CONGRESS MOVES TO CALM COALITION JITTERS

C O N F I D E N T I A L SECTION 01 OF 04 NEW DELHI 007759

SIPDIS

E.O. 12958: DECL: 10/03/2015
TAGS: PGOV ECON ELAB KISL PREL PINR EINV IR IN
SUBJECT: CONGRESS MOVES TO CALM COALITION JITTERS

REF: A. NEW DELHI 7661

B. NEW DELHI 7598

Classified By: DCM Robert Blake, Jr. for Reasons 1.4 (B, D)


1. (C) Summary: The virulent criticism by the Left Front
(LF) and the opposition BJP of India's anti-Iran vote in the
IAEA and their efforts to politicize the debate on economic
reform has caught many Congress leaders by surprise, and fed
rumors that the United Progressive Alliance (UPA) government
may be shaky. Congress is contesting elections in Kerala,
West Bengal, and Bihar and could well be defeated in all
three states. This has motivated Congress Party stalwarts in
Sonia Gandhi's office to publicly back away from
controversial economic reform programs to allow the dust to
settle after the Prime Minister's visit to the US and his
vigorous efforts to push forward fiscal economic
restructuring programs. These uncertain political prospects
and the left's onslaught (Ref A) have led some within
Congress to speculate that the party was too quick to endorse
a pro-US, pro-reform agenda, providing ready targets to UPA
opponents. Congress moved quickly to shore up its ranks,
calling meetings of its "core group," its Chief Ministers,
and convening the coordination committee to discuss matters
with the LF. Congress insiders self-servingly tell us that
while there is some nervousness regarding upcoming elections,
the Prime Minister faces no real opposition capable of
undermining the UPA agenda. The general consensus among
economic pundits is that the Congress Party leadership has
chosen to soft-pedal economic reform and privatization
efforts in the lead up to the commencement of budget
negotiations in November, when fiscal conditions will insert
a new element of reality (and a new imperative for reform)
into the debate, as the UPA and the opposition figure out how
to finance their pet programs. Rumors could revive should
the party perform poorly. End Summary.

Foreign Policy Becomes a Political Issue
--------------


2. (C) Congress insiders have been rattled by the harsh
criticism of India's IAEA vote against Iran. Foreign policy
issues rarely spill over into Indian domestic politics, and
the party leadership had kept it under the purview of PM
Singh, who manages the day to day agenda of the UPA and
avoids political issues. The IAEA vote has been taken up so
aggressively by the LF and the BJP, however, that it has
slipped over into the political sphere, which is the
responsibility of Party President Sonia Gandhi. This is
causing some within Congress to question whether the UPA has
been too far in front of the voter regarding economic
liberalization and the Iran vote, providing the opposition
with a political opening that could threaten the stability of
the UPA and lead to a mid-term election.


3. (U) Under the energetic direction of Prakash Karat, a
revived Left Front (LF) was the first to capitalize on the
IAEA vote, but the BJP and regional parties have now joined
the bandwagon. On October 3, the LF leadership announced
that it would work with regional parties around the country
to "create awareness on the need for an independent foreign
policy." LF leaders will be traveling to Lucknow to meet the
ruling Samajwadi Party and "to launch a nationwide campaign
to mobilize opinion against India's IAEA vote," and will then
hold public meetings in New Delhi, Kolkata, Hyderabad and
Chennai, in which a variety of regional parties will likely
participate.


4. (C) The BJP has also tried to gain political advantage
from the vote. In an October 3 conversation with the CG,
Tamil Nadu Chief Minister Jayalalitha opined that the UPA now
"lacks stability," and that a mid-term poll is likely in

2006. Tamil Nadu is facing an election next year, and the
BJP leadership has already announced that it will not contest
alone. Jayalalitha is the most likely candidate to sign on
with the BJP.

Muslims Are Not Happy
--------------


5. (C) While many Indian Muslims were not happy with the
Iran vote, Shia leaders in Lucknow told us they were content
to let the Prime Minister have his way and will not force the
issue. Sunnis were more outspoken. The Muslim newspaper
"Milli Gazette" accused PM Singh of "blackening his country's
face" by "succumbing to the US pressure of open and blatant
blackmail," and called on the Prime Minister to resign.
Congress MP Maulana Obaid Azmi told Poloff on October 3 that
the PM made a "mistake" when he allowed India to vote against
Iran in the IAEA. Azmi maintained that US foreign policy
opposes Muslim countries everywhere and India has now
signed-on to that agenda, which will cause more Muslims to
oppose the party.

Congress in an Uproar?
--------------


6. (U) Congress has called a series of high-level meetings
to shore up the leadership and restore confidence. On
September 30, the "core group" of Congress, consisting of
Congress President Sonia Gandhi, PM Singh and senior
ministers Pranab Mukherjee, Arjun Singh, Shivraj Patil,
Ghulam Nabi Azad, and Mrs. Gandhi's Political Secretary Ahmed
Patel met at the Prime Minister's residence. "Hindu" Editor
Harish Khare, quoting senior sources within Congress, claimed
that the PM apologized for not consulting the leadership, and
blamed the US for giving India only 12 hours to make a
decision, rather than 48. After protracted discussion, the
group purportedly agreed that the Iran decision was the only
"realistic" choice, as Iran "had not been a helpful
neighbor." Defense Minister Mukherjee argued that while the
Iran decision would alienate Muslims, they would not abandon
Congress "on the basis of a vote in some distant forum."


