US embassy cable - 05NEWDELHI8535

C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 008535 
 
SIPDIS 
 
E.O. 12958: DECL: 11/07/2015 
TAGS: PGOV, PREL, PINR, ETTC, EPET, KCRM, IN, IR, Indian Domestic Politics 
SUBJECT: THE UPA DESCENDS DEEPER INTO THE VOLCKER REPORT 
QUAGMIRE - NATWAR VEERS TO THE LEFT 
 
REF: A. NEW DELHI 8507 
 
     B. NEW DELHI 8431 
 
Classified By: DCM Robert Blake, Jr. for Reasons 1.4 (B, D) 
 
1.  (C) Summary:  The United Progressive Alliance (UPA) 
government continued to descend into the quagmire created by 
the release of the Volcker Report (reftels), while its 
embattled Foreign Minister has veered to the left in a 
desperate attempt to win support from the Left Front (LF). 
The UPA has responded to the allegations by instituting 
"investigations," and can now remove Natwar as Foreign 
Minister and shunt him into a domestic portfolio where he can 
not do so much damage.  The BJP/NDA are gleeful that they can 
now score points against Congress and will be unrelenting in 
their criticism in the media and on the floor of Parliament. 
Under attack from all sides, the UPA will find it even more 
difficult to move key legislation through Parliament, and 
will likely determine that it must downplay the US/India 
initiative for the time being.  This could make it difficult 
for the GOI to remain in the US column next time the Iran 
nuclear program comes up for a vote in the IAEA.  End Summary. 
 
The UPA Responds 
---------------- 
 
2.  (U) The crisis caused by the release of the Volcker 
Report (reftels) continued to deepen throughout the weekend 
of November 5-6, as Indian media conducted a "death watch," 
at strategic locations throughout New Delhi, waiting to see 
whether Natwar Singh would step down as Foreign Minister. 
The Congress "core group" (PM Manmohan Singh, Congress 
President Sonia Gandhi, Home Minister Shivraj Patil, Defense 
Minister Pranab Mukherjee, HRD Minister Arjun Sigh, and Mrs. 
Gandhi's Political Secretary Ahmed Patel, plus Finance 
Minister P. Chidambaram and Law Minister H.R. Bhardwaj) met 
at the PM's residence to chalk out a response.  Chidambaram 
and Science Minister Kapil Sibal, the Cabinet's two most 
prominent lawyers, determined there was sufficient evidence 
against Natwar to warrant further investigation.  On the 
night of November 6, the UPA appointed retired UN diplomat 
Virendra Dayal as a "special envoy" to "liaise" with the UN 
and "gather relevant materials...regarding the involvement of 
Indian entities and individuals" in the food-for-oil scandal. 
 Dayal will have "the full power and authority of the 
Government," and serve initially for three months. 
 
3.  (U) The UPA will also dispatch a "polite" letter to UN 
Secretary General Kofi Annan, purportedly requesting the UN 
 
SIPDIS 
to treat Congress "differently" than individuals named in the 
report, and to provide the evidence the Commission used to 
name the party as a non-contractual beneficiary.  The UPA 
also plans to establish a judicial committee to examine the 
role of the Swiss company Masefeld AG and the Indian firm 
Hamdan Exports in the scandal and determine whether they 
acted independently or at someone's behest.  Andleeb Sehgal, 
the owner of Hamdan Exports and a close friend of Natwar's 
son, Jagat Singh, continued to elude government 
investigators, who searched his residence and office.  They 
wanted to interrogate him regarding his dealings with the 
Saddam government.  In an impromptu news conference, Sehgal 
denied any role in the affair, stating that "I have had no 
business dealings with either the Congress party or Natwar 
Singh or his son." 
 
Bio Note 
-------- 
 
4.  (U) Virendra Dayal is a distinguished civil servant with 
a spotless record of public service.  He was inducted into 
the Indian Administrative Service (IAS) in 1958.  He resigned 
from the IAS in 1965 to join the UN, serving there until his 
retirement at the rank of Undersecretary in 1992.  After 
leaving the UN, Dayal served two terms as head of the 
National Human Rights Commission.  He was not the GOI's first 
choice.  The UPA approached at least one retired Supreme 
Court Justice, who begged off, citing "poor health." 
 
Natwar Holds Firm 
----------------- 
 
5.  (U)  In a lengthy NDTV interview on November 5, Natwar 
refused to step aside, declaring repeatedly that he and 
Congress were innocent of wrongdoing.  Maintaining that the 
evidence was based on the "records of the current Iraqi 
government, which has no credibility in the world," Natwar 
insisted that the allegations were "outrageous and completely 
false" and denied purchasing oil from or paying kickbacks to 
the Saddam regime.  Natwar also claimed that Sonia Gandhi and 
the PM had "full confidence in my innocence." Declaring that 
Mrs. Gandhi was angry that the Report "sullied the names of 
the party and its members," Natwar emphasized that he served 
at the behest of the Prime Minister, and the BJP "would not 
decide who the Indian Foreign Minister will be." 
 
