In meeting with Ambassador, new PM expresses

C O N F I D E N T I A L SECTION 01 OF 04 COLOMBO 000611

SIPDIS

DEPARTMENT FOR SA, SA/INS, INR/NESA; PLS PASS TO USTR J.
ROSENBAUM

NSC FOR E. MILLARD; TREASURY FOR R. ADKINS; COMMERCE FOR

A. BENAISSA

KATHMANDU PLS PASS TO CODEL DREIER

E.O. 12958: DECL: 04/08/14
TAGS: PREL PGOV PINR ECON MASS CE LTTE
SUBJECT: In meeting with Ambassador, new PM expresses
support for peace process, notes concerns re radical JVP

Refs: Colombo 607, and previous

(U) Classified by Ambassador Jeffrey J. Lunstead.
Reasons 1.5 (b,d).

SUMMARY
--------------

1. (C) Ambassador Lunstead made a congratulatory call
on new Sri Lankan Prime Minister Mahinda Rajapakse on
April 8. During their 45-minute long discussion,
Rajapakse underscored his support for the peace process.
In a theme he kept returning to, he also expressed deep
concerns about the high degree of influence the radical
JVP party would have on the new government. The
Ambassador noted that it was important for the new
government to send a positive signal to investors
regarding its economic plans, and he briefly reviewed
USG military-to-military cooperation with the GSL.
Rajapakse stressed that he wanted to work with the U.S.
very closely. Rajapakse was his usual affable, breezy
self throughout the meeting. He is someone we think the
U.S. can work with. He will be very much overshadowed
by President Kumaratunga and he seems fine with that.
We suggest that a formal letter of congratulations be
sent to him from Washington as soon as possible. END
SUMMARY.

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Meeting the new PM
--------------


2. (C) Ambassador Lunstead called on new Sri Lankan
Prime Minister Mahinda Rajapakse on April 8.
(Rajapakse, the former Leader of the Opposition and a
senior MP in President Kumaratunga's Sri Lanka Freedom
Party, "SLFP," was sworn in on April 6 -- see Reftels
for bio-data.) The meeting took place at Rajapakse's
private residence in Colombo. (There are unconfirmed
reports that Rajapakse does not plan to move into the
official residence located at Temple Trees across from
the Embassy, though he may use it as an office.) Before
the meeting began, there was a photo spray involving a
scrum of photographers and cameramen.


3. (C) When the two sat down, the Ambassador
congratulated Rajapakse on the results of the April 2
parliamentary election in which the United People's
Freedom Alliance (UPFA) won the most seats. (The UPFA
is a coalition of the SLFP and the radical Janatha
Vimukthi Peramuna, "JVP," party.) The Ambassador noted
that the election and the largely peaceful way it was
conducted were a "positive symbol of democracy." When
asked if he was elated, Rajapakse, smiling broadly,
replied: "I don't feel it yet." The Ambassador noted
that he had often said that he represented the U.S. to
Sri Lanka as a whole, and not to one party, or to one
person. That was true in the past and was true now.
The U.S. looks forward to working with the new
government in support of the peace process, prosperity
for the Sri Lankan people, and to defeat terrorism.
Rajapakse, who was dressed in his customary red scarf
over a long white shirt and white sarong, replied that
he wanted good relations with the U.S. and did not
foresee any "barriers" to that happening -- the U.S. and
Sri Lanka "must work together."

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Peace Process
--------------

4. (C) The Ambassador remarked that he had met with the
other local co-chairs of the Tokyo process (Norway,
Japan, and the EU) on April 7 and everyone had agreed on
how important it was to support the peace process.
Rajapakse agreed that maintaining the peace process was
a key priority. He noted, however, that "President
Kumaratunga will be dealing with that." The Ambassador
asked whether some sort of public statement by the co-
chairs expressing support for the peace process would be
helpful at this time. Rajapakse said it would be
because many people in the south needed reassurance that
the country was not going to be divided into two. The
Ambassador also asked about Rajapakse's reported comment
on April 6 that India should assume a bigger role in the
peace process. (Lakshman Kadirgamar, a former foreign
minister who is set to reclaim his old job, had made a
similar point in April 7 comments to the press.)
Rajapakse replied that he had not had anything specific
in mind. India, however, was an important country and
people in the south would be reassured about the peace
process if India was actively involved. The Ambassador
agreed that additional Indian involvement would only
help. He added that the U.S. and India enjoyed a very
warm relationship on international matters, including on
Sri Lanka. This may have not been the case years ago,
but it was today.

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Concerns about JVP
--------------


5. (C) Shifting focus, Rajapakse immediately turned the
conversation to a point he kept returning to during the
meeting: his concerns about JVP influence in the new
government. He related that the JVP was gaining
strength in the country. It had won 39 seats in the
April 2 election, up from 16 seats in the last election.
(Note: Based on the election result, the JVP could have
had 41 seats, but, in a spirit of compromise, it decided
to forego two seats it could have had on the UPFA's
"national list" of candidates.) The JVP had a "definite
plan" and it was going to have a great deal of influence
on the new government and its policies. He added that
he thought that "President (Kumaratunga) was
underestimating the JVP, thinking she could control
them." The JVP, however, was in a good position "to
interfere" in many aspects of the new government. The
group, for example, was going to get four key
ministries: agriculture, rural development, fisheries,
and culture. These ministries were very important ones
in Sri Lanka, he averred. The ministries the JVP would
control would demand funds from the government, but the
party did not have any responsibility for the budget,
and thus would be in position to criticize the GSL's
actions. In addition, key JVP leaders had decided not
to assume ministerial slots, preferring to leave them to
subordinates, which was a clear sign that the JVP
planned to separate itself and strike out at the new
government when it wanted. One of the reasons he wanted
India to be more actively involved in the peace process
was to reassure people in the south and, by doing so,
help convince them not to turn to the JVP or the JHU.
(The Jathika Hela Urumaya, the "JHU," is an all-Buddhist
monk party, which -- in a very impressive result for a
new party -- won nine seats in the election.) When
Rajapakse finished his soliloquy regarding the JVP, the
Ambassador responded that the U.S. also had concerns
about the JVP involving its stance regarding the peace
process, economic reform, and on other issues. When
queried, Rajapakse said he was not certain when a new
cabinet would be named, but it could be as early as
tomorrow (April 9).

