US embassy cable - 05NEWDELHI4721

S E C R E T SECTION 01 OF 08 NEW DELHI 004721 
 
SIPDIS 
 
FOR THE SECRETARY 
 
E.O. 12958: DECL: 06/21/2030 
TAGS: PREL, ETTC, ETRD, KNNP, MASS, PTER, IN, NP, PK, IZ, IR, External Political Relations 
SUBJECT: SCENESETTER FOR INDIAN DEFENSE MINISTER 
MUKHERJEE,S 25 JUNE - 2 JULY VISIT TO THE USA 
 
Classified By: Ambassador David Mulford for Reasons 1.4 (B, D) 
 
1. (C) Summary:  Secretary Rumsfeld, we appreciate your 
willingness to host the upcoming visit of Indian Defense 
Minister Pranab Mukherjee, and see many opportunities to 
accelerate our burgeoning defense cooperation with a nation 
we believe to be the key to a prosperous and peaceful future 
for South Asia.  As the Defense Minister overseeing one of 
the largest militaries in the world, Mukherjee obviously has 
considerable clout by any standard.  However, as a respected 
economist and keen political strategist with close personal 
ties to the Congress Party's kingmaker Sonia Gandhi, 
Mukherjee's political influence extends far beyond the halls 
of the MOD.  Mukherjee chairs as many as 18 ministerial 
working groups -- far more than any other minister -- and 
participates in several others.  These influential groups 
deliberate on and facilitate government approval of national 
policies such as the Patents Act and the recently enacted WMD 
Bill.  His influence over both GOI policy and public opinion 
is rivaled only by tha 
t of the Prime Minister himself.  He is, in effect, the 
Deputy Prime Minister, and we believe he aspires to the top 
job.  By demonstrating our understanding of his influence 
beyond the military realm, it may be easier to advance our 
defense-related objectives.  (More on Mukherjee's bio in para 
18.) 
 
2.  (C) Mukherjee's trip to the US comes soon after Secretary 
of State Rice's highly successful March 16-17 visit to India 
and just before Prime Minister Manmohan Singh's state visit 
to the US on July 18.  In addition to promoting greater 
cooperation between the two militaries, he will want to 
engage on issues outlined in the larger March 25th strategic 
partnership, e.g., energy and economic issues.  While 
Mukherjee will seek to pave the way for deliverables for the 
PM's upcoming visit, he will also want to return with some 
tangible agreements of his own.  Signing the "Framework for 
US-India Strategic Defense Relationship" may be one such 
deliverable. 
 
3.  (C) In light of Mukherjee's position as de facto Deputy 
Prime Minister, we see five objectives we can advance during 
his visit: 
 
-- Strategic:  Underscore the significance of a broad 
US-India relationship toward achieving shared strategic, 
global, regional, and economic objectives.  In particular, we 
feel it is time to involve India as a full member (including 
in the Core Group if this is to continue to exist) in the 
Proliferation Security Initiative (PSI). 
 
-- Defense:  Emphasize the importance of a deeper defense 
relationship in the context of our broader strategic 
relationship with India, highlighting the opportunities 
presented by a larger FMS relationship while addressing 
concerns about US reliability as an arms supplier, pressing 
for negotiation of an Acquisition and Cross Servicing 
Agreement (ACSA), and initialing of a Research and 
Development, Test and Evaluation (RDT&E) Agreement. 
 
-- Regional:  Laud unprecedented progress in the Indo-Pak 
relationship and reaffirm the effective US-India regional 
partnership in meeting shared objectives in Nepal and 
Bangladesh.  You might also acknowledge India's leading role 
in the regional tsunami recovery and note that we see our 
cooperation in this effort as a good template for future 
humanitarian operations. 
 
-- Economic:  Highlight our strong desire to use the US-India 
Economic Dialogue to remove blockages to bilateral trade and 
direct investment, increase private and government technical 
and regulatory exchanges, and resolve commercial disputes. 
 
-- Iraq:  As a strategic partner with interests beyond its 
immediate region, seek GOI commitment to immediate and 
long-term engagement in reconstruction and democratization in 
Iraq. 
 
