Viewing cable 06NEWDELHI2231

06NEWDELHI22312006-03-31 15:07:00 2011-08-30 01:44:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy New Delhi
DE RUEHNE #2231/01 0901507
O 311507Z MAR 06
E.O. 12958: N/A 
REF: STATE 47580 
¶1.  (SBU) Senator Hagel, your delegation's 8-12 April visit 
to India provides a significant opportunity to assess the 
accelerating transformation of the India-US relationship 
following President Bush's historic March 1-3 meeting and 
help shape the next phase of this growing partnership.  After 
forty years of mutual indifference during the Cold War, the 
US and India are making up for lost time.  Twenty million 
Indians are among the richest consumers in the world, while 
200 million more consume like Americans.  As India's economy 
expands, hundreds of millions more will seek out imported US 
goods and services.  As a result, we aim to double trade in 
just the next three years.  New nonstop flights between the 
US and India are proliferating, and visa issuances to Indians 
have skyrocketed.  India is now the leading non-US 
destination for NIH research grants, and the largest supplier 
of foreign students in the US.  Our militaries are moving 
ever closer together with sophisticated joint exercises, 
shared research and development, and possible important 
aircraft and other acquisitions that could create thousands 
of American jobs. The unique relationship that has taken 
form, built on the personal ties of two million Americans of 
Indian descent, booming business links between American and 
Indian firms, shared values of democracy and tolerance, and 
the newly-forged links of nuclear, space, agricultural, and 
high-tech cooperation, will become one of America's most 
significant partnerships for the 21st century. 
¶2.  (SBU) India and the US are beginning to coordinate our 
foreign policies for the first time, with joint efforts to 
sustain Afghan democracy, defeat the Maoists in Nepal and 
spread the culture and values of democracy throughout the 
world.  This reflects a cultural transformation that is 
taking place here. America, viewed for decades as a Cold War 
bogie man by suspicious leftist elites, is now increasingly 
seen as India's natural strategic partner and a land of vast 
opportunity and potential.  Reflecting this new mood, the GOI 
is working hard to advance the Prime Minister's vision of an 
Indo-Pak relationship is entangled from old territorial 
disputes, despite the substantial irritant of Pakistan-based 
terrorism.  Problems remain -- a vocal froup of Communist 
parliamentarians (whose support keeps the PM's coalition in 
power) oppose globalization, free trade, and the US-India 
relationship, to include a joint strategy on curbing Iran's 
WMD program.  In addition, the UPA government continues to 
manage an unwieldy and fractious governing coalition even as 
it fends off challenges from the BJP, Leftists, and regional 
parties.  The common threat that the US and India face from 
terrorism has given impetus for growing cooperation on 
intelligence-sharing and cooperative counter-terrorism 
efforts but this field has greater potential than we have yet 
¶3.  (SBU) Overall trend lines are very positive, and India is 
a country experiencing newly found yet sustained dynamism 
that has breathed hope into the lives of many of its 
citizens.  Your visit here can help address the concerns of 
some Indians about the expanding relationship with the United 
States even as you help us to educate others about the clear 
benefits of partnership with the US.  By and large, recent 
polls such as those by the Pew Research Center show that 70 
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percent of Indians view the US favorably, and increasingly 
appreciate our language, culture, and values.  A natural 
partnership that should have been forged in 1947 is finally 
taking flight today.  Its creation will enhance American 
security and prosperity for decades to come.  End Summary. 
President Bush's Visit to India 
¶4.  (SBU) President Bush's landmark March 1-3 visit to India 
heralded a new dynamic era of a strong US-India partnership 
based on common objectives and shared values.  "Our two great 
democracies are now united by opportunities that can lift our 
people, and by threats that can bring down all our progress," 
the President declared at his historic March 3 speech in 
front of the Old Fort in New Delhi.  The convivial relations 
and substantive dialogue between the President and Prime 
Minister Singh reinforced a transformed and energized 
strategic partnership that will help make the world a safer, 
more stable place, as the US and India work together to fight 
terrorism and promote democratic values worldwide. 
