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Cablegate: Prime Minister Tells Negroponte: No More F-16

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C O N F I D E N T I A L SECTION 01 OF 03 ISLAMABAD 004086

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/20/2017
TAGS: PGOV PK
SUBJECT: PRIME MINISTER TELLS NEGROPONTE: NO MORE F-16
PAYMENTS, READY TO RE-OPEN INVESTMENT TREATY TALKS

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

1. (C) Summary: During a September 14 meeting with Deputy
Secretary of State John Negroponte, Prime Minister Shaukat

SIPDIS
Aziz voiced his government's frustration with what Pakistan
perceives as changes in the terms of sale of U.S. F-16s to
Pakistan. Aziz said that unless the U.S. changes some of its
current provisions, Pakistan will stop payment for breach of
contract. Citing the importance of creating jobs in the
tribal areas, Aziz also pressed for inclusion of categories
347 and 348 in the Reconstruction Opportunity Zone
legislation. Acknowledging that this may not be possible,
Aziz agreed to do his part to re-energize bilateral
investment treaty talks as an alternative way to spur U.S.
investment in Pakistan. On the political front, Aziz
emphasized Pakistan's commitment to free and fair elections
and to using a holistic approach to the mitigate security and
development problems in the tribal areas. Aziz also
requested U.S. assistance in rebuilding Pakistan's "trust
deficit" with Afghanistan and in helping Pakistan meet its
growing energy needs. End Summary.

-------------------------------------------
F-16s: The U.S. Keeps Moving the Goal Posts
-------------------------------------------

2. (C) On September 14, Prime Minster Shaukat Aziz met with
Deputy Secretary of State John Negroponte, Assistant
Secretary for Central and South Asian Affairs Richard

SIPDIS
Boucher, Coordinator for Counterterrorism Dell Dailey, and
the Ambassador. Aziz asked for Negroponte's help in
enlisting "serious high level attention" to the terms of sale
of U.S. F-16s to Pakistan. Pakistan's Air Force feels that
U.S. requirements for mid-life upgrades outside of Pakistan
and crypto keys for the aircraft amount to new requirements
not envisioned in the original contract. "The goal posts have
moved," Aziz said, and if the U.S. does not reconsider its
requirements, Pakistan will consider the U.S. to be in breach
of contract and will discontinue payments. Aziz added that
Pakistan's Air Chief Marshal is traveling soon to Washington
to try to resolve the issue.

3. (C) Negroponte replied that he understood the long history
behind the F-16 sale and that the United States wants to make
this deal work -- perhaps by working with Pakistan on
determining which country would be acceptable to complete the
mid-life upgrades.

--------------------------------------------- ------
Negroponte: Investment Treaty More Feasible Than
Textile Exemptions to Generate Jobs in Tribal Areas
--------------------------------------------- ------

4. (C) Aziz thanked Negroponte for U.S. support of Pakistan's
multifaceted approach to mitigating the security and
development problems in the Federally Administered Tribal
Areas. Aziz said that the biggest return on dollars spent in
the tribal areas will be through the planned U.S.
Reconstruction Opportunity Zones (ROZs), which will provide
jobs for youth who would otherwise be vulnerable to the
influence of extremist rhetoric.

5. (C) Aziz welcomed progress toward introducing the
legislation to Congress, but said that the key to success
will be in attracting investors once the legislation is in
place. Inclusion of category 347/348 textiles (cotton
trousers) in the ROZ legislation would immediately attract
ROZ investment, Aziz said. Negroponte replied that inclusion
of 347 and 348 would be difficult, but it is still possible
to attract U.S. investment by finalizing a bilateral
investment treaty.

6. (C) Aziz said that Pakistan still has serious concerns
whether Pakistan can conclude a bilateral investment treaty
with the U.S., and that there is little political will to do
so right now. However, if the U.S. is interested in
re-starting talks, Pakistan is willing to do so. Aziz
suggested that the first step would be for the U.S. to set a
date for a video teleconference between U.S. and Pakistani
officials and, if progress is made, face-to-face negotiations

ISLAMABAD 00004086 002 OF 003


could resume.

