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05NEWDELHI8844 2005-11-22 14:02:00 CONFIDENTIAL Embassy New Delhi
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					  C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 008844 


E.O. 12958: DECL: 11/22/2015


Classified By: Political Counselor Geoff Pyatt, for Reasons 1.4 (B, D)

1. (C) Summary: With Parliament set to convene on November
23, the Congress-led United Progressive Alliance (UPA)
government is reeling from assaults from its left and right
and faces a series of political events that could undermine
its stability, including the UPA defeat in the important
Bihar election, and an impending Supreme Court Ruling on the
constitutionality of the President's dismissal of the Bihar
government (septel). With the BJP-led National Democratic
Alliance set to demand former Foreign Minister Natwar Singh
and Congress Party President Sonia Gandhi's resignations over
the oil-for-food scandal (reftel), few of our contacts
believe that Natwar is innocent of wrongdoing or are willing
to come to his defense, and suspicion of possible Congress
malfeasance runs deep. Most interlocutors believe that Sonia
Gandhi will eventually have to drop Natwar from the Cabinet.
Congress miscues have contributed to a growing perception
that Prime Minister Manmohan Singh is too weak to manage
alone the oil-for-food scandal, or the controversies
surrounding the now-deferred IAEA vote on Iran and the UPA's
dissolution of the Bihar Assembly. BJP and Left critics view
the Natwar affair as the an opportunity to attack a UPA
already weakened politically by its IAEA vote. The Left,
chastened by the NDA's Bihar victory, has agreed to tone down
its attacks in Parliament and is unlikely to withdraw its
support for fear of consigning itself again to irrelevance
and the country to right-wing Hindu rule. However, the Left
Front (LF) has joined with regional parties in a "Left and
Secular Alliance," is increasingly combative and could grow
more powerful if Congress fails to manage the political
maelstrom. End Summary.

The Anti-Congress Matrix


2. (SBU) This is not a good time for the Congress Party. A
set of issues has combined to erode its political integrity
and place it on the defensive. With Parliament set to
convene on November 23, the LF on November 22 agreed to tone
down its attacks on the UPA in Parliament, as it was
satisfied that Congress was responding to its concerns
regarding Iran in the IAEA. This will not assure a smooth
Parliamentary session, however, as the NDA Parliamentary
delegation plans to raise questions on the UPA's dissolution
of the Bihar Assembly, the alleged Congress role in the
oil-for-food scandal, the GOI's September 24 vote against
Iran at the IAEA, and alleged KGB payoffs to Congress leaders
during the Cold War. The NDA will focus on perceived
Congress malfeasance and corruption, demanding Natwar's
resignation from the cabinet and Sonia Gandhi's resignation
as party President, as the proper response to the
oil-for-food scandal and the dissolution of the Bihar

Congress Vulnerable


3. (SBU) Poloffs queried contacts from across the political
spectrum to determine their views on Congress prospects.
Those from Congress confirmed that their party faces a time
of increased political vulnerability but, in typical fashion,
claimed full faith in Party President Sonia Gandhi's ability
to handle the crisis. They also characterized the UPA
decision to keep Natwar in the Cabinet as a Minister without
Portfolio as a face-saving gesture rather than a genuine
expression of support. Most believed that Natwar would be
expelled from the Cabinet after a decent interval.

Congress Hits the Natwar Iceberg


4. (C) Sonia is reportedly very displeased with the turn of
events prompted by the Volcker report. Hanspal, an
Ex-President of the Punjab Congress Committee, noted that
while the Volcker scandal could hurt Congress nation-wide, it
could particularly effect Punjab, where Congress faces stiff
competition from the Sikh regional party, the Akali Dal, and
the Chief Minister is a Natwar relative. Herkewaljit Singh,
Editor of the Punjabi Daily Ajit, pointed out that the
Volcker Report could open a Pandora's box of corruption,
implicating Congress in further scandals. Echoing those
sentiments, Ilya Azmi, a BSP MP from Uttar Pradesh,
speculated that the Natwar episode was just the tip of the
iceberg and would reveal other skeletons in the Congress
closet. He pointed out that if Congress is implicated in a
cascade of scandals, its strength will be sapped as it
contests assembly polls in West Bengal, Assam, Kerala, and
Tamil Nadu next year. This has forced the party to move
quickly to support what are likely to be painful
investigations in hopes of clearing its name.

Natwar Singed


5. (SBU) Congress contacts expressed frustration at the
damage caused to the Party image by Natwar's failure to
manage the Volcker report. They focused on Natwar's
hysterical reaction to the scandal and avoided substantive
discussion of the far more embarrassing corruption issues
that it raised, although most were more than willing to point
the finger at Natwar's son Jagat Singh. Sonia Gandhi clearly
demonstrated her displeasure by ordering Natwar not to attend
further meetings of the Jawaharlal Nehru and Indira Gandhi
Foundations. He has heretofore played a leading role in

6. (C) Ammar Rizvi, an MLA and senior Congress leader in
Lucknow, suggested that Natwar's refusal to step down before
challenging the Volcker findings embarrassed his party and
the UPA government. Rizvi claimed that this has led many
within Congress to write Natwar off and downplay his
importance as part of their damage control strategy. Rizvi
pointed out that Natwar is an elitist politician without a
mass base who failed to deliver his own caste (the Jats) in
the last assembly elections. Freelance journalist Zafar Agha
maintained that the Congress rank and file are steering clear
of the Natwar affair, content to let Sonia defend the Party
against corruption charges. Such superficial support, he
pointed out, may not be enough to prevent this bundle of
crises from spreading further.

The BJP and Left Smell Blood


7. (SBU) BJP and Leftist contacts viewed the Natwar scandal
as the beginning of a "perfect storm" that has presented them
with an opportunity to score political gains against Congress
after months of opposition drift. While the Left has
benefited from its consistent opposition to UPA policies, the
BJP has been searching for its own issue. BJP contacts
confirmed that the Natwar affair has rejuvenated their party
by providing them with the resonant issue they were hoping
for. They were particularly elated that the Volcker report,
while flawed in their eyes, was issued by the United Nations,
which is still viewed by most Indians as a credible world
body. This, they argued, makes it difficult for Congress to
dismiss the Volcker findings.

Comment: Buckle Your Safety Belts Congress


8. (C) Congress' ability to weather this perfect storm will
depend on whether Sonia Gandhi and PM Singh can present
cogent responses to multiple crises occurring at the same
time. The party's performance so far has been short of the
mark. Should Congress continue to present a weak face, it
could begin to present a picture of a party in disarray and
decline, emboldening its critics from the Left and the right,
compelling regional parties to re-examine their commitment to
the UPA, and fostering political realignments that could
render this government more unstable. While Sonia leads the
Congress effort in Delhi, it seems adrift and without a
focused strategy in the states, where it must fight crucial
upcoming elections. The drifting BJP has the most to gain
politically and should get a much-needed shot in the arm from
the NDA electoral victory in Bihar. However, the BJP/RSS
leadership struggle is still not resolved. The Left appears
bent on portraying itself as the defender of India against
alleged US bullying, and is trying to convince more regional
parties to sign up for a new Left coalition that might
eventually challenge the UPA. In India, even such farfetched
political constructs should not entirely be ruled out.