Heavy Focus on Substantive Achievements 
¶5.  (SBU) President Bush's visit brought many 
accomplishments, from the civil nuclear initiative to 
agreement to establish a US consulate in Hyderabad.  On the 
economic front, we agreed to intensify efforts to increase 
trade and investment, building on the US role as India's 
number one bilateral (the EU is a bigger trade partner) trade 
and investment partner, and India's status as a growing 
destination for US exports.  Seeking to bolster global energy 
security, the US welcomed India's participation in a wide 
range of international activities to develop cutting-edge, 
environmentally friendly technology that could help meet the 
world's energy needs.  As part of the energy initiative, 
India released its civil nuclear separation plan, which will 
make its entire civil nuclear program transparent for the 
first time.  The two leaders also reaffirmed the importance 
of counter-terrorism cooperation and enhanced joint defense 
activities, including a Maritime Cooperation Framework that 
will help prevent transnational crimes like piracy and 
mitigate the effects of natural disasters.  Pointing to the 
vast potential for collaboration between the countries, the 
President announced, "The partnership between our free 
nations has the power to transform the world." 
Civil Nuclear Initiative 
¶6.  (SBU) President Bush and Prime Minister Singh announced 
that they had reached an historic understanding on India's 
proposed separation of civil and military nuclear facilities 
and programs, one element of the US-India civil nuclear 
cooperation initiative that the two announced in July 2005. 
This initiative removes an important source of discord that 
constrained the US-Indian bilateral relationship for over 
thirty years and promises a profound transformation in the 
way the United States and India will partner to promote 
democracy, stability, prosperity, and peace in the region and 
globally.  India's separation of its civil nuclear facilities 
and programs, including a commitment to negotiate permanent 
safeguards and an Additional Protocol with the IAEA, are 
significant nonproliferation gains.  This initiative will 
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also open up US-India trade and investment in nuclear energy 
for the first time in three decades, while helping meet 
India's energy needs in an environmentally friendly manner 
and reducing global competition for scarce hydrocarbons.  As 
you know, Secretary Rice and Under Secretaries Burns and 
Joseph have briefed Congress about the proposal to amend 
legislation and the Administration will encourage partners in 
the Nuclear Suppliers Group (NSG) to adjust guidelines, which 
will allow for full civil nuclear commerce with India. 
¶7.  (SBU) We also continue our path finding cooperation in 
other areas of energy.  The US-India Energy Dialogue was 
initiated by President George W. Bush and Indian Prime 
Minister Manmohan Singh in September 2004 and launched by US 
Secretary of Energy Samuel Bodman and India Deputy Chairman 
of Planning Commission Dr. Montek Singh Ahluwalia in May 
¶2005.  The Energy Dialogue has five Working Groups -- 
Civilian Nuclear Energy; Oil and Gas; Coal; Power and Energy 
Efficiency; and New Technology and Renewable Energy -- each 
of which has held several meetings since the Bush-Singh 
summit in July 2005.  The Dialogue aims at our mutual 
interests in promoting government and private sector 
cooperation to advance the security, reliability, and 
environmental-soundness of world energy supplies and in 
supporting India's sustainable economic growth through energy 
sector reforms and more efficient utilization and expanded 
production and consumption of energy resources.  A few of the 
many activities include: the Civil Nuclear Energy workshop in 
Mumbai (Jan 9-13, 2006); Clean Coal Technology seminar (Nov 
2005); a Power Efficiency Seminar (March 2006); a Bilateral 
exchange with the US New Energy Technology Laboratories 
(March 2006); and a Natural Gas and Coal Bed Methane Seminar 
(March 2006). 
