UNDER SECRETARY JEFFERY'S MEETING WITH PAKISTAN'S FM QURESHI

C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 002464

SIPDIS

E.O. 12958: DECL: 07/19/2018
TAGS: ECON EAID ENRG EPET PK
SUBJECT: UNDER SECRETARY JEFFERY'S MEETING WITH PAKISTAN'S FM QURESHI

Classified By: Anne W. Patterson, Reasons 1.4 (b),(d)


1. (C) Summary: Under Secretary for Economic, Energy, and
Agricultural Affairs Reuben Jeffery visited Pakistan July 17-19. On
July 19, U/S Jeffery and the Ambassador met with Minister of Foreign
Affairs Shah Mehmood Qureshi, who was also named acting Minister of
Petroleum following Pakistan Muslim League-Nawaz's (PML-N) May 12
withdrawal from the Cabinet. FM Qureshi and U/S Jeffery agreed on
the need for a long-term, broad-based, mutually beneficial
U.S.-Pakistan relationship. Qureshi said the GOP already has a solid
economic framework in place that can attract investment, given the
proper conditions. He noted that Pakistan needs assistance in
meeting a potentially destabilizing wheat shortfall this year. He
noted that the Ministry had received positive indications that
agriculture would be included in the next meeting of the
U.S.-Pakistan Economic Dialogue. He also expressed hope that the
U.S.-Pakistan Energy Dialogue would be restarted soon.


2. (C) Summary Continued: U/S Jeffery noted USG concerns about
increasing signs of stress in the Pakistani economy and noted that if
the GOP does not clearly articulate economic policy soon, it may face
a balance of payments crisis. The Under Secretary and the Ambassador
stressed U.S. interest in reviving Bilateral Investment Treaty (BIT)
negotiations and making an announcement to this effect during the
Prime Minister's upcoming visit to Washington. The Foreign Minister
promised to look into whether Pakistan might now approve the proposed
U.S.-funded, USD 20.7 million U.S. Geological Survey and Naval
Research Lab geophysical survey of Pakistan, which had previously
been held up by military and intelligence organizations on national
security grounds. Qureshi said cabinet vacancies will be filled
soon, indicating an imminent announcement. End Summary.


3. (C) Noting troubling economic indicators, FM Qureshi stated the
United States and Pakistan should develop a long-term, broad-based
relationship beyond the security realm, including economic
cooperation that will "impact the Pakistani population more broadly."
He observed the United States has the technical capability for
project assistance to contribute to broad-based economic development.
Qureshi said the current government had inherited a troubled economy
and stressed that Pakistan needs immediate economic assistance,
including market access and access to credit, particularly in light
of a trade gap that has increased from 1 percent of GDP in 2003 to
11.6 percent of GDP today. The United States, he said, has a vibrant
private sector that already knows that significant returns can be
made on Pakistani investments.


4. (C) Responding to U/S Jeffery's question whether the GOP will
implement policies to improve the current economic situation, the
Foreign Minister said the GOP must reduce subsides significantly, and
establish a social safety net. He stressed the private sector must
be the agent of growth and assured the Under Secretary the GOP
already has a solid economic framework in place that, if given the
proper conditions, will attract investment. The Foreign Minister
noted the importance of opening trade with India.


5. (C) Regarding the agricultural sector, Qureshi observed that
Pakistan is currently producing well below capacity. He noted
Pakistan's wheat crop this year had been poor and that there is an
urgent need to import wheat to avoid what could be a politically
destabilizing shortfall by winter. He emphasized his interest in
seeing agriculture become part of the U.S.-Pakistan Economic
Dialogue, and noted that the Ministry had received indications this
would happen.


6. (C) Regarding the energy sector, Qureshi noted the GOP hopes to
increase hydroelectric power generation and mine thus far unexplored
coal reserves in Sindh province. He said hydropower generation was
viable in the short-term and coal mining viable in the medium-term.
The Foreign Minister expressed hope that the U.S.-Pakistan Energy
Dialogue would be restarted soon.


7. (C) U/S Jeffery noted the U.S. is supportive of a long-term and
broad-based relationship with Pakistan, and he said the United States
is particularly interested in cooperating with Pakistan in the areas
of agriculture, energy, and trade and investment. However, he noted
USG concerns about increasing signs of stress in the Pakistani
economy.


8. (C) The Under Secretary and the Ambassador emphasized U.S.
interest in reviving Bilateral Investment Treaty (BIT) negotiations
and noted that an announcement to this effect during the Prime
Minister's upcoming visit to Washington would be welcomed by private
investors. Qureshi expressed interest in the Reconstruction

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Opportunity Zone legislation, the recently tabled Biden-Lugar
legislation, the ongoing U.S.-Pakistan Strategic Dialogue, and
restarting BIT negotiations.


9. (C) The Ambassador asked about a possible impending announcement
regarding filling vacancies in the GOP cabinet. Qureshi indicated
the government had been struggling with a dilemma: fill the
positions too soon and risk harming what is an already fragile
coalition, or wait to fill the positions and risk upsetting world
financial markets because of perceived inaction of the government.
He said the decision had been made to fill these vacancies sooner
rather than later (indicating an imminent announcement); to wait
longer, he observed, would be counterproductive. The Foreign
Minister noted that he would be traveling with the Prime Minister to
Washington later this month and said that he would be meeting with
economic stakeholders June 21 to discuss what initiatives the GOP
might propose during the upcoming visit.


10. (C) Responding to the Ambassador's question about the prospect
of GOP approval of the U.S.-funded USD 20.7 million U.S. Geological
Survey and Naval Research Lab geophysical survey of Pakistan, the
Foreign Minister promised that he would look into the issue. The
survey is a multi-year, bilateral effort to collect scientific
information for the purpose of natural resource identification,
hydrology, and civil infrastructure planning. It has been on hold
since 2006 because of military and intelligence organizations
objections on national security grounds, despite U.S. offers to allow
full military participation.


11. (U) Under Secretary Jeffery cleared this cable.

PATTERSON