US embassy cable - 04COLOMBO1857

C O N F I D E N T I A L SECTION 01 OF 03 COLOMBO 001857 
 
SIPDIS 
 
STATE FOR SA/INS 
 
E.O. 12958: DECL: 11/17/2014 
TAGS: PREL, PGOV, PTER, IN, CE, LTTE - Peace Process, External Relations 
SUBJECT: SRI LANKAN PRESIDENT'S VISIT TO INDIA YIELDS SOFT 
LOANS, STRONGER LANGUAGE ON PEACE PROCESS 
 
 
Classified By: AMB. JEFFREY J. LUNSTEAD.  REASON:  1.4 (B,D). 
 
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SUMMARY 
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1.  (C) President Chandrika Kumaratunga's November 3-7 
working visit to India yielded USD 250 million in 
concessional loans; the announcement of a pending bilateral 
Defense Cooperation Agreement and Indian assistance to 
refurbish a strategic airfield in Jaffna; and an even 
stronger public statement of official Indian support of 
Government of Sri Lanka (GSL) efforts to find a negotiated 
settlement to the lengthy conflict with the Liberation Tigers 
of Tamil Eelam (LTTE).  The two governments also resolved to 
form a joint monitoring mechanism to address continuing 
problems with fishing rights.  Both the GSL and Indian 
Embassy representatives downplayed the significance of the 
defense agreement, indicating that the pact, once signed, 
only codifies ongoing assistance and exchanges in one 
comprehensive document.  Although Indian Embassy officials 
told us that Indian assistance to rehabilitate Palaly 
airfield, if accepted by the GSL, would oblige the GSL to 
"consult" with India on all usage by third countries, Sri 
Lankan Foreign Minister Kadirgamar categorically told the 
Ambassador that the GSL would not accept such restrictions. 
Despite President Kumaratunga's apparent optimism regarding 
the peace process during her visit, Indian Embassy officials 
see little prospect for positive change in the near future. 
End summary. 
 
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PEACE, PROSPERITY ON BILATERAL AGENDA 
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2.  (U) President Chandrika Kumaratunga's November 3-7 trip 
to India included a two-day working visit during which she 
met with Prime Minister Manmohan Singh; President A.P.J. 
Abdul Kalam; External Affairs Minister Natwar Singh; Defense 
Minister Pranab Mukherjee; BJP Leader Vajpayee; and Sonia 
Gandhi.  (Note:  During the rest of her time in India, 
Kumaratunga also addressed a conference sponsored by The 
Hindustan Times and visited Buddhist pilgrimage sites.  End 
note.)  The visit marked the President's first trip to India 
since her coalition government's victory in Parliamentary 
elections in April. 
 
3.  (SBU)  Among the most tangible outcomes of Kumaratunga's 
visit, according to officials at the Sri Lankan Ministry of 
Foreign Affairs and the Indian Embassy, were agreements for 
the Indian Government to provide a USD 100 million credit 
line for rural infrastructure projects (including the 
rehabilitation of the Trincomalee-Anuradhapura highway to be 
renamed, at Kumaratunga's suggestion, the Rajiv Gandhi 
Memorial Highway) and a USD 150 million credit line to be 
used to purchase petroleum products.  (Note:  We believe that 
at least some of this will be used to address the GSL's 
existing arrears with the Indian Oil Corporation.  End note.) 
 Amandeep Singh Gill, First Secretary at the Indian Embassy, 
emphasized that the rural infrastructure aid agreement was 
more detailed than similar agreements in the past to prevent 
"slippage" (which had apparently been a common phenomenon 
with the previous government) and to ensure that funds are 
distributed equitably among different geographical regions, 
especially the east.  The two governments also agreed to 
examine ways to strengthen bilateral economic relations 
(bilateral trade hit USD 1.5 billion last year) and to expand 
the India-Sri Lanka Free Trade Agreement into a comprehensive 
economic partnership.  For the Government of Sri Lanka (GSL), 
this means working to include services, as well as goods, 
under the FTA, Aruni Wijewardene, Director of South Asia and 
SAARC for the Ministry of Foreign Affairs, explained. 
 
4.  (C)  Besides the soft loans, the GSL was pleased with the 
strong support of the peace process the Indian Government 
signaled in the Joint Press Statement issued in New Delhi 
November 7, Wijewardene told poloff.  Besides the Indian 
Government's call for a settlement "within the framework of a 
united Sri Lanka"; Indian commitment to Sri Lanka's "unity, 
sovereignty and territorial integrity" and emphasis on "the 
early resumption of negotiations," the GSL found the Indian 
stipulation that "any interim arrangement or administration 
should be an integral part of an enduring final settlement" 
especially helpful, Wijewardene noted.  (Note:  The 
Liberation Tigers of Tamil Eelam continue to resist publicly 
tying an interim administration to a final settlement--a 
major sticking point for President Kumaratunga's chief 
coalition partner, the Janatha Vimukthi Peramuna.  End note.) 
 In a separate conversation, Indian First Secretary Amandeep 
Singh Gill highlighted the insertion of an additional clause 
calling for a settlement that "ensures the safety, well-being 
and prosperity of the people" as a significant new shift in 
nuance.  The Liberation Tigers of Tamil Eelam (LTTE) found 
that clause particularly objectionable, he said, noting that 
the pro-LTTE Tamil press had been full of indignant 
editorials questioning India's right to comment on the safety 
and well-being of Sri Lankan Tamils. 
 