The Economic Relationship 
¶8.  (SBU) The US-India economic relationship, for decades 
narrow and circumspect, is gathering steam and promises to be 
a key driver of our overall bilateral relationship in the 
21st century.  The United States is India's largest trading 
partner and its largest foreign investor.  Two-way trade grew 
to about $27 billion last year, its highest level ever, with 
US exports surging 30 percent.  Our publicly stated goal is 
to double bilateral trade in the next three years, an 
ambitious but not unrealistic target.  The US-India economic 
partnership extends beyond trade and investment, however. The 
increasingly complex economic links being forged between our 
two countries are having a profound impact on our respective 
economic outlooks in the 21st century.  American companies 
understand that abundant brainpower here is the natural 
resource necessary for the competitiveness of their firms. 
They also see India's market as one of growing importance. 
Two million Indian Americans and many millions of Indian who 
travel regularly to the US are helping weave the economies 
(and societies) together. 
¶9.  (SBU) President Bush's March 1-3 visit raised the 
trajectory of the economic relationship to new heights.  He 
and Prime Minister Manmohan Singh agreed on a wide range of 
initiatives on trade, agriculture, energy security, and 
innovation and the knowledge economy, signaling that the 
economic component of the bilateral relationship will be a 
top priority for the two nations.  They also convened a 
meeting of the CEO Forum, a group of CEOs from some of the 
NEW DELHI 00002231  004 OF 008 
largest American and Indian companies, to accept a report on 
what the two governments can do to further bolster trade and 
investment.  The intense bilateral economic engagement with 
the Indians over the last two years has yielded a wide range 
of economic successes, including $13.5 billion in Indian 
orders last year for Boeing airplanes and settlement of the 
thorny Enron-related Dabhol power project dispute.  The top 
Indian economic priorities are ensuring reliable supplies of 
energy to sustain economic growth and spreading the benefits 
of this growth into rural India.  For both these priorities, 
the Indians realize that we are critical to their agenda. 
They need our support internationally and they want access to 
our technology to enhance energy security and to develop the 
agricultural sector. 
¶10.  (SBU) The Indian economy continues to set a torrid pace, 
with GDP growing at over 8 percent this year.  An important 
economic advantage for India in the coming decades will be 
its young population, with 70 percent below the age of 36 at 
this time.  Another significant trend we detect is a palpable 
improvement in the Indian business community's confidence 
about its ability to compete in the international economy. 
Yet, India will find it hard to sustain the high growth rates 
in the medium term unless it undertakes a second generation 
of some critical but politically difficult reforms -- cutting 
subsidies, reducing government's role in the economy, 
building infrastructure and liberalizing the agricultural and 
financial sectors.  Fortunately for India, its government is 
led by a group of economists who understand very well what 
needs to be done.  Their room for maneuver is constrained, 
however, as they must carefully navigate the political 
minefields created by their communists allies on the left, 
the opposition on the right, and populist blocs within the 
ruling parties. 
Domestic Politics 
¶11.  (SBU) The opposition National Democratic Alliance (NDA), 
consisting of the Bharatiya Janata Party (BJP) and its 
regional party allies, remains distracted by internal 
ideological disputes and a recent party split despite the 
selection of a new party president.  As a result, the United 
Progressive Alliance (UPA) coalition faces diminished 
pressure from the Hindu nationalist right wing.  The UPA, 
which consists of the Congress Party and its regional allies, 
does not enjoy a ruling majority in Parliament, and depends 
for survival on the Communist-dominated Left Front (LF), so 
coalition management is key to its survival.  Although they 
do not belong to the UPA, the Left Front (LF) of four 
Communist and Leftist parties keeps it in power by providing 
the necessary support of its 62 MPs, increasing the LF's 
stature and significance out of any proportion to its true 
level of popular support.  Their support, however, can be 
more of a curse than a blessing for the UPA, and has made the 
Leftists the de facto opposition as a result of the BJP's 
continuing disarray and lack of fresh ideas.  Increasingly 
disenchanted with the UPA, Left leaders have made no secret 
of their determination to form a new non-UPA government at 
the first opportunity, while Congress hopes to win a 
Parliamentary majority in the next national election and rule 
without LF support.  Although the UPA can call for a mid-term 
election at any time, it appears likely the UPA government 
will serve its full five year term until 2009. 
