1. (C) Summary. The always inevitable clash between
Pakistan People's Party (PPP) leader President Asif Zardari
and Pakistan Muslim League-N (PML-N) leader Nawaz Sharif may
be about to break open over Zardari's use of the current
court proceedings to have Nawaz and his brother Shahbaz
Sharif declared ineligible for public office. That decision,
in a Supreme Court case, could occur as early as next week.
The backlash from the Sharifs and the PML-N is likely to
include increased political attacks on Zardari in parliament,
support for violent street protests in Punjab where growing
unemployment will swell the ranks of demonstrators, and
support for another nationwide lawyers' demonstrations in
March just as Senate elections are scheduled to take place.
Before taking action, Zardari plans to shore up his minority
government by bringing the Muttahida Quami Movement (MQM) and
its 25 National Assembly votes into the coalition.

2. (C) Saudi Prince and Intelligence Chief Muqrin last week
attempted to dissuade Zardari from attacking the Sharifs, and
not all of Zardari's advisors believe it is a wise course of
action. Zardari has repeatedly asked Ambassador if the USG
would support this initiative, and so far she has declined to
get involved in the quagmire of domestic Pakistani politics.
The salient points of this drama for Washington are: (1)
Regardless of the turmoil, the PPP government appears to be
strengthening, not weakening, its federal coalition in the
short-term; (2) There could be significant public upheaval
just as the proposed Donors'/Friends meet for a tentative
ministerial in March in Tokyo; (3) Public unrest in Punjab
will sap an already over-burdened law enforcement system and
could possibly require Army assistance to keep public order;
and (4) Washington's reaction to Nawaz's disqualification
will frame whether the U.S. is again seen locally as backing
a pro-American but currently besieged leader (Zardari) over
the most popular politician in Pakistan (Nawaz). Ultimately
the PPP and Nawaz are going to fight it out with or without
our support. End Summary.

PPP Is Solidifying its Coalition


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



3. (C) After a series of meetings by Ambassador, A/DCM, PO
Lahore, and Poloffs with President Zardari, Punjab Chief
Minister, Shahbaz Sharif, PML-N's National Assembly Leader of
the Opposition Chaudhry Nisar, PML-N spokesperson Ahsan
Iqbal, Minister of Interior Rehman Malik, PPP's Leader of the
House Senator Raza Rabbani, Speaker of the National Assembly
Fehmida Mirza, Nawaz's personal attorney Akram Sheikh, PML-Q
President Chaudhry Shujaat Hussain, Jamaat-e-Islami (JI)
Punjab president Liaquat Baloch, PML-Q stalwart Moonis Elahi,
MQM in-country party leader Farooq Sattar, PPP presidential
spokesperson Farhatullah Babar, and other political leaders
over the past two weeks, it is clear that the political right
and left are consolidating their respective positions and are
about to clash.

4. (C) MQM leader Farooq Sattar confirmed MQM is finishing
negotiations over ministries in preparation to join the
Pakistan People's Party (PPP) government in the center. This
will give PM Gilani another 25 votes in the National Assembly
to shore up what is now technically a minority government and
provide some protection against a possible no-confidence vote
from the opposition.

..in Preparation to Attack Nawaz Sharif


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



5. (C) Once strengthened in the National Assembly by the
additional MQM votes, we expect PPP President Zardari to have
the Supreme Court disqualify Pakistan Muslim League-N (PML-N)
opposition leaders Nawaz Sharif and Shahbaz Sharif from
holding public office. The Lahore High Court in June
separately declared both ineligible. The case challenging
Nawaz's eligibility is based on his prior convictions for
corruption and hijacking; the case against Shahbaz, based on
a technical violation of election law, was referred to the
Supreme Court via an election tribunal (although he has been
allowed to continue as Chief Minister pending a final
decision). The Sharifs refused to appeal because they do not
recognize the legitimacy of the Supreme Court without former

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Chief Justice Iftikhar Chaudhry. However, the PPP government
appealed on behalf of the Sharifs, and the case which had
been pending for months could wrap up as early as January 23
(septel).

6. (C) The Supreme Court ruling may be based on a
technicality that the PPP government has no grounds to
represent the Sharifs. Zardari has repeatedly told
Ambassador that he wanted to hold this pending decision over
Nawaz's head and was inclined to move against Nawaz. PML-N
party officials have stepped up anti-Zardari rhetoric in
recent weeks and continues to fund an increasingly nasty
press campaign against the PPP (mostly through the Jang media
group). The proverbial last straw for both Zardari and Nawaz
was a case which challenged an Education Board decision to
raise the exam scores of the current Supreme Court Justice's
daughter so she could enter medical school. Nawaz has used
the case to criticize Zardari and keep the issue of the
deposed judiciary alive; Zardari considered this assault as
an unnecessary provocation.

Civil Unrest Likely


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



7. (C) The consequences could unfold in several ways.
Nawaz, who now holds no public office and has been relatively
muted in criticizing Zardari, would have little reason not to
give Opposition Leader Chaudhry Nisar orders to heighten
parliamentary criticism and rhetoric against Zardari. With
an 83 percent approval rating in the latest IRI poll, Nawaz
is far and away the most popular politician in the country
and his disqualification will be seen by many as
anti-democratic. Shahbaz Sharif currently is Chief Minister
of Punjab. Unlike the PPP government in Islamabad, Shahbaz's
job approval ratings are high, and his departure would be
seen locally as an assault against good governance and
personally motivated by Zardari.