And Becomes More Shrill 
----------------------- 
 
6.  (SBU) In what appeared to be an attempt to enlist the 
support of the Left Front, Natwar also turned up the 
rhetorical heat regarding the controversial IAEA vote and 
expressed sympathy for the LF.  In a November 6 interview on 
NDTV, he emphasized his close ties with the Communist 
leadership, that he has been "left of center" since his 
youth, and lamented the "disintegration of the Soviet Union" 
as "one of the tragedies of the 20th Century."  Natwar went 
on to decry that "I am not anti-American,...I am pro-Indian. 
If any country launches a war on another country and calls it 
a humanitarian intervention, it is unacceptable."  On the 
same day, while addressing the Confederation of Indian 
Industry (CII), Natwar stated that if the upcoming IAEA 
resolution on Iran's nuclear program was "more severe that 
the previous one," he would advise the government "to reverse 
its vote."  He pointed out that India's September 24 vote 
"prevented Iran from being taken to the UNSC" and predicted 
that India would work to "thwart another move in this 
direction."  Natwar emphasized that "Nothing will prevent us 
as a great country from raising our voice as we did when we 
were in opposition to what was done in Iraq," and "India and 
Africa should stand together so that no country or group of 
countries can take unilateral action to reduce countries to 
what has been done in Iraq."  (To read excerpts of the 
interview go to: 
www.indianexpress.com/full story.php?content id=81468) 
 
And the BJP Turns the Screws 
---------------------------- 
 
7.  (U) The top BJP leadership spent the weekend criticizing 
Natwar and calling for his dismissal.  BJP General Secretary 
Arun Jaitley played the lead role, insisting that there was 
sufficient evidence in the Volcker Report to indict Natwar on 
criminal charges under the Foreign Contribution Regulation 
Act (FCRA) which prohibits parties and individuals from 
accepting political contributions from foreign governments. 
Jaitley called on Natwar to quit, as his position is now 
"morally untenable" and his effectiveness in dealing with the 
UN "eroded."  Insisting that the GOI should file criminal 
cases against everyone involved, Jaitley maintained that the 
Prime Minister should "decide whether he runs a government or 
merely occupies an office."  Party President LK Advani 
confirmed that the BJP would formally request Natwar's 
dismissal, while Sushma Swaraj expressed surprise "that the 
PM has given a clean chit to Natwar Singh without studying 
the Volcker report." 
 
While Congress Largely Abandons Him 
----------------------------------- 
 
8.  (C) There was no evidence that the heavy-hitters in 
Congress were ready to come to Natwar's aid in his hour of 
need.  The press speculated that most within Congress would 
not be unhappy to see Natwar go, as his legendary arrogance 
has come to haunt him.  With the big names silent, the UPA 
second echelon mounted a weak defense.  Chhatisgarh Congress 
leader Ajit Jogi made an "open challenge" to the Volcker 
Committee to produce its evidence.  Andhra Pradesh Chief 
Minister Y.S. Rajesekhar Reddy condemned the "politically 
motivated" campaign of the BJP against Natwar, Railway 
Minister Lallu Prasad Yadav echoed Natwar, saying that the FM 
should not resign on the back of "baseless allegations," and 
DMK President M. Karunanidhi decried the BJP's calls for 
Natwar's resignation as mere  "politics of confusion." 
 
Comment - When and Not If 
------------------------- 
 
9.  (C) Hardly anyone believes that Natwar will survive as 
Foreign Minister.  The UPA appointment of a "special envoy" 
and a "judicial commission" are transparent face-saving 
measures, not the principled stand of a government convinced 
of its innocence.  Party insiders have told the press that 
the evidence is too specific to dismiss and Congress will 
most likely remove Natwar while the GOI investigation 
proceeds.  While Natwar is in deep trouble, he is unlikely to 
be dropped from the Cabinet, but merely shunted to a domestic 
portfolio where he will not have to deal with the UN and 
foreign government, most particularly the US. 
 
10.  (C) The Congress leadership has likely lost confidence 
in Natwar as Foreign Minister.  His latest statements on the 
IAEA vote are an embarrassment to the GOI, which is engaged 
in a delicate balancing act requiring sophisticated diplomacy 
and does not find Natwar's rhetorical excesses helpful. 
While his position on the IAEA vote is partially an attempt 
to win LF support, it also likely reflects his personal 
views.  The Left Parties were among the first to call for a 
GOI investigation of the Volcker Report allegations, however, 
and will likely distance themselves from Natwar.  Proud of 
their relatively clean record on corruption, the Communists 
have always been quick to criticize Congress on that score. 
 
11.  (C) The LF and BJP/NDA have already scored points 
against the UPA over the IAEA affair and have put the UPA on 
the defensive regarding US/India relations.  The Volcker 
Report has been a Godsend for the BJP, which was in desperate 
need of an issue to use against the UPA.  Having been 
provided with a golden issue, the BJP will play it for all it 
is worth.  With Congress on the ropes over the oil-for-food 
affairs, both the NDA and the LF can be expected to ramp up 
their criticism of the UPA, accusing it of allowing the US to 
dictate India's economic and foreign policy. 
MULFORD