US embassy cable - 05COLOMBO1974

C O N F I D E N T I A L SECTION 01 OF 02 COLOMBO 001974 
 
SIPDIS 
 
E.O. 12958: DECL: 11/18/2015 
TAGS: PREL, PGOV, ECON, EAID, PTER, US, CE, LTTE - Peace Process, Elections, Political Parties 
SUBJECT: US INTERESTS AFTER THE SRI LANKAN PRESIDENTIAL 
ELECTION 
 
Classified by Ambassador Jeffrey J. Lunstead for reasons 1.4 
(b) and (d). 
 
1.  (C)  How is the apparent victory of Mahinda Rajapakse 
likely to affect US interests in Sri Lanka?  We define our 
overriding interests here quite simply: Peace and Prosperity. 
 Peace because a successful peace process will mean the end 
of terrorism by the Liberation Tigers of Tamil Eelam (LTTE). 
 Prosperity because it would both reinforce and be a product 
of peace, and allow Sri Lanka to reach its considerable--and 
up till now largely wasted--economic potential.  Sri Lanka 
has also been a moderately helpful partner in the 
international arena, not always voting with us, but often 
willing to cast a strategic abstention. 
 
2.  (C)  The questions to ask on these issues are where does 
Mahinda stand, where do his partners--especially the Marxist 
JVP--stand, and how will they interact?  Mahinda has stated 
some general but vague views: 
 
--Peace.  Critical of the current peace process, wants to 
revise the Cease Fire Agreement, will build a southern 
consensus, hold direct talks with LTTE leader Prabhakaran. 
Says he wants a "unitary" state, but seems willing to 
consider devolution amounting to federalism in practice. 
Unclear about future role of the Co-Chairs, skeptical in 
public about the Norwegian facilitator role, more positive in 
private. 
 
--Economy.  Comes from a vaguely leftist background, says he 
supports private sector but wants a "national economy." 
Unclear what this means, but seems to indicate a mild amount 
of protectionism, enhanced government role in directing the 
economy.  Increased subsidies, likely a ballooning budget 
deficit. 
 
--International Arena.  Again Rajapakse has a vaguely 
leftist, NAM-oriented worldview, a founder of the Palestine 
Friendship Society.  In person has always been friendly to us 
and appreciative of US relationship, especially after the 
tsunami. 
 
SIPDIS 
 
3. (C)  The JVP's views are decidedly clearer. 
 
--Peace.  The LTTE must give up its arms and abjure terrorism 
at the start of the peace process. No federalism in name or 
form. 
 
--Economy.  A mixed economy with a role for the private 
sector, but a very active state role. Probably very 
protectionist. Say they want to emulate China, Malaysia and 
India--but without a clear idea of what this means. 
 
--International Arena.  Strong leftist tendency, voice 
admiration for Castro and, more lately, Hugo Chavez. 
 
4.  (C)  Mahinda Rajapakse has told us many times that he is 
a moderate, that he is for peace and against war, 
and--crucially--that he will control his JVP allies and not 
let them control him.  After this victory the JVP will 
certainly be out for blood, however, and we expect a  major 
tussle over policy direction.  Key indicators in the coming 
days will be how Rajapakse reshapes the Cabinet, whom he 
chooses as Prime Minister, and whether he replaces a number 
of the Ministry Secretaries, such as Foreign Secretary 
Palihakkara and Treasury Secretary PB Jayasundera, who have 
been steady and responsible hands. 
 
5. (C)  On balance we think that Rajapakse, if he is able to 
control policy, will follow a slightly more leftist but not 
radical set of policies.  This would be a type of "muddling 
through" path for Sri Lanka.  It would not be as close to our 
interests as the policies of either Ranil Wickremesinghe or 
Chandrika Bandaranaike Kumaratunga were.  It would, 
unfortunately, have a large opportunity cost, as Sri Lanka 
once again would miss a chance to leap forward economically. 
If the JVP is able to exert considerably more influence over 
policy, we will have much greater divergence with US 
interests. 
 
6.  (C)  One area of potential conflict in either scenario is 
Millenium Challenge Account funding.  MCA-eligible Sri Lanka 
is engaged in discussions on a compact agreement with MCC. 
If the new government turns toward unsound economic policies, 
we believe we would have to re-consider MCA funding.  This is 
a hypothetical at the moment, but a real possibility.  And an 
announcement that we were dropping Sri Lanka from MCA would 
be a serious blow to the Government. 
 
7.  (C)  The sleeper here is peace, however.  Unlike the 
economy, this is not completely in Rajapakse's hands.  The 
LTTE's actions during the election in preventing Tamils from 
voting and stating that the election was meaningless because 
neither Sinhalese leader could deliver justice to the Tamils 
are extremely worrisome.  Taken to their logical conclusion, 
they mean that the LTTE believe there is no hope for the 
peace process.  If that is so, adherence to the ceasefire is 
a tactical move, and it could be broken at any time. 
Everyone now anxiously awaits Prabhakaran's Heroes Day speech 
on November 27.  Many fear that he will announce that recent 
history and the elections have shown Tamils can never receive 
their rights in a united Sri Lanka and declare an independent 
state.  Whatever Prabhakaran says on November 27, recent 
Tiger actions cast a grim shadow over the peace process. 
8.  (C)  What should the US do in this situation?  Ambassador 
will seek an early appointment with Rajapakse, perhaps even 
before he is sworn in.  He intends to make the points that: 
 
--the US accepts the verdict of the Sri Lankan people, 
--the US wants to work with the new government, 
--our ability to do so will depend on what policies that 
government follows. 
 
9.  (C)  We are entering a period of great uncertainty in Sri 
Lanka.  As we have indicated above, we believe Mahinda 
Rajapakse's policies will diverge a bit more from US 
policies.  This will not be an insuperable obstacle to a 
useful relationship if we can early on set some boundaries 
and a tone of frank discussion.  We will try to do that, but 
much will depend on the external--and largely out of our 
control--factors of the LTTE and the JVP. 
LUNSTEAD