4.  (SBU) In sum, the Defense Minister's visit comes at a 
time when the goal of establishing a key strategic 
relationship is becoming reality.  New initiatives, combined 
with careful management of possible irritants, will move us 
forward in building, with one of Asia's rising giants, a 
collaborative relationship.  End Summary. 
 
 
NSSP and Strategic Partnership 
------------------------------ 
 
5.  (C) Until Secretary Rice's March visit, the keystone for 
our new relationship with India was the NSSP, which set the 
objective of extending our cooperation into civil space, 
civil nuclear, high-tech trade and establishing a dialogue on 
Missile Defense.  In order to conclude Phase II and III of 
NSSP, the GOI expended extraordinary effort to pass a 
comprehensive "WMD Act," which explicitly gives the GOI 
authority to stop and punish those who are involved in 
transfer of items or technology related to the creation or 
transfer of WMD. 
 
6.  (S) However, they reacted strongly to parts of A/S 
Rademaker's recent presentation on the steps India must still 
take to conclude the NSSP.  Foreign Secretary Saran made it 
clear that they will manage the implementation of their new 
legislation and supporting regulations in their own way. 
Mukerjee may raise the GOI view that the US keeps moving the 
goalposts on NSSP.  The GOI understanding of their original 
NSSP obligations was that India must "agree to adhere" to the 
NSG and MTCR in Phase II and then harmonize national control 
lists with the NSG and MTCR and enact export control 
legislation in Phase III.  They have objected that we are 
suddenly saying a) the GOI must also complete and show us 
their implementing regulations; and b) they must make a 
public announcement that they have adhered.  (They also 
objected that harmonization to the Australia Group and 
Wassenaar Arrangement lists are not conditions for completion 
of NSSP.  We told them we agree but pointed out that 
harmonization with these two regim 
es will facilitate post-NSSP strategic cooperation in areas 
such as space.)  Otherwise, India has gone to great lengths 
to demonstrate that it is a responsible member of the nuclear 
club, upholding a "no first use" policy coupled with an 
undefined "minimum credible deterrent" and a strong policy 
against onward proliferation of nuclear and missile 
technology.  Our recent Missile Defense engagement reflects 
the broad convergence of our strategic outlooks. 
 
 
Defense Equipment Sales--Underexploited 
------------------------------------------- 
 
7. (C) Closely related to this NSSP agenda is our ongoing 
effort to address Indian concerns about US reliability as a 
supplier for major weapons systems and to lay the foundation 
for a breakthrough arms sale.  We see this as key to 
deepening our mil-mil relationship and to developing the 
military interoperability that will help our strategic 
partnership realize its potential.  Despite the US lifting of 
sanctions in 2001, we have not yet achieved a breakthrough 
sale of a major platform that would clearly establish our 
intent to be a major player in this market, our technical and 
price competitiveness, and our reliability as a supplier. 
The pending obsolescence of much of India's Soviet-origin 
equipment will create once-in-a-decade opportunities for 
foreign suppliers.  Our decision to respond to the Request 
for Information (RFI) for 126 multi-role fighters to replace 
India's aging MIG fleet has been a critically important 
signal of our intention to compete in this USD 14 billion 
defense market.  While eager to 
 diversify its sources of supply, purchase what it believes 
is superior US technology, and develop an indigenous private 
defense industry, the GOI continues to raise questions about 
the dependability of the US Government as an arms provider, 
and seeks licensed production and technology transfer to the 
maximum extent possible both as a way to expand the 
capability of Indian industry and as insurance against future 
sanctions.  Following our strong presence at the recent 
Aero-India trade show, the GOI has been making more positive 
noises about our arms sales relationship.  However, Defense 
Minister Mukherjee continues to raise public questions about 
US reliability that your meetings and a US decision to 
compete on a large scale, including co-production and 
technology transfer, could help to address. 
 
