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Indonesia's Invasion of Aceh


Ordinarily, a courtesy call on French President Jacques Chirac from the International Chamber of Commerce would be little more than a photo op. But the group's chairman, Chief Executive Jean-Ren? Fourtou of Paris' Vivendi Universal, delivered an unusually pointed request when he met with Chirac on May 20. "Our key message, now that the war in Iraq is over, is for governments to put their divisions behind them," said Fourtou and other chamber leaders in a statement after the session.

More than a month after the fighting ended in Iraq, the political war between France and the U.S. is far from over. True, the two countries appear to have resolved their differences over a proposed U.N. resolution to end sanctions against Iraq, set for a Security Council vote on May 22. But only a week before the scheduled vote, the French ambassador to the U.S. sent a blistering letter to the White House accusing the Administration of spreading false allegations that France had supplied weapons to Saddam's regime. The U.S. ambassador to France, Howard H. Leach, told Le Figaro on May 20 that if the squabbling continues, he "would indeed be worried about our relations, including in economic matters."

The French business Establishment is already worried. On Apr. 30, a group of prominent French executives published an open letter in business daily Les Echos warning that continued hostility could damage the nearly $100 billion in annual trade between the U.S. and France. It's extremely unusual for French business leaders to speak publicly about politics. But, says Pierre A. Rodocanachi, a Paris executive at consulting firm Booz, Allen & Hamilton, who was one of the letter's signers, "there's too much at stake economically to take any risks." Now, groups such as the International Chamber of Commerce fret that Franco-U.S. tension could overshadow the Group of Eight summit that Chirac will host on June 1-3 in Evian-les-Bains. Business leaders hoped the summit would spur action on lagging global trade talks and other issues.

There have been some conciliatory signals. When G-8 ministers met in Normandy in mid-May, French Finance Minister Francis Mer toured the D-day beaches with U.S. Treasury Secretary John Snow. The U.S. is reassuring the French that President Bush will attend the summit and spend the night in France -- not, as was rumored, in Switzerland.

Yet Chirac and Foreign Minister Dominique de Villepin show few signs of softening. Paris' last-minute support for the U.N. resolution on Iraq is pragmatic, not heartfelt. The French realized they could not marshal the opposition and risked alienating Germany and Russia, which want to mend fences with the U.S. Business leaders have pleaded with the Elys?e Palace to tone down the rhetoric, says Pierre Lellouche, a center-right parliamentarian who opposed Chirac's Iraq position. But, says Lellouche, "they've been told, 'Get lost."'

The problem is that, for Chirac, standing up to the U.S. is still paying political dividends. The French public avidly backed his antiwar stance. Chirac's approval rating is still as high as 68%. But business leaders fear a long-term chill in relations could hurt commerce, particularly for companies such as food-service giant Sodexho Alliance, which relies heavily on U.S. government contracts. Commercial aviation, where Boeing (BA) Co. faces Airbus Industrie, could be embroiled in tensions, too. "There's a strong desire in the business and political leadership to restore normal relations," says Yves Galland, a center-right politician who was just hired to run Boeing's operations in France. "But this may take some time." For now, both sides stand to lose. Fear is growing about the possible consequences of Indonesia's attack on separatist rebels in Aceh, launched on May 19. President Megawati Sukarnoputri deployed 40,000 troops against 5,000 guerrillas of the Free Aceh Movement. The invasion came after a five-month peace accord between the government and the rebels fell apart. Now, analysts predict a protracted military campaign.

Much is at stake for Indonesia and its neighbors. Some of the heaviest fighting could hit Banda Aceh, the provincial capital, which is located on the island of Sumatra at the northwestern end of the Strait of Malacca. That's the world's second-busiest waterway and a vital trans-Pacific route for supertankers. War could also threaten a major source of hard currency for Indonesia: Exxon Mobil (XOM), which runs a $3 billion natural gas liquefaction plant in Lhokseumawe for the national oil company, Pertamina, stepped up security in early May, after guerrilla commanders threatened to attack "strategic installations." The plant shut down for three months in 2001 after rebels attacked a bus and a helicopter carrying company employees.

Human-rights groups are also worried that casualties could run into the thousands and that civilians are at risk. There's concern that the Indonesian action could create a huge refugee problem, with tens of thousands of Acehnese fleeing the violence. An independent Indonesian commission found that civilians were killed when the military ruled Aceh under martial law in 1989-98.


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