NEW DELHI 00002231  005 OF 008 
¶12.  (SBU) Because of its ideological orientation, the LF has 
opposed many UPA economic liberalization policies and what 
they consider the subordination of Indian foreign policy to 
the US.  The LF denounced India's votes with the US on Iran's 
nuclear program, for example.  The LF also demanded that 
India vote with Iran in future IAEA sessions or "face the 
consequences."  However, knowing that the Left cannot bring 
down the government over the issue, the UPA has continued its 
principled opposition to Iran's nuclear program, not allowing 
the LF objections to derail policy. 
The Domestic Impact of Growing US Ties 
¶13.  (SBU) India's growing partnership with the US has 
created frictions inside and outside the ruling coalition. 
Several regional parties that either belong to the UPA 
coalition or support it have joined the LF to attack the 
government for staking too much on relations with the United 
States.  Despite this opposition, however, key UPA leaders 
led by the PM himself have shown their determination to stay 
the course with the US.  The PM has stoutly defended India's 
ties with the US and the nuclear deal on the floor of 
Parliament.  Moreover, political commentators increasingly 
complain that the Left's stance is unhelpful to India's 
strategic needs. 
¶14.  (SBU) The UPA's trump card is that, notwithstanding the 
grumpiness of political parties, the vast majority of Indians 
enthusiastically support better ties with the US and enhanced 
Indian integration into the opportunities and risks of the 
global economy.  Pew Trust polls over the last four years 
consistently show that more than 70% of Indians have a 
favorable impression of the US.  Opposition by political 
parties to the UPA's foreign policies should be viewed 
through the prism of parochial opportunism, and not usually 
out of principled ideological opposition.  Even the Left 
parties, who rely on Marxism to justify their positions, find 
that the Chief Ministers of the states they govern (West 
Bengal and Kerala) aggressively court US and other foreign 
investors and seek to reform economic conditions. 
A Challenging Political Season 
¶15.  (SBU) The Congress-led United Progressive Alliance (UPA) 
government continues to weather assaults from its left and 
right, even when on-going political events distract from the 
Prime Minister's ability to advance his reform agenda.  These 
have included recent attacks on Sonia Gandhi in Parliament 
for holding a "position of profit" as Chairperson of the 
National Advisory Commission (NAC), the UPA's defeat in a key 
election in the large state of Bihar, and domestic discontent 
over its stance in the IAEA on Iran (fanned by the Denmark 
cartoon controversy and opportunistic politicians).  After 
Natwar Singh resigned from the cabinet following accusations 
in the Oil for Food scandal, the UPA effectively deflected 
further opposition assaults.  Following this tumultuous 
period, televised revelations of blatant corruption by MPs, 
from the BJP and other anti-Congress parties, shifted the 
focus away from the UPA, allowing the Prime Minister to 
return to his intended course in foreign and domestic 
affairs.  Sonia Gandhi's resignation from Parliament and as 
NAC chief effectively deflected the most recent Parliamentary 
attacks, even as she retained her party and coalition 
NEW DELHI 00002231  006 OF 008 
presidency.  However, the constant dalliance of the UPA's 
Left Front partners with opportunistic regional parties in a 
"Left and Secular Alliance" keeps the UPA from taking too 
many bold initiatives, and draws attention away from national 
issues to state-level politics where the regional parties 
hold more sway.  This matrix of impending political issues 
has energized the Left and right opposition and encouraged 
increasing criticism of Congress integrity as the party faces 
challenging elections in Kerala, West Bengal, Tamil Nadu and 
Assam and Pondicherry in 2006 and the possible early 
elections in Uttar Pradesh (India's largest state). 
Indo-Pak Relations Hinge on Terror Waged Against India 
--------------------------------------------- --------- 
¶16.  (SBU) Indian citizens are very worried by what appears 
to be a trend toward more deadly terrorist attacks spreading 
beyond the traditionally troubled state of Jammu and Kashmir. 
