THE DEPUTY SECRETARY'S MEETING WITH ASIF ZARDARI

C O N F I D E N T I A L SECTION 01 OF 03 ISLAMABAD 001330

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E.O. 12958: DECL: 03/26/2018
TAGS: PREL PGOV PHUM PK
SUBJECT: THE DEPUTY SECRETARY'S MEETING WITH ASIF ZARDARI

Classified By: Charge d'Affaires Peter Bodde, for reasons 1.4 (b)(d)


1. (C) Summary. In a wide-ranging discussion March 25,
Pakistan People's Party (PPP) leader Asif Zardari told the
Deputy Secretary that the National Assembly would give newly
elected Prime Minister Gillani a vote of confidence on March

29. This would give the new government six months to begin
to implement its "First 100 Days" program. Shah Mehmood
Qureshi would be named Foreign Minister on March 29 when the
cabinet was announced. The Deputy Secretary welcomed
Zardari's intent to work closely with the U.S., especially in
combating terrorism. Zardari welcomed introduction of
Reconstruction Opportunity Zone legislation in the Senate but
said he wanted to do even more to expand trade with both the
U.S. and India. On restoring the judges, Zardari confirmed
he would find a way to restore 99% of the judges, but not the
former Chief Justice. Zardari indicated that he and the new
parliament would be seeking ways to restore the powers of the
Prime Minster over those of the President. End Summary.


2. (C) Deputy Secretary Negroponte, accompanied by SCA A/S
Boucher, Charge, and Polcouns, met March 25 with Pakistan
People's Party (PPP) Co-Chairman Asif Zardari. Also
attending the meeting were Bilawal Zardari Bhutto, PPP Punjab
President Shah Mehmood Qureshi and Zardari advisor Husein
Haqqani.


3. (C) The Deputy Secretary conveyed his condolences over
Benazir Bhutto's death to Zardari and Bilawal. He offered
his congratulations on the PPP victory and noted that it was
a sheer coincidence he had arrived on the day the new Prime
Minister was taking his oath of office. The press no doubt
would see a conspiracy in all this; Zardari laughed and said
he was not denying it. The Deputy Secretary said the USG
goal was to keep our good relations with Pakistan on an even
keel, and we looked forward to working with the PPP. Zardari
said he was happy to have U.S. support -- "what would we do
without you?" -- because the new government had an
opportunity and a challenge to tackle some very difficult
issues, especially terrorism.


4. (C) The Deputy Secretary agreed we had a mutuality of
interests. In the past year, he had noted a growing
awareness in Washington of developments in Pakistan, and
there was interest in extending our help. Zardari said the
election had not been perfect but acknowledged USG assistance
in making the election fairer. He now wanted to create a
face of Islam in Pakistan that would be easier for the
American people to understand. Boucher noted that the
election of a new government would assist that effort.

Government Formation
--------------


5. (C) Turning to government formation, Zardari said he had
put his foot down in negotiations with Pakistan Muslim
League-N (PML-N) leader Nawaz Sharif and insisted that the
PPP name the new Speaker as a symbol of a new beginning.
Negotiations over apportioning ministers were ongoing, but
Zardari said that he would insist on keeping Foreign Affairs
and Interior and probably would have to give up Finance to
the PML-N. Shah Mehmood Qureshi would be the Foreign
Minister. The cabinet would be announced after a vote of
confidence in Prime Minister Gillani, which would occur on
March 29. Once the new government had a vote of confidence,
there could not be another challenge for six months. Gillani
would also announce the coalition's "First 100 Days" program
after the vote of confidence.


6. (C) Zardari indicated he had made some deliberate
trades on provincial power. He allowed the Awami National
Party (ANP) to form the government in the Northwest Frontier
Province because they could be more effective in working with
the tribes in the fight against militants. The PPP would
form a government in Balochistan but would be sensitive to
the needs of Balochis because "we don't need another front"
over which to battle.


7. (C) Zardari noted that he looked forward to receiving a
briefing from Chief of Army Staff General Kayani on the
security situation. The Deputy Secretary said he had just
met Kayani, who was looking forward to briefing the new
government. On security, the U.S. had three major concerns:

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the once confined insurgency in Pakistan was spreading, there
was a need to focus on the Pak-Afghan border region, and we
needed to prevent any future 9/11 type attack that might be
launched from Pakistan. Zardari agreed that "we can't afford
that." The Deputy Secretary said there were never 100%
guarantees, but we must increase our efforts to prevent any
such attack.

Economic Issues/India
--------------


8. (C) The news that Pakistan had a $90 (external) billion
debt, said Zardari, limits what the new government can do.
Pakistan needs better interaction with the American market to
increase industrial output and employment. There was a nexus
between jobs and terrorism; "whoever employs, succeeds."
Zardari said he had spent three years in New York getting
treatment for his heart so he understood America, and he
believed it would be important to "increase the U.S.
appetite" to help Pakistan. The Deputy Secretary noted that
Reconstruction Opportunity Zone legislation had just been
introduced in the Senate; Zardari said that was good but he
wanted to do more to expand trade.


