174700            10/22/2008 8:58          08ISLAMABAD3339 Embassy Islamabad      SECRET//NOFORN               "VZCZCXRO1234

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RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL"          "S E C R E T SECTION 01 OF 03 ISLAMABAD 003339

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E.O. 12958: DECL: 10/22/2018

TAGS: PGOV, PK, PREL, PTER

SUBJECT: ZARDARI EXPRESSES DELIGHT WITH CHINA VISIT, LOOKS

TO FRIENDS FOR HELP ON CHALLENGES

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

1. (S/NF) Summary: In a wide-ranging discussion with visiting SCA Assistant Secretary Boucher, President Zardari expressed complete satisfaction with his just concluded visit to China, reviewed planning for the Friends of Pakistan, and reiterated his determination to press the fight against extremism and the militancy in the tribal areas.  He linked his ability to sustain the counter-insurgency fight to progress on addressing Pakistan,s economic woes, however, and chastised the IMF for only wanting to &take away8 in its negotiations.  Zardari alerted Boucher to Iran's offer of concessional oil for Pakistan, an offer he did not believe he could refuse.  Boucher reminded him of the Deputy Secretary's recent caution not to allow Iran to gain a toehold in Pakistan.  End Summary.

2. (SBU) Visiting Assistant Secretary for South and Central Asian Affairs Richard Boucher called on President Zardari at the Aiwan-e-Sadr, October 18.  He was accompanied by the Ambassador, DCM (notetaker), and SCA Senior Advisor Hayden. Minister of Information Sherry Rehman joined Zardari.

China Visit

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3.  (S/NF) Zardari told Boucher his visit to China was &great.8  He confirmed that the Chinese had committed to building two additional nuclear power plants for Pakistan ) Chashma 3 and 4.  He noted, however, that construction would not start until the completion of the Chashma 2 reactor, which he anticipated would require an additional five years. Commenting that the Chinese were providing only old technology, Zardari said that Pakistan had no choice but to accept &junk.8  Boucher told Zardari we would examine the implications of the new nuclear deal vis--vis the International Atomic Energy Agency and let the Pakistanis know if we anticipated any problems with the deal.

4.  (S/NF) Zardari also told Boucher that the Chinese had committed to providing assistance to Pakistan,s security forces.  Arguing that China was Pakistan,s only affordable option for needed security items, Zardari said the government plans to acquire armored vehicles, body armor, and small arms from China.  The Chinese also plan to provide large scanners to Pakistan to help check the contents of trucks.  Boucher and the Ambassador reminded Zardari that the U.S. is working with the Frontier Corps on a comprehensive train and equip program.  (Comment: Embassy is preparing a letter to Zardari reviewing the details of the U.S. government's extensive support to the Frontier Corps.  End Comment)

5.  (C) Although silent on the question of possible Chinese balance of payments support to Pakistan, Zardari lauded Chinese &out-of-box8 thinking about business investment in Pakistan.  As an example, he described a project to build a dam that would irrigate land that Zardari would then grant to women, who would grow flowers on the land for export to the Emirates.  The Chinese will manage the marketing for the project.

Friends of Pakistan

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6.  (C) Zardari confirmed that he wants to formally change the name of the group to Friends of Democratic Pakistan.  In response to Boucher's question about the Saudi position, he provided Boucher with a convoluted description of his discussions with Prince Turki bin Abdullah, who requested Zardari,s participation in the Interfaith Dialogue that the King is organizing in New York.  In exchange, Zardari expects that the Saudis will be full participants in the Friends group (see septel).

7.  (C) As for other possible additions to the Friends group, Boucher suggested that Spain and the Scandinavians might be good additions.  Zardari assented, and asked Boucher if the U.S. would support Libya's inclusion, to which Boucher agreed.  Zardari suggested to Boucher that he would like China added to the steering group.  Boucher was open to the idea but noted that the steering committee needed to remain small.

8.  (C) Boucher reminded Zardari that the Friends group is not a &checkbook8 organization.  He noted that we need to sit with the steering group and consider issues like membership and the role of the UN.  We are hoping that the UN will help drive the process by providing a secretariat function.  After the next meeting in Abu Dhabi, the U.S. vision would be to launch a series of experts meeting that would consider Pakistani policies and initiatives in a sector-by-sector review.

9.  (S/NF) In an aside, Zardari mentioned that Iran has offered to provide Pakistan with concessional oil.  How could he go to the National Assembly and tell them Iran had offered the assistance and Pakistan had turned it down, he asked rhetorically.  Boucher reminded him of Ambassador Haqqani,s

recent conversation on this issue with Deputy Secretary Negroponte in which the Deputy cautioned against providing Iran with a toehold in Pakistan.