------------------------------------------
Pakistan Committed to Fair Elections and
Making Tribal Areas More Secure, Developed
------------------------------------------

7. (C) Aziz said that the government is keen to ensure fair
elections, since no subsequent government would have the
moral authority to govern without them. The cabinet just
unanimously supported having the current assemblies elect the
next president, Aziz said, because the Pakistan Muslim League
believes that if Musharraf is re-elected their party will
receive a 10-15 percent boost at the polls in the upcoming
general elections. Aziz declined to go into detail about
whether/when President Musharraf intends to remove his
uniform, but said that he is hopeful that the Supreme Court
-- which has become "intrusive and aggressive" lately -- will
not interfere with upcoming elections and will let the ballot
box decide who should govern next. Negroponte said that the
U.S. is watching Pakistan's evolving political landscape with
great interest, and that we have an interest in Pakistan's
stability and political evolution.

8. (C) Aziz said that Pakistan is committed to eliminating
terrorism. "We do not want Pakistan to be used as a
sanctuary," Aziz said. The government has to strike a
balance in securing the tribal areas, he said. People who
live there respect the power of the gun, but they also need
to be provided with an alternative way to live so that young,
unemployed men are not influenced by militants. The
cabinet's recent decision to launch a crash project to build
schools in 10 target areas will be one way of addressing this
problem, Aziz said. The schools would provide free books,
meals and a monthly stipend, and will provide an alternative
for parents who otherwise would have no choice but to send
their children to madrassas (religious schools) that may be
teaching violent extremist rhetoric. Negroponte acknowledged
Pakistan's commitment to eliminating terrorism, and said that
the U.S. has learned a lot from Pakistan over the past
several years and would like to support Pakistan's holistic
approach to the problem. President Bush's biggest
frustration, Negroponte said, is that funding for the tribal
areas is not being delivered faster.

--------------------------------------------- --
Rebuilding the "Trust Deficit" With Afghanistan
--------------------------------------------- --

9. (C) Aziz told Negroponte that more could be done on the
Afghan side of the border to control the Taliban and al
Qaeda. Pakistan sees them as a threat because they are
looting Pakistan's own people. "We are engaging the enemy
head on," Aziz said, "but the game of hide and seek will
continue unless Afghan stakeholders emerge to help control
them." Afghanistan's skyrocketing drug production is the
biggest fuel for global terror, he added.

10. (C) While his government has good relations with
Afghanistan's President Karzai, they are frustrated at the
Afghan government's failure to take action against
"criminals." (Note: The "criminals" are presumably Brahamdagh
Bugti and Baloch Marri, two Baloch nationalists whom the GOP
would like extradited back to Pakistan. End Note.) They
have obtained fake Afghan passports and have traveled to
Delhi, India and back to Afghanistan, Aziz said. They are
now living in close proximity to Karzai's residence, Aziz
continued, and the Afghan government has yet to take action
against them. At this point, there is a clear need to
rebuild the "trust deficit" with Afghanistan, Aziz said.

--------------------------------------------- --------
Pakistan Wants Help In Meeting Growing Energy Demands
--------------------------------------------- --------

11. (C) Aziz said that demand for energy is growing quickly
and that Pakistan is struggling to meet those needs. One
source is Iran -- and Pakistan has just signed a memorandum
of understanding to increase its imported electricity from
Iran from 100 megawatts to 1,000 ("out of acute desparation,"

ISLAMABAD 00004086 003 OF 003


Aziz said, "because they are unreliable suppliers.").
Pakistan is also talking to Tajikistan about electicity
imports and Turkmenistan about gas. Aziz added that dealing
with Turkmenistan has been frustrating because the government
has not been able to give potential investors a clear idea of
the level of gas reserves in the country and because Gazprom
has discouraged outside interest in the reserves.

12. (C) Aziz asked that the U.S. consider assistance in
developing Pakistan's civlian nuclear capacity (a
civilian-run nuclear reactor could even be operated by a
foreign investor, he said). Pakistan's coal reserves also
need to be developed, he said. Negroponte replied that the
U.S. may be able to provide assistance in the way of clean
coal or coal gasification technology.

13. (U) The Deputy Secretary's staff has cleared this message.

PATTERSON

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