9. (C) Noting he had been criticized for suggesting that he
could put the Kashmir issue aside and concentrate on
increasing trade with India, Zardari said Pakistan could not
ignore India's huge market, Pakistan's possible role as an
energy corridor, and India's potential as an investor.
Boucher noted that he had been in India when Zardari made his
remarks on Kashmir; the reaction was positive and there may
be fertile ground to move forward.

Relations with Musharraf
--------------


10. (C) Zardari said that he wanted to shift the
government from a military focus to one based on aid and
trade. But the Presidency "does not yet understand" the
importance of this. Zardari questioned whether Musharraf was
ready to change. On releasing the judges, Zardari said "we
couldn't have keep the old man (former Chief Justice Iftikhar
Chaudhry) under house arrest" but confirmed he had an
agreement with Nawaz to find a solution to restore 99% of the
judges, minus Chaudhry. "Nawaz left this on my plate" to
find a solution that will save face for the PML-N. "We will
handle the situation" asserted Zardari, although some will
try and exploit the issue for political purposes.


11. (C) The Deputy Secretary said he had been encouraged by
his meeting with Musharraf. The President had taken off the
uniform, held a fair election and had talked positively of
new Prime Minister Gillani and the prospect of working with
the PPP. Musharraf had felt that "only 2-3 judges were still
a problem" so seemed resigned to having the others
reinstated. Zardari responded that this issue needed to be
solved because it would divert the new government from
combating extremism.


12. (C) Zardari said he lost power by deliberately "being
soft" on Musharraf during the campaign. In contrast, Nawaz
had been harsh and won additional seats because of it. But
Musharraf has not reciprocated, said Zardari, in responding
to his request to oust the Chaudhrys from the Pakistan Muslim
League (PML) party. If Chaudhry Shujaat Hussain is gone,
claimed Zardari, "I can then work with the PML."


13. (C) The Deputy Secretary said Musharraf anticipated
this issue would arise and asked that he pass on a message to
Zardari. Musharraf said that if he dumps the Chaudhrys they
will join Nawaz, and this will make life even more
complicated for the PPP. Musharraf suggested they "let the
dust settle" and issues would work out. Qureshi questioned
this, saying that PML members were already forming a forward
block, and the party had little future. Referring to
discussions with Musharraf intermediaries, Zardari said Tariq
Aziz had been on board with ousting the Chaudhrys but ISI
Chief Taj had not. Boucher suggested that the PML still had
a future.


14. (C) Zardari commented that Musharraf had changed
Pakistan's government from one dominated by the Prime
Minister to one run by the President -- the new parliament

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will want to reverse this. So far, Zardari felt he should
give Musharraf time to adjust to coming changes. The Deputy
Secretary asked if Zardari had a personal relationship with

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Musharraf, and Zardari said not really. He could not afford
to be seen supporting Musharraf right now, as Pakistani
politicians are not that generous about accepting deals with
rivals.


15. (C) Saying he had discussed the PM/Presidency power
relationship with Musharraf's aides, Zardari described an
idea of Benazir's that he was pursuing. He had discussed
with Pakistan Ambassador to the U.S. Durrani the possibility
of becoming the Prime Minister's advisor to the NSC. This
would not entail eliminating the NSC just yet, but it would
allow Durrani, who has credibility with the Army, Musharraf
and political leaders, to serve as a bridge between the PPP
and Musharraf. Boucher noted that the division of powers had
been a topic of negotiation between Benazir and Musharraf;
Musharraf had indicated that he was prepared to accept a
Prime Minister as chief executive.

Energy Woes
--------------


16. (C) The Deputy Secretary noted that in the last eight
years, despite economic growth, Pakistan had not added a
single megawatt of power to its energy grid. Zardari agreed
this was astonishing, noting that before Benazir left office,
there were contracts (many with U.S. firms) signed to add
27,000 megawatts of power. These contracts had been scrapped
over concerns over kickbacks. But Zardari questioned how
Musharraf could not have been aware of this problem. He said
that he was amazed that Musharraf believes the economy is
still in good shape. On power, however, there would be at
least a three year lag before any solution could be
delivered, said Zardari. Even if Pakistan ordered new power
plants now, there was a waiting list. The fastest solution
was through the pipeline with Iran, but this was "politically
incorrect," acknowledged Zardari. The Deputy Secretary
agreed that the U.S. would be dismayed to see Pakistan go
forward with the Iran pipeline deal and asked about the
Turkmenistan pipeline. Haqqani asked who would fund it;
Boucher noted that it would be difficult to get financing
because there had been no audit of the Turkmenistan reserves.


17. (U) The Deputy Secretary has cleared this message.

BODDE