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S E C R E T ISLAMABAD 002524 


NOFORN 

E.O. 12958: DECL: 07/25/2018 
TAGS: PREL PTER PGOV PK

SUBJECT: SCENESETTER FOR PM GILANI'S VISIT TO WASHINGTON 

Classified By: Anne W. Patterson, for reasons 1.4 (b)(d) 

¶1. (S/NF) Summary. Prime Minister Syed Yousuf Raza Gilani 
will be anxious to prove that he is committed to fighting 
"Pakistan's war" on terrorism and will outline the GOP's 
partial response to the July demands presented by CJCS 
Mullen/DDCIA Kappes. Gilani will publicly support the 
coaliton's "negotiations first" counter-terrorism strategy 
and defend Pakistani sovereignty in the face of reported 
plans for unilateral U.S. action. Privately, he will agree 
that force is sometimes necessary and assert he is prepared 
to use it. However, coalition strains and governance 
gridlock are limiting Gilani's ability to coordinate either 
security or economic policy. He likely will repeat requests 
for "actionable intelligence" and suggest the need for 
increased U.S./ISAF operations on the Afghan side of the 
border. We should maintain pressure for specific 
counter-terrorism (CT) action and condition future Foreign 
Military Financing (FMF) assistance on Pakistani agreement to 
training that will increase its counter-insurgency 
capabilities. 

¶2. (C/NF) Summary continued. Pakistan Muslim League-Nawaz 
(PML-N) leader Nawaz Sharif has used his "go Musharraf go" 
campaign to become Pakistan's most popular leader today. To 
bolster his sagging Pakistan People's Party (PPP) popularity, 
PM Gilani may ask for quiet support of a dignified exit 
(resignation) for President Musharraf; in contrast, Musharraf 
has asked that we reaffirm U.S. support for him as President. 
Musharraf continues to debate dissolving the National 
Assembly, a step we believe will lead to widespread unrest 
and increase calls for his departure. 

¶3. (C/NF) Summary continued. Gilani likely will ask for 
faster delivery of Coalition Support Fund (CSF) 
reimbursements, endorse the Biden/Lugar bill to double 
economic aid to Pakistan, and support passage of 
Reconstruction Opportunity Zone (ROZ) legislation. He will 
welcome offers of food security and energy assistance to help 
overcome rising food and fuel inflation and rolling power 
blackouts. He may ask for support to convince Riyadh to 
agree to Pakistan's request to defer $5.9 billion in oil 
payments. Gilani fully supports efforts to repair strained 
relations with Afghanistan and India. End Summary. 

Filling a Leadership Vacuum 
--------------------------- 

¶4. (C/NF) Prime Minister Yousuf Gilani is well-meaning, 
pro-American and anxious to convince us that he is committed 
to fighting "Pakistan's war" against terrorism. The 
challenge is turning good intentions into sustainable action. 
Gilani presides over a fragile coalition mired in governance 
gridlock over the issue of President Musharraf's future. The 
real centers of power -- PPP Co-Chair Asif Zardari and PML-N 
leader Nawaz Sharif -- sit outside government fighting for 
political supremacy. Gilani supports what has been improving 
Ministry of Interior CT cooperation, but he has limited power 
to force the Army and the intelligence services 
(Inter-Services Intelligence (ISI)) to battle a growing 
militant insurgency. His visit to the White House may well 
empower him to do more. With the withdrawal of Nawaz 
Sharif's economic ministers, the coalition lacks the 
expertise to tackle spiraling debt, food and fuel inflation, 
capital flight, and rolling blackouts. 

¶5. (C/NF) Gilani will be seeking public assurances that the 
U.S. supports Pakistan's new civilian government, but the 
uneasy Zardari-Nawaz marriage of convenience may not last 
much longer. When the coalition breaks apart, Zardari will 
need to bolster his slim parliamentary majority with other 
partners. President Musharraf believes his party can be one 
of those partners, and we agree. But his "go Musharraf go" 
campaign has made Nawaz Sharif the most popular leader in 
Pakistan today. Zardari and Gilani fear they cannot 
politically afford to continue working with Musharraf and may 
raise this in Washington. In contrast, Musharraf has asked 
that the USG make it clear to Gilani that the U.S. continues 
to support him as President. Chief of Army Staff General 
Kayani prefers to remain out of politics, if for no other 
reason than a reluctance to take on twin security and 
economic crises. We believe he will support Musharraf's 
resignation with dignity, if the prospect of impeachment 
becomes real. 

¶6. (C/NF) Musharraf continues to debate the possibility of 
dissolving the National Assembly and imposing a technocratic 
government; we believe this scenario will provoke unrest and 
increase calls for Musharraf's departure. We should support 
Gilani now and through a coalition breakup. Nawaz currently 
does not have the votes to bring down the coalition. 

Fulfilling Promises 
------------------- 

¶7. (S/NF) We have learned since 9/11 that Pakistan 
responds, periodically, to U.S. pressure on 
counter-terrorism; we should continue to press for action on 
specific agenda items. The GOP has responded to the CJCS 
Mullen/DDCIA Kappes visit in July by arresting several 
Taliban shura members in Quetta, signed an agreement to 
install cellphone towers in the tribal areas (FATA), is 
initiating an Army operation in North Waziristan, and we 
expect they will allow another B-300 surveillance aircraft to 
operate. These steps will help disrupt cross-border attacks 
and improve our intelligence capabilities. 

¶8. (S/NF) However, the GOP has not targeted Siraj Haqqani 
or his network; nor have they arrested Commander Nazir or 
Gulbaddin Hekmatyar. These militants are responsible for 
much of the 40 percent increase in cross-border attacks on 
our troops in Afghanistan this year. The Army/ISI can do the 
job, but they cling to "old think" -- the belief that it is 
better to manipulate militants through infiltration, payoffs 
and "divide and conquer" strategy than fight extremists on 
the battlefield. They fear military action would provoke a 
tribal war they cannot control, but the GOP strategy has 
failed and the government is losing territory to extremists 
every day. While acknowledging that elements of ISI may be 
out of control, Musharraf and Kayani remain reluctant to 
replace ISI Director Nadeem Taj. 

Bolstering CT Strategy 
---------------------- 

¶9. (C/NF) Gilani will proudly explain the GOP's 
three-pronged CT strategy: political engagement; economic 
development; and force when needed. He likely will claim 
recent (minimal) Frontier Corps action in the tribal areas 
(Hangu and Bara) and (weak) coalition concensus as evidence 
of GOP resolve to execute that strategy. We should 
acknowledge Pakistani sacrifices in the war on terror. 
Gilani believes the coalition must build popular support for 
military action, and General Kayani agrees. But we should 
stress that militants are exploiting the coalition's 
"negotiations first" policy to plan and launch attacks 
against Pakistani and U.S. targets. 

¶10. (S/NF) Gilani will repeat GOP requests for "actionable 
intelligence" and may suggest that the U.S. and ISAF beef up 
border patrols and stop the drug trade in Afghanistan that 
finances arms and militant operations. We should respond 
that the GOP knows better than we do the location of Haqqani, 
Nazir and Hekmatyar; most al Qaeda and Taliban sanctuaries 
are in Pakistan, not Afghanistan. If Gilani suggests 
improved regional (especially Gulf) intelligence sharing, we 
should welcome that initiative. Zardari has just proposed to 
us a September conference hosted by the UAE with Pakistan, 
India, Afghanistan, the U.K., the U.S., and NATO observers to 
discuss the situation in the tribal areas and along the 
border. This idea has merit, too. 

¶11. (C/NF) Gilani will thank the U.S. for its five-year 
$750 million FATA development program and may ask for more. 
Despite security challenges, USAID is implementing small 
projects in five of the seven FATA agencies that will 
eventually create 120,000 short-term jobs for young Pashtuns 
who otherwise would be tempted to join the Taliban. USAID 
is developing a program to preposition relief packages to 
deliver (in the GOP's name) to villages after military 
action; we should encourage the GOP to increase its own 
civil-military programs to provide relief as part of its 
counter-insurgency (COIN) strategy. 

¶12. (C/NF) Largely because of pride, the Pakistani Army 
remains reluctant to accept COIN training for itself or the 
badly trained and under-equipped Frontier Corps. We should 
tell Gilani that future FMF support will be conditioned on 
the GOP's willingness to accept COIN and close air support 
training. We should assure Gilani that we will continue 
current efforts to train and equip para-military forces like 
the Levies and push him to accept pending training for the 
Frontier Corps. Pakistan now has six military officers 
working in the tripartite Torkham Border Coordination Center 
(BCC); we should press for Gilani's concurrence to identify 
two BCC sites in Pakistan. Gilani may raise the Pakistani 
request to use FMF for F-16 mid-life upgrades; we currently 
are seeking Congressional support for this request. 

