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 COLOMBO 001857 
 
SIPDIS 
 
STATE FOR SA/INS 
 
E.O. 12958: DECL: 11/17/2014 
TAGS: PREL PGOV PTER IN CE LTTE

SUBJECT: SRI LANKAN PRESIDENT'S VISIT TO INDIA YIELDS SOFT LOANS, STRONGER LANGUAGE ON PEACE PROCESS 

Classified By: AMB. JEFFREY J. LUNSTEAD.  REASON:  1.4 (B,D). 

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¶1.  (C) President Chandrika Kumaratunga's November 3-7 working visit to India yielded USD 250 million in concessional loans; the announcement of a pending bilateral Defense Cooperation Agreement and Indian assistance to refurbish a strategic airfield in Jaffna; and an even stronger public statement of official Indian support of Government of Sri Lanka (GSL) efforts to find a negotiated settlement to the lengthy conflict with the Liberation Tigers of Tamil Eelam (LTTE).  The two governments also resolved to form a joint monitoring mechanism to address continuing problems with fishing rights.  Both the GSL and Indian Embassy representatives downplayed the significance of the defense agreement, indicating that the pact, once signed, only codifies ongoing assistance and exchanges in one comprehensive document.  Although Indian Embassy officials told us that Indian assistance to rehabilitate Palaly airfield, if accepted by the GSL, would oblige the GSL to ""consult"" with India on all usage by third countries, Sri Lankan Foreign Minister Kadirgamar categorically told the Ambassador that the GSL would not accept such restrictions. Despite President Kumaratunga's apparent optimism regarding the peace process during her visit, Indian Embassy officials see little prospect for positive change in the near future. End summary. 

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PEACE, PROSPERITY ON BILATERAL AGENDA 
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¶2.  (U) President Chandrika Kumaratunga's November 3-7 trip to India included a two-day working visit during which she met with Prime Minister Manmohan Singh; President A.P.J. Abdul Kalam; External Affairs Minister Natwar Singh; Defense Minister Pranab Mukherjee; BJP Leader Vajpayee; and Sonia Gandhi.  (Note:  During the rest of her time in India, Kumaratunga also addressed a conference sponsored by The Hindustan Times and visited Buddhist pilgrimage sites.  End note.)  The visit marked the President's first trip to India since her coalition government's victory in Parliamentary elections in April. 

¶3.  (SBU)  Among the most tangible outcomes of Kumaratunga's visit, according to officials at the Sri Lankan Ministry of Foreign Affairs and the Indian Embassy, were agreements for the Indian Government to provide a USD 100 million credit line for rural infrastructure projects (including the rehabilitation of the Trincomalee-Anuradhapura highway to be renamed, at Kumaratunga's suggestion, the Rajiv Gandhi Memorial Highway) and a USD 150 million credit line to be used to purchase petroleum products.  (Note:  We believe that at least some of this will be used to address the GSL's existing arrears with the Indian Oil Corporation.  End note.)  Amandeep Singh Gill, First Secretary at the Indian Embassy, emphasized that the rural infrastructure aid agreement was more detailed than similar agreements in the past to prevent ""slippage"" (which had apparently been a common phenomenon with the previous government) and to ensure that funds are distributed equitably among different geographical regions, especially the east.  The two governments also agreed to examine ways to strengthen bilateral economic relations (bilateral trade hit USD 1.5 billion last year) and to expand the India-Sri Lanka Free Trade Agreement into a comprehensive economic partnership.  For the Government of Sri Lanka (GSL), this means working to include services, as well as goods, under the FTA, Aruni Wijewardene, Director of South Asia and SAARC for the Ministry of Foreign Affairs, explained. 

¶4.  (C)  Besides the soft loans, the GSL was pleased with the strong support of the peace process the Indian Government signaled in the Joint Press Statement issued in New Delhi November 7, Wijewardene told poloff.  Besides the Indian Government's call for a settlement ""within the framework of a united Sri Lanka""; Indian commitment to Sri Lanka's ""unity, sovereignty and territorial integrity"" and emphasis on ""the early resumption of negotiations,"" the GSL found the Indian stipulation that ""any interim arrangement or administration should be an integral part of an enduring final settlement"" especially helpful, Wijewardene noted.  (Note:  The Liberation Tigers of Tamil Eelam continue to resist publicly tying an interim administration to a final settlement--a major sticking point for President Kumaratunga's chief coalition partner, the Janatha Vimukthi Peramuna.  End note.)  In a separate conversation, Indian First Secretary Amandeep Singh Gill highlighted the insertion of an additional clause calling for a settlement that ""ensures the safety, well-being and prosperity of the people"" as a significant new shift in nuance.  The Liberation Tigers of Tamil Eelam (LTTE) found that clause particularly objectionable, he said, noting that the pro-LTTE Tamil press had been full of indignant editorials questioning India's right to comment on the safety and well-being of Sri Lankan Tamils. 

