1. (C) Opposition parties and lawyers are dancing in the
streets. Asif Zardari's sudden decision late March 15 to
capitulate to Nawaz Sharif exposed his political weakness and
isolation after the debacle of imposing governor's rule in
Punjab. Chief of Army Staff General Kayani's late night
meetings with Zardari and Gilani may have helped them decide
on the merits of avoiding more street violence after a
troubled day in Lahore. Interestingly, Zardari allowed PM
Gilani to take the public credit for plans to restore Punjab
Chief Minister Shahbaz Sharif and former Chief Justice
Iftikhar Chaudhry.

2. (C) This alleged win for civil society was really a
victory for Nawaz Sharif, and whether he presses for more may
determine Zardari's future. Nawaz does not have the votes to
bring down the government or impeach Zardari, but that does
not mean he would not try. A weakened Zardari may not be
able to prevent enactment of constitutional reform to shift
powers from the President to the Prime Minister.

3. (C) It is too soon to count Zardari out--we expect he
still has cards to play--but we need to consider the
consequences of our most effective interlocutor in Pakistan
losing the political strength to pursue a shared agenda.
Increasingly, we may have to deal with an empowered PM Gilani
who supports a close U.S.-Pakistan relationship but is
concerned about U.S. strikes in the tribal areas and prefers
reconciliation to combat with militants. To retain coalition
support, Zardari may feel compelled to sign the Swat deal on
Shari'a law. Interior Minister and Zardari confidant Rehman
Malik has been our strongest partner in pressing for Mumbai
prosecutions, but he also has lost standing as a result of
this crisis.

4. (C) Longer-term, if Gilani becomes the face of Pakistan,
we will lose Zardari's ability to project confidence to both
Donors and Friends. He also may be unable to deliver on his
promise to give former President Musharraf indemnity; a
reinstated Chief Justice Chaudhry could challenge his old
nemesis Musharraf on a number of grounds. Chaudhry could
renew his efforts to release the "disappeared," and we will
need to engage to protect our equities on a small number of
these terrorist detainees. On a positive note, U.S. efforts
to mediate the Zardari-Sharif dispute generally have been
well-received by the public and the opposition parties alike.
High-level Washington intervention with the Sharifs has
helped build relations with the brothers and should
strengthen our hand in future interactions. End Summary.

5. (C) It will take some time for all the consequences of
the lawyers' "long march" to play out. In the short term,
Prime Minister Gilani's announcement that the judges
(including former Chief Justice Iftikhar Chaudhry) deposed by
then President Musharraf would be restored and the government
would file a review petition challenging the Supreme Court's
decision to disqualify Nawaz and Shahbaz Sharif from office
is good news. It will end governor's rule, restore Shahbaz
Sharif as Chief Minister of Punjab, and resolve a two-year
struggle by lawyers to overturn Musharraf's
extra-constitutional action to sack uncooperative judges.
The government's sudden capitulation and the Pakistan Muslim
League-N (PML-N) decision to stop the march ended an
unnecessary political crisis that was creating violent street
protests.

Sudden Capitulation


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



6. (C) Several factors contributed to the government's
sudden change of heart. Despite repeated polling that showed
Nawaz Sharif as the most popular leader in Pakistan (by a
favorability factor of 83% to Zardari's 20% in the latest IRI
poll), Zardari underestimated Nawaz's ability to bring people
into the streets. In spite of extensive efforts, neither the
GOP nor the Punjab government under Pakistan People's Party
(PPP) Governor Taseer was able to limit or control the
crowds. Zardari believes that Taseer misled him in
estimating the reaction to imposing governor's rule. As
resignations of mid-level police officers in Punjab and the
ability of the Sharifs to "evade" police blockades
demonstrated, many of the police sided with Nawaz and were

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reluctant to use force to stop the protests. It was never
clear exactly why Zardari so feared the proposed sit-in in
the capital, which the GOP should have been able to manage
peacefully.