8. (C) In the Punjab, Shahbaz rules in a coalition with the
PPP, which has been threatening for months to withdraw its
support. PPP Governor Salman Taseer and Shahbaz have been
exchanging pot shots for months in preparation for a
showdown. The Pakistan Muslim League (PML-Q) and the
Chaudhrys from Gujrat hold enough votes to team up with
either the PPP or Shahbaz to form a new government in Punjab.
Zardari wants the PML-Q at the national level as well, but
he recently rejected the idea of bringing Chaudhry Pevaiz
Elahi back as Chief Minister of Punjab in exchange for PML-Q
joining the coalition in Islamabad. Without this benefit,
PML-Q has little incentive to support the PPP in Punjab,
although hatred of Nawaz will probably ensure that PML-Q
continues to quietly support Zardari in Islamabad. The
Chaudhrys and the Sharifs have not been able to settle the
issue of who would lead a theoretical PML-N/PML-Q government
in Punjab.

Weighing Consequences


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



9. (C) In expectation of being disqualified, Nawaz already
was planning to team up with the street power of JI to
support another lawyers' protest, now scheduled for March 9,
across the country. That protest could turn ugly; we expect
the Punjab street also to turn out in large numbers to
protest the disqualification of Nawaz, particularly if
coupled with the removal of Shahbaz as Chief Minister.
Pressed by high interest rates and energy shortages, we also
expect the textile manufacturers in Faisalabad (Punjab) to
lay off up to 30,000 workers within the next month. Smaller
textile layoffs are also expected in Lahore and Multan. Nawaz
will not miss the opportunity to exploit discontent from
newly unemployed workers in an increasingly tough economy.

10. (C) The lawyers' march is likely to take place at the
same time as Senate elections on/about March 9, according to
Deputy Election Commissioner Dilshad. This is an indirect
election in which half of the Senate's 100 members will be
chosen by provincial party assembly members (see septel for a
full explanation of the Senate vote). We expect the PPP to
increase its membership in the Senate, but the process could
be disrupted by an imbroglio in the Punjab.

11. (C) If Shahbaz is removed as Chief Minister, it would
instigate complex political maneuvering over a new provincial

ISLAMABAD 00000141 003 OF 003


election in which all three parties would vie for control.
Shahbaz could withdraw his party from the government in order
to prevent a potential PPP victory in the provincial
assembly. While there are scenarios that would leave PPP
Governor Taseer in control of a technocratic government, PO
Lahore does not believe that Taseer has the administrative
ability or the political skill to hold a PML-N dominated
province together.

The Army?


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



12. (C) The big question, as always in Pakistan, is how the
Army will react. There are growing rumors that low-level
Inter-Service Intelligence (ISI) officers have restarted a
quiet campaign to replace the PPP government with some sort
of technocratic government on the Bangladesh model where the
civilians would rule as a facade for the military. As yet,
these are rumors that rely on the sad but historically valid
Pakistani assumption that the Army is always poised to oust
inept civilian governments. Chief of Army Staff (COAS)
General Kayani has made it clear to Ambassador that he is
frustrated with Zardari's weak government but has no
intention of replacing him and he has repeatedly reiterated
his intention to support the civilian government. In fact,
we believe that the relationship between Kayani and Zardari,
while hardly warm, has improved. In the end, Kayani's
dislike for Nawaz outweighs his distrust for Zardari. Post
does not believe there is any evidence to indicate the Army
wants to inherit the economic and security challenges facing
the Zardari government.

13. (C) Post contacts in JI who lunched with Saudi Prince
and Intelligence Chief Muqrin during his visit to Islamabad
reported that Muqrin urged Zardari not to go after Nawaz.
Fearing a backlash in the parliament, PM Gilani and many PPP
rank and file also oppose efforts to remove PML-N from power
in the Punjab. Interior Minister Malik first tried to
dissuade Zardari from going after Nawaz, but he now is
increasingly convinced that the PPP has no other choice.

14. (C) Zardari has dismissed concerns about widespread
unrest in reaction to an attack on the Sharifs, but he has
asked Ambassador several times whether the USG would support
his efforts to disqualify the Sharifs and remove the PML-N
from power in the Punjab. To date, Ambassador has declined
to get involved in this internal political quagmire.
Pakistan's pro-PPP political left will have to struggle with
what, on principle, would be Zardari's anti-democratic move
against Nawaz.

15. (C) Comment: The salient points of this drama for
Washington are: (1) Regardless of the turmoil, the PPP
government appears to be strengthening, not weakening, its
federal coalition in the short-term; (2) There could be
significant public upheaval just as the proposed
Donors'/Friends meet for a tentative ministerial in March in
Tokyo; (3) Public unrest in Punjab will sap an already
over-burdened law enforcement system and could possibly
require Army assistance to keep public order; and, (4)
Washington's reaction to Nawaz's disqualification will frame
whether the U.S. is again seen locally as backing a
pro-American but currently besieged leader (Zardari) over the
most popular politician in Pakistan (Nawaz). We could
possibly dissuade Zardari from going down this road, but
ultimately the PPP and Nawaz are going to fight it out with
or without our support. End Comment.

PATTERSON