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DE RUEHNE #1699/01 0691458
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O 101458Z MAR 06
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1157
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEHAN/AMEMBASSY ANTANANARIVO 0003
RUEHBJ/AMEMBASSY BEIJING 0831
RUEHBY/AMEMBASSY CANBERRA 0856
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RUEHSA/AMEMBASSY PRETORIA 0494
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RUEHCI/AMCONSUL CALCUTTA 2327
RUEHCG/AMCONSUL CHENNAI 2179
RUEHBI/AMCONSUL MUMBAI 1405
RHEHNSC/NSC WASHDC
RUEIDN/DNI WASHINGTON DC
RHHMUNA/CDR USPACOM HONOLULU HI
RUCNDT/USMISSION USUN NEW YORK 9595
RHMFISS/HQ USCENTCOM MACDILL AFB FL
RUEHGV/USMISSION GENEVA 1813
RHHMUNA/HQ USPACOM HONOLULU HI
RHMFISS/HQ USSOCOM MACDILL AFB FL
RUEKJCS/JOINT STAFF WASHDC

C O N F I D E N T I A L SECTION 01 OF 05 NEW DELHI 001699 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 01/18/2015 
TAGS: PREL MOPS ENRG ECON ETRD MNUC TRGY TSPL ASEAN
XO, AS, IN 
SUBJECT: INDIA AND AUSTRALIA SEEING EACH OTHER IN A NEW 
LIGHT FOLLOWING HOWARD'S VISIT 
 
REF: A. NEW DELHI 1656 
     ¶B. CANBERRA 00361 
 
NEW DELHI 00001699  001.2 OF 005 
 
 
Classified By: PolCouns Geoff Pyatt for Reasons 1.4 (B, D) 
 
¶1.  (C) Summary: Australian Prime Minister John Howard on 
March 9 concluded a successful four-day visit to Delhi, 
Chennai and Mumbai and signed six agreements on a range of 
issues, including a Memorandum of Understanding (MOU) on 
Defense Cooperation that will bury lingering Indo-Australian 
suspicion and could facilitate U.S.-India-Australia 
cooperation in the Indian Ocean Basin.  The Australian High 
Commission believes the visit heralded a clear desire to 
partner with Australia -- a GOI position the Australian High 
Commission tells us only began to materialize since July when 
PM Singh visited Washington.  On exports of uranium, PM 
Howard invited some confusion by initially indicating 
openness to a change in policy, before having to pull-back 
and spend the better part of the visit reaffirming the 
current GOA prohibition of uranium export to non-NPT 
countries.  The GOA will carefully review the U.S.-India 
agreement, and the High Commission believes that a positive 
Nuclear Supplier Group (NSG) position may open the door to 
overcoming Australian domestic opposition to uranium sales. 
The agenda of the visit mirrored in many ways that of 
President Bush, underscoring the common interests and 
opportunities of the U.S. and Australia collaborating with 
India.  End Summary. 
 
INDO-AUSTRALIA RELATIONS ALSO TRANSFORMING 
------------------------------------------ 
 
¶2.  (C) Despite the long shadow cast by President Bush's 
recent and successful visit, Australian PM John Howard's 
visit to India signaled an important shift in Indo-Australia 
relations that were once perceived as icy and marked by 
rivalry for dominance in the Indian Ocean.  Moreover, the 
visit maintains the momentum of India's emergence as a world 
power, increasingly engaging the countries with which it has 
identified strategic interests.  Given Australia's huge 
natural resource base, geographic position and sizable 
non-resident Indian (NRI) community, the transformation in 
Indo-Australia relations comes as a welcome development. 
 
¶3.  (C) While overshadowed in the press by the issue of 
uranium exports to India, the breadth of Indo-Australia 
cooperation evidenced during the visit is wide and, in some 
regards, substantive.  Specifically, the two countries 
entered into a MOU on Defense Cooperation, a MOU on 
biotechnology, a MOU on customs, a Trade and Economic 
Framework, an Agreement on Air Services, and a Letter of 
Intent on an India-Australia Strategic Research Fund. 
Moreover, PM Howard announced the opening of a new Australian 
consulate, in Chennai. 
 
