PRIME MINISTER AZIZ RAISES ECONOMIC AND CROSS-BORDER AGENDA

C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 000283

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E.O. 12958: DECL: 01/12/2016
TAGS: PREL PTER ECON ETRD EINV OPIC MNUC AF PK
SUBJECT: PRIME MINISTER AZIZ RAISES ECONOMIC AND CROSS-BORDER AGENDA
WITH BOUCHER

(U) Classified By: Ambassador Ryan C. Crocker, Reasons 1.4 (b) and
(d).


1. (C) Summary: On January 12, Assistant Secretary of State for
South and Central Asian Affairs Richard Boucher met with Prime
Minister Shaukat Aziz. Aziz discussed his recent visit to
Afghanistan, noting that he had spent over two hours in a one-on-one
meeting with Karzai, and that Karzai's agreement to close the refugee
camps was a positive development. The Prime Minister was pleased
with the progress being made on the Reconstruction Opportunity Zones
and made another pitch for a Free Trade Agreement with the U.S.,
noting that President Musharraf would be writing President Bush on
this topic. The Assistant Secretary urged Pakistan to focus on
finalizing a Bilateral Investment Treaty and Reconstruction
Opportunity Zones, rather than on an agreement whose chances of
passing Congress was so slight. Aziz expressed concerns about
Congressional testimony by Director of National Intelligence
Negroponte regarding Al Qaeda's Pakistan network and the Democrats'
9/11 legislation, saying that such public statements are discouraging
to those who are struggling against Al Qaeda. Pakistan (along with
India) will send a team to Iran shortly to negotiate a pipeline deal.
End Summary


2. (U) On January 12, Boucher, accompanied by Ambassador Crocker,
Senior Advisor Hayden, and Econ Counselor (notetaker),met with Prime
Minister Shaukat Aziz. Khalid Saeed, Principal Secretary to the
Prime Minister; Zameer Akram, Additional Secretary, Prime Minister's
Secretariat; and Shahid Kamal, Additional Secretary, Ministry of

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Foreign Affairs, were also present.

AFGHANISTAN


3. (C) Prime Minister Aziz discussed his recent trip to
Afghanistan, noting that the "unfair" press reports did not
accurately reflect the visit. He spent over two hours alone with
Karzai, and was very blunt with him. He needed to be more
consistent, Aziz told Karzai, and more supportive of Pakistan's
efforts to address common problems, such as a new biometric
checkpoint at the Chaman border crossing, which officials in Kandahar
were reportedly discouraging Afghans from using. Karzai did agree to
the closure of Afghan refugee camps in Pakistan, Aziz continued, a
step that Pakistan found very positive. There are two - one in
Quetta and one near Peshawar - that must go, Aziz continued, as they
are hotbeds of radicalism infecting the surrounding areas. "We have
put pickets around them, but they are not 100 percent effective."
Aziz stressed that financial support for resettling the refugees
would be critical.


4. (C) The Prime Minister said that Karzai liked the idea of a
Marshall Plan, but, in Aziz's opinion, there was no "economic czar"
in Afghanistan capable of implementing such a program. Aziz said
Pakistan could not volunteer because of the current environment, and
that donors' conferences were not particularly useful, as they were
not small and focused enough. He mentioned that Saleh (the head of
the Afghan intelligence service) joined part of the meeting and it
was clear that lack of trust was a significant issue. "That is why
we like tri-partite meetings between General Kiyani, Saleh, and your
people," he said. The Assistant Secretary agreed and Ambassador
Crocker added that regular meetings were taking place. Aziz
repeatedly characterized Karzai as a man under tremendous pressure
who needed everyone's help. Aziz went on to say, "When you spend
that much time with him, you understand why he sometimes says what he
does." "Help us help you" was what he had told Karzai: first,
reduce the reasons for crossing (i.e., eliminate the refugee camps),
then target the bad guys, and finally build systems on both sides.


5. (C) Boucher responded that the U.S. wanted to be helpful with
the jirgas, and that we were looking at ways, both militarily and
through improved governance, to disrupt the Taliban. The sooner the
jirgas take place, the better, in order to improve the atmosphere.
The U.S. was also very supportive of resettling Afghan refugees.
Aziz lamented the lack of progress on the narcotics front, opining
that drug money was replacing the remittances from places like Dubai.
The Assistant Secretary responded that the U.S. had a very large

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counter narcotics program, based in some respects on the Pakistani
model, and that interdiction efforts were being stepped up.

ECONOMIC ZONES, TREATIES AND AGREEMENTS


6. (C) Boucher told Aziz that progress was being made on the
Reconstruction Opportunity Zones and that legislation would be
submitted to Congress in the coming months, on the schedule laid out
during President Bush's March 2006 visit. Responding to a question
from Aziz, Boucher assured him that Balochistan would be included in
the proposal. While the U.S. wants to encourage joint projects
across the border, the main point of the zones is to improve overall
economic conditions, and the initial focus would likely be along the
Peshawar-Jalalabad corridor. The product mix would be fairly broad
and include some textiles. Boucher said that the legislation should
have quite substantial bipartisan support as a counter terrorism
measure, but that there could be problems in the two trade committees
because of textile sensitivities. The Prime Minister assured the
Assistant Secretary that the Government of Pakistan would promote the
zones "very intensely."


7. (C) On the Bilateral Investment Treaty, Boucher told Aziz that
signing the treaty would be very important for investors and we
wanted it to be finalized; but it wouldn't resolve the impasse to
treat it as the first stage of a Free Trade Agreement. Political
prospects for passing any trade agreements are pretty dim in Congress
right now, so it was more important to concentrate on the zones and
the Bilateral Investment Treaty, before starting discussions on a
free trade agreement. Aziz responded that Pakistan would like a
level playing field and that President Musharraf would be writing
President Bush next week on the subject.

BOTHERED BY NEGROPONTE REMARKS


8. (C) Aziz explained that he had been voted to "formally record"
his government's concern with statements the previous day by
Director of National Intelligence John Negroponte before a Senate
committee linking Pakistan with Al Qaeda, and said the Government of
Pakistan would be issuing a statement rebutting the remarks shortly.
He said that such public statements discouraged those who had been
doing so much to fight Al Qaeda and were better made in private.
Boucher replied that the remarks were consistent with what Pakistani
officials had been saying, and urged Aziz to look at the full
statement rather than relying on press reports. The Prime Minister
also expressed concern about the 9/11 resolution bill currently being
considered by Congress. Boucher replied that the House had moved the
bill through in a fashion that precluded our input, but that
amendments could best be made while the Senate was considering it,
and that we would be coordinating with the Pakistani embassy in this
regard.

IRAN


9. (C) Aziz mentioned that he had recently met with the Iranian
Minister of Health. He gave the message that Iran should adhere to
the principles it had committed to when it had signed the Non
Proliferation Treaty, and work through the International Atomic
Energy Agency and diplomatic channels. The Prime Minister said that
a team of Pakistani and Indian negotiators would be going to Tehran
on January 22 for pipeline discussions, commenting ruefully that Iran
drove a hard bargain, but that Pakistan urgently needed more energy
options.


10. (U) This cable was coordinated with SCA - Caitlin Hayden.

Crocker