172648    10/6/2008 10:20    08ISLAMABAD3186    Embassy Islamabad    CONFIDENTIAL//NOFORN        "VZCZCXRO9135 OO RUEHLH RUEHPW DE RUEHIL #3186/01 2801020 ZNY CCCCC ZZH O 061020Z OCT 08 FM AMEMBASSY ISLAMABAD TO RUEHC/SECSTATE WASHDC IMMEDIATE 9140 INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 4996 RUEHBUL/AMEMBASSY KABUL PRIORITY 9215 RUEHLO/AMEMBASSY LONDON PRIORITY 8809 RUEHNE/AMEMBASSY NEW DELHI PRIORITY 3855 RUEHRH/AMEMBASSY RIYADH PRIORITY 5884 RUEHKP/AMCONSUL KARACHI PRIORITY 0418 RUEHLH/AMCONSUL LAHORE PRIORITY 6160 RUEHPW/AMCONSUL PESHAWAR PRIORITY 4987 RUEKJCS/SECDEF WASHINGTON DC PRIORITY RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL PRIORITY RHWSMRC/USCINCCENT MACDILL AFB FL PRIORITY RUEAIIA/CIA WASHDC PRIORITY"    "C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 003186

NOFORN SIPDIS

E.O. 12958: DECL: 08/04/2018 TAGS: PREL, PTER, PGOV, PK SUBJECT: TOUR D'HORIZON WITH ZARDARI

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

1. (C)  Summary:  In a discursive conversation with President Zardari on October 2, Ambassador again encouraged the appointment of a czar for the Federally Administered Tribal Areas (FATA).  She stressed that the federal and provincial governments were not working well together to confront the issues of relief and development.  Zardari said he was inclined to retain Northwest Frontier Province Governor Owais Ghani but Awami National Party (ANP) leader Asfundyar Wali Khan had been ""a disappointment.""  Zardari advised he would soon be appointing businessman Shaukat Tarin as Minister of Finance; Finance Minister Naveed Qamar would then be solely in charge of privatization.  Zardari repeated his now familiar request for financial help from Saudi Arabia, the UAE, and Kuwait, including asking for deposits in the Central Bank and concessional oil sales.  Zardari again recounted the significant investment opportunities in steel and cement in Pakistan.  Zardari noted he would be willing to ""take the political heat"" of a cross-border raid if a really important high value target was captured.  He was appreciative of his briefings and meetings in New York.

2.  (C)  Zardari was particularly pleased that ISI chief General Nadeem Taj had been reassigned.  ""See, I told you,"" he said, ""that we would begin to make progress on ISI and political consolidation.""  He indicated he would not confront Nawaz Sharif's control of the Punjab government immediately because it would cause problems with his management of the federal government.  But he was certain the Sharifs were trying to undermine the Pakistan People's Party in the Punjab.

3. (C)  On October 1, Prime Minister Gilani asked Ambassador for a pull aside at a reception.  He asked her to convey to President Bush that ""he had kept his word"" at the Oval office meeting.  His government was fighting terrorism in Bajaur and Swat and would continue to do so.  He wanted to be clear that ""it was Pakistan's war.""  End summary.

4.  (C)  Ambassador called on President Asif Zardari October 2.  Zardari was pleased with his meetings in the U.S. Zardari was disappointed, however, that the Saudis had not attended the Friends of Pakistan meeting.  He said perhaps the GOP had made a mistake in not being the first to invite the Saudis.  He noted that Pakistan needed American help in obtaining Central Bank deposits from the Arabs, as well as oil at less than market prices.  Ambassador asked about progress on the government's economic plan.  Zardari said he was replacing Finance Minister Naveed Qamar with Shaukat Tarin, a former head of the Habib Bank and well respected for overseeing successful privatization efforts.  Zardari revealed he was going to Saudi Arabia soon, as well as to China, where he would request financial assistance.  Zardari was eager to participate in the next ""Friends"" meeting in the UAE.

5.  (C)  Ambassador pressed for the assignment of a FATA Czar, to serve the coordinating role that General Nadeem had undertaken during the earthquake relief.  Zardari said he would discuss this with Chief of Army Staff (COAS) General Kayani and ANP leader Asfundyar Wali Khan, whom he described as ""a disappointment.""  Ambassador said the federal government was not working well with the provincial government and there was not a responsible point of contact to address such issues as relief for internally displaced persons.  Zardari said Northwest Frontier Province Governor Ghani ""could do the job.""  Despite his initial reservations about the Ghani as a ""Musharraf man,"" Zardari was impressed with him.  Ambassador said we had worked well with Ghani but we needed someone to focus more on project implementation.

6.  (C)  Zardari said he would soon be seeking military assistance from the French, particularly a new attack helicopter, at below market prices.  Ambassador reminded him that we were providing Cobras under the FMF program.  She asked if they were going to buy more Alouettes.  Ambassador pointed out that the U.S. was the only country providing military assistance to Pakistan - although some countries did offer favorable payment terms - and this meant that U.S. military assistance was indirectly subsidizing commercial arms purchases from other countries.  Zardari said the French were trying to sell Mirages to Pakistan, but he did not need them since Pakistan had F-16s.  He was going to try to secure armored personnel carriers from the UK.  (Note: It was clear that we need to provide more details on our military assistance programs.  End note.)

7.  (C)  Zardari mused about his desire to retain former Musharraf national security advisor Tariq Aziz to handle the India account, possibly by appointing him ambassador to India.  But Zardari said he had found COAS Kayani resistant to this proposal.  Ambassador expressed surprise: Tariq Aziz and Kayani had always seemed to have gotten along well. Zardari replied that Tariq Aziz used to be the ""big boss"" as the advisor closest to Musharraf but now Kayani was on top and reluctant to relinquish that position.  Ambassador suggested NSA Durrani would also be an effective player on the India account.  The conversation moved into a discussion of Indian activities in Balochistan, with Zardari saying he knew Indian intelligence was operating in Balochistan, and it had to stop.  Zardari said he was working with the tribes and reaching out to the Bughtis to reduce tensions.

8.  (C)  Ambassador asked if Zardari was going to move against the Pakistan Muslim League-Nawaz in the Punjab and bring down Shahbaz Sharif's government.  Zardari said he was not - implying at least not immediately.  (Plans to do so are already well advanced as Embassy will be reporting septel.) He was afraid the Sharifs would turn on him immediately in the National Assembly.  Zardari (grinning) said he was going to invite Nawaz to reopen a dialogue with him.  He noted that Nawaz has been silent on terrorism and had been conveniently out of town after the Marriott bombing.

9. (C)  Comment:  In press interviews October 6, Zardari ambitiously announced he wanted USD 100 billion in foreign aid from Pakistan's friends.  We expect Zardari and Gilani to announce additional cabinet ministers and perhaps some ministerial swaps this week, after the joint session of parliament that Zardari called for October 8 to address the terrorism threat.  According to the media, Zardari will be in China October 14-24; PM Gilani will join him for celebrations of the Asia-Europe Summit on October 23-24; COAS Kayani just returned from a counterparts visit in Beijing.  Embassy will follow up to offer Zardari a detailed briefing on current U.S. military assistance programs in Pakistan.  End comment. PATTERSON "?