¶4.  (SBU) Indo-Australia ties are emerging from a 
relationship that was described by Australian High 
Commissioner John McCarthy, in his post-visit briefing to New 
Delhi based diplomats, "as having its ups and downs." 
Retired Assistant Naval Chief of Staff and leading Indian 
security analyst Raja Menon explained in a discussion with 
PolOff how sensitive the nuclear issue remains in Australia, 
as is the subject of chemical and biological weapons, since 
India has never joined the Australia Group.  Indeed, the 
relationship has often been seen through the prism of these 
two issues. 
 
DEFENSE COOPERATION TAKING OFF 
------------------------------ 
 
NEW DELHI 00001699  002.2 OF 005 
 
 
 
¶5.  (C) D/PolCouns talked privately to David Holley, 
Australian Deputy High Commissioner, and was struck by the 
enthusiasm that Holley exhibited about the level of military 
cooperation achieved during the visit.  The Defense MOU was 
considered by the Indian Cabinet and is, therefore, more 
substantive than a Framework Agreement within the Indian 
system.  Regardless of the diplomatic format, the MOU (reftel 
A) is still drafted in very general terms, but does note the 
common interest of the two governments "in the stability of 
the Asia-Pacific region, non-proliferation of weapons of mass 
destruction, combating international terrorism, and security 
of sea lanes of communication."  Its stated purpose "is to 
promote cooperation and understanding between the 
Participants in defense strategic dialogue, defense industry, 
production, education, training and acquisition of defense 
equipment, research and development management," and creates 
an India-Australia Joint Working Group on Defense.  On 
maritime cooperation, which High Commissioner McCarthy 
described in his briefing as the focus of defense 
cooperation, the MOU specifically provides for "extending 
cooperation in this sphere in the context of common interest 
in the security of the Indian Ocean and other areas of mutual 
interest and benefit...(and may) include activities such as 
joint naval exercises, ship visits and professional 
exchanges."  On defense material cooperation, the MOU speaks 
only of "mutually beneficial exchanges between the defense 
organizations in various areas of mutual interest including, 
inter alia, acquisition of defense equipment, services, 
training, technology, research and development and 
management.  There is no specific mention of provisions of 
equipment sales, Holley notes, due to "Pakistan 
sensitivities" and the relatively small defense sector in 
Australia. 
 
¶6.  (C) Interestingly, Holley informed us that the Indians 
characterized similar talks on defense in April 2005 "a waste 
of time."  Even on maritime cooperation, India had previously 
been quite negative on what it had formerly viewed as 
Australian efforts to "intrude in their ocean."  Since July 
of 2005 (PM Singh's visit to Washington), however, the 
Indians have proven far more receptive to cooperation in this 
field.  In fact, Holley believes the GOA is "overwhelmed" by 
Indian ideas and suggestions and can not possibly fulfill all 
the Indian expectations. 
 
¶7.  (C) Menon was also positive on the Indo-Australia MOU, 
though far less exuberant than Holley.  For one, he believes 
it shares some of the weakness inherent in U.S.-India defense 
cooperation, which is a lack of "functional operability." 
Menon does not believe defense cooperation between Australia 
and India or between the U.S. and India can be simply a 
series of increasingly complex joint exercises.  He looks 
forward to inter-operability "being put to use," "and to 
reflect foreign policy."  Specific to this MOU, he notes that 
Indian responsibility for the Joint Working Group will remain 
within the Ministry of Defense, which he describes as "weak 
on policy." 
 
