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ODC NEW DELHI IN
USMISSION GENEVA
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UNCLAS NEW DELHI 002078 
 
 
SENSITIVE 
SIPDIS 
 
FOR VICE ADMIRAL WIERINGA FROM CHARGE D,AFFAIRES STEVEN 
WHITE 
 
E.O. 12958: N/A 
TAGS: IN MASS MOPS PARM PREL XD
 
SUBJECT: SCENESETTER FOR VICE ADMIRAL WIERINGA DPPG AUGUST 
2008 VISIT TO INDIA 
 
¶1.  (SBU) The Country Team and I warmly welcome you to India. 
 Your visit comes at an important juncture in our military 
relationship with India.  The commanding position that the 
Soviet Union and later Russia enjoyed on military sales to 
India is weakening, the Ministry of Defense is progressing in 
its struggle to reform a heretofore convoluted and opaque 
procurement system, there is strong interest within the 
Services in high-tech US equipment, and funds are available 
for very substantial purchases.  Within the bounds of a well 
thought-out disclosure policy, we strongly support a robust 
military sales program with India and look forward to the day 
when the United States supplants the Russians as India,s 
vendor of choice.  A strong military sales program will build 
on the robust exercise program we enjoy with the Indian 
Military and provide substantial benefits in terms of 
interoperability and access.  There are, however, substantial 
unresolved issues including Transfer of Technology (TOT), End 
Use Monitoring and Enhanced End Use Monitoring (EUM/EEUM), 
and India,s failure to sign basic agreements such as the 
Classified Information Security Memorandum of Agreement 
(CISMOA).  We anticipate all these issues and specifics about 
ongoing and planned purchases will be discussed during your 
calls on government officials and during the DPPG Mid-Year 
Review.  We look forward to working with you and DSCA to move 
these issues toward resolution. 
------ 
U.S.-India Relations 
------ 
¶2.  (U) Long term prospects for a closer, abiding bilateral 
relationship with a vibrant, prosperous India are very strong 
- and remain of strategic importance to the U.S.  With India 
expected to surpass China as the fastest growing economy in 
2015, this may well become our most important bilateral 
relationship within 20 years.  Your visit helps demonstrate 
the vitality and breadth of our relationship, which now 
touches on almost all areas of human endeavor.  Our Embassy 
is trying to put out the public message that there are 
numerous natural complementarities and deep linkages between 
our two countries.  We hope that the more these linkages 
bring visible benefits to ordinary Indians, the more the 
outdated socialist ideology of the Left and still formidable 
protectionist forces will be seen as incurring heavy costs to 
India and its people.  The recent confidence vote in the 
Indian Parliament, which saw the Congress-party led 
government survive after its former coalition partner 
(Communist-party) pulled out over the U.S.-India civil 
nuclear deal, was an encouraging sign. The bright spot 
remains the private sector's exponential growth and 
people-to-people ties between the U.S. and India, to which 
government-to-government ties ultimately must catch up. 
------ 
The Civil Nuclear Cooperation Initiative 
------ 
¶3.  (SBU) President Bush and Prime Minister Singh pledged in 
July 2005 to take a series of reciprocal steps that would 
culminate in the opening of India's formerly sanctioned civil 
nuclear market.  India completed the first milestone on March 
2, 2006 by releasing a plan to separate its civilian and 
strategic nuclear programs in a phased manner, and pledging 
to place its civilian facilities under International Atomic 
Energy Agency (IAEA) safeguards.  An overwhelming, bipartisan 
majority in the U.S. Congress then approved in December 2006 
the Hyde Act, which set forth the terms under which the U.S. 
and India could engage in civil nuclear trade.  The U.S. and 
India then concluded an Agreement for Peaceful Nuclear 
Cooperation, also known as the 123 Agreement, in July 2007. 
