0217_71_telegram_amembassy

Department of State

CONFIDENTIAL

ISLAMA 01425 01 OF 02 171228Z

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112062

R 171110Z FEB 71

FM AMEMBASSY ISLAMABAD

TO SECSTATE WASHDC 6973

INFO AMCONSUL DACCA

AMCONSUL KARACHI

AMCONSUL LAHORE

CONFIDENTIAL SECTION 1 OF 2 ISLAMABAD 1425

SUBJ : CONVERSATION WITH ZULFIKAR ALI BHUTTO IN EXTENSION OF

KARACHI CONVERSATIONS.

RESMC ISLAMABAD 1147, 1351, 1360, 1378, 1424.

1. Bhutto called upon me at Consul's residence Peshawar Friday evening Feb. 13 accompanied by Mustafa Khar and Hyatt Sherpao. Sherpao, who during political campaign was violently anti-US and the sponsor of many attacks upon me personally, and was introduced as Bhutto's trusted lieutenant in the North-West Frontier Province. Mustafa Khar was likewise characterized as a trusted lieutenant and I was informed that he would be Chief Minister of the Punjab Provincial Government, Bhutto said that he had asked them to come with him to stress the fact that these two men would serve in their respective areas as the PPP's principal contact for "Mutual Briefings" with US officials.

2. Throughout preliminary conversation and later in more substantive comments Bhutto indicated quite clearly that he wanted to "turn over a new leaf' in his relatiom with the US and pointed out that, as a concrete gesture of good will on his part. he had refrained from severely criticizing the "new American adventure in Laos". Personally, he said, he was opposed to "American policy in Vietnam" and that he could easily be critical, but as a friend he would attempt to play down his personal views and not succumb to the considerable pressure from his party to make some public statements criticizing the United States action in Vietnam.

3. In this connection, he said that during the campaign he had tried to minimize attacks upon the US and to curtail personal attacks against me. He said that he had

issued instructions to all of his lieutenants to bear his personal feelings in mind and refrain from derogatory statements, particularly when they affected me personally. He was quite jovial in acknowledging that Sherpao had been one of my principal vilifiers, adding that Sherpao's presence in this meeting indicated that "that chapter" had now ended. I said that I certainly hoped that this was true because not only were the charges fallacious, a fact well known to the leadership of the PPP, but it seemed to me that with all the problems facing Pakistan, foundationless vilifications would serve no useful purpose and were viewed not only by my government but by virtually all of the diplomatic corps in Islamabad as being less than self-serving.

4. During the somewhat rambling conversation then ensuing, which extended for a period of an hour and fifteen minutes, the following subjects were discussed.

5. Devaluation. Noting that Pakistan's economy was slowed down considerably and that Pakistan's balance of payments position was becoming critical, Bhutto posed the question whether or not devaluation would increase Pakistan's exports. I indicated this question was for economists specialized in international trade and, further, as the American Ambassador, I was disinclined to answer. However, I said that, personally, it seemed to me to be a necessary step and, most certainly would increase West Pakistan's exports and to a lesser extent the exports of East Pakistan, the jute market being fairly well stabilized. I added that I hoped his advisers would concentrate on this subject soonest.

6. Foreign investments. I pointed out to Bhutto that, like all developing countries, Pakistan was sorely in need of private foreign capital and could make little if any progress in economic development without it. I further pointed out that potential investors unfortunately were being discouraged by a slow grinding cumbersome bureaucracy which seemed bent on preventing private foreign capital coming into Pakistan. Bhutto, in reply, agreed that private foreign capital was necessary for the economic advancement of his country and noted that while he was minister of commerce he had exercised his best effort to attract foreign investments but had succeeded only in bringing Esso Fertilizer to Pakistan. This was followed by an extensive discussion of means of attracting private foreign capital and the areas of interest.

