US embassy cable - 05NEWDELHI1480

C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 001480 
 
SIPDIS 
 
E.O. 12958: DECL: 02/25/2015 
TAGS: PREL, ETTC, ECON, IN, PK, INDO-PAK 
SUBJECT: BAGLIHAR, OTHER J&K HYDEL PROJECTS COMPLICATE 
INDO-PAK CALCULUS 
 
REF: A. NEW DELHI 1282 
     B. ISLAMABAD 2264 
     C. NEW DELHI 1113 
 
Classified By: A/DCM Geoff Pyatt for Reasons 1.4 (B, D) 
 
1.  (C) Summary: The Indian government recently offered new 
evidence of its benign intentions for the Baglihar hydel 
project by noting that, if its dam were used to inundate 
Pakistan, one of its own existing downriver projects would be 
the first casualty.  Although the MEA continues to exude 
confidence the Baglihar project complies with India's treaty 
obligations, the GOI has been curiously unwilling to share 
with us any supporting evidence to prove their position. 
This is in stark contrast to the Pakistanis, who have begun a 
major public relations effort here.  Meanwhile, the Baglihar 
issue continues to move slowly on three fronts: its 
construction, direct discussions between Indian and Pakistani 
officials, and the dispute resolution process under the Indus 
Water Treaty (IWT) umbrella.  The World Bank's IWT 
obligations are not as simple or straightforward as some 
commentators had originally suggested.  The new item in this 
mix is a handful of other planned hydel projects in J&K, some 
of which may conflict with proposed Pakistani projects.  The 
GOI may have to brace itself for more treaty challenges, 
although both sides continue to respect the IWT and seem 
content to let the World Bank take the lead in resolving the 
issue.  End Summary. 
 
GOI: Salal Dam Guarantees Good Behavior on Baglihar 
--------------------------------------------- ------ 
 
2.  (C) In a little noticed February 16 remark, Foreign 
Secretary Shyam Saran provided further insight into why the 
 
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GOI believes it is right on Baglihar, commenting that if 
India "had any intention of either flooding Pakistan or 
denying water to Pakistan, the first installation that would 
disappear would be the Salal project," which is downriver on 
the Chenab from the Baglihar site.  Calling the 400 MW Salal 
project "very important to India and the state of J&K," he 
said it was unrealistic to think that New Delhi would "harm 
itself in order to have the capability to hurt Pakistan." 
Saran concluded that the IWT was signed precisely to prevent 
such suspicions. 
 
Opaque GOI, Active GOP 
---------------------- 
 
3.  (C) Our repeated attempts to obtain India's views on 
Pakistan's January 18 World Bank petition have met with 
stonewalling from the GOI.  The Indian Water Secretary 
cancelled a meeting with the DCM, and the Indian Indus Water 
Commissioner continues to deflect calls to the MEA.  In 
contrast, the Pakistani High Commission sent us an eight-page 
fact sheet outlining their view of how the issue has evolved 
since New Delhi first informed Islamabad of its intentions to 
build the project in 1992. 
 
Baglihar Construction Proceeding ... 
------------------------------------ 
 
4.  (C) According to the Indian press, work on Baglihar is 
accelerating, with the first of two 450 MW phases expected to 
be completed in early 2006 and the second in the 2007-8 
timeframe.  New Delhi continues to brush aside Islamabad's 
calls to halt construction of the project -- slated to be the 
largest power generator in J&K -- until after the IWT process 
is complete.  MEA Joint Secretary Arun K. Singh has 
repeatedly pointed out that it put the Tulbul Navigation 
Project/Wullar Barrage on hold in 1987, and subsequent GOP 
unwillingness negotiate essentially killed it.  Eight rounds 
of bilateral talks since then have produced no results. 
 
... As are the IWT Process and Direct Talks 
------------------------------------------- 
 
5.  (C) The Pakistani High Commission on February 23 pointed 
out to us that Islamabad offered to continue bilateral 
discussions while the IWT process continues -- and the issue 
was discussed during Natwar Singh's recent trip to Pakistan 
(Refs A and B) -- but the GOP would not put the dispute 
resolution process on hold because of its fear of being faced 
with a fait accompli, saying "the Indians continue to build, 
we will continue with the World Bank." 
 
