VZCZCXRO0575
OO RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHNE #2319/01 2411200
ZNR UUUUU ZZH
O 281200Z AUG 08
FM AMEMBASSY NEW DELHI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3167
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNNSG/NUCLEAR SUPPLIERS GROUP COLLECTIVE
RUEAIIA/CIA WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEKJCS/JOINT STAFF WASHDC
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEHUNV/USMISSION UNVIE VIENNA 1619
RUCNDT/USMISSION USUN NEW YORK 6829

UNCLAS SECTION 01 OF 04 NEW DELHI 002319 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PARM TSPL KNNP ETTC ENRG TRGY IN
SUBJECT: AMBASSADOR ALERTS "GROUP OF SIX" ENVOYS THAT 
RELATIONSHIPS WITH INDIA AT STAKE IN CIVIL NUCLEAR 
INITIATIVE 
 
REF: A. NEW DELHI 2306 (NOTAL) 
     ¶B. NEW DELHI 2307 
 
¶1. (SBU) SUMMARY. Ambassador Mulford told the heads of 
mission of the "Group of Six" members of the Nuclear 
Suppliers Group (NSG) at a lunch on August 28 that the 
amendments to India's exception that their delegations 
proposed at the August 21-22 Plenary could cause India to 
walk away, leading to the collapse of the Civil Nuclear 
Cooperation Initiative.  He cautioned that should India begin 
to assign blame for the failure of the Initiative, the Group 
of Six "will be at the top of the list."  He urged the envoys 
to seek to broaden the perspective in their capitals and to 
remind their governments of possible damage to their 
bilateral relations that a narrow, nonproliferation-based 
approach could cause.  The envoys from Switzerland, New 
Zealand, and Ireland -- and to a lesser extent, of Norway -- 
asserted that their representatives in Vienna accurately 
reflected the views of their political leaders on 
nonproliferation, but nevertheless seemed surprised to learn 
that the Initiative's fate hung in the balance and 
uncomfortable considering the implication of failure at the 
September 4-5 Plenary for their bilateral relationships.  The 
Austrian envoy remained silent.  The envoy from the 
Netherlands said the issue would be taken up by the Dutch 
parliament when it reconvenes on September 1.  The envoys 
indicated they would relay the Ambassador's message to their 
respective capitals.  END SUMMARY. 
 
Lunch for "Group of Six" 
- - - 
 
¶2. (SBU) Ambassador Mulford hosted a lunch on August 28 for 
the heads of mission of the "Group of Six" like-minded 
members of the Nuclear Suppliers Group (NSG).  The six states 
collectively championed the majority of amendments to India's 
exception text at the Group's August 21-22 Extraordinary 
Plenary in Vienna.  Mulford told the envoys of Austria, 
Ireland, New Zealand, the Netherlands, Norway, and 
Switzerland that the sixty-plus amendments to India's 
exception "shocked" the U.S. and provoked a sense of betrayal 
in India.  He said that the Civil Nuclear Initiative now 
"hangs in the balance," and that India could walk away. 
Having met the previous day with the Prime Minister, National 
Security Adviser and PM's Special Envoy for the Nuclear 
Initiative (ref A), the Ambassador indicated that India might 
prove unable to accept the amendments required.  This was 
especially the case with regard to testing and review. 
 
¶3. (SBU) Mulford reminded the envoys that their governments 
had conveyed three general points to India and to the U.S. 
prior to the Plenary:  they appreciated the importance of the 
Initiative, they would be constructive in the process, and 
they had some concerns.  When given the opportunity to engage 
the Indian delegation following its presentation in Vienna on 
August 21, no one offerred questions or dialogue.  In fact, 
many of the "concerns" represented by their nonproliferation 
experts at the Plenary turned out to be killer amendments. 
He urged the envoys to seek a broader approach from their 
capitals and reminded them of the possible damage to their 
bilateral relations if the Initiative were to fail.  Mulford 
shared a nonpaper he had prepared (see para 10) outlining the 
nature and extent of each country's currently expanding 
economic ties with India.  (In each case, the direction of 
these relations was impressive.)  He expressed puzzlement 
that each of these governments would be willing to risk 
damaging these relations. 
 
Responses From Group of Six Envoys 
- - - 
 
¶4. (SBU) Except for Austrian Charge d'Affaires (CDA) Dr. 
Gerlinde Paschinger, who neither took notes nor spoke, the 
envoys actively engaged the Ambassador.  Swiss Ambassador 
Dominique Dreyer said it was not his country's intention to 
"scuttle the process," but that the result of the August 
21-22 Plenary should not have been surprising because it was 
the first opportunity for Suppliers Group members to express 
their views formally on the text.  On the issue of the 
compressed timeline, he said, "In a way, the Indian 
government only has itself to blame for having waited so long 
 
NEW DELHI 00002319  002 OF 004 
 
 
to act."  On the issue of a testing condition, he said India 
cannot expect to test a nuclear explosive without 
consequences.  Ambassador Mulford responded that India 
clearly understands this, as demonstrated in the 123 Agrement 
and Hyde Act.  Also, Mulford pointed out that provisions 
already exist in current Suppliers Group guidelines to deal 
decisively with issues such as to a nuclear test. 
 