URANIUM EXPORTS: "A POLICY CAN'T CHANGE AT A PRESS CONFERENCE" 
-------------------- ----------------------------------------- 
 
¶8.  (C) Although PM Howard and Australian Foreign Minister 
Downer quickly came out in favor of the U.S.-India nuclear 
deal, Howard invited some confusion on the issue by initially 
stating, on the subject of uranium exports, "I think we would 
like to talk about it," and signaling continued strong 
support of the U.S.-India civil nuclear agreement early in 
his visit.  He stated in New Delhi on March 6: "There are a 
 
NEW DELHI 00001699  003.2 OF 005 
 
 
lot of good things about that agreement, including the fact 
that for the first time India's civilian nuclear facilities 
will come under international inspections."  While it was 
inevitable that the subject of uranium exports would figure 
prominently -- PM Singh himself raised the issue in direct 
terms with Howard -- FM Downer, publicly and undiplomatically 
ruled out selling uranium to India only days before the 
visit, even if the NSG made an exception for India.  The 
tempest in Australia that resulted from Howard's positive 
signals forced the PM into something of a public about-face, 
as he then had to reaffirm repeatedly throughout his trip the 
GOA's current policy only to export to NPT countries with 
whom it has a bilateral safeguards agreement.  In this, he 
was not assisted by PM Singh who made no effort to downplay 
the issue.  High Commissioner McCarthy reported that the 
Indian PM made a direct request for uranium exports to 
Howard, and, answering questions at the joint press 
conference, Singh said India was deserving of an 
international exception, given that it abides by the NPT's 
rules and was committed to a moratorium on nuclear testing. 
 
¶9.  (C) Australia is estimated to possess nearly 40 percent 
of the world's known uranium exports, and by the measure of 
some local trade analysts, opening these exports to New Delhi 
could nearly double the value of Australia's current exports 
to India. 
 
¶10. (C) Despite the pressure from Australia's political 
opposition and strong anti-nuclear lobby, PM Howard did 
manage to remain flexible on future uranium exports. 
Australian High Commission Political Counselor and Press 
Chief John Fisher (PROTECT), while conceding that the 
shifting public sentiments indicated that the GOA had not 
done its homework prior to the visit, described to D/PolCouns 
the challenge for the PM as one of "not saying to the Indians 
we're closed to supply, but not hinting at an immediate 
policy change that would cause domestic political 
turbulence."  To that end, Deputy High Commissioner Holley 
believes the PM was successful, "remaining ambiguous while 
sticking to the official line."  The Australian High 
Commissioner, in his briefing to diplomats, described the 
PM's position as "constructive ambiguity," and in response to 
questions on the potential for future uranium sales to India, 
he said: "It might go against, it might go in favor."  Deputy 
High Commissioner Holley was a bit more revealing in private, 
and believes "there could be a way around the problem -- by 
using the NSG for political cover." "But it will take some 
time."  Moving forward, the GOA set up an experts group to 
gather details on the U.S.-India agreement as a possible 
first step toward uranium sales.  The GOA, say their 
diplomats in New Delhi, will also watch NSG signal very 
carefully. 
 
TRADE AND INVESTMENT, LIBERALIZED AIR SERVICES 
--------------------------------------------- - 
 
¶11.  (U) The Indians also got down to business on expanding 
further the burgeoning trade relationship between the two 
countries.  India is already ranked as Australia's sixth 
largest export destination, and trade between the two nations 
currently stands at $7 billion, and is growing 20 percent per 
year.  However, the levels of direct investment have remained 
comparatively low.  The Trade and Economic Framework aims at 
enhancing cooperation in the fields of energy, mining, 
infrastructure, food and beverages, textiles, clothing, 
footwear, and agriculture.  The PM was accompanied by a 
top-flight delegation of Australian business leaders, 
including the directors of energy majors Geodynamics and 
Hydro Tasmania, the Group President of mining giant BHP 
 
NEW DELHI 00001699  004.2 OF 005 
 
 
Billiton and representatives of Rio Tinto and One Steel, and 
the CEO of Qantas Airways.  High Commissioner McCarthy noted 
that it is uncommon for a business delegation formally to 
join the PM on his travels, underscoring the importance of 
the economic relationship.  The comprehensive Agreement 
Relating to Air Services expands the access of each country's 
carriers to the other's aviation market.  Moreover, Qantas is 
currently engaged in talks with India's largest domestic 
airline, Jet Airways, for a code-share agreement and 
marketing tie-up, and Qantas was meanwhile signaling in India 
its intent to expand its coverage beyond Mumbai. 
 