7. (U) On October 3 Congress scheduled a coordination
meeting with the LF, and on October 7 and 8 Mrs. Gandhi and
PM Singh will address Congress Chief Ministers, in what will
be the first such meeting since the UPA took power in 2004.
In its press releases, Congress emphasized that the party
leadership will discuss how best to implement the party
manifesto and "thrust areas identified by Mrs. Gandhi."

State Elections Hold the Key
--------------


8. (C) Although the opposition BJP is currently in disarray
and ineffectual, Congress holds a slim parliamentary majority
and depends on UPA allies and the LF to remain in power. Any
indication that the political winds have shifted and are no
longer blowing in the Congress direction, would lead India's
political class to speculate about growing instability and a
possible mid-term poll. Likewise, ambitious politicians
among the LF and the UPA's regional allies would view any
sign of Congress weakness as an opportunity. Congress
defeats in all three upcoming electoral contests in Bihar,
West Bengal and Kerala, would spur growing worries within
Congress that the UPA has become shaky and vulnerable, and
energize Indian politicians to start plotting against it.

The Left is Also Playing for High Stakes
--------------


9. (C) While the Communists are pleased with their present
position, they are also closely watching the outcome of
upcoming state elections. Karat is determined to expand LF
influence beyond the "red forts" of West Bengal, Kerala and
Tripura. To do so, the Communists must do well in state
elections and weaken Congress. Indian journalist AB
Mahapatra told Poloff on October 5 that Karat had earlier
hoped to build on a good electoral performance by expanding
into new states, recruiting new allies and preparing to part
company with Congress, but has become more pessimistic about
dropping support for the UPA over the short-term. If
Congress appears to be weakening, he could speed up his
timetable.

The Views of the Insiders - Not Yet a Big Deal
-------------- -


10. (C) Harish Khare told Poloff on September 26 that there
was no Congress "left wing" siding with the LF, and
predicted that party leaders will continue to support PM
Singh and Sonia Gandhi. He suggested that Congress may be
deliberately feeding false rumors of a left wing to give the
party "breathing room" to act against Washington's wishes if
necessary. Khare claimed that this was reflected in PM
Singh's statement to him in a private conversation that
"India must distribute its energy dependence between the
ayatollahs in Teheran and the ayatollahs in Washington."
Congress MP and party insider Rashid Alvi also insisted that
there is no "left wing" within Congress that is sympathetic
to the Communists, and that the party leadership universally
dislikes Karat. Alvi was also worried about the election
outcome, pointing out that Congress is weak politically and
does not want a mid-term poll. He predicted that the NDA
would win the Bihar election, forcing the LF to support the
UPA to prevent an NDA resurgence.


11. (C) In a September 28 conversation with Poloff,
Revolutionary Socialist Party (RSP) Secretary Abani Roy gave
no indication that the LF was contemplating dramatic
political moves, and seemed resigned to the political status
quo. Roy also predicted an NDA win in Bihar, pointing out
that this would be a major victory for the BJP and its
allies.

Nervousness Probably Does Not Portend a Fall
--------------


12. (C) Comment: The Iran vote and the UPA's proposed
economic reform measures have made many within Congress
nervous, and this has been compounded by the unexpected
virulence of the LF under Karat's energetic leadership, and
intimations of an impending cabinet shuffle. However, the
Congress culture does not encourage quick and radical
political moves, and there is little to indicate that this
nervousness implies anything near as significant as a change
of government. With political forces so evenly divided,
neither the LF nor the BJP could come up with the necessary
numbers to form a new government, and no major bloc is
prepared or eager now to contest another national election.
While the rumor mill is churning in New Delhi, the Congress
leadership has already moved to reassert party discipline and
this should suffice for the time being. With crucial state
elections imminent, no one is willing to engage in more than
gossip until the election outcome is known. Karat is
ambitious, and should the LF do well, will embark on a
long-term plan to increase the Communist base, expand into
new areas, and fill the opposition vacuum that the BJP
collapse has engendered. This would take time, and in the
interim, there is little to suggest that he, or anyone within
Congress, BJP or the UPA is prepared to bring the government
down. Nonetheless, revived chatter about a cabinet reshuffle
and repeated speculation to us by senior Congress players
about the pressure that Manmohan Singh is feeling are
evidence of the Autumn jitters that this government is
enduring. And that in turn should limit the government's
room for maneuver in the weeks ahead on issues of concern to
the US. While Congress "has taken a breather" when it comes
to economic reform, we expect it to be short-lived and
efforts to resume after the political climate has cooled.

13. (U) Visit New Delhi's Classified Website:
(http://www.state.sgov.gov/p/sa/newdelhi/)
Mulford