NAWAZ STILL NEGOTIATING

1. (C) Summary. Nawaz Sharif told Ambassador February 25
that on election day the process had been free and fair. He
continued to negotiate with the Pakistan People's Party (PPP)
over joining in a coalition government but had not made any
final decisions. It was likely he would run in a by-election
and may be named Speaker of the National Assembly in lieu of
taking a formal position in the government. His Pakistan
Muslim League-N (PML-N) party would form a government in the
Punjab and Nawaz's brother, Shahbaz would become Chief
Minister. Nawaz did not support inclusion of the Muttahida
Quami Movement (MQM) in a national government but would
continue to support the PPP if it decided to invite MQM into
the coalition. Efforts to woo independent candidates and
potential defectors from Musharraf's party will continue for
the next week to ten days; until independents declare their
party affiliations, it is unlikely the PPP and PML-N will
make a final decision on a coalition.

2. (C) Nawaz continued to press his personal feud with
Musharraf and questioned why the U.S. would continue to
support a politically defeated leader who "cannot deliver on
Washington's agenda to fight terrorism." Nawaz clearly wants
Washington recognition and respect that he has returned to be
a major player in Pakistani politics. He insisted he was and
remains "the best friend" of the U.S. End Summary

3. (C) Ambassador and Polcouns met February 25 with
Pakistan Muslim League-N (PML-N) leader Nawaz Sharif in
Islamabad. Also attending the meeting were former Petroleum
Minister Chaudhry Nisar Ali Khan, former Finance Minister
Ishaq Dar, and former Pakistani Ambassador to the U.S. Tariq
Fatemi.

4. (C) Nawaz admitted that on February 18, the election
process was in fact "free and fair." But he described
several attempts by the GOP to dissuade him from campaigning
because of security threats and claimed that, if his
nomination papers had been approved, the PML-N would have won
even more seats. Nevertheless, "we have broken the siege"
and won 87 seats (counting women and minorities). The PML-N
is now wooing independent candidates and hopes to further
expand their National Assembly seats by perhaps 14 more.
Khan noted that there were a growing number of defections
from Musharraf's party to the PML-N; "even PML-N spokesman
Tariq Azeem is ready to join us."

5. (C) The party has not yet decided if it will join the
Pakistan People's Party (PPP) in a coalition government, but
Nawaz confirmed that PPP Co-Chair Zardari has offered to form
an equal partnership despite PPP's greater numbers. PML-N is
opposed to cooperating with the Muttahida Quami Movement
(MQM) because it was part of Musharraf's government and is
"fascist and non-democratic." However, if Zardari agrees to
include MQM, the PML-N will continue to support the
coalition.

6. (C) Nawaz confirmed that the PML-N would form a
government in the Punjab with the support of the PPP.
Nawaz's brother Shahbaz would run in a provincial by-election
and become the Chief Minister of Punjab. Ambassador asked
about Nawaz's own plans; Khan said that the party had chosen
Nawaz as their parliamentary leader, so he would have to run
in a by-election to take his seat. But Nawaz said the PML-N
would probably not accept national positions as ministers
because that would require them to take an oath before
Musharraf.

7. (C) Ambassador noted that some analysts were predicting
that PML-N would sit back and wait for the next government to
falter over a growing list of economic challenges. Nawaz
agreed that probably would be the best strategic option, but
he had "a moral and national obligation" to pave the way for
democracy, so he would work with the PPP in the next
government. (Note: Before Nawaz arrived, Khan told the
Ambassador the PML-N believed that the next government would
not last long. He also said the PML-N would demand that
Nawaz become the Speaker of the National Assembly rather than
take a formal position in the government.)


ISLAMABAD 00000807 002 OF 003


The U.S. is our "best friend"


--------------------------



8. (C) Nawaz spent most of the meeting wondering why
Washington continues to support President Musharraf. Why,
asked Nawaz, is President Bush extending support to
Musharraf, an unpopular president who "cannot deliver on
Washington's agenda to fight terrorism?" It would be better
for the winning parties to devise a joint strategy that can
succeed, and the PML-N is ready to work with the U.S. and the
UK to that end.

9. (C) Noting that Musharraf's party lost "in every nook
and cranny" of Pakistan, Nawaz said the U.S. should accept
the mandate of the Pakistani people. The PLM-N does not
accept Musharraf as a legitimate president; the former
Supreme Court ruled against his eligibility as a candidate,
and even if the political parties try to ignore this, civil
society will continue to press the issue. It is key to
restoring Pakistan's democracy. The sooner politicians and
"our foreign friends" recognize this, the better. Nawaz said
he did not know if Secretary Rice had been misquoted, but he
read that she had said Musharraf "is and will remain
President." We are ready to work together, said Nawaz, but
that spirit must be reciprocated. "Washington is our best
friend, but you should respect us."

