INDIA'S COMMUNISTS LOBBY FOR CHINA

UNCLAS SECTION 01 OF 04 CALCUTTA 000495

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR SCA/INS, EAP/C
PACOM FOR POL/AD

E.O. 12958: N/A
TAGS: ECON CH ETRD ENRG PBTS IN PGOV PREL
SUBJECT: INDIA'S COMMUNISTS LOBBY FOR CHINA

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1. (SBU) SUMMARY: In anticipation of Chinese President Hu
Jintao's November 20-24 visit to India, Communist Party of
India-Marxist (CPM) has been pressuring the GOI to conduct a
more conciliatory foreign policy towards China. In its
September Central Committee meeting, the CPM criticized the
ruling United Progressive Alliance (UPA) for a perceived
pro-U.S. foreign policy and outlined the Party's intent to
advocate for a more pro-China foreign policy. The CPM's efforts
at pushing its pro-China agenda have been comprehensive, with
key leaders like Politburo Member Sitaram Yechury traveling to
Beijing for discussions with Chinese officials and CPM General
Secretary Prakash Karat meeting recently-appointed MEA Foreign

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Secretary Menon. Contacts indicate that the agenda for Jintao's

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visit will likely include three critical issues for the Eastern
region: borders, market liberalization, and water-sharing.
The issue of water-sharing is a concern following recent press
reports that China may dam rivers on the Tibetan plateau for
large hydro-power projects similar to projects already
undertaken along the Mekong. A Calcutta-based MEA
Representative noted CPM's lobbying for China but dismissed it,
saying officials in the MEA still view China with suspicion.
The CPM is apparently using China to stake out a more assertive
foreign policy position, one that is more than simply negating
closer Indo-U.S. ties but ostensibly offering an alternative.
Historic sympathies may be a factor, but the CPM also sees
potential economic and financial benefits from increased Chinese
investments. The tone and results of Hu Jintao's visit will be
a good barometer of how effective the CPM can really be in
influencing India's foreign policy. END SUMMARY.


2. (U) During its September Central Committee meeting, the CPM
leadership criticized the ruling UPA, which the party supports
from outside the coalition, for conducting a pro-U.S. foreign
policy. The Committee's minutes cited India's voting for the
International Atomic Energy Agency (IAEA) resolution to refer
Iran to the United Nations (UN) Security Council for IAEA
violations; joint military training exercises, and the Indo-U.S.
civil nuclear agreement as a few examples of this pro-U.S. tilt.
The CPM outlined an effort to pressure the UPA to implement a
more pro-China program, as part of its desire to see India
become part of a new "multipolar" world order that it envisions
will replace the current "unipolar" set-up. (Note: The CPM
historically has maintained a pro-China bias following its split
in the 1960's from the Communist Party of India (CPI),which was
generally pro-Soviet Union. End Note.)

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CPM's Full Court Press For China
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3. (SBU) In recent weeks, CPM leaders have been aggressively
conducting its pro-China advocacy. October 16-24, CPM
Politburo Member Sitaram Yechury led a five-member CPM
delegation, which included Northeast Tripura state Chief
Minister Manik Sarkar to Beijing for discussions with Communist
Party and government officials. The delegation went to China at
the invitation of the Communist Party of China (CPC) and met
with Foreign Minister Li Zhao Xing and CPC Central Committee's
Standing Committee Member Lou Gan. According to media reports,
Chinese officials sought to elevate relations with India from
"strategic cooperation" to "strategic partnership" and indicated
that Hu Jintao's visit would serve as a landmark in moving
forward the Indo-Chinese relationship. CPM leaders emphasized
that India would not be a part of a U.S.-led global strategy to
contain China. (Comment: With this travel and engagement with
Chinese officials, Yechury appears to be building on his recent
efforts negotiating with Nepal's Maoists to further position
himself as the CPM's "Foreign Minister." Other CPM members have
reportedly spoken derisively of Yechury who, while serving as an
appointed Member of Parliament in the upper house, has never had
to run for public office; calling him a "Prima Donna." End
Comment.)