7. Nationalization. Regardless of the wording of the manifesto, Bhutto insisted that the PPP did not intend to institute sweeping dramatic reforms of the private sector. He said that the party program was aimed at redressing some legitimate grievances and at this juncture showed intense displeasure towards the "entrepreneurs" of Pakistan, calling them "callous cannibals" who were thriving on the misery of the people. He said it was most unlikely that they could be influenced toward a greater interest in the common man and that, hence, the government would have to go around them in an "end run". He added that some measures which would be taken might be economically unsound over the long pull but they had appeal at the present and the psychological climate among the voters was such that the PPP had no other choice. At any rate foreign investors should not be inhibited by the "mild forms of nationalization" contemplated by the PPP. Bhutto added that, to give his ideas some term of reference understandable to the American investor, he contemplated changes somewhat in keeping with the reforms instituted by Pres. Roosevelt during the latter's first two terms.

FARLAND

Department of State

CONFIDENTIAL 732

ISLAMA 01425 02 OF 02 180556Z

ACTION NEA - 15

INFO : OCT - 01 CIAE - 00 DODE - 00 PM - 05 H - 02 INR - 08 NSAE - 00 NSC - 10

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R 171137Z FEB 71

FM AMEMBASSY ISLAMABAD TO SECSTATE WASHDC 6974

INFO AMCONSUL DACCA AMCONSUL KARACHI

AMCONSUL LAHORE

CONFIDENTIAL SECTION 2 OF 2 ISLAMABAD 1425

8. Pakistan unity. Bhutto made a special point of recalling that part of the Karachi conversation which dealt with US policy concerning the unity and integrity of Pakistan. He said that he fully understood and appreciated the US position and that, regardless of propaganda to the contrary, he did not doubt that what I had told him continued to be the policy of the US. Nevertheless, he said he was wondering what would be the attitude of the US if the PPP could not agree on a "Modus Vivendi" with the Awami League on the constitution. I told him that it should be obvious to all concerned that Pakistan belongs to its people and how its people decide to orgainze the nation and deal with its multitude of problems was their business, nevertheless, I wanted him to know that the policy of the US has been and continues to be that of supporting the independence, unity and integrity of Paksitan.

9. Convening the National Assembly. Bhutto said that he was agreeable to convening the National Assembly in accordance with the call of the President. He said that nonetheless he would have preferred additional time. He noted also that he had told Sheikh Mujibur Rahman that he would not be ready for a call by Feb. 15 as proposed by the Awami League leader. Bhutto said that the reason for this was that the PPP had to coordinate a program of action with four provinces and that the situation in the West was greatly different from that which prevailed in the East wing, where Mujib was swept into power on a unified program. FYI Inasmuch as Pres. Yahya had announced the March 3 convening of the National Assembly several hours prior to the instant conversation, and inasmuch as the subject was being

discussed by Bhutto later in the night, it is reasonable to assume that the PPP Chairman was knowledgeable of the decision at the time he made the foregoing comments.

10. The Northwest Frontier Province. Bhutto said that in his talks with Qaiyum and Jamiat Leaders he had stressed PPP neutrality in the present struggle for the formation of the provincial government. Jamiat leaders, Mufti Mahmood and Maulana Hazarvi, had indicated that they wished to lead a coalition Government, but, Bhutto said, the PPP was not interested in promoting "merchants of medieval nostrum". Political expediency dictated cordial relations with the Maulanas but there was little hope for any working arrangement with Jamiat. The position of Wali Khan (NAP) in the Frontier, Bhutto went on, would be determined by his position in the National Assembly. If the NAP leader gave his unqualified support to the Six Points, he would have insurmountable difficulties in forming a Government in the Frontier. On the other hand, if Wali accepted the Six Points with reservations, his chances in the Frontier would be enhanced but he would lose the three Baluchi seats controlled by Bugti, the unreconstructed separatist of Baluchists. Bhutto concluded by saying that the political situation in the Frontier was very unstable and that the solution might lie in new elections. If such elections were to be held, the PPP had an excellent chance of improving its standing considerably.

11. Comment: The referenced telegrams contain general comments on the foregoing matters, eliminating the need for repetition.

GP.-3

FARLAND

Source: The American Papers- Secret and Confidential India.Pakistan.Bangladesh Documents 1965-1973, The University Press Limited, p.490-493