134295            12/14/2007 4:56          07ISLAMABAD5266 Embassy Islamabad      CONFIDENTIAL            07ISLAMABAD4369|07ISLAMABAD4817  "VZCZCXRO1556

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SIPDIS

SIPDIS

E.O. 12958: DECL: 12/14/2017

TAGS: PINR, PK, PREL, PTER

SUBJECT: PAKISTAN: FIXING COALITION SUPPORT FUNDING

REF: A. ISLAMABAD 4817

B. ISLAMABAD 4369

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

1. (U) This is an action request, see Para 12.

2. (C)  SUMMARY.  Since 2002, the USG has reimbursed Pakistan over 5.3 billion USD for support to U.S. operations using Coalition Support Funds (CSF).  When pending claims are processed, that figure will likely exceed 5.6 billion USD. The CSF authorizing legislation was written soon after 9/11; six years down the road, we need Pakistan to more vigorously engage in the war on terror, but CSF is not working the way it should.  CSF is not reaching those parts of the GoP that are shouldering the load in GWOT operations.  Two clear examples of the problem are helicopter readiness and medical support to the Frontier Corps.  The readiness of Pakistan's helicopter fleet is poor.  Despite giving the GoP 55 USD million for helicopter operations over seven months, only 2 to 6 Pakistani Cobras are fully mission capable at a time they desperately need air power to fight spreading militancy. Additionally, we have processed or will process reimbursement requests for 100 million USD over the year to support medical operations, but the Frontier Corps still does not receive basic medevac support.  Another consequence of the current system is political.  It fuels the internal argument that the USG is ""paying"" Pakistan to fight a U.S. war - this at a time when the Pakistanis need to accept the direct threat to their own security and sovereignty posed by al-Qaida, Taliban and extremist forces.

3.  (C)  Post has worked extensively with the GoP to increase GoP transparency and accountability.  What we have discovered is that we are receiving reimbursement requests for barbed wire and air defense radar systems that have no or marginal impact on the GWOT.  We recognize the legal and political sensitivities involved in developing a new approach, but the program, as it is currently being implemented, simply is not meeting U.S. or Pakistan counter-terrorism objectives.  This message outlines several ways forward.  In the meantime, DOD or CENTCOM should undertake an audit or program review of CSF.  END SUMMARY.

TARGETING CSF FUNDING TOWARD PAKISTAN AND U.S. STRATEGIC GOALS

4. (C) U.S. Public Law 109-289 (2206) authorizes CSF to reimburse Pakistan for logistical, military and other support provided to U.S. military operations.  Under this authorization, the U.S. has reimbursed Pakistan 5.3 billion USD since 2002.  When pending claims are processed, the total CSF reimbursement to Pakistan will exceed 5.6 billion USD. Pakistan receives nearly 90 percent of total CSF worldwide. While the December 8, 2003 guidance provided by the Office of the Secretary of Defense (OSD) on parameters for reimbursements is broad, there have been multiple instances in which Post is confident funds have been diverted and that reimbursed claims figures have been seriously inflated.  A few examples:

-- HELICOPTER READINESS.  Pakistan received 55 million USD for helicopter operations from July 2006 to February 2007; however, Post estimates that as few as 3 Cobra Helicopters were fully mission capable as recently as 10 weeks ago.  Post is confident Army Aviation Command never received the 55 million.

-- MEDEVAC ASSISTANCE TO FRONTIER CORPS.  The Pakistan Army claimed 99 million USD over past 12 months for medical operations and the U.S. has paid or is in process of paying all/all submitted medical claims.   Yet, despite providing this plus fully funding 235 million USD CSF lease assistance for 26 new Bell 412 helicopters, the Inspector General of the Frontier Corps has repeatedly requested U.S. assistance in providing assets for medevac, obviously unaware of the resources the U.S. has provided.

--RADAR MAINTENANCE:  Between August 2006 and July 2007, Pakistan submitted claims for almost 70 million USD in ADA Radar Maintenance, although there is no enemy air threat related to the war on terror.

--BARBED WIRE:  Between August 2006 and July 2007, we ISLAMABAD 00005266  002 OF 002 received a claim for 26 million USD in barbed wire and pickets.  While these items are no doubt helpful in protecting outposts, the claim figures are highly suspect.

5. (C)  Ambassador, the Office of Defense Representative and DOD officials have repeatedly raised CSF disbursement and other problems with the Prime Minister, Ministry of Finance and key military officials but have not received satisfactory responses.  In fact, recent correspondence from Pakistan leadership argues for additional funding to support increased operations.

6. (C) CSF reimbursement funds go directly into Pakistan,s general treasury -- from there we have no visibility on their

final destination or application.  And we are not alone - based on our conversations with GoP officials, from President Musharraf down to the average Pakistani private, no one in Pakistan seems to have a clear grasp of the amount of US military reimbursement assistance actually provided.

7.  (C)  The CSF authorization legislation was drafted soon after 9/11.  Six years down the road, we still need Pakistan to engage more vigorously in the fight against extremism, but it is clear we also need to do a better job of making sure our monies are targeted to meet our counter-terrorism objectives.

POTENTIAL APPROACHES TO CSF REFORM

8. (C) Potential options to address CSF issues include the

following:

(1) Stop approving Pakistan's CSF reimbursement requests until we receive adequate assurances on disbursement;

(2) Earmark CSF monies for specific areas: maintenance, support, etc.;

(3) Create a CSF ""trust fund"" that would allow the USG to

control reimbursement and to obligate some funds for specific needs; or

(4) Convert CSF into a direct cash transfer program.

9.  (C)  Option 1 would lead to a major political clash and damage our military to military relationship, just as we have the potential for greater cooperation under Chief of Army Staff General Kayani's leadership.  This would undermine the very purpose of CSF--to encourage the GoP to continue fighting militant extremism.  The Taliban, al Qaida and Islamic extremists represent a clear and growing danger to U.S. and Pakistani security and to regional stability.  As allies with forces in the region, we have a responsibility to strengthen and focus our assistance to improve their security forces' capabilities.

10.  (C) We understand DOD has determined Options 2, 3 and 4 would require asking Congress to amend the authorizing legislation.  Post could attempt to persuade Pakistan to concur with establishment of some form of ""trust"" mechanism - pointing out the alternative may be a severe reduction or loss of funding if Congress continues to see insufficient transparency and accountability.  In any event, a new approach is urgently required. We believe some variation of Options 3 and 4, which allow the USG to earmark at least some CSF monies for those Pakistani military elements of vital interest to us (helicopters, special forces and Frontier Corps), is the most logical and efficient approach.

CSF AUDIT/PROGRAM REVIEW

11. (C) Post repeats that we do not have visibility over the destination of CSF funds.  Accordingly, Post would welcome an audit or program review of the CSF process by CENTCOM or by DOD.

ACTION REQUEST

12.  (C)  Action Request:  Post would appreciate a front-channel response to the options proposed in para 8 and the proposal for an audit/review.

PATTERSON

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