
Shell and Total in 2000.  The CCA stipulated that the oil and gas 
revenue in the disputed areas would be shared between the two 
nations.  It was not disclosed how much each country would receive. 
 
 
4.(U) The joint Brunei-Malaysia technical committee tasked to 
finalize the technical issues related to surveying and demarcating 
both the land and maritime boundaries would "require a bit of time". 
Until then, petroleum exploration and exploitation activities in the 
area will have to wait.  (NOTE: Brunei team is led by the Minister 
of Foreign Affairs and Trade II, Pehin Lim Jock Seng, while Malaysia 
team is lead by Malaysian Foreign Minister Datuk Seri Dr Rais Yatim. 
END NOTE.) 
 
 
MALAYSIA'S PUBLIC CLAIMS ON LIMBANG 
----------------------------------- 
5.(U)On March 16, during a press conference with the Malaysian 
media, PM Abdullah Badawi said "Brunei has decided to drop the 
Limbang issue and as a result, Limbang is part of Malaysian 
territory".  However, the following day at the Legislative Council 
session, the Minister of Foreign Affairs and Trade II, Pehin Lim 
Jock Seng, clarified PM Abdullah Badawi's statement by saying, "In 
actual fact, the issue of claims over Limbang was never discussed. 
What was discussed is regarding the demarcation of land boundaries". 
 Pehin Lim Jock Seng further clarified that the LOE did not have any 
specific mention on Limbang. 
 
GOVERNMENT OF BRUNEI DIRECTS MEDIA RESPONSE 
------------------------------------------- 
6.(SBU) In response to the Malaysian media report on PM Abdullah 
Badawi's statement, the Information Department instructed both 
private-owned Borneo Bulletin and Brunei Times to make Pehin Lim 
Jock Seng's clarification as the headline.  Local journalist told 
Political Assistant that the Information Department received the 
instruction from the Prime Minister's Office.  According to embassy 
contacts, the local media would have preferred for Pehin Lim Jock 
Seng to hold a press conference. 
 
 
BRUNEI'S MIXED REACTION 
-------------- -------- 
¶7. (SBU) Rozan Yunos, Permanent Secretary at the Ministry of 
Development, wrote on his blog; "I am not that much worried about 
the land boundary or the issue of claims...the bigger issue is 
economics".  Rozan would rather focus on the maritime agreement 
because there is great potential in the maritime area.  Another 
 
BANDAR SER 00000059  002 OF 002 
 
 
popular local blogger, 'anakbrunei' concurred with Rozan's statement 
and agreed that "we should be focusing on the potential economic 
gains rather than getting all hot and bothered over the border". 
 
8.(SBU)On March 16, Brunei's only political party, NDP wrote on 
their website that they hoped the agreement on the issue of Limbang 
will favor Brunei and Brunei will not be at lost.  NDP, since its 
inception in 2005, has been campaigning vigorously for the Brunei 
government to claim Limbang as Brunei's territory because there is 
still one village in Limbang where Brunei citizens are still 
residing.  NDP Vice President Mahmud Morshidi did not hide his 
disappointment if Brunei dropped its claim over Limbang.  On March 
19, NDP wrote that the government should include its citizen in the 
decision making on the issues of claims and invited Pehin Lim Jock 
Seng to be more transparent in discussions about settlement status. 
 
UPSIDE OF SETTLEMENT 
--------------------- 
¶9. (SBU) Total (French Oil and Gas firm) was not a participant in 
the negotiations. (NOTE: Total current is responsible for about five 
percent of Brunei's total oil and gas production. END NOTE.) 
However, Total did give a presentation to GoB officials on technical 
and production details of any final settlement. During the past 
year, Total has publicly encouraged the GoB to speed up the 
negotiations.  There appears to be mixed opinion in Total regarding 
how quickly the CCAs will be finalized. This mixed opinion is 
balanced by the tremendous oil and gas development possibilities. 
Total, the GoB, and current and future partners will benefit from 
oil and gas fields that have conservative public estimates of at 
least twenty years of production. 
 
COMMENT 
------- 
¶10. (SBU) The initial public goodwill was greatly reduced by the 
public spat over Limbang. It appeared GoB officials were caught off 
guard by senior Malaysian leaders' public statements. In our recent 
discussions with GoB officials, local media, and private sector 
business leaders there is a general consensus that any lasting final 
settlement hinges on the upcoming committee meetings.  While Limbang 
is an important issue to many Bruneians, the benefits of new oil and 
gas field development can and will do much to mitigate those 
concerns.  Demarcation and the CCA actual revenue sharing will 
determine how quickly both sides come to final settlement.  While 
public sentiment has been positive, notwithstanding the Limbang 
dispute, there are many leaders who have told us they believe the 
final settlement is likely a longer-term process than initial 
anticipated and announced. 
 
MCINTYRE