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UNCLAS SECTION 01 OF 08 NEW DELHI 001854 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
H PLEASE PASS TO SENATOR BOND 
 
E.O. 12958: N/A 
TAGS: PREL PGOV MASS OREP KSTC KOMC PARM INCB IN
PK, IR 
SUBJECT: SCENESETTER FOR CODEL BOND 
 
REF: STATE 37763 
 
Summary 
------- 
 
¶1.  (SBU) Senator Bond, your delegation's 22-23 March visit 
to India provides a significant opportunity to assess the 
accelerating India-US relationship on the heels of President 
Bush's historic summit 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 
today is working hard to advance the Prime Minister's vision 
of an Indo-Pak relationship disentangled from old territorial 
disputes, despite the substantial irritant of alleged 
Pakistan-based terrorism.  Problems remain -- a vocal group 
of Communist parliamentarians (whose support keeps the PM's 
coalition in power) oppose some aspects of 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.  Your visit here can 
serve to educate Indians about the opportunities for civil 
nuclear cooperation.  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 
realized. 
 
¶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 and the opportunities in 
the President's civil nuclear cooperation initiative.  By and 
large, recent polls such as those by the Pew Research Center 
show that 70 percent of Indians view the US favorably, and 
increasingly appreciate our language, culture, and values.  A 
 
NEW DELHI 00001854  002 OF 008 
 
 
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 
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.  The 
Administration will work with Congress to amend legislation 
and will encourage partners in the Nuclear Suppliers Group 
 
NEW DELHI 00001854  003 OF 008 
 
 
(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 
 
SIPDIS 
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 4he 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 imports surging 30 percent.  Our publicly stated goal is 
to double the 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 million 
Indians 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 
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 
 
NEW DELHI 00001854  004 OF 008 
 
 
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, remain distracted by internal 
ideological disputes 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, 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.  Increasingly 
disenchanted with the UPA, Left leaders have made no se cret 
of their determination to form a new non-UPA government at 
the first opportunity, while Congress hopes to win a 
Parliamentary majority and rule without LF support.  For now, 
it appears likely the UPA government will serve its full five 
year term until 2009. 
 
¶12.  (SBU) Because of its ideological orientation, the LF has 
opposed some UPA economic liberalization policies and aspects 
of the improving US-India relationship, and staged 
demonstrations during President Bush's visit.  The LF has 
denounced India's votes with the US on Iran's nuclear program 
in the IAEA as evidence that the UPA has abandoned India's 
traditional non-alignment stance under US pressure.  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 
 
NEW DELHI 00001854  005 OF 008 
 
 
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 on three occasions in the last two weeks. 
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.  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 threaten its 
stability, including its 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 managed to effectively deflect 
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.  However, the constant dalliance of the UPA's Left 
Front partners with 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. 
 
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 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 
 
NEW DELHI 00001854  006 OF 008 
 
 
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 but it remains suspended until roads 
and bridges can be repaired; other related positive moves are 
increasing cultural and sports exchanges and the opening of 
two additional bus routes between Indian and Pakistani Punjab 
and a new rail link between Rajasthan and Sindh. 
 
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, 
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. 
 
Iran 
---- 
 
¶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 
 
NEW DELHI 00001854  007 OF 008 
 
 
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.  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 
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 
relations. 
 
¶21.  (SBU) Eager to purchase what it believes is superior 
technology and quality military items, the GOI has indicated 
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 125 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 Bond, 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 
 
NEW DELHI 00001854  008 OF 008 
 
 
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: 
(http://www.state.sgov.gov/p/sa/newdelhi/) 
BLAKE