5.  (C)  In her conversations with Indian officials, 
President Kumaratunga came across as extremely optimistic and 
confident regarding the peace process, Gill said.  She 
reportedly told her Indian counterparts that she had already 
done "75 percent of all (she) could" to move the process 
along; the next steps are up to the LTTE.  Gill expressed to 
poloff some puzzlement at her attitude, noting that his 
government sees no immediate prospect for a breakthrough on 
the horizon.  The Indian Government's talking points included 
"a very polite point" urging her not to allow 
partisanship--i.e., her rivalry with Opposition Leader and 
former Prime Minister Ranil Wickremesinghe--to cloud 
prospects for peace. 
 
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TROUBLED WATERS 
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6.  (SBU)  Disputes over fishing rights also figured on the 
bilateral agenda.  Wijewardene said that while Indian 
fishermen have long poached in Sri Lanka's territorial 
waters, the problem has become "more acute" during the 
ceasefire.  The GSL regularly impounds boats and presses 
charges against Indian fishermen found in its territorial 
waters, but from time to time there have been allegations of 
the Sri Lankan Navy firing on the fishing vessels. (The Navy 
routinely officially denies these charges.  Low-level Navy 
officers have confirmed to DATT, however, the occasional need 
to fire across the bow of an Indian trawler to ensure 
compliance with instructions.)  Although Sri Lankan fishermen 
complain of their Indian counterparts plundering their catch, 
the problem is "really a security issue," she said, 
exacerbated by the LTTE's activities, including arms 
smuggling, in the same area.  To address the matter, the 
Indian government suggested setting up a Joint Working Group, 
Wijewardene reported, adding that the two governments had 
exchanged draft texts of a Memorandum of Understanding. 
Indian Emboff Gill told poloff that Indian fishermen are 
"clearly at fault" in causing this bilateral irritant, noting 
that another 12 of his compatriots had been picked up by the 
Sri Lankan Navy that very day. 
 
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DEFENSE COOPERATION; 
PALALY AIRFIELD 
--------------------- 
 
7.  (C)  The two governments also agreed to sign a Defense 
Cooperation Agreement and an MOU on Indian assistance to 
rebuild Palaly Airfield in Jaffna on unspecified "mutually 
convenient dates."  In a November 9 conversation with the 
DCM, Indian DCM Mohan Kumar dismissed as nonsense feverish 
Sri Lankan press speculation that the as-yet unsigned 
agreement constituted a mutual defense treaty.  Instead, he 
said, the proposed agreement will only codify assistance and 
exchanges that are already ongoing.  Wijewardene echoed this 
description, adding that the agreement will consolidate all 
the different elements of the bilateral military-to-military 
agreement in one comprehensive document.  In a November 16 
conversation with the Ambassador, Foreign Minister Lakshman 
Kadirgamar said that the media reaction to the proposed 
defense agreement "is a hue and cry about nothing," adding 
that the draft is "relatively anodyne."  According to 
Kadirgamar, the agreement does include one new feature (which 
he says was inserted at his suggestion):  expanded 
cooperation on maritime surveillance, leading to 
counter-measures where necessary.   (Note:  As expected, the 
Tigers objected to the agreement, with LTTE theoretician 
Anton Balasingham warning direly that it "would tilt the 
military equilibrium."  End note.) 
 
8.  (C)  In separate conversations, both Indian DCM Kumar and 
Indian First Secretary Gill told us that the proposed 
agreement on rehabilitating Palaly airfield would include a 
clause requiring that the Indian Government be "consulted" on 
all third-party usage of the airfield.  "We are not trying to 
shackle the Sri Lankan Government," Gill explained, "but we 
would naturally expect to be consulted" on such matters. 
Foreign Minister Kadirgamar, however, categorically told the 
Ambassador that there were "no restrictions at all" on 
third-party usage in the proposed MOU, adding, "I personally 
settled that."  The Ambassador welcomed the news, saying that 
he believed the U.S. government would have found such 
restrictions unfortunate. 
 
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COMMENT 
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9.  (C) The Indians' strong language on the peace process and 
soft money for development and fuel are obviously welcome 
demonstrations of support at a time, with the peace process 
stalled and the budget debate for her strapped government 
looming ahead, when President Kumaratunga needs it most.  The 
Indians (or at least their Embassy representatives here) and 
the Foreign Minister clearly have widely differing ideas 
about the contents of the still-unsigned MOU on Palaly 
Airport.  While the details are obviously still to be worked 
out (things are rarely as black-and-white as the Foreign 
Minister depicts them), we are on record as expressing our 
concerns at any restrictions on third-party usage. 
 
LUNSTEAD