AMBASSADOR ALERTS "GROUP OF SIX" ENVOYS THAT

UNCLAS SECTION 01 OF 04 NEW DELHI 002319 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PREL PARM TSPL KNNP ETTC ENRG TRGY IN SUBJECT: AMBASSADOR ALERTS "GROUP OF SIX" ENVOYS THAT RELATIONSHIPS WITH INDIA AT STAKE IN CIVIL NUCLEAR INITIATIVE REF: A. NEW DELHI 2306 (NOTAL) ¶B. NEW DELHI 2307 ¶1. (SBU) SUMMARY. Ambassador Mulford told the heads of mission of the "Group of Six" members of the Nuclear Suppliers Group (NSG) at a lunch on August 28 that the amendments to India's exception that their delegations proposed at the August 21-22 Plenary could cause India to walk away, leading to the collapse of the Civil Nuclear Cooperation Initiative. He cautioned that should India begin to assign blame for the failure of the Initiative, the Group of Six "will be at the top of the list." He urged the envoys to seek to broaden the perspective in their capitals and to remind their governments of possible damage to their bilateral relations that a narrow, nonproliferation-based approach could cause. The envoys from Switzerland, New Zealand, and Ireland -- and to a lesser extent, of Norway -- asserted that their representatives in Vienna accurately reflected the views of their political leaders on nonproliferation, but nevertheless seemed surprised to learn that the Initiative's fate hung in the balance and uncomfortable considering the implication of failure at the September 4-5 Plenary for their bilateral relationships. The Austrian envoy remained silent. The envoy from the Netherlands said the issue would be taken up by the Dutch parliament when it reconvenes on September 1. The envoys indicated they would relay the Ambassador's message to their respective capitals. END SUMMARY. Lunch for "Group of Six" - - - ¶2. (SBU) Ambassador Mulford hosted a lunch on August 28 for the heads of mission of the "Group of Six" like-minded members of the Nuclear Suppliers Group (NSG). The six states collectively championed the majority of amendments to India's exception text at the Group's August 21-22 Extraordinary Plenary in Vienna. Mulford told the envoys of Austria, Ireland, New Zealand, the Netherlands, Norway, and Switzerland that the sixty-plus amendments to India's exception "shocked" the U.S. and provoked a sense of betrayal in India. He said that the Civil Nuclear Initiative now "hangs in the balance," and that India could walk away. Having met the previous day with the Prime Minister, National Security Adviser and PM's Special Envoy for the Nuclear Initiative (ref A),the Ambassador indicated that India might prove unable to accept the amendments required. This was especially the case with regard to testing and review. ¶3. (SBU) Mulford reminded the envoys that their governments had conveyed three general points to India and to the U.S. prior to the Plenary: they appreciated the importance of the Initiative, they would be constructive in the process, and they had some concerns. When given the opportunity to engage the Indian delegation following its presentation in Vienna on August 21, no one offerred questions or dialogue. In fact, many of the "concerns" represented by their nonproliferation experts at the Plenary turned out to be killer amendments. He urged the envoys to seek a broader approach from their capitals and reminded them of the possible damage to their bilateral relations if the Initiative were to fail. Mulford shared a nonpaper he had prepared (see para 10) outlining the nature and extent of each country's currently expanding economic ties with India. (In each case, the direction of these relations was impressive.) He expressed puzzlement that each of these governments would be willing to risk damaging these relations. Responses From Group of Six Envoys - - - ¶4. (SBU) Except for Austrian Charge d'Affaires (CDA) Dr. Gerlinde Paschinger, who neither took notes nor spoke, the envoys actively engaged the Ambassador. Swiss Ambassador Dominique Dreyer said it was not his country's intention to "scuttle the process," but that the result of the August 21-22 Plenary should not have been surprising because it was the first opportunity for Suppliers Group members to express their views formally on the text. On the issue of the compressed timeline, he said, "In a way, the Indian government only has itself to blame for having waited so long NEW DELHI 00002319 002 OF 004 to act." On the issue of a testing condition, he said India cannot expect to test a nuclear explosive without consequences. Ambassador Mulford responded that India clearly understands this, as demonstrated in the 123 Agrement and Hyde Act. Also, Mulford pointed out that provisions already exist in current Suppliers Group guidelines to deal decisively with issues such as to a nuclear test. ¶5. (SBU) New Zealand