8.  (C) We currently see serious potential for the sale or 
lease of P-3C Orion maritime patrol aircraft, and a chance to 
compete for multi-role combat aircraft.  During Indian Chief 
of Naval Staff Admiral Prakash's recent visit to the US he 
indicated a strong desire to move quickly on acquisition of 
P-3Cs, even requesting leasing two P-3's as an interim 
solution.  The Navy is investigating options including 
refurbishment of strategic reserve aircraft, transfer from 
other nations, and provision of other US owned aircraft in an 
attempt to meet Indian needs.  India has also indicated 
interest in acquisition of one Amphibious Transport Dock 
(LPD) and four Minehunters (MHCs) to be retired from the Navy 
over the next two years.  In 2004 the Indian Navy signed a 
LOA for Deep Submergence Rescue Vehicle services worth 
$700,000 and they have indicated a desire to test this 
capability as soon as possible.  Up to this point the major 
arms sales have remained 200 million USD for 12 An-TPQ-37 
Firefinder Radars, and 14 USD 
million worth of Special Forces Equipment.  Unfortunately, 
the Firefinder Radar has been plagued with problems, further 
reinforcing the need for a breakthrough sale such as the 
MRCA.  We have suggested to MOD that assigning an Indian 
expert on defense procurement to the Indian Embassy in 
Washington could assist in coordination of defense sales. 
 
 
Acquisition and Cross Servicing Agreement (ACSA) 
--------------------------------------------- --- 
 
9. (C) One key administrative goal to further advance our 
defense cooperation programs is the completion of an ACSA. 
Our Embassy has initiated and subsequently reinvigorated this 
issue with the Indian MOD several times.  USD(P) Feith 
mentioned it in June during the Defense Policy Group.  Mr. 
Feith also mentioned it with Foreign Secretary Saran in 
September.  In a recent meeting with DCM Blake, Indian 
Defense Secretary Vikram Singh, stated he had not been aware 
the ACSA was subject to negotiation and could take into 
account Indian concerns about being drawn into a future US 
military action.  Now understanding the US flexibility 
regarding the text the GOI is considering inviting a USPACOM 
negotiation team to India to discuss wording acceptable to 
India.  We recommend you stress with Mukherjee and other 
officials the importance of moving this long stalled 
agreement forward. 
 
 
Research Development Test and Evaluation (RDT&E) Agreement 
--------------------------------------------- ------------- 
 
10.  (C) The GOI views R&D collaboration as an important part 
of the defense supply relationship.  Furthermore, the quality 
of the Indian S&T community is source of national pride.  A 
robust Defense Cooperation in Armaments (DCA) program conveys 
that our relationship is a partnership among equals, and not 
one based solely on a "buyer-seller" relationship.  The 
Master Information Exchange Agreement (MIEA) was signed in 
February 2004 and the Research Development Test and 
Evaluation (RDT&E) agreement may be initialed during this 
visit and signed once congressional notification is complete. 
 Additionally, the first of two Information Exchange Annexes 
(IEAs) related to human performance enhancement was signed in 
April 2005 and the second is currently pending signature. 
Senior US defense R&D leaders have also exhibited an 
unprecedented interest in engaging the Indian R&D community. 
Our primary task now is to maintain the momentum and explore 
additional areas of collaboration that could lead to a near 
term project 
agreement. 
 
 
Rapidly Expanding Mil-Mil Engagement 
------------------------------------ 
 
11. (C) India and the US now routinely engage in military 
exercises of growing scope and sophistication.  The Malabar 
2004 naval exercise tested newly developed USN-IN Standard 
Operating Procedures (a key step toward interoperability) and 
included the first visit of a US nuclear powered warship to 
an Indian port.  Malabar 2005 will include aircraft carrier 
operations, and use of a common operating picture and 
encrypted communications.  The Air Force exercise Cope India 
is rapidly becoming the premier Air-to-Air Combat exercise in 
the Pacific.  In November of this year, 12 F-16 Block 50s 
from Misawa, Japan and 1 x E-3B AWACS aircraft from Kadena, 
Japan will deploy to Kalaikunda Air Force Station in India 
for Dissimilar Air Combat Training against Indian Air Force 
SU-30MKIs, Mirage 2000-5, and the upgraded Mig 21(bis) 
fighter aircraft.  This year brings added interest as the GOI 
is seriously considering purchasing the F-16 for the 126 
Multi-role Combat Aircraft (MRCA) acquisition.  US Army and 
Special Forces un 
its have participated in exercises in the Himalayas and the 
jungles of eastern India while Indian Army units participate 
in exercises in Alaska, Hawaii, and California.  These 
exercises and many others were well covered in the Indian 
press and are viewed here as opportunities for the Indian 
military to display their professional prowess and to signal 
India's credibility as a regional power. 
 