The Communist parties, part of India,s Congress Party-led 
United Progressive Alliance (UPA) coalition government, 
obstructed the implementation of the 123 Agreement by 
threatening to withdraw support from the government if it 
were to proceed with the Agreement because they felt it would 
bring India too close to the U.S.  The opposition Bharatiya 
Janata Party (BJP) which had initiated the process leading to 
the 123 Agreement under the previous government - also 
opposed the initiative because it claimed that the terms of 
the Hyde Act and 123 Agreement placed additional constraints 
on India's nuclear weapons program.  This impasse was broken 
when Prime Minister Manmohan Singh threatened to resign 
rather than face President Bush at the G8 Summit this past 
July without being able to demonstrate progress on the 
initiative.  His party and much of the governing coalition 
backed him, but the Communists withdrew their support and 
called for a confidence vote in the government.  The 
government cobbled together a new coalition and prevailed by 
a narrow margin in the dramatic July 22 confidence vote, 
which was viewed as much as a vote ON the nuclear initiative 
as for the government.  The UPA government,s victory 
provides it with the opportunity to push through several 
additional steps necessary to complete the U.S.-India Civil 
Nuclear Cooperation Initiative. The Indian government and the 
USG are pressing the 35 Board members of the nuclear 
watch-dog International Atomic Energy Agency (IAEA) to 
approve of India,s safeguards agreement at its meeting on 
August 1.  The 45 members of the Nuclear Suppliers Group 
(NSG), which licenses trade in nuclear technology, will then 
meet in August to consider granting a special India-specific 
exemption to allow India, as a non-signatory of the Nuclear 
Non-Proliferation (NPT) treaty, to engage in civil nuclear 
commerce globally.  The USG is also working with India to 
meet its nonproliferation obligations as set forth in the 
Hyde Act.  Once the President determines that all these steps 
have been completed, the Administration will submit the 123 
Agreement to the U.S. Congress for an up-or-down vote of 
approval.  Civil nuclear cooperation between the U.S. and 
India will benefit both countries through enhanced energy 
security, more robust nonproliferation efforts, greater 
economic opportunities, and a clean energy source to fuel 
India,s growing economy without carbon emissions. 
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MILITARY TO MILITARY 
-------- 
¶4.  (SBU) The trend in the U.S.-India security relationship 
is positive, despite irritants such as unsigned agreements on 
logistics support and the sharing of classified information, 
which have lingered for years.  The Indian military - 
particularly the Navy - generally is more willing to push the 
envelope on closer relations than any other GOI body. 
Malabar 2007 brought Japan, Australia and Singapore together 
with the U.S. and India for the first time for naval 
exercises.  Red Flag 2008 (9-22 AUG 08) in the Nevada desert 
marks the Indian Air Force,s (IAF) first deployment to the 
CONUS to participate in a coalition exercise.  The first ever 
U.S.-India cooperation under the Global Peacekeeping 
Operations Initiative (GPOI) took place in April 2008 when 
India sent forces to participate in the GPOI capstone event 
Shanti-Dooti in Bangladesh.  With India as a significant 
player in PKO participation and training, there is hope for 
expanding GPOI cooperation.  Secretary Gates visited India 
February 26-27, the first visit by the U.S. Secretary of 
Defense since Secretary Rumsfeld signed the Defense Framework 
Agreement in June 2005, and solidified gains in mil-to-mil 
relations. 
¶5.  (SBU) Defense sales, dormant for over 40 years, have 
begun to take off, with a billion-dollar deal for six C-130Js 
finalized in January as the latest breakthrough.  We're 
hoping to finalize a separate billion dollar deal for P-8I 
maritime patrol aircraft, and both Boeing and Lockheed Martin 
are competitors for the estimated USD 10 billion Medium 
Multi-Role Combat Aircraft (MMRCA) bid expected to be decided 
in 2009.  The technical bids, which include transfer of 
technology (ToT) requirements, for the MMRCA are currently 
under review by the Indian Air Force (IAF) Technical 
Evaluation Committee (TEC).  During recent meetings to review 
clarifications sought by the TEC, the U.S. competitors were 
both told that the IAF required all the compliance and 
restriction documents to be signed as part of the deal (at 
least in draft language) so that all requirements could be 
understood.  As you know, future military sales to India are 
dependent on Indian acceptance and implementation of EUM/EEUM 
requirements.  Although India agreed to the language for the 
Boeing VVIP aircraft presented by Mr. Shivers, our sense is 
that there is still considerable misunderstanding and 
distrust of EUM/EEUM requirements.  Senior IAF Officers have 
told us they would not have proceeded with the Boeing VVIP 
aircraft purchase had they understood the EEUM requirements. 
The IAF,s recent request for all EUM/EEUM language relating 
to MMRCA is an attempt to determine the impacts and 
implications such agreements will have.  The unwillingness of 
the Indian Navy to agree to EUM verification of their NVD,s 
is but one example of their continued resistance.  Another 
issue which begs further discussion and understanding is ToT. 
 During the recent TEC meeting on the MMRCA proposals; it was 
clear that the HAL representative felt that the level of ToT 
was not sufficient. We believe it would be useful during your 
discussions to raise the issue to fully understand the Indian 
expectations on this topic.  Such a discussion will at a 
minimum, aid us in our technology release debates as the 
MMRCA process continues.  The recent Indian requests for 
assurances on technology release approval, is the most recent 
indicator from the Indian side that this issue is a point of 
contention.  We fully expect that your counterparts will 
insist on maximum release of all the technologies for the 
aircraft and its avionics/subsystems to enable the Indian 
Defense Industry the ability to indigenously produce, 
maintain and repair components.  Such a capability is their 
stated goal/requirement. 
