27677    2/25/2005 13:38    05NEWDELHI1480    Embassy New Delhi    CONFIDENTIAL    05ISLAMABAD2264|05NEWDELHI1113|05NEWDELHI1282    "This record is a partial extract of the original cable. The full text of the original cable is not available.

"    "C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 001480

SIPDIS

E.O. 12958: DECL: 02/25/2015TAGS: PREL, ETTC, ECON, IN, PK, INDO-PAKSUBJECT: BAGLIHAR, OTHER J&K HYDEL PROJECTS COMPLICATE INDO-PAK CALCULUS

REF: A. NEW DELHI 1282B. ISLAMABAD 2264C. NEW DELHI 1113

Classified By: A/DCM Geoff Pyatt for Reasons 1.4 (B, D)

1.  (C) Summary: The Indian government recently offered newevidence of its benign intentions for the Baglihar hydelproject by noting that, if its dam were used to inundatePakistan, one of its own existing downriver projects would bethe first casualty.  Although the MEA continues to exudeconfidence the Baglihar project complies with India's treatyobligations, the GOI has been curiously unwilling to sharewith us any supporting evidence to prove their position.This is in stark contrast to the Pakistanis, who have begun amajor public relations effort here.  Meanwhile, the Bagliharissue continues to move slowly on three fronts: itsconstruction, direct discussions between Indian and Pakistaniofficials, and the dispute resolution process under the IndusWater Treaty (IWT) umbrella.  The World Bank's IWTobligations are not as simple or straightforward as somecommentators had originally suggested.  The new item in thismix is a handful of other planned hydel projects in J&K, someof which may conflict with proposed Pakistani projects.  TheGOI may have to brace itself for more treaty challenges,although both sides continue to respect the IWT and seemcontent to let the World Bank take the lead in resolving theissue.  End Summary.

GOI: Salal Dam Guarantees Good Behavior on Baglihar--------------------------------------------- ------

2.  (C) In a little noticed February 16 remark, ForeignSecretary Shyam Saran provided further insight into why the

SIPDISGOI believes it is right on Baglihar, commenting that ifIndia ""had any intention of either flooding Pakistan ordenying water to Pakistan, the first installation that woulddisappear would be the Salal project,"" which is downriver onthe Chenab from the Baglihar site.  Calling the 400 MW Salalproject ""very important to India and the state of J&K,"" hesaid it was unrealistic to think that New Delhi would ""harmitself in order to have the capability to hurt Pakistan.""Saran concluded that the IWT was signed precisely to preventsuch suspicions.

Opaque GOI, Active GOP----------------------

3.  (C) Our repeated attempts to obtain India's views onPakistan's January 18 World Bank petition have met withstonewalling from the GOI.  The Indian Water Secretarycancelled a meeting with the DCM, and the Indian Indus WaterCommissioner continues to deflect calls to the MEA.  Incontrast, the Pakistani High Commission sent us an eight-pagefact sheet outlining their view of how the issue has evolvedsince New Delhi first informed Islamabad of its intentions tobuild the project in 1992.

Baglihar Construction Proceeding ...------------------------------------

4.  (C) According to the Indian press, work on Baglihar isaccelerating, with the first of two 450 MW phases expected tobe completed in early 2006 and the second in the 2007-8timeframe.  New Delhi continues to brush aside Islamabad'scalls to halt construction of the project -- slated to be thelargest power generator in J&K -- until after the IWT processis complete.  MEA Joint Secretary Arun K. Singh hasrepeatedly pointed out that it put the Tulbul NavigationProject/Wullar Barrage on hold in 1987, and subsequent GOPunwillingness negotiate essentially killed it.  Eight roundsof bilateral talks since then have produced no results.

... As are the IWT Process and Direct Talks-------------------------------------------

5.  (C) The Pakistani High Commission on February 23 pointedout to us that Islamabad offered to continue bilateraldiscussions while the IWT process continues -- and the issuewas discussed during Natwar Singh's recent trip to Pakistan(Refs A and B) -- but the GOP would not put the disputeresolution process on hold because of its fear of being facedwith a fait accompli, saying ""the Indians continue to build,we will continue with the World Bank.""

