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U.S. Department of State

Daily Press Briefing

...................... QUESTION: On his trip to Pakistan, did Mr. Talbott raise with the Pakistani Government the noticing of cancellation of power projects with US companies?

MR. RUBIN: Pakistan's treatment of foreign independent power producers has been a subject of strong US concern for some time, and we have raised it at the highest levels of the Pakistani Government. The subject is on the agenda of the Deputy Secretary's delegation. They, I believe, have a few minutes ago or shortly will meet the Prime Minister.

In its discussions with the Pakistani Government, we will be pointing out how national security has an economic as well as a military component, and that Pakistan's current economic situation is dire and it would be a mistake to not treat foreign investors hospitably and honor their contracts.

The delegation will raise it. I can't say for sure who will do it; but it will happen.

QUESTION: The premise of that seems to be that the US Government believes the allegations against the US companies are without foundation.

MR. RUBIN: On the contrary - we are raising with the government there a subject of our concern that this decision or otherwise interfering with these contracts or US businessmen is not correct and wrong and shouldn't happen. The fact that we raise it at the highest level of governments means we give credence to the reports.

QUESTION: But I mean, the Pakistani Government has alleged that there was corruption in these contracts; that the US companies were involved somehow in corrupt activities with the Bhutto regime. I'm wondering if --

MR. RUBIN: I can't really be too more specific about the specific issues of each of the companies. What I can say is that this type of discrimination is a matter of concern to us - strong US concern - and those points will be made. Then the actions will be judged on the merits of each of the cases.

QUESTION: Do you have anything more on Talbott's trip? He has move on to Pakistan?

MR. RUBIN: Right. I don't have anything new, really, to report; other than, obviously, what his goals are -- and the goals today are the same as yesterday, which is how to reduce tensions in the area and get the Indian and Pakistani Governments to move step by step towards acceptance of international norms in the area of non-proliferation.

QUESTION: Did the Indians suggest a seat on the UN Security Council to --

MR. RUBIN: Let me be very clear on that. Secretary Albright has been very clear on that. India is not going to blow its way onto the Security Council as a permanent member. All it has done by conducting these explosions is to harm and make impossible, in the current circumstances, India joining the Security Council as a permanent member. We cannot support that kind of policy.

Let's bear in mind that Germany and Japan, the other countries that we have supported for Security Council membership, have forsworn nuclear weapons and are members of the NPT. So there is no relationship between having nuclear weapons and American support for permanent membership. On the contrary - with the current trend away from the proliferation of nuclear weapons, with more and more countries forswearing them, India has made it far, far harder for it ever to join the UN as a permanent member.

QUESTION: Do you know if the issue arose during Talbott's meeting in Delhi?

MR. RUBIN: I would assume that in a full-fledged discussion like this that the issue of India's aspirations in this regard came up in one form or another. Whether it was in a formal bilateral or on the margins, though, I don't know.

QUESTION: Later on today there's going to be a background briefing?

MR. RUBIN: A background briefing on Pakistan and with respect to the international financial institutions.

QUESTION: Is there anything you can say on the record that might get us started, as to why - the reason for the briefing?

MR. RUBIN: Yes. Let me say that Pakistan's serious economic problems, a legacy of severe and lengthy mismanagement, have been exacerbated by sanctions. A default could result in severe hardship for Pakistan's people, leading to political instability and turmoil.

It was not our intention that sanctions should punish Pakistan's citizens or precipitate an economic collapse. We need to respond in a prudent manner, and this can best be done through international institutions designed to deal with such problems.

We think it is critical that the IMF be allowed to resume negotiations on reinstating Pakistan's IMF program. We are re-examining, with our G-7 colleagues, the multilateral approach to the IMF with respect to Pakistan.

Resumed IMF involvement is the minimum necessary to forestall a collapse of confidence in Pakistan's economy; but it is unlikely, by itself, to prevent default. To turn things around, Pakistan must commit to serious economic reforms. We and our partners, together with the IMF, will do everything possible to see those reforms implemented.

We have not softened or somehow waived the sanctions. We are abstaining and making use of the flexibility that the law currently allows. We are not being softer on Pakistan than India. On the contrary - the overall effect of sanctions is harder on Pakistan; and in addition, India neither seeks nor receives support from the IMF.

Both India and Pakistan will continue to feel the impact of US sanctions. Pakistan will continue to be denied much needed spares for its US-origin military equipment, for instance; and both India and Pakistan will continue to be denied desperately needed financing and insurance for investment. We still retain significant leverage, but we are trying to deal with one of the fundamental problems right now, which is the state of the Pakistani economy.

.................

(The briefing concluded at 1:40 P.M.)

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