¶6. (U) Through the IMET program, India currently sends 
exceptional officers to attend our War Colleges and Post 
Graduate Schools.  In fact, we have preprocessed "stand-by" 
candidates should end-of-year funds become available.  This 
was not always the case.  When the IMET began here in the 
1980s, there was little interest in sending officers to the 
U.S. for training and almost half of the allocated funds were 
not spent because the Indian military did not make officers 
available.  Of the three Service Chiefs, the Air Chief 
Marshall attended the APCSS Senior Executive Course, and the 
present Vice Chief of Naval Staff is a Naval War College 
graduate.  Returning students universally report a positive 
experience in America and excellent training.  We recently 
wrote to the Joint Secretary (Training) & Chief 
Administration Officer, Ministry of Defense (MoD), to 
recommend that the Government of India begin paying for the 
travel of students going to the U.S.  This would allow us to 
stretch IMET funds and send more students to training.  We 
ask that you encourage your Indian MoD counterparts to fund a 
portion of IMET training and expand their program 
accordingly.  This would be in line with the Government of 
India,s recent decision to match U.S. Fulbright scholarship 
funds to increase the number of students attending schools in 
the U.S. 
------ 
TERRORISM/COUNTERTERRORISM 
------ 
¶7.  (SBU) India continues to rank among the world's most 
terror-afflicted countries.  The conflict in Jammu and 
Kashmir, attacks by extreme leftist Naxalites and Maoists in 
eastern and central India, assaults by ethno-linguistic 
nationalists in the northeastern states, and terrorist 
strikes nationwide by Islamic extremists took more than 2,300 
lives in 2007.  There were several major attacks linked to 
Islamic extremists in 2007 and 2008.  Indian officials claim 
that the perpetrators of these attacks have links to groups 
based in Pakistan and Bangladesh, particularly 
Lashkar-e-Taiba, Jaish-e-Mohammad, and Harkat-ul-Jihad 
Islami, among others.  The violence in Jammu and Kashmir 
abated somewhat in 2007, but attacks are expected to increase 
in the lead up to State elections in October 2008.  Officials 
have not yet pointed to suspected perpetrators of last 
week,s bombings in Bangalore and Ahmedabad, which killed at 
least 40 people, but an e-mail from a group calling itself 
Islamic Mujahedeen claimed responsibility for the Ahmedabad 
attacks.  Prime Minister Singh has called leftist extremist 
(Maoist or agrarian Naxalite) groups, "the greatest threat to 
India's internal stability and democratic culture."  Leftist 
extremist groups are very active in wide areas of 
impoverished rural eastern and central India; and also 
operate in parts of southern India.  Ethno-linguistic 
separatist groups carried out deadly attacks in Northeastern 
India; particularly in the states of Assam, Nagaland, 
Manipur, Tripura, and Meghalaya. Several proscribed terrorist 
groups operate in the northeast, including the United 
Liberation Front of Assam (ULFA) and the People's Liberation 
Army. 
¶8.  (SBU) The lack of security, remoteness, and inhospitable 
terrain combine to prevent the government from providing 
security and other basic services in many of the areas in 
which the leftist extremists and the northeastern separatist 
groups operate.  The Indian government's counterterrorism 
efforts are hampered by its outdated and overburdened law 
enforcement and legal systems. The Indian court system is 
slow, laborious, and prone to corruption; terrorism trials 
can take years to complete. Many of India's local police 
forces are poorly staffed, lack training, and are 
ill-equipped to combat terrorism effectively. 
¶9.  (SBU) The United States cooperates with India under the 
Counter Terrorism Joint Working Group, which meets annually. 
Our Anti-Terrorism Assistance program provides training to 
India's law enforcement officials.  One area of concern is 
that the program will be cut significantly in FY 2009, which 
is in the beginning stages of developing regional programs in 
key areas of India. The Office of Defense Cooperation also 
provides counter terrorism courses to a small number of 
military and civilian officials. 
------ 
INDIAN FOREIGN POLICY 
------ 
¶10.  (SBU) India's current foreign policy can best be 
summarized as "be friends with everyone," as we can see Delhi 
keeping one foot squarely inside the Non-Aligned Movement 
camp, while at the same time increasing engagement with the 
U.S., China, Russia, EU, and Japan.  This has been 
exemplified recently by India accepting visits from Iranian 
President Ahmadinejad and Syrian President Assad while 
considering moving ahead with the civil-nuclear deal and 
attending the G8 Summit in Hokkaido.  The top priorities for 
India's Foreign Ministry would include: 1) maintaining 
healthy relations with all neighbors in order to promote 
Indian interests of stability and access to resources, 
particularly energy, with Pakistan/Kashmir seen as the most 
immediate threat and China as the long-term strategic one; 2) 
completing the US-India civilian-nuclear deal; 3) and 
pursuing a permanent seat on the UN Security Council, as part 
of a broader strategy of becoming a more respected global 
player.  Prime Minister Singh recently put his government on 
the line to move forward on the civil-nuclear deal.  We would 
like to see that strategic decision applied to other areas of 
cooperation.  You may wish to ask your interlocutors what 
specific steps India plans to take in order to improve the 
mil to mil relationship. 