 These recent attacks include the October 29 Delhi bombings, 
the December 28 shooting at the Indian Institute for Science 
in Bangalore, and most recently a March 7 series of bombings 
in the Hindu holy city of Varanasi.  Indian news media 
speculate that the attacks reflect a shift in tactics by 
Pakistan-based terror groups as they move away from terrorism 
within Kashmir and focus on traditional Hindu sites in an 
attempt to attract more media and international attention and 
provoke communal tensions, as well as targeting the new 
centers of commerce that have given India the foundation for 
its economic growth.  These worries are planting doubts in 
the minds of Indians about Pakistan's sincerity in claiming 
to want peace. 
¶17.  (SBU) Nevertheless, Prime Minister Singh has pursued a 
sustained policy of rapprochement toward Pakistan because the 
vast majority of Indians seek normalization and free trade 
and travel with their western neighbor.  India's aid to 
Pakistan following the October 2005 earthquake reflects the 
PM's desire to try to keep moving ahead with Pakistan in 
several areas, including energy cooperation, trade, and 
people-to-people ties.  The bus service between Srinagar and 
Muzaffarabad that began in April has been cited in the media 
and by contacts as the most visible example of the improving 
Indo-Pak relationship; other related positive moves are 
increasing cultural and sports exchanges, the opening of two 
additional bus routes between Indian and Pakistani Punjab and 
a new rail link between Rajasthan and Sindh, and the PM's 
March 24 offer of a Treaty of Peace, Security, and Friendship. 
Other Regional Issues 
¶18.  (SBU) Under Prime Minister Singh's leadership, the 
Government of India has emerged as a responsible leader in 
the South Asia region, as well as Asia at large.  India has 
joined as a full partner in international efforts to rebuild 
Afghanistan, pledging more than $600 million to Afghanistan's 
reconstruction, focused specifically on building 
infrastructure, strengthening the country's democratic 
institutions, and training the country's newly elected 
leaders.  As an alleged staging ground for terrorist attacks 
within India, Bangladesh causes constant concern for the 
Indian government, which also seeks the country's cooperation 
in importing natural gas from Burma.  President Kalam's March 
10-13 trip to Burma, as well as a recent trip to South Korea 
and the Philippines, illustrated India's "Look East" policy, 
NEW DELHI 00002231  007 OF 008 
in which the PM Singh administration seeks to increase its 
influence in Southeast Asia, countering China's growing 
presence in the region.  Meanwhile, India and China have 
sought warmer relations by engaging in a strategic dialogue, 
and separating the contentious border issues from the surging 
economic links (bilateral trade has been growing at about 40% 
annually).  India and China concluded on March 13 the latest 
round of talks aimed at settling their long-running border 
disputes.  The Maoist insurgency in Nepal also causes alarm 
in New Delhi, but India has preferred to work quietly behind 
the scenes in the hope that continued agitation for 
democratic reform, led by the political parties in Nepal, 
will pressure the monarchy to restore democratic government, 
followed by peace talks with the Maoists.  The Indian 
government has implemented a similar policy in Sri Lanka, 
where it hopes that talks between the government and LTTE 
continue under the guidance of the Norwegian mediators.  That 
India and the US increasingly share a common outlook on 
regional issues reflects the transformation of relations and 
the forging of a meaningful partnership. 