 
Nonproliferation, Missile Defense, and PSI 
------------------------------------------ 
 
12.  (C) India has endeavored to prove itself a responsible 
member of the nuclear club, upholding a "no first use" policy 
coupled with an undefined "minimum credible deterrent" and a 
strong policy against onward proliferation of nuclear and 
missile technology.  Our recent Missile Defense engagements 
reflect the broad convergence of our strategic outlooks; 
India would like now to pursue a missile defense technical 
cooperation agreement of the sort we have with other close 
allies and friends.  Further, the GOI also remains interested 
in the Proliferation Security Initiative (PSI).  The 
government, however, contends that it would be politically 
unacceptable for India to be a junior partner in PSI so they 
want PSI partners either to disband the Core Group or admit 
India as a full member.  Indian involvement in PSI would 
bring India's significant naval and intelligence assets to 
the PSI mission and would represent a strategically 
significant realignment of the GOI's historical rejection of 
multilateral non-prolife 
ration regimes.  Mukherjee hopes SecDef will be able to 
report progress and that the President will be able to tell 
the PM that the US has made a decision either to discuss with 
its PSI partners the disbanding of the Core Group or the 
inclusion of India in it. The UK is scheduled to host a PSI 
exercise in the Indian Ocean in September, and we would like 
to see formal GOI involvement at that time. 
Economic Reform 
--------------- 
 
13. (SBU) The GOI recognizes the need for structural and 
regulatory changes to build market institutions, reduce the 
role of government in the economy, increase competition, and 
boost direct foreign investment.  It is attempting to package 
reforms in a way that links reform to the delivery of 
tangible social benefits to key constituents, especially the 
rural poor.  A sustained growth rate of 7-8 percent will 
require India to achieve strong and sustained inflows of 
foreign capital, technology; goods and services (including 
training).  This makes the US an essential partner in India's 
economic transformation.  You should use this visit to 
congratulate Minister Mukherjee on the GOI's reform 
accomplishments to date and highlight our strong desire to 
use the U.S.-India Economic Dialogue to: resolve commercial 
disputes, identify and remove blockages to bilateral trade 
and investment, increase private and government technical and 
regulatory exchanges, and strengthen appreciation in the 
Indian bureaucracy of the econ 
omic benefits derived from a strategic partnership with the 
U.S. (very important for a government led by economists!). 
 
 
Indo-Pak Upswing 
---------------- 
 
14.  (C) Indo-Pak relations continue to improve, to the point 
where it is now difficult to imagine a return to the high 
tension and crisis diplomacy of 2002/3.  The Indians say that 
terrorist infiltration from Pakistan was down significantly 
during 2004, which the GOI attributes mostly to its own 
policies (a fence along the LOC, extensive deployment of 
sensors and other technology, and better anti-insurgency 
strategy), but also to Pakistani restraint. These trends have 
smoothed the way for a year of bilateral talks on over a 
dozen topics, including energy cooperation, trade, and 
territorial issues.  The bus service between Srinagar and 
Muzaffarabad that began in April is the most visible example 
of the improving Indo-Pak relationship, which is largely 
fueled by people-to-people exchanges and a motivated PM Singh 
who champions unconventional thinking within limited 
constraints - notably, that India will not accept territorial 
solutions that divide people based on religion.  Despite 
these positive trends, a spe 
ctacular terrorist attack against India, especially if it 
were to take place outside J&K, would quickly dispel the 
climate for diplomacy.  The GOI has absorbed several 
high-profile suicide attacks in Srinagar in recent months, in 
large part because the PM and his team place a very high 
priority on the peace process.  The perception of US 
engagement on the problem of terrorist infiltration from 
Pakistan is key to our influence over Indian behavior. 
 