Fixing the Economy 
------------------ 

¶13. (C/NF) Economic growth for the current fiscal year is 
expected to be 5.8 percent, well below the target of 7.2 
percent. The fiscal deficit is projected to be 7 percent of 
GDP versus a target of 4 percent; GOP borrowing from the 
State Bank of Pakistan (SBP) has reached an all-time high of 
USD 8 billion. Pakistan's trade deficit rose to USD 17 
billion, up from USD 11 billion last year, as lackluster 
export growth fell far short of increasing imports. Savings 
and foreign investment both declined. Pakistan's rupee has 
lost 16.8 percent of its value since January and is at record 
lows. We support approval of a pending USD 500 million World 
Bank loan for Pakistan, conditioned on a coherent plan for 
reducing food and energy subisidies. Gilani may ask for 
speedier delivery of Coalition Support Fund reimbursements 
(approximately USD 1 billion per year) and endorse the 
recently introduced Biden/Lugar bill to double economic aid 
to Pakistan. 

¶14. (SBU) Not a single megawatt of electricity has been 
added to the national grid since 2000, despite population 
growth and economic expansion. Industrial production is 
threatened by blackouts and unemployment is rising. Petroleum 
and electricity subsidies account for the bulk of the fiscal 
deficit and have continued to rise with skyrocketing 
international oil prices. The GOP is paying USD 554 million 
per month for subsidies on petroleum and will attempt to 
reduce these subsidies despite the intense popularity of such 
measures. Energy accounts for 29.3 percent of Pakistan's 
imports, and growth in exports cannot cover the increases in 
international commodity prices. Saudi Arabia is considering 
a Pakistani request to defer $5.9 billion in oil payments; 
Gilani may request help in convincing Riyadh to agree. USAID 
will launch a three year program to assist with energy policy 
issues and energy efficiency and we are offering to fund a 
USGS mapping survey to identify commercial mineral deposits 
and potential energy sources. Gilani will attend in 
Washington a World Bank investment roundtable focused on 
developing Pakistan's Thar coal field reserves. 

¶15. (U) Gilani will welcome the USG offer of food 
assistance; he estimates that Pakistan needs help obtaining 
3.5 million metric tons of wheat to stave off shortages this 
year. Pakistanis have suffered monthly double digit food 
price inflation since September 2007. Over 100 million 
Pakistanis live on less than 2 dollars per day, including 25 
million living on less than one dollar per day. The World 
Food Program recently identified Pakistan as one of 40 
countries at risk of food insecurity and recently raised its 
estimate of at-risk individuals from 60 to 77 million, or 48 
percent of Pakistan's population. 

Repairing Regional Security 
--------------------------- 

¶16. (C/NF) Zardari strongly supports improved ties with 
India, irrespective of progress on Kashmir. Gilani called 
Indian PM Singh this week and has agreed to meet with both 
Singh and President Karzai in Sri Lanka following the 
Washington trip. Gilani has approved the list of Pakistani 
participants to the mini-jirga with Afghanistan. India and 
Pakistan initiated the fifth round of their Composite 
Dialogue in July and agreed to expand confidence building 
measures in Kashmir. Gilani may ask for more pressure on 
Congress for passage of Reconstruction Opportunity Zone 
legislation which would benefit both Afghanistan and 
Pakistan. 

¶17. (C/NF) However, increased allegations of ISI involvement 
in the July 7 bombing of the Indian Embassy in Kabul have 
undermined regional relations. India and Pakistan are 
investigating the incident; we are working with Kabul to 
restart Pak-Afghan economic and military meetings cancelled 
in the wake of the bombing. If asked, Gilani will state that 
Pakistan will not impede approval of the India-IAEA 
Safeguards Agreement. But Pakistan clearly would like 
similar USG assistance to develop its own civilian nuclear 
capability to meet growing energy demand. Negotiations 
continue on the proposed Iran-Pakistan-India gas pipeline. 

¶18. (C/NF) We were disappointed that the Islamabad High 
Court increased personal freedoms for Pakistani nuclear 
scientist AQ Khan; if asked, Gilani will say that the GOP 
continues to closely monitor Khan's activities. 

PATTERSON 


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