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Economic Issues
--------------


6. (C) The Ambassador noted that the peace process
reinforced efforts to bring prosperity to the Sri Lankan
people and vice versa. In light of this, it was
important that the new government send a clear signal to
investors, international and local, that it supported
potential investment. Investors need to know that the
peace process would continue and that the government in
power would provide sound, stable economic management in
regard to the budget, privatizations and other reforms.
Rajapakse replied that he could not support the
privatization of basic services, such as health services
or transport industries, such as the railways. The
Ambassador commented that the railways were facing huge
losses. Rajapakse replied that they needed a new
management system. He added that if the new government
attempted to privatize the railway system: "we would
lose power as quickly as the last government." In any
case, the JVP would not allow the railway system to be
privatized. The Ambassador noted that free markets were
almost always the best way to create efficiencies and
asked whether the new government planned to move ahead
with the planned third wave privatization of the
petroleum sector. Rajapakse did not give a clear
response to the question. The Ambassador then remarked
that neighboring India was experiencing a huge economic
surge, with very high growth rates. He had read that
Prime Minister Vajpayee, in the midst of the
parliamentary campaign, was promising to go forward with
more privatizations. Rajapakse replied that "India can
afford to do that; Sri Lanka has a lot of poverty." The
Ambassador related that Sri Lanka had many advantages,
but it had to work to sell itself; India and China,
immense markets, were doing so and getting ahead. In
closing, the Ambassador advised that it might be a good
idea if the new government made a pro-investment
statement to soothe any concerns in the near-term.

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Mil-to-Mil Cooperation
--------------


7. (C) The Ambassador added that the U.S. had a wide
variety of programs in Sri Lanka. These programs
covered many areas, including development assistance and
military-to-military cooperation. The Ambassador
briefly reviewed the Millennium Challenge Account,
noting that Sri Lanka was a potential candidate.
Regarding military cooperation, the Ambassador said two
signals were being sent to the Tigers: first, if they
pursued peace, there would be benefits in economic
reconstruction; and second, if they returned to the war,
the U.S. and others would stand by the GSL. In regard
to specific programs, the U.S. was planning to provide
the GSL with a former U.S. Coast Guard cutter. This
would send a strong signal. The ship was being provided
gratis, though the GSL would have to fund the
refurbishment costs. Rajapakse said he had heard of the
cutter program from a friend from his home area in the
south, who was an engineer and had inspected the cutter
for the GSL in the U.S. The Ambassador commented that
some quick decisions were needed by the GSL regarding
the cutter and he had just sent a letter to Defense
Secretary Herath. Rajapakse said it was important that

SIPDIS
the ship be provided to the navy and not to the
fisheries ministry, which was going to be under JVP
control.

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Other Issues
--------------


8. (C) Toward the end of the discussion, Rajapakse
suddenly commented that he had a friend in Las Vegas who
had called him and told him that some Americans were
talking about Sri Lanka now having "a Marxist
government." The Ambassador replied that that was not
how the USG felt. We planned to continue to work very
closely with the GSL. As democracies, we had much in
common. Rajapakse noted that he was the head of a group
called "The Palestinian Solidarity Movement," but his
only responsibilities involved a meeting and a statement
once a year. The Ambassador remarked that with respect
to international affairs, including the Middle East, the
U.S. planned to work closely with Sri Lanka. There was
always room for disagreement, but the two governments
needed to continue to consult. Both the U.S. and Sri
Lanka were on the UN Commission on Human Rights, for
example. The U.S. had reviewed proposed CHR resolutions
regarding Cuba and China with high-levels in the Sri
Lankan government and wanted to keep in close touch as
discussions proceeded in Geneva.

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COMMENT
--------------


9. (C) Rajapakse was his usual affable, breezy self
throughout the meeting. He is very much a tactical
thinker, seemingly focused almost single-mindedly on
domestic politics. Rajapakse speaks from experience
regarding the JVP: he comes from Sri Lanka's deep south
and his political survival has depended on beating back
repeated JVP challenges to his voter base. His concerns
regarding the group have long been known, but the depth
of those concerns came through loud and clear during the
meeting. Based on his remarks and those we have heard
elsewhere, there is little doubt that the JVP is going
to have a huge degree of influence on the government,
though the net impact of that on the peace process and
the economic arena remains uncertain. In discussing the
JVP, Rajapakse was also transparently signaling that
there could be problems with infighting within the UPFA
coalition. Overall, Rajapakse is someone we think the
U.S. can work with. It is clear that he will be very
much overshadowed by President Kumaratunga, however. He
seems to realize that and to be fine with it. We
suggest that a formal letter of congratulations be sent
to him from Washington as soon as possible. END
COMMENT.


10. (U) Minimize considered.

LUNSTEAD