 
Domestic Politics 
----------------- 
 
15.  (C) In the year the United Progressive Alliance (UPA) 
coalition has been in power, it has faced generally smooth 
sailing, with an eviscerated opposition and largely favorable 
domestic, foreign policy and economic trends.  While the 
Indian public is generally enthusiastic about closer 
relations with the US, the UPA government is frustratingly 
cautious because of its reliance on Left parties which are 
often opposed to growing ties with the US. 
 
 
Regional Dialogue 
----------------- 
 
16. (C) One of the Bush Administration's signature 
accomplishments in US-India relations has been our 
intensified dialogue in dealing with challenges elsewhere in 
South Asia.  The substantial military resources that India 
deployed in response to the tsunami, the GOI's effective 
participation in the Core Group, and the Army's deployment of 
liaison officers to USPACOM and the JTF in Thailand 
illustrate India's status as a dominant regional player that 
is increasingly capable of projecting power over long 
distances.  On Nepal, the Indian government has welcomed the 
opportunity to coordinate closely with us in responding to 
the King's power grab, and has sought to minimize any 
divergence in our approach.  Afghanistan is another success 
story, with the GOI reinforcing our support for Karzai, 
committing substantial development resources (USD 500 million 
so far), and pursuing an agenda that parallels our own quest 
for a democratic, multi-ethnic Afghanistan.  We expect the 
Indians will want to raise with you their vi 
ews regarding Bangladesh and Nepal.  The Indians will also be 
keenly attuned to what you have to say on Iran.  For the GOI, 
Iran is part of the immediate neighborhood, and serves as a 
crucial gateway to Central Asia, a supplier of energy, a 
means of complicating Pakistan's war-time calculus, and a 
potential source of influence for good or ill on India's 
large Shia minority.  Driven in part by surging domestic 
energy demand, India has significantly softened its position 
on participating in trans-Pakistan gas pipelines to take 
advantage of energy supplies in Iran and Turkmenistan. 
Secretary Rice took just the right approach in a recent 
 
SIPDIS 
interview in stressing our desire to engage constructively 
with India on the Iran-Pakistan-India gas pipeline. 
 
 
Iraq 
---- 
 
17. (C) Mukherjee's visit will also be an opportunity to 
press for greater GOI engagement in Iraq.  India pledged $10 
million for Iraq at the Madrid conference and will 
participate in the US-EU conference in Brussels, but lacks 
the will to engage except from a distance.  GOI officials say 
they would like to do more in Iraq, but cannot muster the 
political courage to lift the travel ban that was imposed 
following the kidnapping and release of three Indian truck 
drivers in the summer of 2003.  Iraq Coordinator Ambassador 
Jones visited New Delhi recently and encouraged the GOI to 
make use of its past experience in Iraq's electricity sector 
to refurbish local electrical grids in some of the "safe" 
provinces, and provide training to Iraqi police and military 
forces either in India, Amman or Abu Dhabi. 
 
 
Biography 
--------- 
 
18.  (U) Pranab Kumar MUKHERJEE (pronounced: "moo-KER-jee") 
 
Addressed as: Mr. Minister 
 
Minister for Defense (since May 2004) 
 
19.  (SBU)  Pranab Kumar Mukherjee (68) is one of most senior 
Congress Party stalwarts and strategists, as well as a close 
advisor to Sonia Gandhi.  Originally slated to become the 
Home Minister, he was given the Defense portfolio to prevent 
him from challenging PM Singh's leadership.  Observers of the 
Indian political scene believe he is positioning himself for 
higher political aspirations, i.e.,Prime Minister.  He was 
elected to the Lok Sabha (lower house of the Parliament) from 
West Bengal in the 2004 national elections with support from 
regional Left leaders, with whom he maintains close ties.  A 
Congress Working 
Committee member and the Leader of the Congress party in the 
Lok Sabha, he has favored stronger ties with the US, 
including more economic and trade cooperation. 
 