¶12.  (U) The Framework takes on additional importance in 
light of India's intentions to pursue separate Free Trade 
Agreements (FTA) with ASEAN countries and with Thailand 
within the next few months.  While Australia and India did 
not announce plans for an FTA, some Indian business analysts 
view the Framework as a precursor to an FTA and an eventual 
free trade area covering nearly all of Asia, and extending to 
Australia and New Zealand.  High Commissioner McCarthy did 
not accept that rosy view at his briefing, noting the 
particular difficulties India and Australia would have 
negotiating on agriculture, but he did not rule it out for 
the future. 
 
¶13.  (C) While no formal announcement was made, another clear 
signal of the intent by Australia to expand its relations 
with India -- and one that may have a significant impact on 
foreign trade and investment -- is the likely extension to 
Indians of access to Australia's on-line "e-visa" scheme when 
it comes into effect later this year.  The PM did, however, 
signal a strong desire to foster increased Indo-Australia 
exchanges and partnerships by announcing -- in another echo 
of President Bush's trip -- the intent to open a new 
consulate, in Chennai. 
 
A GROWING DESTINATION FOR INDIAN STUDENTS 
----------------------------------------- 
 
¶14.  (U) Already the third-largest destination for Indian 
students, the extension of on-line visa application is also 
expected to give a further boost to the number of Indian 
students studying in Australia.  Year-on-year, this number is 
growing 35 percent, and some analysts expect it to jump 50 
percent in 2006.  Under the new procedures, any student 
holding a valid Indian passport can submit an application 
on-line, with the entire procedure usually taking only 7 
days.  Australia remains competitive in India due to its 
universities' relative affordability, English-medium 
instruction and emigration opportunities for skilled Indians. 
 
 
SCIENCE AND TECHNOLOGY 
---------------------- 
 
¶15.  (U) High Commissioner McCarthy was enthusiastic about 
the work done on science and technology, where the GOA and 
GOI each committed AUD $20 million (USD $17.4 million) to an 
Australia-India Strategic Research Fund for collaborative 
research between the two countries.  In addition, the GOA is 
setting aside AUD $5 million for research fellowships and 
professional development for Indian scientists and 
researchers.  The two nations also signed an MOU on 
biotechnology, including the creation of a Joint 
Biotechnology Committee (managed on the GOI side by the 
Ministry of Science and Technology) to identify priority 
areas and develop successful collaborative projects.  That 
MOU contains no specific funding mechanism. 
 
 
NEW DELHI 00001699  005.2 OF 005 
 
 
U.S.-INDIA RELATIONS FUELING THE UPSWING IN INDO-AUSTRALIA 
TIES 
---------------------------- 
---------------------------------- 
 
¶16.  (C) MEA's Under Secretary, South Division, Kesar Alam, 
was positive in his discussion with PolOff of Howard's visit. 
 On uranium exports, he believes the Australian line "has 
softened."  Speaking on the MOU on Defense Cooperation, he 
shares the assessment of the Australian High Commission that 
cooperation is substantive, but emphasized the strong 
Australian desire for cooperation, whereas our High 
Commission contacts emphasized the Indian push.  In any case, 
he likens the expansion of Indo-Australia relations to the 
growth in U.S.-India ties, and shared his personal view that 
relations between the two countries really began to take off 
in July 2005, as U.S.-India relations went into high gear. 
 
COMMENT: OPPORTUNITY ABOUNDS 
---------------------------- 
 
¶17.  (SBU) Comment:  PM Howard's successful trip to 
Australia, coming only days after the visits of French 
President Chirac and President Bush is another potent symbol 
of India's emergence on the world stage.  Given the U.S. and 
Australia's shared values and priorities, this 
"transformation" in Indo-Australia relations is welcome.  We 
are also struck by the openness of the GOA to the U.S.-India 
civil nuclear deal despite the strong anti-nuclear sentiment 
at home.  The budding Indo-Australia partnership owes a lot 
to the U.S. effort to push India onto the world stage, and we 
should look for opportunities to partner with Australia as we 
move India along on key issues, such as proliferation, 
maritime security and missile defense.  End Comment. 
 
 
 
 
 
  (U) Visit New Delhi's Classified Website: 
(http://www.state.sgov.gov/p/sa/newdelhi/) 
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