US embassy cable - 04NEWDELHI7251

C O N F I D E N T I A L SECTION 01 OF 05 NEW DELHI 007251 
 
SIPDIS 
 
E.O. 12958: DECL: 11/15/2014 
TAGS: PREL, PGOV, PHUM, ENRG, IN, PK, INDO-PAK 
SUBJECT: INDIA PLEASED ON INDO-PAK TIES, BUT "DOESN'T 
EXPECT MIRACLES" 
 
REF: A. NEW DELHI 6924 
     B. NEW DELHI 5796 
 
Classified By: Charge Robert O. Blake Jr, Reasons 1.4 (B,D). 
 
1.  (C) Summary: India remains upbeat on relations with 
Pakistan as the pair look toward Round Two of the Composite 
Dialogue (CD) beginning in late November and extending 
through early 2005, but is seeking to dampen expectations for 
breakthroughs on tough bilateral issues such as Kashmir.  The 
decline in terrorist infiltration over the last few months 
enabled PM Singh to announce a troop reduction in J&K on 
November 11, paving the way for his November 17-18 trip to 
the Valley.  There is curiosity about a possible 
Iran-Pakistan-India gas pipeline, although the economic case 
is questionable.  There is also increasing speculation that 
the December 7-8 meeting to discuss the mechanics of a 
Srinagar-Muzaffarabad bus route will yield a deal both sides 
can live with.  However, senior GOI officials, led by Foreign 
Minister Natwar Singh, have cautioned about "expecting 
miracles."  New Delhi will look for forward movement on the 
70 plus outstanding CBMs it has proposed.  Earlier hopes for 
a formula to demilitarize the Siachen Glacier have subsided. 
Although GOI reacted mildly to President Musharraf's October 
25 "Iftar musings" on the future of Kashmir, the Indian 
establishment will not entertain any substantial territorial 
changes in J&K.  End Summary. 
 
Atmospherics Continue to Improve 
-------------------------------- 
 
2.  (C) Since the end of CD Round One in September, Indian 
public and private views on ties with Pakistan have continued 
on a positive trajectory.  Pakistan-bashing in the press is 
much reduced, and there is a widespread sense that 
incremental progress on some bilateral issues will be 
possible in the coming months.  Institute for Peace and 
Conflict Studies (IPCS) director Maj. Gen. (Ret.) Dipankar 
Banerjee called the dialogue "sustainable at the national 
level, absent a crisis" such as the 2001 attack on the Indian 
Parliament.  Commodore Uday Bhaskar of the MOD-linked 
Institute for Defense Studies and Analysis (IDSA) predicted 
that the upcoming series of talks (see expanded schedule para 
18) would produce some results because many of the issues on 
the table are "pragmatic, not political," and do not involve 
territory.  Trade, people-to-people exchanges, and law 
enforcement cooperation make "win-win scenarios possible." 
 
3.  (C) The most important improvements in the Indo-Pak 
relationship have been the decline in terrorist infiltration 
across the LOC and the ceasefire, which will complete its 
first anniversary on November 25.  Although most Indian 
commentators credit the LOC fence for this decline, South 
Block officials stress that the fencing would not have been 
possible without the ceasefire.  A senior security official 
recently told "The Hindu" that "The evidence on the ground 
shows that Pakistan is cooperating.  Whether such cooperation 
is long-term or episodic remains to be seen." 
 
Troop Reductions in J&K 
----------------------- 
 
4.  (C) PM Manmohan Singh's November 11 announcement to 
redeploy an as-yet unspecified number of troops -- press 
speculation puts the number at some 10-15,000 -- from J&K or 
within the state has increased expectations that the GOI may 
have more in store on Kashmir than it has revealed to date. 
Kashmiri separatists from the moderate faction of the 
All-Parties Hurriyat Conference (APHC) have welcomed the 
move, even signaling their willingness to meet with the PM 
during his November 17-18 visit to the state (as of November 
16 no meeting has been confirmed, most likely for security 
reasons).  Couching the redeployment as a response to the 
decline in infiltration and the success of the LOC fence, GOI 
officials have also cited the onset of winter as an argument 
that now is the right time to get the dialogue process with 
the Hurriyat back on track.  This move also addresses one of 
the APHC's three pre-conditions for dialogue with the GOI 
(the other two being travel to Pakistan and a reduction in 
human rights abuses in the state). 
 
