Scenesetter for SA/INS Director Good's

C O N F I D E N T I A L SECTION 01 OF 02 COLOMBO 000154

SIPDIS

NEW DELHI PLEASE PASS TO SA/INS DIRECTOR DAVID GOOD FROM
CHARGE LEWIS AMSELEM

E.O. 12958: DECL: 01/28/13
TAGS: PREL PGOV PTER ECON CE LTTE
SUBJECT: Scenesetter for SA/INS Director Good's
upcoming visit to Sri Lanka

(U) Classified by Charge d'Affaires Lewis Amselem.
Reasons 1.5 (b,d).


1. (C) SUMMARY: We warmly welcome your upcoming visit.
It comes at an exciting time, with many of the positive
trends we discussed with you during your visit last fall
gaining increased traction. A ceasefire has been in
place since December 2001, and the government and the
Tamil Tigers continue to hold constructive Norwegian-
facilitated talks. The situation remains highly fluid,
however, with the intentions of the Tigers still
unclear. The peace process could also be undermined by
domestic problems, such as cohabitation stresses and a
delicate economic situation. This period remains one of
tremendous promise and your visit will help cement the
gains made in U.S.-Sri Lankan relations. END SUMMARY.

===========================
Status of the Peace Process
===========================


2. (C) We look forward to your February 4-7 visit to
Sri Lanka. It comes at an exciting time. As you know,
the United National Front (UNF) government led by Prime
Minister Ranil Wickremasinghe has taken an activist
posture regarding the peace process since it assumed
power in December 2001. In short order, the government
and the Liberation Tigers of Tamil Eelam (LTTE) re-
initiated the stalled Norwegian government facilitation
effort and put unilateral ceasefires into effect. A
formal Norwegian-monitored ceasefire accord was signed
in February 2002.


3. (C) Continuing the positive trend, the two sides met
in Thailand in September 2002 for their first round of
peace talks since 1995. Before the talks took place,
the GSL met the long-standing demand of the LTTE and
lifted its ban on the organization. The LTTE,
subsequently, edged away from its long-standing demand
for a separate state. Since September, the government
and the LTTE have held three more rounds of talks, most
recently in early January. In addition, donor countries
met at a conference in Oslo in November 2002, with the
Deputy Secretary in attendance. Japan is scheduled to
host another donors' conference in June.

=========================
LTTE Intentions not clear
=========================


4. (C) Despite so much progress in so short a time, the
situation remains highly fluid, with the LTTE's long-
term commitment to the peace process in some question.
It is possible that the group may be using the peace
process as a test to see if it can get what it wants
(i.e., power in the north and east) without the
inconvenience of war. Some of the LTTE's policy
pronouncements raise red flags, including its apparent
lack of interest in disarmament and demobilization. The
forced recruitment of children is also a major human
rights issue. There are signs of late that the LTTE is
also driving a harder bargain in the face-to-face talks.
Before and during the January talks, for example, the
group pressed hard for a reduction in the size of the
GSL's security zones in Jaffna. Although the two sides
agreed to continue discussing the issue, a feeling is
developing that the talks are losing some of their
initial momentum. All this said, the peace process is
moving forward; the pattern of LTTE activities do not
lead to blue sky optimism, however.

================================
Cohabitation and Eastern problem
================================


5. (C) Another factor that could unravel the peace
process is domestic opposition in the south. While
playing to a small audience thus far, Sinhalese
chauvinists have engaged in rallies against the peace
process. A potentially more ominous threat is President
Kumaratunga, who has sent mixed signals, at times
constructive, at times critical. Kumaratunga's attitude
seems largely bound up in the cohabitation tensions that
flare between her and the government. In addition to
the cohabitation problem, the Muslim community and the
LTTE share a tense relationship in the ethnically mixed
east, with communal violence a real possibility.

===============
Economic Issues
===============


6. (C) Another factor that could work to hurt the peace
process is Sri Lanka's economic situation, which is
quite delicate. Although it has the most open economy
in South Asia and a relatively high per capita income
(USD 837),economic growth has been uneven and is mostly
confined to the greater Colombo region. The UNF
government appears committed to putting the right
policies in place to re-ignite economic growth, but it
has moved haltingly. If economic progress is not made,
opponents of the government could gain political
traction, a situation that could easily cascade to the
detriment of the peace process.


7. (SBU) Meanwhile, our trade relationship with Sri
Lanka entered a new phase with the signing of a
bilateral Trade and Investment Framework Agreement
(TIFA) in July 2002. The first TIFA council meeting
took place in November during a visit to Sri Lanka by
Deputy USTR Ambassador Huntsman. The U.S. intends to
use the TIFA process to improve the investment climate
here and win greater business for American firms.

==========
Conclusion
==========


8. (C) This exciting period in Sri Lanka provides many
opportunities for the U.S. Prime Minister
Wickremesinghe has worked hard to move closer to the
U.S. (e.g., he played a key role in the GSL's signing of
an ICC Article 98 non-surrender agreement in November).
Per the recent policy review, the U.S. has taken steps
to enhance its engagement with the GSL, and various USG
agencies have visited to review commercial, economic,
and defense issues. Your visit will help underline
strong U.S. support for the peace process and our hope
for even closer bilateral ties.


9. (SBU) We suggest that you make the following key
points in your meetings with Sri Lankan officials:

-- Express strong U.S. support for the peace process and
Norwegian facilitation.

-- GSL needs to keep up momentum; Sri Lanka is a vital
symbol of movement toward peace and stability in a
troubled South Asian region.

-- All parties should work in national interest in
regard to the peace process and economic reform. It is
important that peace process not falter because of
political infighting.

-- Express appreciation to Sri Lanka for its support of
the global campaign against terrorism. Review with
government our Iraq policy and our hope for Sri Lanka's
support in this vital area.

-- Express appreciation to GSL for signing an ICC
Article 98 non-surrender agreement with U.S. and our
hope for even closer bilateral ties.


10. (U) Minimize considered.

AMSELEM