¶5.  (C)  In her conversations with Indian officials, President Kumaratunga came across as extremely optimistic and confident regarding the peace process, Gill said.  She reportedly told her Indian counterparts that she had already done ""75 percent of all (she) could"" to move the process along; the next steps are up to the LTTE.  Gill expressed to poloff some puzzlement at her attitude, noting that his government sees no immediate prospect for a breakthrough on the horizon.  The Indian Government's talking points included ""a very polite point"" urging her not to allow partisanship--i.e., her rivalry with Opposition Leader and former Prime Minister Ranil Wickremesinghe--to cloud prospects for peace. 

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TROUBLED WATERS 
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¶6.  (SBU)  Disputes over fishing rights also figured on the bilateral agenda.  Wijewardene said that while Indian fishermen have long poached in Sri Lanka's territorial waters, the problem has become ""more acute"" during the ceasefire.  The GSL regularly impounds boats and presses charges against Indian fishermen found in its territorial waters, but from time to time there have been allegations of the Sri Lankan Navy firing on the fishing vessels. (The Navy routinely officially denies these charges.  Low-level Navy officers have confirmed to DATT, however, the occasional need to fire across the bow of an Indian trawler to ensure compliance with instructions.)  Although Sri Lankan fishermen complain of their Indian counterparts plundering their catch, the problem is ""really a security issue,"" she said, exacerbated by the LTTE's activities, including arms smuggling, in the same area.  To address the matter, the Indian government suggested setting up a Joint Working Group, Wijewardene reported, adding that the two governments had exchanged draft texts of a Memorandum of Understanding. Indian Emboff Gill told poloff that Indian fishermen are ""clearly at fault"" in causing this bilateral irritant, noting that another 12 of his compatriots had been picked up by the Sri Lankan Navy that very day. 

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DEFENSE COOPERATION; PALALY AIRFIELD 
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¶7.  (C)  The two governments also agreed to sign a Defense Cooperation Agreement and an MOU on Indian assistance to rebuild Palaly Airfield in Jaffna on unspecified ""mutually convenient dates.""  In a November 9 conversation with the DCM, Indian DCM Mohan Kumar dismissed as nonsense feverish Sri Lankan press speculation that the as-yet unsigned agreement constituted a mutual defense treaty.  Instead, he said, the proposed agreement will only codify assistance and exchanges that are already ongoing.  Wijewardene echoed this description, adding that the agreement will consolidate all the different elements of the bilateral military-to-military agreement in one comprehensive document.  In a November 16 conversation with the Ambassador, Foreign Minister Lakshman Kadirgamar said that the media reaction to the proposed defense agreement ""is a hue and cry about nothing,"" adding that the draft is ""relatively anodyne.""  According to Kadirgamar, the agreement does include one new feature (which he says was inserted at his suggestion):  expanded cooperation on maritime surveillance, leading to counter-measures where necessary.   (Note:  As expected, the Tigers objected to the agreement, with LTTE theoretician Anton Balasingham warning direly that it ""would tilt the military equilibrium.""  End note.) 

¶8.  (C)  In separate conversations, both Indian DCM Kumar and Indian First Secretary Gill told us that the proposed agreement on rehabilitating Palaly airfield would include a clause requiring that the Indian Government be ""consulted"" on all third-party usage of the airfield.  ""We are not trying to shackle the Sri Lankan Government,"" Gill explained, ""but we would naturally expect to be consulted"" on such matters. Foreign Minister Kadirgamar, however, categorically told the Ambassador that there were ""no restrictions at all"" on third-party usage in the proposed MOU, adding, ""I personally settled that.""  The Ambassador welcomed the news, saying that he believed the U.S. government would have found such restrictions unfortunate. 

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COMMENT 
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¶9.  (C) The Indians' strong language on the peace process and soft money for development and fuel are obviously welcome demonstrations of support at a time, with the peace process stalled and the budget debate for her strapped government looming ahead, when President Kumaratunga needs it most.  The Indians (or at least their Embassy representatives here) and the Foreign Minister clearly have widely differing ideas about the contents of the still-unsigned MOU on Palaly Airport.  While the details are obviously still to be worked out (things are rarely as black-and-white as the Foreign Minister depicts them), we are on record as expressing our concerns at any restrictions on third-party usage. 

LUNSTEAD