142183            2/20/2008 15:19          08ISLAMABAD745   Embassy Islamabad      CONFIDENTIAL            07ISLAMABAD4997|08ISLAMABAD226|08LAHORE84    "VZCZCXRO2657

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SIPDIS

SIPDIS

E.O. 12958: DECL: 01/31/2018

TAGS: PREL, PGOV, PHUM, PK

SUBJECT: ZARDARI EXAMINING A COALITION WITH NAWAZ SHARIF

REF: (A) ISLAMABAD 226 (B) 07 ISLAMABAD 4997 (C)

LAHORE 84

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

1.   (C)  Summary:   In the wake of the losses suffered by Musharraf's Pakistan Muslim League (PML) and the religious parties, scenarios for the next government are being debated. Bhutto widower Zardari described the Pakistan People's Party (PPP) as supporting a government of ""national unity,"" but he is leaning toward a coalition with Nawaz Sharif which excludes the leadership of the pro-government PML. Musharraf's advisors have tried to convince Zardari to exclude Nawaz Sharif in any PPP-led government, but Zardari argues he does not need a party that was resoundingly defeated and whose winners are (allegedly) defecting in droves.  Zardari argues that a government without Nawaz would be weak, short-lived, and ultimately damage the PPP.  Zardari claims he does not intend to force a confrontation with Musharraf nor allow Nawaz to do so.

2.  (C)  Zardari fears the GOP (""the agencies"") will attempt to split the PPP by backing Amin Faheem, who Zardari does not want to become Prime Minister.  Zardari floated the idea of allowing Pakistan Muslim League-Nawaz (PML-N) stalwart  Javed Hashmi - whom he claims is on the outs with Nawaz - or the head of the Pashtun nationalist Awami National Party (ANP), Asfandyar Wali Khan to become Prime Minister.  Ambassador emphasized the need to look toward the future, not to revisit old issues, and stressed our concerns about Nawaz's seeming desire to focus the new assembly on getting rid of President Musharraf instead of on the insurgency and the economy. Zardari candidly said he knew he had to deal with Musharraf because of Musharraf's influence with the military and his own lack of credibility with that institution.  End summary.

3.  (C)  Ambassador met alone with Bhutto widower and party head Asif Zardari February 20 for ninety minutes to discuss his plans for the PPP's participation in government.  Not surprisingly, Zardari sought to send the right messages to the USG about fighting terrorism,  PPP's long alliance with the U.S., and the need for a long-term strategy in the tribal areas.  As had NSA Tariq Aziz, he noted that Nawaz had benefited from a last-minute infusion of Saudi money and support, ostensibly taking votes away from the PPP (Ref A).

4.  (C)  Zardari had met February 19 with NSA Tariq Aziz and DG ISI General Nadeem Taj about the formation of the government.   Zardari said he wanted  a ""government of national unity"" with Nawaz Sharif, ANP, independents, and probably the Muttahida Quami Movement (MQM) party. Ambassador asked about Nawaz  Sharif's desire to unseat Musharraf.   Ambassador said the Embassy had good relations with Nawaz and his party, but we were concerned by recent public statements in which he seemed to look toward the past. This strategy would not solve Pakistan's critical economic challenges and the insurgency.

5.  (C)  Zardari said he would not accept Sharif's public conditions.  If Nawaz joined the PPP coalition, Zardari planned to meet Nawaz's demands on the judiciary by burying them in committee, which he thought might satisfy Nawaz.  He said that if the PPP left Nawaz out of its coalition, the government would be weak, would fail quickly, and Nawaz would win the next election.   Zardari said it was even possible they could agree to give the PML-N the Prime Minister position, but neither Nawaz nor his brother Shahbaz will be in the parliament.  One possible candidate, he mused, was PML-Q stalwart,  Javed Hashmi.   According to Zardari, Nawaz had assigned Hashmi to the closest races in hopes that he would lose.  ""What is Nawaz going to tell me,"" Zardari laughed, ""that he doesn't want Javed Hashmi to be Prime Minister?"" (Ref B)

6.  (C)  Another option, Zardari mused, was to give the PM post to the ANP leader, Asfandyar Wali Khan, who could be a compromise candidate.   Zardari said he was afraid the ""government forces"" (ISI, etc) would try and split the PPP and make Amin Faheem Prime Minister.  Zardari noted  Faheem has never done a day's work in his life,"" and that ""he had been in Dubai five times since Benazir's death for rest and recreation."" Benazir was fond of him and he was loyal, Zardari recounted, but Faheem was incompetent.   Zardari described Faheem as ""not happy"" with the Prime Minister post slipping away from him.   As reported reftel, Zardari said he would be more inclined toward PPP Punjab leader, Shah Mehmood Qureshi.

7.  (C)  Ambassador asked Zardari about rumors that he planned to put his sister Azra Pechuho - a respected physician with a reserved seat from Sindh - into the Prime Ministership until he could take the job himself.   Zardari replied Benazir had come up with this scheme at one point, but he knew it was not viable.

8.  (C)  Zardari said he was trying to convince Musharraf's advisors that Nawaz would be better off ""inside the tent"" than outside.  He said that he would not work with PML leader Pervaiz Elahi.  ""Why,"" he asked  ""should I include someone who has just had an embarrassing defeat at the polls when I can attract many of his assembly members to my side.  They are already calling us.""   Zardari added that he would have a hard time bringing along his party stalwarts if the PML were in the coalition.  Zardari said he was trying to convince Musharraf he would work with him.  He knew the Army would never see Musharraf humiliated, that Musharraf still had power within the Army, and he recognized his own reputation within the Army was not good.

9.  (C)  Comment:  Zardari is far less emotional than his late wife.  He seems both ruthless and practical but his political skills have not really been put to the test.   The process of forming a government will go through several, emotion-laden versions over the next few days.

PATTERSON

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