4. (U) In an October 26 article in the CPM's mouthpiece

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newspaper "Ganoshakti" CPM General Secretary Prakash Karat wrote
that India needed to increase its cooperation with Russia and
China and give "due importance" to the Shanghai Cooperation
Organization. Karat went on to add, "All these steps, however,
do not contribute to an overarching framework of an independent
foreign policy, as the trend of accommodating to U.S. interests
remains dominant." He also wrote that External Affairs
Minister Pranab Mukherjee and Defense Minister A.K. Antony were
aware of New Delhi's traditional foreign policy based on
non-alignment and protecting India's vital interests. "Assuming
their new responsibilities, it would be expected that the UPA
(United Progressive Alliance) government will reappraise the
foreign and security policies so that a proper direction can be
given in these spheres during the UPA government's remaining
term in office." This message was apparently pushed by Karat in
his meeting on October 19 with newly appointed MEA Foreign
Secretary Shiv Shankar Menon. In addition, Menon again

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discussed border relations and China on October 28 in Calcutta
with West Bengal CM Bhattacharjee. On October 29, Politburo
Member and former West Bengal Chief Minister Jyoti Basu demanded
that Hu Jintao speak at a joint session of Parliament. The CPM
vehemently objected to President Bush speaking to Parliament
during his March visit to India.


5. (U) CPM's China advocacy has also included defending Chinese
investment. While opposed to U.S. and other foreign investment
in public corporations, insurance, agriculture, retail and other
sectors, the CPM sees no irony in supporting Chinese investment
in port facilities. In October the CPM publicly supported
Chinese plans to invest USD 13.5 billion in 13 Indian ports, but
Indian security agencies balked at the Chinese initiative,
pointing out that the Chinese Harbor Engineering Company was
building a strategic port already at Gwadar Deep Sea Port in
Pakistan, and that it could pose a serious threat to India's
maritime security. The Indian Intelligence Bureau (IB),
Research and Analysis Wing (RAW) and the Defense Ministry were
unanimous that Chinese entry in the Indian Ocean is a serious
national security threat. CPM General Secretary Prakash Karat
publicly pressured the GOI to spell out the security
considerations for blacklisting the Chinese companies wanting to
invest in Indian ports. Karat asked to the media, "What are
these security considerations? We would like to know why [there
is] this old mind-set. George Fernandes had called China enemy
number one. I am sure the Congress does not think on these
lines...why are Chinese companies being blacklisted?"

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Chinese Economic Ties Strong In West Bengal
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6. (U) The CPM-led Left Front Government in West Bengal has
been eager to bring greater Chinese trade and investment in the
state and has requested that it be brought into the loop on
future bilateral trade talks between India and China regarding
the Nathu La pass in Sikkim. West Bengal's economic ties with
China are strong and growing. The Chinese company Dongfang is
working with West Bengal Power Development Corporation Ltd
(WBPDL) on the Sagardighi thermal power project. Boilers in
public sector power plants like the Durgapur Projects Ltd (DPL),
which were initially supplied by American or European companies,
are currently of Chinese make. A DPL 300 MW plant to be
commissioned by 2007 is being built with Chinese technology. An
industrial park to be converted to a Special Economic Zone (SEZ)
exclusively for investors from China will be set up soon in
Haldia, 150 km south of Calcutta. On September 4, an expression
of interest (EoI) was signed between the state government and
Jiangsu Overseas Group Corporation (JOGC) of Nanjing province of
China. A proposed manufacturing complex will be set up on 250
acres, purchased by JOGC at market price, and JOGC will be
responsible for identifying Chinese companies from different
manufacturing areas to set up shop. The Chinese companies
products manufactured in West Bengal would then be marketed in
India and exported abroad. Sectors identified for this complex
include specialty chemicals and pharmaceuticals, textile yarn,

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steel, marine, and process food items.


7. (U) The CPM has also been lobbying in support of Indian
companies working with China. Reliance Industries Limited CEO
Mukesh Ambani, who had announced significant investments in West
Bengal, received the CPM's support in successfully pressuring
the GOI to loosen visa restrictions on 1,800 Chinese
technicians, who will work on the 1,400-km long Kakinada-Bharuch
pipeline.
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...And the Rest of India Too
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8. (U) Chinese investments are not restricted to just West
Bengal. A thermal power project in Andheri, Mumbai, and Grasim
and Ultra Tech Cement projects in collaboration with the China
National Machinery Company are planned. The Wuhan Research
Institute of Post and Telecommunication has joined with Himachal
Exicom Communications for "in-building and tunnel projects" for
the Delhi Metro Rail Corporation. The proposed Chennai monorail
project, too, will involve significant Chinese participation.
The National Highways Authority of India (NHAI) has tied up with
at least two Chinese companies -- China Coal Construction Group
and Longjian Road and Bridge -- for building National Highway 2
and the East-West corridor. The China Petroleum Pipeline
Company, a subsidiary of CNPC, is building a 1,000-km-long gas
pipeline from Kakinada to Bharuch for Reliance Gas Pipelines, a
Mukesh Ambani company. Chinese telecom major ZTE Corp has
connections with government telecom companies BSNL and MTNL as
well as the Tatas and Reliance Infocomm in India's fast-growing
telecom sector. Even in Northeastern states like Manipur, which
is still deemed sensitive, Chinese firms are bidding for, and
winning contracts. (Comment: PM Manmohan Singh's government
plans to showcase this recent economic cooperation with China to
counter the CPM's allegations of discrimination against China.
Notwithstanding the new and increasing Chinese investment in
India, the total Foreign Direct Investment (FDI) flow from China
between August 1991 and July 2006 amounted to USD 3.53 million
which is 0.01% of total FDI flow to India in this period. It is
this imbalance that the CPM wants to reverse in its ideological
battle with the "Capitalist West." End Comment.)