World Bank Clarifies Its Role 
----------------------------- 
 
6.  (C) According to the text of the IWT, the Bank is not a 
"guarantor" of the Treaty, but it does have ongoing 
responsibilities.  On issues that the two governments cannot 
resolve bilaterally, the Bank is to appoint a "neutral 
expert" (vice mediator or arbitrator) to try to adjudicate 
the "differences."  The Bank is to consult both parties in 
selecting the neutral expert and it would also manage the 
trust fund to cover the expert's expenses. 
 
7.  (C) If differences go beyond the expert's mandate of 
determining treaty compliance, the Bank would then help to 
establish an arbitration board to address what would be 
termed "the dispute."  According to the IWT, the World Bank 
President and other eminent individuals (such as the UN 
Secretary-General and the Chief Justices of the US and UK) 
 
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would be asked to select three members of a seven-member 
independent arbitration court, with New Delhi and Islamabad 
each appointing two representatives of their own. 
Separately, a World Bank official in New Delhi told 
D/PolCouns recently that this would be the first test of the 
IWT and that Pakistan "seems to have taken all the necessary 
steps" to initiate the dispute resolution process.  The Bank 
official commented that despite the confidence we have seen 
among our GOI interlocutors, "India may not want to be so 
bold." 
 
Kishanganga/Neelum Dam on the Table ... 
--------------------------------------- 
 
8.  (C) Meeting on February 10-14 in New Delhi, Indian and 
Pakistani Indus Water Commissioners discussed GOP technical 
concerns regarding the height and water diversion of another 
proposed dam on the Kishanganga (also called Neelum) River; 
although this represented an extension of the scheduled 
two-day meeting, the only outcome was an agreement to 
continue the dialogue.  FM Natwar Singh also discussed the 
issue during his February 15-17 Islamabad trip (Refs A and 
B).  Compared to Baglihar, however, the GOI would reportedly 
have difficulty presenting the GOP with a fait accompli, as 
the Kishanganga work site is snowed in between November and 
May, which allows more than two more months of negotiations 
before construction could resume.  The GOI would presumably 
want to complete Kishanganga before Pakistan can begin work 
on its own 969 MW Neelum-Jhellum Dam Project, because if the 
Pakistani dam is built first, IWT provisions appear to 
protect the downstream Pakistani project from upstream Indian 
diversions or ponding. 
 
... And Several Projects are On the Drawing Board 
--------------------------------------------- ---- 
 
9.  (C) Our World Bank contact added that even if India and 
Pakistan could resolve the Baglihar and Kishanganga projects, 
there are several more hydroelectric dams planned for Indian 
Kashmir that might be questioned under the IWT.  He ticked 
off the recently begun Dul Hasti Dam, and the proposed 
Burser, Pakul Dul, and Sawalkote projects -- all on the order 
of 1000 MW -- as significant undertakings in varying stages 
of planning that might be questioned as to their IWT 
compliance. 
 
Comment 
------- 
10.  (C) GOI reluctance to discuss Baglihar and other power 
projects may reflect their supreme confidence, or perhaps 
concern that their case is not as firmly grounded as they 
have led us to believe.  The new item is the potential for 
the Dul Hasti, Burser, Pakul Dul, and Sawalkote hydel 
projects to exacerbate Pakistani anxiety over access to 
water.  As a Pakistani diplomat recently commented to us, 
"There are no doves and there are no moderates on water 
issues."  The GOI, in its desire to produce power for J&K 
that fulfills the economic aspirations of Kashmiris and 
demonstrates the effectiveness of the elected government, may 
not fully appreciate -- or may simply not care about -- 
Pakistani concerns.  The saving grace in this politically 
charged impasse is the IWT.  India and Pakistan seem content 
to have the World Bank take the lead in resolving this issue, 
which should seriously reduce the likelihood of Islamabad's 
worst case scenario, that India's dams in J&K have the 
potential to destroy the peace process or even to lead to war 
(Ref B).  We and our Pakistan-watching contacts (Ref C) hope 
that the external judgment of either the neutral expert or 
the arbitration court will provide the political cover for 
whichever side eventually needs to climb down. 
MULFORD