SCENESETTER FOR PM GILANI'S VISIT TO WASHINGTON

S E C R E T ISLAMABAD 002524


NOFORN

E.O. 12958: DECL: 07/25/2018
TAGS: PREL PTER PGOV PK

SUBJECT: SCENESETTER FOR PM GILANI'S VISIT TO WASHINGTON

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


1. (S/NF) Summary. Prime Minister Syed Yousuf Raza Gilani
will be anxious to prove that he is committed to fighting
"Pakistan's war" on terrorism and will outline the GOP's
partial response to the July demands presented by CJCS
Mullen/DDCIA Kappes. Gilani will publicly support the
coaliton's "negotiations first" counter-terrorism strategy
and defend Pakistani sovereignty in the face of reported
plans for unilateral U.S. action. Privately, he will agree
that force is sometimes necessary and assert he is prepared
to use it. However, coalition strains and governance
gridlock are limiting Gilani's ability to coordinate either
security or economic policy. He likely will repeat requests
for "actionable intelligence" and suggest the need for
increased U.S./ISAF operations on the Afghan side of the
border. We should maintain pressure for specific
counter-terrorism (CT) action and condition future Foreign
Military Financing (FMF) assistance on Pakistani agreement to
training that will increase its counter-insurgency
capabilities.


2. (C/NF) Summary continued. Pakistan Muslim League-Nawaz
(PML-N) leader Nawaz Sharif has used his "go Musharraf go"
campaign to become Pakistan's most popular leader today. To
bolster his sagging Pakistan People's Party (PPP) popularity,
PM Gilani may ask for quiet support of a dignified exit
(resignation) for President Musharraf; in contrast, Musharraf
has asked that we reaffirm U.S. support for him as President.
Musharraf continues to debate dissolving the National
Assembly, a step we believe will lead to widespread unrest
and increase calls for his departure.


3. (C/NF) Summary continued. Gilani likely will ask for
faster delivery of Coalition Support Fund (CSF)
reimbursements, endorse the Biden/Lugar bill to double
economic aid to Pakistan, and support passage of
Reconstruction Opportunity Zone (ROZ) legislation. He will
welcome offers of food security and energy assistance to help
overcome rising food and fuel inflation and rolling power
blackouts. He may ask for support to convince Riyadh to
agree to Pakistan's request to defer $5.9 billion in oil
payments. Gilani fully supports efforts to repair strained
relations with Afghanistan and India. End Summary.

Filling a Leadership Vacuum
--------------


4. (C/NF) Prime Minister Yousuf Gilani is well-meaning,
pro-American and anxious to convince us that he is committed
to fighting "Pakistan's war" against terrorism. The
challenge is turning good intentions into sustainable action.
Gilani presides over a fragile coalition mired in governance
gridlock over the issue of President Musharraf's future. The
real centers of power -- PPP Co-Chair Asif Zardari and PML-N
leader Nawaz Sharif -- sit outside government fighting for
political supremacy. Gilani supports what has been improving
Ministry of Interior CT cooperation, but he has limited power
to force the Army and the intelligence services
(Inter-Services Intelligence (ISI)) to battle a growing
militant insurgency. His visit to the White House may well
empower him to do more. With the withdrawal of Nawaz
Sharif's economic ministers, the coalition lacks the
expertise to tackle spiraling debt, food and fuel inflation,
capital flight, and rolling blackouts.


5. (C/NF) Gilani will be seeking public assurances that the
U.S. supports Pakistan's new civilian government, but the
uneasy Zardari-Nawaz marriage of convenience may not last
much longer. When the coalition breaks apart, Zardari will
need to bolster his slim parliamentary majority with other
partners. President Musharraf believes his party can be one
of those partners, and we agree. But his "go Musharraf go"
campaign has made Nawaz Sharif the most popular leader in
Pakistan today. Zardari and Gilani fear they cannot
politically afford to continue working with Musharraf and may
raise this in Washington. In contrast, Musharraf has asked
that the USG make it clear to Gilani that the U.S. continues
to support him as President. Chief of Army Staff General
Kayani prefers to remain out of politics, if for no other
reason than a reluctance to take on twin security and
economic crises. We believe he will support Musharraf's
resignation with dignity, if the prospect of impeachment
becomes real.