High Commissioner Rupert Holborow argued that there was no disconnect between Wellington's senior politicians and its nonproliferation bureaucrats in Vienna. He said Prime Minister Clark was "faithful to what she told Secretary Rice (on July 26),including her intention to consult with like-minded countries." He suggested that, "We're all being very careful precisely because we do understand the importance of these issues, so we are all following our scripts very precisely, which may have affected the atmosphere of the first Plenary." He allowed that perhaps more senior representation at the next Plenary may be called for. Indicating that he understood what was at stake with India, he concluded with the caution that "perhaps in fact we are not prepared to give up our nonproliferation goals." ¶6. (SBU) Irish CDA Mr. Pat Bourne said he agreed with his colleague from New Zealand that Ireland's position on the Nuclear Non-Proliferation Treaty was based on long-held and deeply felt conviction. Its position on the Civil Nuclear Initiative had likewise been known for some time, as had its association with a like-minded group. He said his government was open to the idea of the Initiative constituting "a net gain for the NPT regime," but confessed to a "degree of disappointment" among the group when the August 7 draft exception was made available to them. ¶7. (SBU) Norwegian CDA Mr. Lasse B. Johannessen also said his government had remained true to its word that it would "support the exception while working for consensus." In light of the Plenary, he said it was reasonable to ask whether a consensus was in fact possible, but he nevertheless expressed unease regarding the implication of a lack of consensus in Vienna for his government's relationship with India. ¶8. (SBU) Dutch CDA Mr. Jeroen Roodenburg emphasized that political leaders in The Netherlands have expressed the need to discuss the Initiative with their parliament, which convenes on September 1. On the issue of testing, he asked whether India would be willing to renew or reiterate its unilateral testing moratorium in the form of a fresh political statement. Mulford replied that India has consistently maintained this commitment, which the U.S. accepted as valid. He did not know whether the Indian Government would consider issuing a new statement. Decide Where You Stand - - - ¶9. (SBU) Ambassador Mulford asserted that "we cannot have another Plenary like the last one." India does not want to "stand cap in hand and get turned down by the world." "If the standard for consensus is unrealistic," Mulford said, "then statements that you support the Initiative are meaningless and the conclusion must be drawn that your intent is to destroy the deal." Mulford concluded, "This is a political decision about your relationship with India, and you must decide where you stand." Nonpaper on Group of Six Economic Links with India - - - ¶10. (U) The following is a nonpaper compiled by Post on the Group of Six's economic ties to India: Following are brief summaries of the key bilateral economic links between India and Austria, Ireland, New Zealand, Norway, Netherlands, and Switzerland. The summaries are based on publicly-available information, and while some of the data may not be comparable or updated, certain trends in India's economic relationship with these countries emerge clearly and strongly. India's rapidly growing economy NEW DELHI 00002319 003 OF 004 positions it as a vital economic and political partner for each of the six nations. India is an important trading partner, a valuable source of and destination for investment, and a source of employable talent. Overview: India's imports from the Group of Six are growing very rapidly, mainly in higher value-added goods, such as machinery and electronic goods to fuel its investments in capacity expansion and infrastructure. As one of the world's fastest growing economies in the midst of a global economic slowdown, India's share in European countries' exports has probably risen in 2008, and likely represents a high-growth export market for all six countries. Further, India's increasing flow of outward investment (USD 16 billion in 2007-08) is sending billions of dollars to these countries. In addition, India is increasingly a source of skilled workers for Europe. In mid-2007, India signed a memorandum of understanding with the International Organization for Migration (IOM) to facilitate legal migration of Indian workers to the EU. Switzerland: India is a significant market for Switzerland, totaling roughly 6 percent of annual Swiss exports. Goods and equipment totaling nearly USD 10 billion were purchased by India in 2007-08, up 50 percent in the last two years. Switzerland enjoys a roughly 10:1 trade surplus with India. India mainly