20.  (C)  Lacking military experience, he relies heavily on 
advisors for counsel on strategic and operational issues 
confronting the country's armed forces, and seems to be more 
involved in his other political duties (see below).  He 
appears to be very supportive of the growing number of joint 
US-India military exercises, exchanges, conferences, and 
training.  In his December 9 meeting with Secretary Rumsfeld, 
Mukherjee stated his desire to diversify India's arms supply 
(the lion's share of which comes from Russia), but raised the 
specific concern about the slowness of the US arms 
procurement process. 
 
21.  (U) Mukherjee's political clout is reinforced by his 
membership in several influential committees.  He is a senior 
member of the Cabinet Committee on Political Affairs, the 
Cabinet Committee on Economic Affairs and the Cabinet 
Committee on Security.  He chairs the Group of Ministers on 
Patent Laws -- charged with bringing India's product patent 
coverage up to international standards.  He is a member of 
the Cabinet Committee on the World Trade Organization, and 
heads the Group of Ministers Committee on the Dabhol dispute, 
charged with bringing the closed power plant back on line. 
He also heads the Group of Ministers investigating the 
alleged corruption of the previous NDA (National Democratic 
Alliance) government. 
 
22.  (U)  Before taking the Defense Minister post, 
Mukherjee's experience in government was primarily in the 
economic area.  In 2000-2001, he chaired the Congress party 
Economic Affairs Department and was President of its West 
Bengal unit.  He served as Union Minister for Finance and 
Commerce (1993-95) in the Narasimha Rao government and Deputy 
Chairman of the Planning Commission (1991-93).  Working 
closely with the late PM Indira Gandhi, he presented three 
consecutive union budgets (1982, 1983 and 1984) as Finance 
Minister, which prompted New York-based EuroMoney magazine at 
that time to rate him "one of the most innovative finance 
ministers of the world." 
 
23.  (U)  After the assassination of Indira Gandhi in 1984, 
Mukherjee failed to maintain good relations with Rajiv 
Gandhi, who expelled him from Congress in 1986, reportedly 
for showing too much ambition.  In response, the frustrated 
Mukherjee launched the Rashtriya Samajwadi Congress party in 
1987, but it did not win a single seat in the West Bengal 
Assembly elections of 1987, and Rajiv Gandhi took him back 
into the party in 1988, considering his exit a brief 
aberration from a long career dedicated to the Congress 
party. 
 
24.  (U)  Born into a middle-class freedom fighter's family 
on December 11, 1935 in West Bengal, Mukherjee has a Law 
degree and Masters degrees in History and Political Science. 
After a brief career as a lecturer and a journalist, 
Mukherjee entered politics by joining the Bangla Congress in 
1966, and soon switched to the Congress party.  Elected to 
the Rajya Sabha in 1969 and in 1975, he was re-elected to the 
Rajya Sabha from Gujarat in 1980 and joined Indira Gandhi's 
cabinet as an independent charge Minister for Commerce 
(1980-82).  Mukherjee became Union Minister for Finance with 
additional charge of Commerce and Supply in 1982.  The author 
of a book, "Emerging Dimensions of Indian Economy" (1984), he 
regularly contributes articles on Indian economy and politics. 
 
25.  (U)  A devout upper caste Hindu Brahmin, Mukherjee is 
married to Subhra.  They have two sons and one daughter.  His 
daughter, Sharmishtha Mukherjee, is a well-known Indian 
classical dancer.  His native tongue is Bengali, but he is 
equally fluent in Hindi and English.  Though articulate, he 
is soft-spoken and speaks with a heavy Bengali accent which 
can sometimes be difficult for Americans to understand. 
 
26. (U) Again, we thank you for hosting this visit of India's 
Defense Minister and look forward to a highly successful 
visit. 
MULFORD