6. (C/NF) Musharraf continues to debate the possibility of
dissolving the National Assembly and imposing a technocratic
government; we believe this scenario will provoke unrest and
increase calls for Musharraf's departure. We should support
Gilani now and through a coalition breakup. Nawaz currently
does not have the votes to bring down the coalition.

Fulfilling Promises
--------------


7. (S/NF) We have learned since 9/11 that Pakistan
responds, periodically, to U.S. pressure on
counter-terrorism; we should continue to press for action on
specific agenda items. The GOP has responded to the CJCS
Mullen/DDCIA Kappes visit in July by arresting several
Taliban shura members in Quetta, signed an agreement to
install cellphone towers in the tribal areas (FATA),is
initiating an Army operation in North Waziristan, and we
expect they will allow another B-300 surveillance aircraft to
operate. These steps will help disrupt cross-border attacks
and improve our intelligence capabilities.


8. (S/NF) However, the GOP has not targeted Siraj Haqqani
or his network; nor have they arrested Commander Nazir or
Gulbaddin Hekmatyar. These militants are responsible for
much of the 40 percent increase in cross-border attacks on
our troops in Afghanistan this year. The Army/ISI can do the
job, but they cling to "old think" -- the belief that it is
better to manipulate militants through infiltration, payoffs
and "divide and conquer" strategy than fight extremists on
the battlefield. They fear military action would provoke a
tribal war they cannot control, but the GOP strategy has
failed and the government is losing territory to extremists
every day. While acknowledging that elements of ISI may be
out of control, Musharraf and Kayani remain reluctant to
replace ISI Director Nadeem Taj.

Bolstering CT Strategy
--------------


9. (C/NF) Gilani will proudly explain the GOP's
three-pronged CT strategy: political engagement; economic
development; and force when needed. He likely will claim
recent (minimal) Frontier Corps action in the tribal areas
(Hangu and Bara) and (weak) coalition concensus as evidence
of GOP resolve to execute that strategy. We should
acknowledge Pakistani sacrifices in the war on terror.
Gilani believes the coalition must build popular support for
military action, and General Kayani agrees. But we should
stress that militants are exploiting the coalition's
"negotiations first" policy to plan and launch attacks
against Pakistani and U.S. targets.


10. (S/NF) Gilani will repeat GOP requests for "actionable
intelligence" and may suggest that the U.S. and ISAF beef up
border patrols and stop the drug trade in Afghanistan that
finances arms and militant operations. We should respond
that the GOP knows better than we do the location of Haqqani,
Nazir and Hekmatyar; most al Qaeda and Taliban sanctuaries
are in Pakistan, not Afghanistan. If Gilani suggests
improved regional (especially Gulf) intelligence sharing, we
should welcome that initiative. Zardari has just proposed to
us a September conference hosted by the UAE with Pakistan,
India, Afghanistan, the U.K., the U.S., and NATO observers to
discuss the situation in the tribal areas and along the
border. This idea has merit, too.


11. (C/NF) Gilani will thank the U.S. for its five-year
$750 million FATA development program and may ask for more.
Despite security challenges, USAID is implementing small
projects in five of the seven FATA agencies that will
eventually create 120,000 short-term jobs for young Pashtuns
who otherwise would be tempted to join the Taliban. USAID
is developing a program to preposition relief packages to
deliver (in the GOP's name) to villages after military
action; we should encourage the GOP to increase its own
civil-military programs to provide relief as part of its
counter-insurgency (COIN) strategy.


12. (C/NF) Largely because of pride, the Pakistani Army
remains reluctant to accept COIN training for itself or the
badly trained and under-equipped Frontier Corps. We should
tell Gilani that future FMF support will be conditioned on
the GOP's willingness to accept COIN and close air support
training. We should assure Gilani that we will continue
current efforts to train and equip para-military forces like
the Levies and push him to accept pending training for the
Frontier Corps. Pakistan now has six military officers
working in the tripartite Torkham Border Coordination Center
(BCC); we should press for Gilani's concurrence to identify
two BCC sites in Pakistan. Gilani may raise the Pakistani
request to use FMF for F-16 mid-life upgrades; we currently
are seeking Congressional support for this request.