¶5. (SBU) New Zealand High Commissioner Rupert Holborow argued 
that there was no disconnect between Wellington's senior 
politicians and its nonproliferation bureaucrats in Vienna. 
He said Prime Minister Clark was "faithful to what she told 
Secretary Rice (on July 26), including her intention to 
consult with like-minded countries."  He suggested that, 
"We're all being very careful precisely because we do 
understand the importance of these issues, so we are all 
following our scripts very precisely, which may have affected 
the atmosphere of the first Plenary."  He allowed that 
perhaps more senior representation at the next Plenary may be 
called for.  Indicating that he understood what was at stake 
with India, he concluded with the caution that "perhaps in 
fact we are not prepared to give up our nonproliferation 
goals." 
 
¶6. (SBU) Irish CDA Mr. Pat Bourne said he agreed with his 
colleague from New Zealand that Ireland's position on the 
Nuclear Non-Proliferation Treaty was based on long-held and 
deeply felt conviction.  Its position on the Civil Nuclear 
Initiative had likewise been known for some time, as had its 
association with a like-minded group.  He said his government 
was open to the idea of the Initiative constituting "a net 
gain for the NPT regime," but confessed to a "degree of 
disappointment" among the group when the August 7 draft 
exception was made available to them. 
 
¶7. (SBU) Norwegian CDA Mr. Lasse B. Johannessen also said his 
government had remained true to its word that it would 
"support the exception while working for consensus."  In 
light of the Plenary, he said it was reasonable to ask 
whether a consensus was in fact possible, but he nevertheless 
expressed unease regarding the implication of a lack of 
consensus in Vienna for his government's relationship with 
India. 
 
¶8. (SBU) Dutch CDA Mr. Jeroen Roodenburg emphasized that 
political leaders in The Netherlands have expressed the need 
to discuss the Initiative with their parliament, which 
convenes on September 1.  On the issue of testing, he asked 
whether India would be willing to renew or reiterate its 
unilateral testing moratorium in the form of a fresh 
political statement.  Mulford replied that India has 
consistently maintained this commitment, which the U.S. 
accepted as valid.  He did not know whether the Indian 
Government would consider issuing a new statement. 
 
Decide Where You Stand 
- - - 
 
¶9. (SBU) Ambassador Mulford asserted that "we cannot have 
another Plenary like the last one."  India does not want to 
"stand cap in hand and get turned down by the world."  "If 
the standard for consensus is unrealistic," Mulford said, 
"then statements that you support the Initiative are 
meaningless and the conclusion must be drawn that your intent 
is to destroy the deal."  Mulford concluded, "This is a 
political decision about your relationship with India, and 
you must decide where you stand." 
 
Nonpaper on Group of Six Economic Links with India 
- - - 
 
¶10. (U) The following is a nonpaper compiled by Post on the 
Group of Six's economic ties to India: 
 
Following are brief summaries of the key bilateral economic 
links between India and Austria, Ireland, New Zealand, 
Norway, Netherlands, and Switzerland.  The summaries are 
based on publicly-available information, and while some of 
the data may not be comparable or updated, certain trends in 
India's economic relationship with these countries emerge 
clearly and strongly.  India's rapidly growing economy 
 
NEW DELHI 00002319  003 OF 004 
 
 
positions it as a vital economic and political partner for 
each of the six nations.  India is an important trading 
partner, a valuable source of and destination for investment, 
and a source of employable talent. 
 
Overview:  India's imports from the Group of Six are growing 
very rapidly, mainly in higher value-added goods, such as 
machinery and electronic goods to fuel its investments in 
capacity expansion and infrastructure.  As one of the world's 
fastest growing economies in the midst of a global economic 
slowdown, India's share in European countries' exports has 
probably risen in 2008, and likely represents a high-growth 
export market for all six countries.  Further, India's 
increasing flow of outward investment (USD 16 billion in 
2007-08) is sending billions of dollars to these countries. 
In addition, India is increasingly a source of skilled 
workers for Europe.  In mid-2007, India signed a memorandum 
of understanding with the International Organization for 
Migration (IOM) to facilitate legal migration of Indian 
workers to the EU. 
 
