Parsing Washington’s Latest Cambodia Sanctions

The United States Treasury Department in mid September imposed sanctions on the Chinese company Union Development Group (UDG), which since 2008 has been building a $3.8 billion tourism project in Cambodia’s Koh Kong province, alleged to be a front for a future Chinese military installation. As such, the rumor mill in Cambodia is back up and running, at a difficult moment for Prime Minister Hun Sen and the ruling Cambodian People’s Party.

Rumors that China was trying to station its troops somewhere in Cambodia bristled the Phnom Penh grapevine for much of 2018, thanks in part to reports by the Center for Advanced Defense Studies, a Washington-based research group. By November that year, I had sources confirm that things were moving ahead at the UDG site, where satellite images showed the construction of a 3.4 kilometer runway, much longer than was needed for a mere tourism site, and according to some analysts, similar to runways built for the Chinese military elsewhere. I also heard that Washington was planning on saying something about the matter. On November 14, 2018, my Asia Times editor Shawn Crispin telephoned to say that according to his own sources, U.S. Vice President Mike Pence had penned a letter to Hun Sen regarding the issue, something I was also hearing. It seemed likely this message would be relayed at a regional summit in Singapore set to take place that weekend.

As we thought, Pence did deliver a letter, which Hun Sen admitted days later. But the prime minister said that the reports of a Chinese base in Cambodia were “fake news.” He also claimed to have assured Pence that he would never violate Cambodia’s constitution, which bans foreign troops from being stationed in the country. The government spent the following months having to constantly deny the rumors and calm ordinary Cambodians, who, as a result of the negative impacts wrought by a surge of Chinese investments, are growing increasingly hostile to China’s influence in the country.

Phnom Penh’s response also showed how sensitive the subject was. Ruling party-backed newspapers rallied around the government and accused journalists, including myself, of spreading “fake news” designed to impair national security. I received mysterious telephone calls and was possibly followed on occasions. I was blacklisted by several government officials who would no longer take my calls. Some mid-level officials I had known for years would no longer meet. I know for a fact that Cambodian analysts and commentators were instructed not to talk to me. I later learned (or, at least, was informed by several reliable sources) that I was on a list of threatening individuals drawn up by those around Hun Sen, and it was discussed whether I should be kicked out of Cambodia, or perhaps something worse.

The subject continued to simmer in early 2019, receiving coverage here and there. But the embers flared into life again in July last year, when the Wall Street Journal published a report asserting that Beijing and Phnom Penh had signed a secret agreement allowing Chinese troops to deploy to Cambodia. Rather than the UDG site in Koh Kong province, however, the Journal’s report referred to the Ream Naval Base in neighboring Preah Sihanouk province. Again, this forced the Cambodian government into repeated denials, and assertions that the constitution would be upheld. It even allowed journalists to visit the Ream base in order to “prove” the allegations false.

I have heard two theories for this apparent change of location. First, that the idea of a Chinese military base being situated at the UDG site was wrong from the get-go – although in 2018 anyone with knowledge of the issue wasn’t talking about Ream, and high-level sources were only speaking about the Koh Kong development. After all, Pence’s letter referred to the UDG site, not Ream. Second, and more plausibly, there is the possibility that the location was changed following the media storm about the UDG site. The latest sanctions against UDG presumably show that Washington still thinks the Koh Kong site remains a possibility.

Now, more than a year on from the Wall Street Journal report, the rumors are ablaze again following the imposition of U.S. sanctions on UDG under the Global Magnitsky Human Rights Accountability Act, which targets perpetrators of human rights abuse and corruption. The U.S. Treasury’s statement did not specifically say anything about a Chinese military installation, but pointedly referred to the UDG site as “ostensibly” a tourism development. Instead, Treasury Secretary Steven T. Mnuchin said that the sanctions were imposed because UDG’s “predatory investment schemes deepen corruption, undermine the rule of law and exploit the resources of other countries.”

These concerns were well-known for at least the last decade and were obvious when UDG acquired a 99-year lease on the site back in 2008. The development juts into the Botum Sakor National Park, a protected natural area, and is far larger than the 10,000-hectare limit for land concessions laid out in Cambodian law. Furthermore, reports of forced land confiscation, often carried out with protection from the Cambodian military, have dogged the project from the outset.

But, of course, UDG is far from being the only large company, Chinese or otherwise, accused of flagrantly evicting people from their land through force. It is just one of many that have been credibly accused of corruption, of environmental destruction, and of using the military as its enforcers. Indeed, some of Cambodia’s largest firms would face a similar blacklisting if the U.S. Treasury were to apply these same criteria equally. The same applies to the U.S. Treasury’s sanctioning of former Cambodian General Kun Kim under the Magnitsky Act back in December, for corruption, the expropriation of private assets for personal gain, and the extraction of natural resources. Interestingly enough, we learned from the U.S. Treasury report in mid-September that Kim was “instrumental in the UDG development and reaped significant financial benefit from his relationships with UDG.”

One pressing question is why now. Why wasn’t UDG sanctioned earlier, considering the accusations against it have been known for a long time, and why weren’t Kim’s ties to UDG more explicitly mentioned last year when he was sanctioned by the United States? For most analysts, the answer is because the Trump administration is now trying to punish Chinese firms accused of assisting Beijing’s military expansion. Yet, I suspect that this has also given a free hand to those in Washington who have studied the UDG development for years.

The Chinese naval base rumors made Cambodia something of an unusual fixation for U.S. State Department staffers in 2018 and 2019, and it appeared to matter more to American foreign policymakers than Cambodia’s democratic backsliding. Indeed, this U.S. administration has imposed relatively few punitive measures against the Cambodian government for its democratic deterioration since 2017. Hing Bun Hieng, the former head of Hun Sen’s bodyguard unit, was sanctioned by the U.S. Treasury in 2018 but only because of alleged human rights violations he committed in the 1990s. So, then, the only real sanctions applied by the United States against Cambodia have ostensibly concerned the UDG project.

It isn’t a trivial matter. Granting China access to a base on Cambodia’s southern coast would fundamentally change the region’s geopolitics. Vietnam, in a bitter contest with China over territory in the South China Sea and a close American partner in this fight, is currently encircled by China by land from the north and by sea from the east. A naval base in Cambodia would give China a flank to Vietnam’s south as well. Thailand has been somewhat more amenable to Chinese influence, given that it sits at more of a remove, lacking a direct border with China. The presence of Chinese troops in neighboring Cambodia, and a naval presence in the Gulf of Siam, however, would fundamentally change Bangkok’s security calculus. Such a facility would also allow Chinese vessels easier access to the islands and features in the South China Sea, which Beijing contests with Malaysia, Singapore, and Brunei (along with clashes over fishing rights with Indonesia).

While the sanctions are unlikely to affect the UDG development itself, they will certainly annoy the Chinese government. They will also put renewed pressure on Phnom Penh to temper its partnership with Beijing. Every time the naval base rumor surfaces, the Cambodian government feels it must show that it isn’t a mere proxy of Beijing by affecting a degree of distance from its primary patron, something that must frustrate both sides.

These are far from easy times for Hun Sen, who is currently facing a rare wave of dissent alongside longer term challenges over the expected handover of power to his son. The reawakening of the Chinese military base rumors – pushed back into the headlines by the UDG sanctions this week – will only place further strains on his rule, as Washington no doubt understands. Having played a limited role in this saga for the past three years, there’s a little part of me that thinks the Americans have found an effective way of trolling the Cambodian government.