¶11.  (SBU) In addition to the burgeoning U.S.-India 
relationship, Pakistan and China are the two most immediate 
issues in Indian foreign policy.  U.S. policy in Pakistan is 
an enigma for India.  Delhi shares our belief that stability 
in Pakistan is in everyone's interest; however, the Indian 
have serious concerns about terrorist attacks allegedly 
emanating from Islamabad/ISI - not to mention the legacy of 
four wars since independence - can't be overrated.  As India 
seeks to attain global power, it has placed greater emphasis 
on looking beyond conflict with Pakistan and more toward 
economic growth and power projection. 
¶12.  (SBU) India has a complex relationship with China. 
While bilateral trade is booming (China is on track to soon 
surpass the U.S. as India,s largest trading partner), 
building a healthy interdependence, political rivalry 
continues to manifest itself in areas ranging from 
decades-old border disputes to competition for influence in 
Burma.  Recent feel-good summits between the two countries' 
leaders were tarnished somewhat by controversies over the 
border immediately before/after the summits took place with 
Chinese border incursions are regularly reported in the 
Indian media.  However, the Indian government downplays the 
instances, noting that the border is not definitively marked 
and mechanisms are in place to deal with the incursions 
peacefully.  While India has been a welcoming refuge for 
Tibetan refugees, including the Dalai Lama, in a gesture to 
Beijing, it does not condone "political activities" by 
resident Tibetans. 
------ 
INDIA'S ECONOMIC TRAJECTORY - ONE OF TRANSFORMATION 
------ 
¶13.  (SBU) You are well aware of India's economic performance 
that has seen an average annual Gross Domestic Product (GDP) 
growth rate of almost nine percent over the past five years, 
making India the second fastest growing major emerging 
economy after China.  While some question whether this growth 
is simply cyclical, we perceive fundamental structural 
changes underway that are reshaping India's socio-economic 
landscape.  These include the significant rise in savings and 
investment, the declining share of agriculture in GDP 
replaced by services, and to a lesser extent industry, and 
the "market-seeking" flows of foreign direct and portfolio 
investment into the country.  The central bank's tightening 
monetary policy over the last year, partially a response to 
higher global commodity prices, is adversely affecting 
consumer demand in some sectors.  This is expected to 
moderate India's growth in the coming fiscal year, with many 
economists projecting 7.5 to 8% GDP growth. 
¶14.  (SBU) Savings have risen over the past decade to roughly 
34 percent of GDP, a combination of more corporate saving and 
less government dis-saving (debt financing).  While corporate 
savings may ebb a bit in the next few years, household 
savings are also beginning to rise and to become more fluid, 
moving from government subsidized post office savings 
deposits to commercial banks and mutual funds. Investment has 
also grown significantly in recent years, nearing 37 percent 
of GDP - again, mainly a function of corporate expansion 
plans, but the government's infrastructure goals are boosting 
public investment levels as well.  Indian economists have 
noted that many Asian economies hit a "take off" stage in 
their growth once investment crossed the threshold of 40 
percent of GDP.  The savings-investment gap is clearly 
financed through imports and a trade deficit, but other 
inflows, including the FDI and portfolio investment noted 
above, have kept the balance of payments in surplus for three 
years, and boosted foreign exchange reserves to USD 300 
billion. 
¶15.  (SBU) At the same time, India's manufacturing sector is 
finally showing signs of expansion and global attention. 
Manufacturing, stuck at roughly 14 percent of GDP for nearly 
two decades - a stark contrast to many Asian economies' 
growth trends - grew to 17 percent of GDP last year, and with 
recent growth, appears likely to continue its increasing 
contribution to GDP. 
------ 
BILATERAL TRADE GROWING 
------ 
¶16.  (SBU) India-U.S. two-way merchandise trade touched USD 
42 billion in 2007.  Last year, the U.S. trade deficit with 
India went down 42 percent.  Despite this strong growth in 
the trade relationship, a number of impediments persist and 
could impact future trade in both directions.  U.S. exporters 
continue to encounter tariff and non-tariff barriers, despite 
Indian economic reforms and autonomous (non-WTO) reductions 
in duties applied to industrial goods. 
¶17.  (SBU) Once again, we look forward to welcoming you back 
to India and to working with your staff to ensure a 
successful and productive visit. 
WHITE