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27677    2/25/2005 13:38    05NEWDELHI1480    Embassy New Delhi    CONFIDENTIAL    05ISLAMABAD2264|05NEWDELHI1113|05NEWDELHI1282    "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 NEW DELHI 001480




Classified By: A/DCM Geoff Pyatt for Reasons 1.4 (B, D)

1.  (C) Summary: The Indian government recently offered new evidence of its benign intentions for the Baglihar hydel project by noting that, if its dam were used to inundate Pakistan, one of its own existing downriver projects would be the first casualty.  Although the MEA continues to exude confidence the Baglihar project complies with India's treaty obligations, the GOI has been curiously unwilling to share with us any supporting evidence to prove their position. This is in stark contrast to the Pakistanis, who have begun a major public relations effort here.  Meanwhile, the Baglihar issue continues to move slowly on three fronts: its construction, direct discussions between Indian and Pakistani officials, and the dispute resolution process under the Indus Water Treaty (IWT) umbrella.  The World Bank's IWT obligations are not as simple or straightforward as some commentators had originally suggested.  The new item in this mix is a handful of other planned hydel projects in J&K, some of which may conflict with proposed Pakistani projects.  The GOI may have to brace itself for more treaty challenges, although both sides continue to respect the IWT and seem content to let the World Bank take the lead in resolving the issue.  End Summary.

GOI: Salal Dam Guarantees Good Behavior on Baglihar --------------------------------------------- ------

2.  (C) In a little noticed February 16 remark, Foreign Secretary Shyam Saran provided further insight into why the

SIPDIS GOI believes it is right on Baglihar, commenting that if India ""had any intention of either flooding Pakistan or denying water to Pakistan, the first installation that would disappear would be the Salal project,"" which is downriver on the Chenab from the Baglihar site.  Calling the 400 MW Salal project ""very important to India and the state of J&K,"" he said it was unrealistic to think that New Delhi would ""harm itself in order to have the capability to hurt Pakistan."" Saran concluded that the IWT was signed precisely to prevent such suspicions.

Opaque GOI, Active GOP ----------------------

3.  (C) Our repeated attempts to obtain India's views on Pakistan's January 18 World Bank petition have met with stonewalling from the GOI.  The Indian Water Secretary cancelled a meeting with the DCM, and the Indian Indus Water Commissioner continues to deflect calls to the MEA.  In contrast, the Pakistani High Commission sent us an eight-page fact sheet outlining their view of how the issue has evolved since New Delhi first informed Islamabad of its intentions to build the project in 1992.

Baglihar Construction Proceeding ... ------------------------------------

4.  (C) According to the Indian press, work on Baglihar is accelerating, with the first of two 450 MW phases expected to be completed in early 2006 and the second in the 2007-8 timeframe.  New Delhi continues to brush aside Islamabad's calls to halt construction of the project -- slated to be the largest power generator in J&K -- until after the IWT process is complete.  MEA Joint Secretary Arun K. Singh has repeatedly pointed out that it put the Tulbul Navigation Project/Wullar Barrage on hold in 1987, and subsequent GOP unwillingness negotiate essentially killed it.  Eight rounds of bilateral talks since then have produced no results.

... As are the IWT Process and Direct Talks -------------------------------------------

5.  (C) The Pakistani High Commission on February 23 pointed out to us that Islamabad offered to continue bilateral discussions while the IWT process continues -- and the issue was discussed during Natwar Singh's recent trip to Pakistan (Refs A and B) -- but the GOP would not put the dispute resolution process on hold because of its fear of being faced with a fait accompli, saying ""the Indians continue to build, we will continue with the World Bank.""

World Bank Clarifies Its Role -----------------------------

6.  (C) According to the text of the IWT, the Bank is not a ""guarantor"" of the Treaty, but it does have ongoing responsibilities.  On issues that the two governments cannot resolve bilaterally, the Bank is to appoint a ""neutral expert"" (vice mediator or arbitrator) to try to adjudicate the ""differences.""  The Bank is to consult both parties in selecting the neutral expert and it would also manage the trust fund to cover the expert's expenses.

7.  (C) If differences go beyond the expert's mandate of determining treaty compliance, the Bank would then help to establish an arbitration board to address what would be termed ""the dispute.""  According to the IWT, the World Bank President and other eminent individuals (such as the UN Secretary-General and the Chief Justices of the US and UK)

SIPDIS would be asked to select three members of a seven-member independent arbitration court, with New Delhi and Islamabad each appointing two representatives of their own. Separately, a World Bank official in New Delhi told D/PolCouns recently that this would be the first test of the IWT and that Pakistan ""seems to have taken all the necessary steps"" to initiate the dispute resolution process.  The Bank official commented that despite the confidence we have seen among our GOI interlocutors, ""India may not want to be so bold.""

Kishanganga/Neelum Dam on the Table ... ---------------------------------------

8.  (C) Meeting on February 10-14 in New Delhi, Indian and Pakistani Indus Water Commissioners discussed GOP technical concerns regarding the height and water diversion of another proposed dam on the Kishanganga (also called Neelum) River; although this represented an extension of the scheduled two-day meeting, the only outcome was an agreement to continue the dialogue.  FM Natwar Singh also discussed the issue during his February 15-17 Islamabad trip (Refs A and B).  Compared to Baglihar, however, the GOI would reportedly have difficulty presenting the GOP with a fait accompli, as the Kishanganga work site is snowed in between November and May, which allows more than two more months of negotiations before construction could resume.  The GOI would presumably want to complete Kishanganga before Pakistan can begin work on its own 969 MW Neelum-Jhellum Dam Project, because if the Pakistani dam is built first, IWT provisions appear to protect the downstream Pakistani project from upstream Indian diversions or ponding.

... And Several Projects are On the Drawing Board --------------------------------------------- ----

9.  (C) Our World Bank contact added that even if India and Pakistan could resolve the Baglihar and Kishanganga projects, there are several more hydroelectric dams planned for Indian Kashmir that might be questioned under the IWT.  He ticked off the recently begun Dul Hasti Dam, and the proposed Burser, Pakul Dul, and Sawalkote projects -- all on the order of 1000 MW -- as significant undertakings in varying stages of planning that might be questioned as to their IWT compliance.

Comment ------- 10.  (C) GOI reluctance to discuss Baglihar and other power projects may reflect their supreme confidence, or perhaps concern that their case is not as firmly grounded as they have led us to believe.  The new item is the potential for the Dul Hasti, Burser, Pakul Dul, and Sawalkote hydel projects to exacerbate Pakistani anxiety over access to water.  As a Pakistani diplomat recently commented to us, ""There are no doves and there are no moderates on water issues.""  The GOI, in its desire to produce power for J&K that fulfills the economic aspirations of Kashmiris and demonstrates the effectiveness of the elected government, may not fully appreciate -- or may simply not care about -- Pakistani concerns.  The saving grace in this politically charged impasse is the IWT.  India and Pakistan seem content to have the World Bank take the lead in resolving this issue, which should seriously reduce the likelihood of Islamabad's worst case scenario, that India's dams in J&K have the potential to destroy the peace process or even to lead to war (Ref B).  We and our Pakistan-watching contacts (Ref C) hope that the external judgment of either the neutral expert or the arbitration court will provide the political cover for whichever side eventually needs to climb down. MULFORD "