Pushing The Pipeline 
-------------------- 
 
5.  (SBU) While some GOI officials have been making the case 
in the press that an Iran-Pakistan-India pipeline is in both 
countries' national interests, the MEA continues to link the 
pipeline to freeing cross-border trade and/or facilitating 
transit trade from India to Afghanistan, Iran, and beyond. 
Lahore-born Indian Petroleum Minister Mani Shankar Aiyar -- 
who served as India's Consul General in Karachi (1978-82) -- 
has been personally spearheading the project, aided by his 
former classmate and friend from Cambridge, Pakistani Foreign 
Minister Kasuri.  Aiyar recently got the nod from the MEA to 
hold talks with his GOP counterpart at the end of November, 
and he is planning to bring together industry professionals 
and bureaucrats from all three countries to a December 15-16 
conference in New Delhi.  In the meantime, he has been 
reaching out to others in Delhi to try to increase the 
momentum for this mega-project. 
 
6.  (C) General Banerjee singled out the gas pipeline as a 
key element in improving Indo-Pakistan relations, because of 
the magnitude and long-term nature of the endeavor.  The 
generally hawkish Director of the Observer Research 
Foundation's (ORF) Pakistan Centre, Sushant Sareen, claimed 
to Poloff that the political constraints on a gas pipeline 
through Pakistan no longer exist, and that it is now "just a 
matter of economics."  The proposed pipeline would service no 
more than 10 percent of India's current energy needs.  A 
decade ago, when Pakistan opposed a pipeline proposal, it 
could have met as much as 60 percent of India's requirement 
-- which would have involved intolerable risks to India's 
energy independence.  Sareen listed two additional hurdles to 
the project getting off the ground: 1) shipped LNG benefits 
from the sunk costs of port facilities already built or being 
built over the as-yet unpaid costs of the pipeline; and 2) 
Iran and Pakistan will try to maintain high originating 
prices and transit fees, which could add to the high 
financial costs, thus forcing the project into 
unprofitability.  These industry concerns will have to be 
addressed if the project is to succeed.  Mission also has 
flagged possible ILSA concerns. 
 
7.  (C) Sareen dismissed concerns about pipeline security, 
commenting that insurance, monitoring, redundancy, and gas 
reserves could easily ensure that any short-term disruption 
in supply through Pakistan would not interrupt India's energy 
picture.  ORF's Wilson John, a skeptic on rapprochement with 
Pakistan, told Poloff recently that if the pipeline is built, 
it would be "as important as the Indus Waters Treaty, or 
more." 
 
Pressure to Drop Trade Barriers 
------------------------------- 
 
8.  (C) A growing number of India-Pakistan private sector 
conferences dot the calendar, highlighting the growing 
interest by industry in both countries in opening commercial 
links and demonstrating readiness to capitalize on potential 
lower trade barriers.  IDSA's Bhaskar predicted that the 
pipeline deal would likely lead to a large increase in other 
goods across the border in both directions, whether or not 
they are formally linked.  He held out hope that bilateral 
trade would be liberalized and normalized, and ticked off 
several sectors where he thought Pakistani firms could do 
well in the Indian market: cotton and textiles, buffalo meat 
("Pakistan has one of the most advanced animal husbandry 
industries in Asia"), and selling excess electricity to the 
states of Punjab and Haryana. 
 
Bus Service Looking More Certain 
-------------------------------- 
 
9.  (C) Progress may also be possible on the proposed 
Srinagar-Muzaffarabad bus service when the two sides meet on 
December 7-8 in New Delhi, according to a number of 
well-informed local Pakistan watchers.  Star TV Diplomatic 
Editor Jyoti Malhotra, who accompanied PM Singh to New York, 
recently told Poloff to expect movement on the bus service 
"sooner rather than later....Manmohan wants it to happen." 
ORF's Sareen also thought that progress on the bus service 
was likely, especially because it would further fuel the 
"people-to-people successes" that have yielded political 
benefits to both Islamabad and New Delhi. 
 