Counter-Insurgency

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10.  (S) Zardari stressed repeatedly his determination to carry through with the fight against extremism and militancy. &I don't believe in talking to the Taliban,8 he said. &We won't do it on our side of the border.8  He noted that he has built a good relationship with the military and praised the leadership of Chief of Army Staff Kayani, ISI Director General Pasha, and Frontier Corps General Tariq Khan.  To challenge the fundamentalists, however, Zardari needs to gain the confidence of the Army, the National Assembly, and the people.  To do that, he believes he must address the economic situation and demonstrate that he can deliver on his economic promises.  Zardari chastised the IMF for just wanting to &take away8 from Pakistan in the negotiations over a bailout package.

11.  (C) In response to Boucher,s question about the National Assembly debate on Pakistan,s counter-insurgency strategy, Zardari expressed confidence that he would succeed in winning from the Assembly a consensus resolution on the government,s policy.  (N.B.: A day earlier, both National Security Advisor Durrani and Information Minister Rehman expressed skepticism that an acceptable consensus resolution was achievable.)  Nawaz Sharif,s Pakistan Muslim League is offering no help on Pakistan,s counter-terrorism policy, Zardari opined.  Rehman added that Nawaz and Chaudhry Nisar have a &good cop/bad cop8 routine.  Nawaz says good things about his party's commitment to cooperation, but Nisar does the opposite in the Assembly.

12. (C) Describing his legislative strategy going forward, Zardari said that proposed revisions to the Frontier Crimes Regulations (FCR) are nearly ready to bring to the Assembly. He anticipates that the extension of the Political Parties Act to the Federally Administered Tribal Areas (permitting political parties to organize and campaign in the tribal areas under the same regulations as apply to the rest of the country) would be introduced within three months.  Zardari also described a de-radicalization program he plans on introducing in the Assembly.  Zardari will propose a criminal regime for &small fries8 that would sentence them to seven years in a &special prison8 to be constructed for handling reforming militants.  While in the prison, the militants would receive job training and would receive lenient treatment, including conjugal rights.  &I won't stop pressing,8 Zardari declared, &either he (the militant) dies or he takes the option.8  Anyone caught a second time after going through the reform program will be sent to prison for life, Zardari declared.

13.  (S) Turning to the fighting in Bajaur, Zardari assertedthat the government needs a mechanism to get compensation into the hands of the victims of the fighting, suggesting that he thought one billion U.S. dollars might be sufficient. Responding that we anticipate the financial requirement would be less than that, Boucher and the Ambassador assured Zardari we are looking for ways that we can help.  Zardari asked if the Friends of Democratic Pakistan might be of help, but Boucher reiterated that such assistance would likely fall outside the mandate of the group.  Zardari then suggested that the Saudis could provide the necessary funds, noting that &the problem leads back to them.8  Rehman interjected that the National Assembly members were asking how the militants were getting their funds and raised the flow of funds from the Gulf to extremists in Pakistan.  (DCM observed that efforts to stop funding terrorist groups were not helped by Pakistan,s obstruction of work in the UN 1267 Committee, mentioning specifically the hold on Katrina.  Zardari expressed surprise that Pakistan was playing such a role, and Rehman made note of the issue.)

14.  (S) As for the Pakistan-Afghanistan mini-jirga scheduled for Islamabad in a week's time, Zardari expressed the hope that it will re-occupy political space in the tribal areas. He expressed the hope that the jirga could re-consolidate the government,s position among the majority of the tribes, noting that the government,s greatest challenge in rooting out the extremists is when they are able to shelter among the population in the area.  As for leadership of the Pakistani delegation to the jirga, Sherry Rehman noted that Asfandyar Wali Khan, who had been proposed as the senior Pakistani, will not be back in Pakistan in time for the meeting.  She suggested that Asfandyar is in &bad shape8 following the terrorist attack on his home near Charsadda.  Zardari indicated separately that he is helping Asfandyar relocate his family to Dubai and would provide him with an armored vehicle when he returns to Pakistan.

Friends: the U.S. and the UK

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15.  (C) Zardari mused about the need to reach out to the new U.S. Administration after the elections and suggested that he would like to organize a &road show8 to visit the U.S. and explain Pakistan,s situation.  Boucher suggested that such an effort could emphasize U.S.-Pakistani cooperation on the border coordination centers, the Joint Military Operations Coordination Center, and the Frontier Corps train and equip program.

16.  (S/NF) As for the UK, Zardari expressed some concern that their support was getting wobbly.  He believes that their views reflect their conviction that Zardari would fail and would be replaced by Nawaz Sharif.  Boucher thought that the concerns are more a reflection of attitude than policy. If Zardari achieves results, he asserted, then the British will come around.

Comment

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17. (S/NF) Zardari was clearly buoyed by his visit to China and in good spirits as he looks ahead to the serious challenges that confront him and the country.  He ran through numerous ideas for new initiatives to deal with the political, economic, and security problems, nearly all of which come with high price tags.  In that regard, Zardari continues to express considerable optimism that, ultimately, his friends will ride to his rescue despite little evidence to support that view.

PATTERSON