Fixing the Economy
--------------


13. (C/NF) Economic growth for the current fiscal year is
expected to be 5.8 percent, well below the target of 7.2
percent. The fiscal deficit is projected to be 7 percent of
GDP versus a target of 4 percent; GOP borrowing from the
State Bank of Pakistan (SBP) has reached an all-time high of
USD 8 billion. Pakistan's trade deficit rose to USD 17
billion, up from USD 11 billion last year, as lackluster
export growth fell far short of increasing imports. Savings
and foreign investment both declined. Pakistan's rupee has
lost 16.8 percent of its value since January and is at record
lows. We support approval of a pending USD 500 million World
Bank loan for Pakistan, conditioned on a coherent plan for
reducing food and energy subisidies. Gilani may ask for
speedier delivery of Coalition Support Fund reimbursements
(approximately USD 1 billion per year) and endorse the
recently introduced Biden/Lugar bill to double economic aid
to Pakistan.


14. (SBU) Not a single megawatt of electricity has been
added to the national grid since 2000, despite population
growth and economic expansion. Industrial production is
threatened by blackouts and unemployment is rising. Petroleum
and electricity subsidies account for the bulk of the fiscal
deficit and have continued to rise with skyrocketing
international oil prices. The GOP is paying USD 554 million
per month for subsidies on petroleum and will attempt to
reduce these subsidies despite the intense popularity of such
measures. Energy accounts for 29.3 percent of Pakistan's
imports, and growth in exports cannot cover the increases in
international commodity prices. Saudi Arabia is considering
a Pakistani request to defer $5.9 billion in oil payments;
Gilani may request help in convincing Riyadh to agree. USAID
will launch a three year program to assist with energy policy
issues and energy efficiency and we are offering to fund a
USGS mapping survey to identify commercial mineral deposits
and potential energy sources. Gilani will attend in
Washington a World Bank investment roundtable focused on
developing Pakistan's Thar coal field reserves.


15. (U) Gilani will welcome the USG offer of food
assistance; he estimates that Pakistan needs help obtaining
3.5 million metric tons of wheat to stave off shortages this
year. Pakistanis have suffered monthly double digit food
price inflation since September 2007. Over 100 million
Pakistanis live on less than 2 dollars per day, including 25
million living on less than one dollar per day. The World
Food Program recently identified Pakistan as one of 40
countries at risk of food insecurity and recently raised its
estimate of at-risk individuals from 60 to 77 million, or 48
percent of Pakistan's population.

Repairing Regional Security
--------------


16. (C/NF) Zardari strongly supports improved ties with
India, irrespective of progress on Kashmir. Gilani called
Indian PM Singh this week and has agreed to meet with both
Singh and President Karzai in Sri Lanka following the
Washington trip. Gilani has approved the list of Pakistani
participants to the mini-jirga with Afghanistan. India and
Pakistan initiated the fifth round of their Composite
Dialogue in July and agreed to expand confidence building
measures in Kashmir. Gilani may ask for more pressure on
Congress for passage of Reconstruction Opportunity Zone
legislation which would benefit both Afghanistan and
Pakistan.


17. (C/NF) However, increased allegations of ISI involvement
in the July 7 bombing of the Indian Embassy in Kabul have
undermined regional relations. India and Pakistan are
investigating the incident; we are working with Kabul to
restart Pak-Afghan economic and military meetings cancelled
in the wake of the bombing. If asked, Gilani will state that
Pakistan will not impede approval of the India-IAEA
Safeguards Agreement. But Pakistan clearly would like
similar USG assistance to develop its own civilian nuclear
capability to meet growing energy demand. Negotiations
continue on the proposed Iran-Pakistan-India gas pipeline.


18. (C/NF) We were disappointed that the Islamabad High
Court increased personal freedoms for Pakistani nuclear
scientist AQ Khan; if asked, Gilani will say that the GOP
continues to closely monitor Khan's activities.

PATTERSON


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