7. (C) Zardari lost support within the PPP and among his
coalition partners after he over-reached and imposed
governor's rule in Punjab. PM Gilani, Awami National Party
leader Asfundyar Wali Khan and Jamiat Ulema-e-Islam leader
Fazlur Rehman had made it clear publicly that they disagreed
with the disqualification ruling and the move to impose
governor's rule. Two PPP ministers (Raza Rabbani and Sherry
Rehman) resigned over Zardari's decisions to support his
lawyer (Law Minister Farouq Naek) as Chairman of the Senate
and to shut down a TV station critical of Zardari. Gilani,
Naek and other key PPP members believed that it was time to
compromise on the judges' issue, despite Zardari's continued
intransigence on the restoration of Iftikhar Chaudhry. Late
March 15, even coalition partner Muttahida Quami Movement
(which controls a critical block of 25 votes in the National
Assembly) was warning Zardari he had to compromise. Last,
but perhaps not least, Chief of Army Staff General Kayani
reportedly met yet again with the President and the Prime
Minister late on March 15.

Restoring the PPP's Reputation


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



8. (C) In his short speech, Gilani emphasized the long
relationship between the PPP and the lawyers and said that
Benazir Bhutto had supported restoration of the judiciary and
of Iftikhar Chaudhry. (Note: Benazir most assuredly did not
support restoration of Chaudhry.) This was an attempt to
reverse a twist in which the populist PPP had ceded the moral
high ground on the independence of the judiciary to the
PML-N. In fact, Nawaz has been expanding PML-N's base into
PPP territory for months on traditional liberal/democracy
issues. Meanwhile, Zardari has been creating rifts within
the PPP by appointing cronies at the expense of Benazir
loyalists and ignoring the need to rebuild the party in the
wake of her death. Also in his speech, Gilani made it a
point to say that the decision to restore the judiciary
fulfilled a promise (made by Zardari to Nawaz in 2008); in
this, Gilani was responding to Zardari's serious credibility
problem and trying to restore the PPP's reputation as a
reliable partner with the PML-N. Gilani and the PPP will
emerge from this crisis stronger than before.

Seeds of Conflict


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



9. (C) This is a clear victory for Nawaz, who did agree to
cancel the long march and is expected to meet with PM Gilani
later today on the way forward. We expect a show of
reconciliation in the form of joint committees on
implementing the PPP/PML-N Charter of Democracy. If Nawaz is
smart, he will consolidate his winnings and wait while the
PPP-led government continues to struggle with economic and
security challenges. However, flush with success, Nawaz may
use the PML-N government in Punjab to create political
gridlock (as it did in the 1990s) for the PPP in the center.
Nawaz does not have the votes to bring down the government or
to impeach Zardari (both require a two-thirds parliamentary
majority), but he may at least make life difficult for
Zardari, perhaps by keeping alive corruption allegations.
Nawaz surely will press for enactment of an 18th amendment to
transfer power from the President to the Prime Minister, and
we expect Gilani will support this popular initiative. Nawaz
will also support any effort by Chaudhry to go after his old
nemesis Pervez Musharraf; Zardari was never enthusiastic
about securing Musharraf's indemnity, and now Zardari may be
too weak to win approval. (Nevertheless, even Nawaz will
understand the need for caution in taking on Musharraf for
fear of provoking the Army.) Nawaz may win yet another
victory if Zardari ousts PPP Punjab Governor Taseer for
giving him bad advice on the PPP's prospects to take over the
Punjab Assembly.