10.  (C) During a recent visit to New Delhi, UK High 
Commissioner in Islamabad Mark Lyall Grant told us that 
Islamabad has all but accepted the use of a "special 
residency document" that would be used in conjunction with a 
passport for travel across the LOC.  The document, but not 
the passport, would be stamped upon transit.  This construct 
is similar to several that have been favorably aired in the 
Indian press in recent weeks, which has raised expectations 
that a deal may ripen for the December 7-8 meeting on the bus 
service to be held in New Delhi. 
 
Speculation Outrunning Reality on Territorial Issues 
--------------------------------------------- ------- 
 
11.  (C) Senior GOI officials have gone to some length to 
dampen expectations of a significant breakthrough on Kashmir 
during PM Singh's upcoming visit to the Valley and the CD 
Round Two.  Despite the positive atmospherics, in recent days 
Foreign Minister Natwar Singh has repeated the mantra that 
"There will be no miracle, (but) we are trying our best" in 
order to control the anticipation of swift and substantial 
progress on the Composite Dialogue's toughest issues.  The 
Indian establishment's position that any changes on Kashmir's 
status must be centered on formalizing the LOC as the border 
remains firm, as summed up by IPCS's PR Chari: "Are the two 
leaderships preparing their people to accept the 
inevitability of the LOC being converted into an 
international border to resolve the Kashmir dispute?"  Talk 
of independence, joint sovereignty or condominium, division 
among communal lines, or a role for the UN remain 
non-starters for New Delhi, as "Hindustan Times" Diplomatic 
Correspondent Saurabh Shukla (who often serves as an MEA 
mouthpiece) wrote on November 15. 
 
Siachen Likely to Remain Frozen 
------------------------------- 
 
12.  (C) Recent Indian press commentary suggests that an 
early deal to demilitarize the Siachen Glacier is less 
likely.  ORF's Sareen opined that progress would only be 
possible if, as the GOI has publicly insisted, the Actual 
Ground Position Line (AGPL) of the current deployment were 
demarcated in advance, suggesting that New Delhi was prepared 
to wait until Islamabad agrees to concessions on this issue. 
 
Kashmir "Food for Thought" Viewed as Leftovers 
--------------------------------------------- - 
 
13.  (C) Relatively few Indian analysts have publicly 
dismissed President Musharraf's October 25 "Iftar musings" on 
moving forward on Kashmir (Ref A), although private comments 
have been more skeptical.  Pakistani High Commissioner Aziz 
Ahmed Khan recently reiterated to an audience at New Delhi's 
Jamia Millia Islamia University that Musharraf's goal was to 
"generate discussion and explore possible options."  Home 
Minister Shivraj Patil left Musharraf a face-saving out, 
telling journalists that New Delhi would consider the idea as 
a proposal if Islamabad "forwarded it to us formally."  PM 
Singh declined to speculate on how such a proposal would be 
received, referring to it as an "off-the-cuff remark" while 
maintaining that "J&K is an integral part of India and not a 
matter for discussion with outside agencies." 
 
14.  (SBU) In a November 16 report, well-connected "Times of 
India" Foreign Affairs correspondent Indrani Bagchi noted 
that if the substance of Musharraf's "musings" should arise 
in formal bilateral discussions, "they will not fly."  Bagchi 
held that the MEA's "remarkable quiet" on the matter suggests 
that South Block is expecting Islamabad to float fresh 
positions on J&K soon. 
 
15.  (SBU) Indian analysts have predictably praised Musharraf 
for backing off from Islamabad's perennial call for a 
plebiscite among Kashmiris to determine the fate of the 
region.  "Hindu" strategic commentator Siddharth Varadarajan 
used Musharraf's trial balloon to examine past and present 
territorial disputes (Andorra, Northern Ireland, the Aland 
Islands, South Tyrol, Gibraltar, the Basque region, New 
Caledonia, and the Sami region in Scandinavia), concluding 
that although "none of these examples offers a complete set 
of principles for the resolution of the Kashmir dispute, many 
individual elements are attractive."  Even as Kashmir 
specialist AG Noorani belittled this proposal, he strongly 
supported Musharraf's efforts to replace a plebiscite with 
new and creative proposals for resolving the Kashmir issue. 
 