10. (C) Ambassador agreed that the PPP and the PML-N had won
a big victory; we respected the will of the Pakistani people
and want to work with whomever they choose to be Prime
Minister. We had been surprised, as had many others, by the
margin of the PPP and PML-N victory; Nawaz asked was the
U.S. "pleasantly surprised?" The Ambassador responded "we
were surprised." Regardless of local press allegations that
the U.S. was manipulating the process, she said, we remain
neutral and stand ready to work with whatever coalition
government is formed. But the Secretary was being
accurate--Musharraf is the President of Pakistan, and we see
no indications that this will change. We will work with him
in this positon. The USG has enormous interests here in
terms of anti-terrorism, military, trade and economic
development. When Senator Biden met with Nawaz, he mentioned
the possibility of additional USG assistance for Pakistan,
and we hope to work with the new government if that aid is
forthcoming.

11. (C) Khan reiterated what he outlined in previous
meetings (Ref C): PML-N, he said, has "bent over backwards"
to support the USG including during the war against the
Soviet invasion of Afghanistan, during the first Gulf War,
after the Kargil war with India, and when Nawaz agreed to
extradite Aimal Kansi, who killed two CIA employees in 1993.
"We are not the religious right." "Why would the U.S. cling
to supporting Musharraf when he no longer could influence
events in the U.S. favor?"

12. (C) Ambassador said the U.S. was concerned about
Pakistan's stability because we have so many shared interests
here. Nawaz said he understood personal friendships, but it
was the friendship between the peoples of Pakistan and the
U.S. that was of greatest importance. It was best to support
democracy and the primacy of the parliament.

Relations with the Army


--------------------------



13. (C) On relations with the Army, Nawaz noted that COAS
General Kayani had briefly been his military advisor. Kayani
was a good man, and Nawaz felt the new government and Kayani
would have a good working relationship. Musharraf continued
to live in the COAS residence of Camp House, and this,
suggested Nawaz, cannot be helping Musharraf's relationship
with Kayani. Until the 17th amendment (giving the President
primacy over the Prime Minister) can be turned back, Nawaz
said, Musharraf would still have considerable powers. "But
Musharraf will be handicapped by the huge PPP/PML-N majority
in the parliament; he will be fighting Kayani on one hand and
the parliament on the other."

Restoring the Judiciary


--------------------------



14. (C) Pressing their theme, Dar said the U.S. image was

ISLAMABAD 00000807 003 OF 003


being hurt by the perception that we continued to support an
unpopular President and opposed restoration of the deposed
judiciary. The PML-N believed that it did not require a
two-thirds majority to restore the judiciary; it merely
required that that Musharraf's Provisional Constitutional
Order expire or be voted down by a simple majority in the
Assembly. Ambassador said the USG continues to support an
independent judiciary; it was our understanding that there
was considerable debate in the legal community over how to
deal with the judiciary issue. Nawaz said that a commission
outside of parliament was being established. It would
include Dar, Zardari, PPP Senator Rabbanni and attorney
(previously working for Nawaz) Fakhruddin Ebrahim who would
examine the way forward.

Other PML-N Voices


--------------------------



15. (C) PML-N General Secretary Ahsan Iqbal told Polcouns
February 22 that the party would support the PPP in the next
government but was unlikely to accept ministerial
appointments. He confirmed rumors that PML-N would not
become ministers at the national level in exchange for the
PPP not becoming ministers in the PML-N dominated Punjab
Provincial Assembly.

16. (C) Iqbal also said that the newly elected PML-N
members of the Assembly would annotate their constitutional
oaths in some way to make it clear they did not recognize
Musharraf's amendments to the constitution. They would
question the legality of Musharraf's election and demand it
be ratified by the newly elected assemblies. Iqbal also
stated the PML-N belief that Musharraf's Provisional
Constitutional Order (PCO) of November 2007 would have to be
ratified by the Assembly. Both former President Zia in 1985
and Musharraf in 2003 sought parliamentary approval of their
constitutional amendments; Musharraf was legally obliged to
again seek ratification. If the Assembly does not ratify it,
Iqbal claimed, the PCO will expire and this will put the
former judiciary back on the bench.

17. (C) Comment: Clearly, Nawaz continues to hold a
personal grudge against Musharraf and very much wants
Washington recognition and respect that he has returned as a
major political player in Pakistan. The horse-trading over a
possible coalition with the PPP continues while the PML-N and
PPP separately woo a growng number of possible defectors from
Musharraf's party. The Election Commission is expected to
issue a final tally of results by the end of the week; when
it does, independent candidates will have three days to
declare their party affiliations. Until this step is
completed, we expect coalition negotiations to continue.
PATTERSON