Zardari's Future


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



10. (C) It is curious that Zardari chose to have Gilani

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make the concession speech. While it allowed Zardari to
avoid personally conceding defeat to Nawaz, it also permitted
Gilani to take all the credit for what is a very popular
decision. We do not expect any immediate changes in
Zardari's status, but he definitely has lost political power
and influence in this self-inflicted drama, and many will be
asking how long he can last. Whether or how he will survive
in the longer term will depend on Nawaz, Justice Chaudhry and
PM Gilani. If Zardari expects to face impeachment or be
forced to cede his presidential powers to the Prime Minister,
he may resign after concluding that remaining in office
simply isn't worth it. Despite his loss, we believe Zardari
is unlikely to give up even a reduced hold on power
voluntarily, at the least because he will want to preserve
the family franchise for Bilawal. At a minimum, PPP Co-Chair
Zardari will need to concentrate on mending fences within his
own party and expanding his circle of advisors to include
more old-line PPP politicians.

A Not-So-Independent Judiciary


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



11. (C) Civil society, particularly Pakistan's
long-suffering lawyers, will tout this as a step toward an
independent judiciary. The reality is not quite so pristine.
Despite his decision to stand up to Musharraf in 2007,
Iftikhar Chaudhry was one of many judges who took an oath to
Musharraf in 1999. Chaudhry now is deeply politicized, and
the temptation to use his newly restored status to strike out
at Zardari and/or Musharraf or again become judicially active
will be strong and difficult for the government to control.
Beginning in 2007, the media used its new-found freedoms to
publicize and support the lawyers' movement. In this latest
crisis, the media lost some objectivity in its overwhelming
bias against Zardari and the government; Zardari's efforts to
shut down two TV channels simply backfired and probably
deepened the media's long-time animus against him.

Kayani: Adroit Moves


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



12. (C) Kayani also emerged as a winner, due to his adroit
behind-the-scenes maneuvering. He effectively worked to
encourage U.S. and UK intervention and managed his Corps
Commanders. Perhaps more importantly, he made the Army's
concerns clear without being alarmist. The Army remained on
stand-by to protect law and order, but Kayani was not seen as
publicly intervening in any negative way. Assurances that
the Army was not ready to step in reinforced Kayani's
reputation as a friend of democracy and preserved his options
if any intervention becomes necessary in the future.

Effect on USG Interests


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



13. (C) It is too soon to predict the extent of fallout
from this weekend's capitulation to Nawaz. However, Zardari
has been our most effective interlocutor in Pakistan, and his
reduced power will affect negatively our ability to get
things done. Above all, if Zardari continues to be focused
on his own political future, he will not concentrate on the
economic or security situation. The most obvious fallback to
Zardari, especially if parliament shifts constitutional
powers, is PM Gilani. In the fight against extremism, Gilani
agrees with Zardari on goals but not necessarily on tactics.
Gilani has serious concerns about U.S. strikes in the tribal
areas and believes that dialogue will go further than
military action in defeating the militants. Under pressure
to restore coalition support, Zardari may now be more willing
to sign on to the Swat Shari'a accord negotiated with local
taliban.

14. (C) On the Mumbai investigation and the arrests and
detention of the Lashkar-e-Taiba masterminds, our strongest
partner has been Interior Minister Rehman Malik, but he was
largely responsible for the GOP's over-zealous reaction to
the demonstrators and is cited by many as giving Zardari bad
advice during this political crisis. As a close Zardari
advisor, Malik's future is not at all clear at the moment.

15. (C) Zardari may not be a sophisticated economist, but
he understands and projects confidence to the international
community far better than Gilani; this confidence will be

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important as we move towards a Donors/Friends conference in
April. Zardari may not now be in a position to push against
the military on approving trans-shipments of wheat from India
to Afghanistan. Chaudhry may also decide to again champion
the "disappeared," and we will have to engage to protect our
equities over a small number of detained terrorists.

16. (C) Comment: Sorting through the fallout of this
political crisis will take some time. With the glory will
come pressure on Gilani to find a way forward on forming a
government in Punjab and enacting the ambitious agenda of the
Charter of Democracy. Don't count Zardari out yet--we expect
he has more (and not necessarily good) cards to play.
PATTERSON