16.  (C) Describing Musharraf's trial balloon "a mish-mash of 
the Kashmir Study Group, the JKLF's proposal, the Owen-Dixon 
plan, and a handful of other ideas all rolled together," 
Sareen reasoned that such a plan might be possible in a few 
decades, if both sides can get away from the old baggage, but 
not now.  He stressed that the GOI had not criticized the 
ideas publicly, to avoid putting Musharraf in an awkward 
position.  The real issue for India is cross-border 
terrorism, he stated.  The UK's Lyall Grant observed to us 
that from Islamabad's perspective, PM Singh had not dismissed 
the concept of making an adjusted LOC into a permanent 
border.  Lyall Grant also conveyed his impression that Singh 
"wants to fix Indo-Pak relations," which will remain as a GOI 
policy priority. 
 
17.  (SBU) Some New Delhi-based Pakistan watchers have been 
more hesitant to give Musharraf the benefit of the doubt. 
Institute for Conflict Management's anti-terrorist hawk Ajay 
Sahni brushed the proposal aside, calling it "both arbitrary 
and nonsensical."  This degree of dismissal, however, appears 
to be the minority viewpoint at the moment. 
 
The Schedule Keeps Filling Up 
----------------------------- 
 
18.  (U) Official and unofficial Indo-Pakistan meetings 
through the end of the year, including Round Two of the 
Composite Dialogue (CD), are as follows: 
 
November 23-24 (New Delhi): Pakistani PM Aziz to visit in his 
capacity as outgoing SAARC Chairman.  This will be the first 
meeting between the PMs of India and Pakistan since the 1999 
Lahore Summit.  Aziz will also likely meet Kashmiri 
separatist leaders, President Kalam, and UPA President Sonia 
Gandhi. 
 
November 29-30 (New Delhi): Meetings between narcotics 
control authorities (CD). 
 
Late November (dates and venue TBD): Petroleum ministers to 
discuss Iran-Pakistan-India gas pipeline. 
 
December 2-3 (Islamabad): Meeting between railways 
authorities on the Munnabao-Khokhrapar rail link (CD). 
 
December 3-4 (New Delhi): Meeting between the Indian Coast 
Guard and the Pakistani Maritime Security Agency.  Agenda 
includes discussing an MOU for establishing a communications 
link (CD). 
 
December 5-11: (Patiala, India): Indo-Pakistan Punjab Games. 
 
December 7-8 (New Delhi): Discussion of "all issues" relating 
to beginning a bus service between Srinagar and Muzaffarabad, 
including presumably what documentation will be required for 
Kashmiris crossing the LOC (Ref B)(CD). 
 
December 9-10 (New Delhi): Meeting of the Committee of 
Experts regarding trade issues (CD). 
 
December 14-15 (Karachi): Joint survey of the boundary 
pillars in the horizontal section of the Sir Creek area (CD). 
 
December 14-15 (Islamabad): Expert-level meeting on nuclear 
confidence-building measures, including discussion on a draft 
agreement for prior notification of missile tests (CD). 
 
December 15-16 (Islamabad): Expert-level meeting on 
conventional CBMs (CD). 
 
December 15-16 (New Delhi): Conference on "Iranian Gas Export 
to Pakistan and India," to include officials from the 
petroleum ministries of all three countries. 
 
January 9-11 (Dhaka): SAARC Summit. 
 
Proposed but not scheduled: Convening a Joint Working Group 
to combat music and video piracy. 
 
Comment 
------- 
 
19.  (C) The upbeat mood in India is based on continuing low 
infiltration levels, increased people-to-people exchanges, 
good atmospherics at recent high-level meetings, and 
restrained Pakistani public statements.  From the New Delhi 
perspective, ties with Islamabad are beginning to acquire the 
semblance of normality, with sparring at a minimum. 
Productive engagement appears to be possible in a number of 
areas, although difficult decisions remain.  Both New Delhi 
and Islamabad need to continue to work for incremental 
progress and increased mutual trust, while managing 
expectations to prevent a blowout if the sides do not achieve 
as much as the optimists seek.  We have seen nothing to 
suggest that any element of the Indian establishment is 
prepared to consider the sort of territorial compromise -- or 
dual control -- that is suggested in President Musharraf's 
recent remarks. 
BLAKE