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How US ‘debt-trap’ diplomacy backfired in Cambodia

Both sides could have settled on long-standing loans made to the corrupt regime of Lon Nol in the early 1970s. Instead, US intransigence pus

South China Morning Post

Both sides could have settled on long-standing loans made to the corrupt regime of Lon Nol in the early 1970s. Instead, US intransigence pushed Phnom Penh further into the embrace of Beijing at a time of intensifying rivalry between the two superpowers

Debt in international relations is diplomacy by other means. Recent breathless reports about China’s “debt- trap” diplomacy often make it sound like Beijing invented it when it is as old as time. In any case, a good deal of the accusations levelled at the Chinese are exaggerated.

But, in light of the ongoing furore over wholly inaccurate claims that the Chinese navy is secretly taking over Cambodia’s Ream naval base, it is worth examining a genuine case of debt-trap diplomacy, only that this one dates back decades and concerns the United States’ egregious repayment claims on the Cambodian people. What’s more is that the debt and its controversy have been tied, directly or indirectly, by one side or the other, to the current row over the [same] naval base.

The debt in question stems from a US$274 million loan made to the regime of the American puppet Lon Nol in the early 1970s. It has since ballooned to about US$700 million from accumulated interest.

Without the war, there would have been no secret and illegal bombing of Cambodia (and Laos), a country with which the US was actually not at war. Without the bombing, the traditional monarchy would have endured. But the intense bombing created the conditions, on the one hand, for Lon Nol to stage the US-backed coup which abolished the monarchy and, on the other, the rise of the Khmer Rouge. Dragging Cambodia into the war intensified its unfolding civil war and prepared the country’s direct descent into hell.

As described in The Phnom Penh Post by Suos Yara, a legislator and spokesman for the ruling Cambodian People’s Party, the original US loan was made to the Lon Nol regime to buy American rice, wheat, oil and cotton. This was meant to avoid a humanitarian crisis to save displaced Cambodians “from starvation after they fled to Phnom Penh under the communist [Khmer Rouge] advance as well as US bombings in the countryside”.

Ever since, Washington has insisted on repayment, including interest. To outsiders, the circularity of the debt may seem morally revolting. America bombed the Cambodians so they needed loans from Washington to buy food and not to starve. And of course, for all of Washington’s subsequent criticisms of other countries’ irresponsible lending, did its officials care about how much Lon Nol and his cronies actually pocketed the money and how much reached Cambodians in distress?

To put the bombing in perspective, 2,756,941 tons of American bombs were dropped on the country between 1965 and 1973. In comparison, the Allies dropped just over 2 million tons of bombs during all of World War II. “Cambodia may be the most heavily bombed country in history,” wrote Ben Kiernan, historian and author of How Pol Pot Came to Power and The Pol Pot Regime.

Unexploded ordnance – which were only detonated later by accident – have caused an estimated 65,000 deaths or injuries up to now. The deliberate spraying of millions of gallons of herbicide, including Agent Orange, have caused physical and cognitive disabilities and deformities over several generations and continue today.

If all these don’t make a strong case for reparations, the cancellation of all debts or at least a generous debt restructuring, it’s hard to think what would qualify.

Long-serving Prime Minister Hun Sen is no angel. But despite having called the US loans “dirty debt”, last year he offered to settle with Washington.

During a visit by US Deputy Secretary of State Wendy Sherman, he proposed: allowing Cambodia to repay gradually; reducing interest to 1 per cent, or turning more than 70 per cent of the debt into development aid to cover education, culture and demining.

That should have been a good opportunity for both sides to get creative and come up with a viable debt restructuring. A generous repayment plan would have given Washington leverage as Sherman explicitly warned Phnom Penh against continuously tilting towards Beijing and expressing alarm at a potential deal with the Chinese navy at the Ream naval base. Could there have been a quid pro quo between cancelling the debt and allowing Americans, instead of Chinese, return to the naval base? It seemed more than possible.

But Sherman apparently stuck to her guns as Washington showed no signs of being flexible over the debt. Indeed, in November, it ended up sanctioning Cambodian Defence Ministry Director-General Chau Phirun and top navy commander Tea Vinh, followed by an arms embargo over the naval base and allegedly growing Chinese military influence.

It was all sticks and no carrots. Should anyone be surprised now that Phnom Penh has, in the most public manner possible, sealed its deal with the Chinese navy? […]

Debt-trap diplomacy is always a double-edged sword.

15 Jun 22