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The Northeast Being Sold Down the River?
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9. (SBU) Recent press reports also note that China may be
planning to dam the Yarlung Zangbo River in Tibet, which flows
into the Brahmaputra River in India's Northeast. The
Bramaphutra is one of the largest rivers in the world in terms
of water volume and irrigates the northern plains of Assam
before flowing through Bangladesh and emptying into the Bay of
Bengal. On October 27, ConGen discussed this possibility with
President of Alstom-India Sunand Sharma. Alstom is a French
company specializing in power generation and engineering with
significant commercial interests in hydro-power projects in
Northeast India. In 2005 the company was awarded a USD 302
million contract to supply 8 turbines for the 2000 MW mega hydro
power project on the Assam-Arunachal Pradesh border. Sharma
noted that any Chinese dams or diversions of the rivers in the
Tibetan plateau would have significant consequences for NE
states such as Assam and Arunachal Pradesh. Assam's Chief
Minister has requested PM Singh to raise this issue with Jintao,
and Arunachal Pradesh's governor has said that he is "very
worried" about this situation. However on October 24, Chinese
Foreign Ministry Spokesman Lui Jianchao denied reports of
China's plans to dam up-river from the Brahmaputra.

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Still Much Suspicion of China
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10. (SBU) The CPM's pressure on the UPA and GOI officials will
face significant opposition within the bureaucracy. ConGen
asked local MEA representative whether the CPM would be

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successful in influencing the UPA to adopt a more pro-China
position at the expense of relations with the US. The MEA
representative responded that within the MEA, China remained a
strategic concern. CPM leaders could make pro-China statements
but the GOI would still view China with suspicion, given ongoing
disagreement over borders and past hostilities. Even within the
CPM, China is not uniformly viewed in a positive light. In an
October 19 meeting with ConGen, West Bengal Finance Minister
Asim Dasgupta expressed a view contrary to his Party's position,
saying that China was a potential strategic and commercial
threat to India.


11. (SBU) COMMENT: The CPM is clearly using the Chinese
President Hu Jintao's November visit to India to flex its
muscles in foreign policy. The CPM has been successful in
tempering the UPA's efforts at implementing economic
liberalization, forcing the GOI to back down on opening various
sectors to investment, privatizing public enterprises and other
policy reforms. With Bengal Congress Leader Pranab Mukherjee as
the new Foreign Minister, the CPM will have a sympathetic ear.
Many political observers believe Mukherjee has been able to
retain his Parliamentary seat in the CPM's heartland and his
political position only because of his sensitivity and close
relation with the CPM. The CPM may be motivated by residual
sympathies for China for its lobbying, but China also appears to
be another useful stick to batter the UPA and by extension, the
USA. The CPM proposal welcoming Hu Jintao's address to a joint
session of Parliament is an easy slap in the face to the USA by
the Communists, as the press will be quick to draw parallels
between the Hu Jintao visit and that of President Bush, who was
unable to address the Lok Sabha because of widespread
opposition. The Communists endorsement of China blatantly
ignores its dismal human rights and environmental record, its
ongoing occupation of Tibet, and its ongoing relationship with
nuclear rogue state North Korea, all issues which have raised
hackles in India. The Indian common man remains deeply
suspicious of Chinese motives, seeing the country as a
non-democratic rival which has little in common with India,
making the Communist love-fest a hard sell. In addition, there
appears to be a strong financial incentive in the CPM's
calculus, whether through investment or because of local
businesses with links to China. The tone and results of Hu
Jintao's visit will therefore serve as a good indicator as to
how effective the CPM can be in extending its influence from
domestic matters to foreign policy.JARDINE