World Bank Clarifies Its Role-----------------------------

6.  (C) According to the text of the IWT, the Bank is not a""guarantor"" of the Treaty, but it does have ongoingresponsibilities.  On issues that the two governments cannotresolve bilaterally, the Bank is to appoint a ""neutralexpert"" (vice mediator or arbitrator) to try to adjudicatethe ""differences.""  The Bank is to consult both parties inselecting the neutral expert and it would also manage thetrust fund to cover the expert's expenses.

7.  (C) If differences go beyond the expert's mandate ofdetermining treaty compliance, the Bank would then help toestablish an arbitration board to address what would betermed ""the dispute.""  According to the IWT, the World BankPresident and other eminent individuals (such as the UNSecretary-General and the Chief Justices of the US and UK)

SIPDISwould be asked to select three members of a seven-memberindependent arbitration court, with New Delhi and Islamabadeach appointing two representatives of their own.Separately, a World Bank official in New Delhi toldD/PolCouns recently that this would be the first test of theIWT and that Pakistan ""seems to have taken all the necessarysteps"" to initiate the dispute resolution process.  The Bankofficial commented that despite the confidence we have seenamong our GOI interlocutors, ""India may not want to be sobold.""

Kishanganga/Neelum Dam on the Table ...---------------------------------------

8.  (C) Meeting on February 10-14 in New Delhi, Indian andPakistani Indus Water Commissioners discussed GOP technicalconcerns regarding the height and water diversion of anotherproposed dam on the Kishanganga (also called Neelum) River;although this represented an extension of the scheduledtwo-day meeting, the only outcome was an agreement tocontinue the dialogue.  FM Natwar Singh also discussed theissue during his February 15-17 Islamabad trip (Refs A andB).  Compared to Baglihar, however, the GOI would reportedlyhave difficulty presenting the GOP with a fait accompli, asthe Kishanganga work site is snowed in between November andMay, which allows more than two more months of negotiationsbefore construction could resume.  The GOI would presumablywant to complete Kishanganga before Pakistan can begin workon its own 969 MW Neelum-Jhellum Dam Project, because if thePakistani dam is built first, IWT provisions appear toprotect the downstream Pakistani project from upstream Indiandiversions or ponding.

... And Several Projects are On the Drawing Board--------------------------------------------- ----

9.  (C) Our World Bank contact added that even if India andPakistan could resolve the Baglihar and Kishanganga projects,there are several more hydroelectric dams planned for IndianKashmir that might be questioned under the IWT.  He tickedoff the recently begun Dul Hasti Dam, and the proposedBurser, Pakul Dul, and Sawalkote projects -- all on the orderof 1000 MW -- as significant undertakings in varying stagesof planning that might be questioned as to their IWTcompliance.

Comment-------10.  (C) GOI reluctance to discuss Baglihar and other powerprojects may reflect their supreme confidence, or perhapsconcern that their case is not as firmly grounded as theyhave led us to believe.  The new item is the potential forthe Dul Hasti, Burser, Pakul Dul, and Sawalkote hydelprojects to exacerbate Pakistani anxiety over access towater.  As a Pakistani diplomat recently commented to us,""There are no doves and there are no moderates on waterissues.""  The GOI, in its desire to produce power for J&Kthat fulfills the economic aspirations of Kashmiris anddemonstrates the effectiveness of the elected government, maynot fully appreciate -- or may simply not care about --Pakistani concerns.  The saving grace in this politicallycharged impasse is the IWT.  India and Pakistan seem contentto have the World Bank take the lead in resolving this issue,which should seriously reduce the likelihood of Islamabad'sworst case scenario, that India's dams in J&K have thepotential to destroy the peace process or even to lead to war(Ref B).  We and our Pakistan-watching contacts (Ref C) hopethat the external judgment of either the neutral expert orthe arbitration court will provide the political cover forwhichever side eventually needs to climb down.MULFORD"