imports from Switzerland gold, machinery, medicinal products, professional instruments, and electronic goods. Switzerland is also the 10th largest investor in India and, according to Ambassador Dreyer, the country is a country of "high priority in the framework of Switzerland's foreign economic strategy." A business delegation visit led by Economics Minister Doris Leuthard in May 2008 moved the countries toward launching negotiations towards free trade agreement. Swiss FDI into India tripled in 2006-07. Meanwhile, top Indian IT and pharmaceutical companies are present in Switzerland. Netherlands: India's trade with the Netherlands grew 20 percent last year to reach USD 4.5 billion. India buys Dutch electronic goods, metal ores and scrap, machinery transport equipment, and chemicals - imports which are likely to be sustained by India's domestic economic growth. Two-way investment flows between the two countries are substantial. The Netherlands is the fourth largest foreign investor in India. In 2006, the Netherlands was the single-largest recipient of Indian foreign investment and remained the second-largest recipient of Indian FDI in 2007, propelled partly by the Tata-Corus deal. IT contributes 5 percent to the Netherlands' GDP and Indian IT giants like Wipro, TCS and Infosys are already operating from Amsterdam, helping to expand the Netherlands' IT output. Norway: Indian imports from Norway have more than doubled each year for the last two years, to reach USD 1.6 billion in ¶2007. The Indian press reported that bilateral trade grew 88 percent in the first quarter of 2008. Overall, Norway enjoys a 6:1 trade surplus with India, mainly selling India transport equipment, machinery, electronic goods and metals. Norway is one of four nations, along with Switzerland, Iceland and Liechtenstein, in the European Free Trade Association (EFTA),exploring a free trade agreement with India. India's Oil and Natural Gas Corp (ONGC) stated this week that Norway's Statoil Hydro is seeking a larger stake and operating rights in a deepwater block owned by ONGC in the Krishna Godavari basin off India's east cost, where Statoil already owns 10 percent, reflecting India's potential market for Norway's deep-sea technological expertise. Proposed hydroelectric projects in Himachal Pradesh are a promising market for Norwegian companies. In 2007, Indian professionals made up one-fourth of foreign skilled workers allowed into Norway in under a special visa, the single largest source of such professionals. Austria: Bilateral trade has been growing at a fast pace - roughly 30 percent per year in recent years, albeit from a low base. India imported USD 586 million from Austria last fiscal year, with total trade between the two countries at USD 769 million, giving Austria a trade surplus with India. India buys machinery, transport equipment, chemicals and non-metal minerals from Austria, products whose demand from NEW DELHI 00002319 004 OF 004 India is sure to stay high, as they feed India's infrastructure and capacity expansion drives. India's relationship with Austria is expected to expand with a focus on climate change related issues, technology transfer and power generation. Ireland: India's merchandise imports from Ireland have grown from USD 162 million in 2004-05 to USD 241 million in 2007-08, a net growth of roughly 50 percent. India mainly buys petroleum products, crude minerals, wool yarn, plastics and resins. Several Indian IT and BPO companies have set up shop in Ireland, creating 3000 jobs and demonstrating synergy between the two countries' IT expertise. Ireland's Economic Minister Nigel Dodds visited India in February 2008 to promote further Indian investment in Ireland, highlighting the skilled labor force that Ireland could provide. After the US, Indian companies are the second biggest investors in Northern Ireland. Northern Island is actively pursuing further Indian investment, setting up its first investment promotion office in India earlier this year. New Zealand: India has emerged as New Zealand's second fastest growing export market, as the trade base diversifies to reflect India's maturing markets. Indian imports from New Zealand are growing fast from a small base in the last few years, hitting 23 percent and 26 percent growth year on year in the last two years. India mainly buys metal scrap, wood, raw wool, coal and machinery from New Zealand, feeding growing manufacturing and textile production. There is fast growth in niche or specialized manufactured products, including electric transformers, sorting machinery, transmission and telecommunications equipment. Commerce Minister Nath visited New Zealand in May 2008, as part of bilateral discussions towards the possible launch of free trade agreement negotiations. MULFORD