Switzerland:  India is a significant market for Switzerland, 
totaling roughly 6 percent of annual Swiss exports.  Goods 
and equipment totaling nearly USD 10 billion were purchased 
by India in 2007-08, up 50 percent in the last two years. 
Switzerland enjoys a roughly 10:1 trade surplus with India. 
India mainly imports from Switzerland gold, machinery, 
medicinal products, professional instruments, and electronic 
goods.   Switzerland is also the 10th largest investor in 
India and, according to Ambassador Dreyer, the country is a 
country of "high priority in the framework of Switzerland's 
foreign economic strategy."  A business delegation visit led 
by Economics Minister Doris Leuthard in May 2008 moved the 
countries toward launching negotiations towards free trade 
agreement.  Swiss FDI into India tripled in 2006-07. 
Meanwhile, top Indian IT and pharmaceutical companies are 
present in Switzerland. 
 
Netherlands:  India's trade with the Netherlands grew 20 
percent last year to reach USD 4.5 billion.  India buys Dutch 
electronic goods, metal ores and scrap, machinery transport 
equipment, and chemicals - imports which are likely to be 
sustained by India's domestic economic growth.  Two-way 
investment flows between the two countries are substantial. 
The Netherlands is the fourth largest foreign investor in 
India.  In 2006, the Netherlands was the single-largest 
recipient of Indian foreign investment and remained the 
second-largest recipient of Indian FDI in 2007, propelled 
partly by the Tata-Corus deal.  IT contributes 5 percent to 
the Netherlands' GDP and Indian IT giants like Wipro, TCS and 
Infosys are already operating from Amsterdam, helping to 
expand the Netherlands' IT output. 
 
Norway:  Indian imports from Norway have more than doubled 
each year for the last two years, to reach USD 1.6 billion in 
¶2007.  The Indian press reported that bilateral trade grew 88 
percent in the first quarter of 2008.  Overall, Norway enjoys 
a 6:1 trade surplus with India, mainly selling India 
transport equipment, machinery, electronic goods and metals. 
Norway is one of four nations, along with Switzerland, 
Iceland and Liechtenstein, in the European Free Trade 
Association (EFTA), exploring a free trade agreement with 
India.  India's Oil and Natural Gas Corp (ONGC) stated this 
week that Norway's Statoil Hydro is seeking a larger stake 
and operating rights in a deepwater block owned by ONGC in 
the Krishna Godavari basin off India's east cost, where 
Statoil already owns 10 percent, reflecting India's potential 
market for Norway's deep-sea technological expertise. 
Proposed hydroelectric projects in Himachal Pradesh are a 
promising market for Norwegian companies.  In 2007, Indian 
professionals made up one-fourth of foreign skilled workers 
allowed into Norway in under a special visa, the single 
largest source of such professionals. 
 
Austria:  Bilateral trade has been growing at a fast pace - 
roughly 30 percent per year in recent years, albeit from a 
low base.  India imported USD 586 million from Austria last 
fiscal year, with total trade between the two countries at 
USD 769 million, giving Austria a trade surplus with India. 
India buys machinery, transport equipment, chemicals and 
non-metal minerals from Austria, products whose demand from 
 
NEW DELHI 00002319  004 OF 004 
 
 
India is sure to stay high, as they feed India's 
infrastructure and capacity expansion drives.  India's 
relationship with Austria is expected to expand with a focus 
on climate change related issues, technology transfer and 
power generation. 
 
Ireland:  India's merchandise imports from Ireland have grown 
from USD 162 million in 2004-05 to USD 241 million in 
2007-08, a net growth of roughly 50 percent.  India mainly 
buys petroleum products, crude minerals, wool yarn, plastics 
and resins.  Several Indian IT and BPO companies have set up 
shop in Ireland, creating 3000 jobs and demonstrating synergy 
between the two countries' IT expertise.  Ireland's Economic 
Minister Nigel Dodds visited India in February 2008 to 
promote further Indian investment in Ireland, highlighting 
the skilled labor force that Ireland could provide.   After 
the US, Indian companies are the second biggest investors in 
Northern Ireland.  Northern Island is actively pursuing 
further Indian investment, setting up its first investment 
promotion office in India earlier this year. 
 
New Zealand:  India has emerged as New Zealand's second 
fastest growing export market, as the trade base diversifies 
to reflect India's maturing markets.  Indian imports from New 
Zealand are growing fast from a small base in the last few 
years, hitting 23 percent and 26 percent growth year on year 
in the last two years.  India mainly buys metal scrap, wood, 
raw wool, coal and machinery from New Zealand, feeding 
growing manufacturing and textile production.  There is fast 
growth in niche or specialized manufactured products, 
including electric transformers, sorting machinery, 
transmission and telecommunications equipment.  Commerce 
Minister Nath visited New Zealand in May 2008, as part of 
bilateral discussions towards the possible launch of free 
trade agreement negotiations. 
MULFORD