¶19.  (SBU) India's large Muslim population and massive 
diaspora in the gulf region give it an important stake in the 
international face-off over Iran's WMD ambitions.  The GOI 
also hopes to use its relationship to cultivate Iran as a 
source of energy, a corridor for trade to Central Asia (most 
importantly to Afghanistan, to which Pakistan continues to 
deny India land-transit rights), and a partner in stabilizing 
Afghanistan.  Past high-level exchanges and intensified 
cooperation in the energy sector illustrate that the GOI 
places value in this relationship.  At the same time, firm 
Indian opposition to Iran's acquisition of nuclear weapons 
has guided India's responsible votes with us in the IAEA, 
despite causing turbulence in Delhi's relations with Tehran 
and uproar in Parliament from left and right opposition 
parties and even from some within Congress.  New Delhi's 
ability to influence the hard-line regime in Tehran is being 
tested, as the controversy about Iran's nuclear program and 
President Ahmadinejad's vitriolic statements against Israel 
continue to boil and the GOI struggles with external and 
internal political pressure to avoid straining ties with 
Iran.  The GOI characterized a recent port visit in Cochin by 
two Iranian naval vessels as a goodwill port call, and denied 
press reports that training had taken place.  Advancing the 
civilian nuclear energy initiative helps to dilute India's 
need for Iranian energy resources, although plans for an 
Iran-Pakistan-India gas pipeline continue to plod ahead. 
Military Ties Multiplying 
¶20.  (SBU) Since lifting sanctions in September 2001, the US 
and India have conducted a series of joint and 
service-to-service exercises of increasing scope and 
capability.  The seventh and largest in a series of naval 
exercises, Malabar 05 was held in the Arabian Sea off the 
Indian Coast, and featured aircraft carriers from both 
countries deploying F/A-18 Super Hornets and Indian Sea 
Harriers in air combat tactics.  The Maritime Security 
Framework endorsed by President Bush and Prime Minister Singh 
in March 2006 will ensure further collaboration between both 
countries' navies, especially in anti-piracy and disaster 
NEW DELHI 00002231  008 OF 008 
relief activities in the Indian Ocean.  US and Indian Air 
Forces participated in Cope India 06 held at Kalaikunda Air 
Station in West Bengal, the largest air combat exercise 
between the US and Indian air forces to date.  Exercise Yudh 
Abyas ("Battle Practice" in Hindi), the largest US Army 
exercise with the Indian Army to date, occurred in January 
2006 in the foothills of the Himalayas and focused on 
counter-insurgency tasks in semi-urban and semi-mountainous 
terrain.  The success of the exercise highlights the 
importance of sustaining the growth of military-to-military 
¶21.  (SBU) Eager to purchase what it believes is superior 
technology and secure long-term military ties with the US, 
the GOI has shown growing interest in acquiring defense items 
and building an arms relationship with the US.  Among the 
larger potential arms sales on the horizon, the Indian Air 
Force will soon purchase 126 multi-role combat aircraft to 
replace some of its aging Russian aircraft, and the US plans 
to offer both the F-16 and F/A-18 fighters to fill India's 
requirement.  Bell Helicopter intends to compete the Model 
407 in response to an Indian Army requirement for the 
purchase of 60 light helicopters, with a follow-on 
co-production contract for an additional 137 units.  In 
addition, the Indian Navy is seeking to acquire the USS 
TRENTON (LPD) as a "hot transfer" in December 2006, which, if 
successful, will mark the first major platform sale to the 
GOI.  Meanwhile, the Indian Army has purchased and is in the 
process of receiving twelve Firefinder Radars worth 
approximately $200 million. 
Conclusion - An Historic Opportunity for America 
--------------------------------------------- --- 
¶22.  (SBU) Senator Hagel, your delegation's program in India 
will give you an excellent view of developing India/US ties 
from government officials and other well-placed commentators 
and analysts.  In the wake of the President's historic visit, 
it is in both countries' common interest to work as partners 
to address the numerous pressing issues both in the region 
and around the world that lie ahead.  While this is a 
delicate process, we are developing cooperation and trust 
that will grow in the years to come.  You can expect your 
Indian interlocutors to ask for your position on the civil 
nuclear legislation introduced by Chairman Lugar and Chairman 
Hyde on March 16.  Your visit can serve to encourage key 
audiences of the value of developing a natural strategic 
partnership with the United States, and the great importance 
we attach to receiving the advice and guidance of our 
legislative branch.  We appreciate very much your taking the 
time to visit India and look forward to assuring an 
informative and productive visit. 
¶23.  (U) Visit New Delhi's Classified Website: