Scenesetter for SA Assistant Secretary Rocca's

C O N F I D E N T I A L SECTION 01 OF 03 COLOMBO 000749

SIPDIS

DEPARTMENT FOR SOUTH ASIA ASSISTANT SECRETARY
CHRISTINA ROCCA FROM AMBASSADOR WILLS

E.O. 12958: DECL: 05/05/13
TAGS: PREL PGOV PTER ECON MARR CE NO JA
SUBJECT: Scenesetter for SA Assistant Secretary Rocca's
upcoming visit to Sri Lanka

(U) Classified by Ambassador E. Ashley Wills:
Reasons: 1.5 (b,d).


1. (C) SUMMARY: We warmly welcome your upcoming visit.
It comes at an important time, with the peace process
facing serious turbulence. After months of progress,
including six rounds of talks, the Tigers recently
suspended negotiations. There have been tentative signs
that the Tigers' may be edging away from their hard-line
stance, but the situation remains fluid. The peace
process is also being buffeted by domestic problems,
such as cohabitation stresses and a delicate economic
situation. Despite all the turbulence, this period
remains one of tremendous promise and your visit will
help cement the gains made in U.S.-Sri Lankan relations,
including in the defense area. END SUMMARY.

===============================
Background on the Peace Process
===============================


2. (C) We look forward to your May 11-14 visit to Sri
Lanka. It comes at an important 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. 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 five more rounds of talks. In
addition, donor countries met at a conference in Oslo in
November 2002, with the Deputy Secretary in attendance.

========================
Tiger Pullout from Talks
========================


3. (C) Despite so much progress in so short a time, the
situation remains highly fluid, with the LTTE's
commitment to the peace process in real question after
its April 21 decision to "suspend" its participation in
the peace talks. At the same time, the group stated
that it would not attend the Tokyo donors conference in
June. In making these announcements, the LTTE said it
wanted to see more progress on such matters as
humanitarian relief and a sharp reduction in the size of
the Jaffna security zones before coming back to the
talks. There are recent signs that the Tigers may be
edging away from their hard-line stance, however. The
tone of the group's reaction to our press statement on
their pullout from the talks was relatively moderate,
for example. That said, despite feverish Norwegian and
Japanese efforts, it is still not clear whether the
peace process will be back on track soon.


4. (C) Re the LTTE's intentions and motivations, we
think the group's pullout from the talks was tactical in
nature, with the LTTE's trying to reset the peace
process more to its advantage. In the longer term, we
think it is likely that the group is using the peace
process more as a test to see if it can get power in the
north and east without the inconvenience of war rather
than as an honest-to-goodness parley that leads to real
ethnic reconciliation. Some of the LTTE's policy
pronouncements raise red flags, for example, including
its apparent lack of interest in disarmament and
demobilization. The group is also clearly unwilling to
end its arms resupply efforts. The forced recruitment
of children is also a major human rights issue, as is
the group's assassination of Tamil opponents,
intimidation of Muslims in the east, and widespread use
of extortion. In spite of these negative signs, the GSL
continues to hope that the peace process will help
domesticate the LTTE through time, strengthening
potential moderate elements in the group.

=====================
Tensions in the South
=====================


5. (C) Another factor that could help unravel the peace
process is domestic opposition in the south. While
playing to a small audience thus far, Sinhalese
chauvinists led by the radical Janantha Vimukthi
Peramuna (JVP) have engaged in rallies against the peace
process. President Kumaratunga, meanwhile, has sent
mixed signals, at times constructive, at times critical.
Kumaratunga's attitude seems largely bound up in the
cohabitation tensions that routinely flare between her
and the government. Most recently, Kumaratunga and her
party, the People's Alliance (PA),have been busily
trying to negotiate a pact with the JVP as a means to
counter the UNF government. It is not clear whether a
PA-JVP alliance will come to fruition, but if it does
the reaction from the LTTE is bound to be sharply
critical.

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


6. (C) Sri Lanka's economic situation is quite delicate
and could have an impact on the peace process. 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 added political traction, a
situation that could easily cascade to the detriment of
the peace process.


7. (SBU) Meanwhile, our trade relationship with Sri
Lanka is gaining strength. The Trade and Investment
Framework Agreement (TIFA) signed last July in
Washington has produced two rounds of highly successful
bilateral talks. At the second TIFA meeting in
Washington in March, Deputy USTR Jon Huntsman signaled
that the U.S. and Sri Lanka would soon begin moving
toward a bilateral Free Trade Agreement. The FTA, which
we expect to be announced later this year, will provide
a much-needed boost to U.S. trade and investment here,
as well as to the GSL's economic reform efforts. It
will also be a strong statement of our confidence in the
peace process and the economic potential of a united Sri
Lanka.

==============
Defense Issues
==============


8. (C) We have long maintained that a strong Sri Lankan
military is essential in keeping the Tigers at the
negotiating table. The three U.S. Department of Defense
assessments conducted last fall identified several
critical weaknesses in the GSL's defense organization
that we are working to help alleviate. Most notably,
Sri Lanka's lack of a viable maritime surveillance and
interdiction capability has allowed the LTTE to smuggle
new weapons and munitions into the country. Sri Lanka
recently purchased a US aerial surveillance system, is
looking at acquiring new radars, will be granted a
refurbished U.S. Coast Guard Cutter under the excess
defense articles program, and hopes to buy 30mm
automatic cannons for their navy vessels. Our
continuing support for these and other such initiatives
are key in ensuring that Sri Lanka's military is capable
of providing a position of strength from which the
government can negotiate.


9. (C) The GSL has consistently supported U.S. military
operations with blanket overflight and landing
clearances as well as access to ports. As the peace
process continues, the military has begun to look
towards increasing participation in United Nations
peacekeeping operations and accepting a larger role in
assisting the U.S. in the global war on terror. Most
recently, Sri Lanka even has begun to explore ways of
assisting in Iraqi reconstruction efforts, an area where
the military's resources and expertise could be
utilized.
==========
Key Points
==========

10. (C) This exciting and turbulent 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, as noted
above, various high-level USG agencies have visited to
review commercial, economic, and defense issues. Your
upcoming visit -- as with the Deputy Secretary's visit
in August 2002 and your previous visit in March 2002 --
will help underline strong U.S. support for the peace
process and our hope for even closer bilateral ties.


11. (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 GSL for signing an ICC
Article 98 non-surrender agreement with U.S., and our
hope for even closer bilateral ties, including in
multilateral settings such as the UN.

-- Express appreciation for Sri Lanka's continuous
support of our military operations through granting of
overflight and landing rights.

-- Express continued support for defense related
initiatives and our growing military-to-military
relationship.


12. (U) Minimize considered.

WILLS