MG Tariq Salim Malik, Additional Secretary of Ministry of Defense Production (MODP), signed the Letter of Acceptance (LOA) to purchase 18 F-16s Saturday evening, September 30.

80337 10/2/2006 10:31:00 AM 06ISLAMABAD19208 Embassy Islamabad CONFIDENTIAL//NOFORN 06ISLAMABAD17768 | 06ISLAMABAD17992 VZCZCXRO6356PP RUEHLH RUEHPWDE RUEHIL #9208/01 2751031ZNY CCCCC ZZHP 021031Z OCT 06FM AMEMBASSY ISLAMABADTO RUEHC/SECSTATE WASHDC PRIORITY 1582INFO RUEHNE/AMEMBASSY NEW DELHI PRIORITY 9402RUEHKP/AMCONSUL KARACHI PRIORITY 2947RUEHLH/AMCONSUL LAHORE PRIORITY 0249RUEHPW/AMCONSUL PESHAWAR PRIORITY 8304RUEKJCS/SECDEF WASHINGTON DC PRIORITYRHEHNSC/NSC WASHDC PRIORITY C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 019208 SIPDIS NOFORN SIPDIS

E.O. 12958: DECL: 09/05/2016 TAGS: MASS, MCAP, PK, PREL

SUBJECT: F-16 LOA SIGNED AT LAST.

REF: A.) ISLAMABAD 017768 B.) ISLAMABAD 017992

Classified By: Ambassador Ryan C. Crocker, Reasons 1.4 (b) and (d)

1. (C) MG Tariq Salim Malik, Additional Secretary of Ministry of Defense Production (MODP), signed the Letter of Acceptance (LOA) to purchase 18 F-16s Saturday evening, September 30. Following the private signing ceremony, MODP presented to Office of Defense Representative Pakistan a side memo, the text of which is printed in paragraph 3.

2. (C) Comment: We consider the memo to be separate from the LOA, which constitutes a valid legal contract. Many of the issues raised in the memo were addressed and resolved in President Musharraf's Washington D.C. meetings with President Bush, Secretary Rumsfeld, and other USG principals. In preparing a response, post encourages USG agencies to include references to the understandings regarding the F-16 LOA that came out of those Washington meetings. End Comment.

3. (SBU) Text of the September 30 momo:

(Begin Text)

RESTRICTED

IMMEDIATE Ministry of Defence Production Directorate General Defence Purchase Pakistan Secretariat II, Rawalpindi Telephone: 9270924 No. 1367/F-16 pkg/DGDP/FMS

30 Sep 2006

To: ODRP

--- US Embassy,

-- Islamabad

Copy to: DSCA

-- 1111 Jefferson Davis HWY

-- Arlington, VA-22202

Subject: Signing of F-16 LOAs

1. All the three F-16 Package LOAs (PK-D-SAF, PK-D-NAP, PK-D-YAD) are being signed subject to the following conditions: -

a. On the method and schedule of payments we request that Pakistan Be allowed to avail clause 4.4.6 of the LOA Standard Terms and conditions; which allows payment on delivery rather cash prior to deliver. If this is absolutely impossible then we suggest as an alternative, that the schedule of payments be modified. Under the existing schedule for the 3 LOAs, out of the total package of $2965.95 million, 83% or $2450.23 million are to be paid by 2009-10, the first four years of the programme. This schedule will be an immense strain on Pakistan,s fiscal and foreign exchange resources, posing sever constraints on Pakistan,s ability to invest in the social and fiscal infrastructure. This will jeopardize Pakistan,s growth and poverty alleviation prospects in a particularly challenging period. We, therefore, request that the payment schedule be back loaded in a manner that most of the payments fall in the last three years of the programme.

b. If during the contract process and delivery schedule of items in the LOAs, delivery is stopped for any reason, complete payments for the undelivered stores will be returned to the Govt of Pakistan immediately without pre-conditions.

c. Security: With respect to the security note 64 to LOA PK-D-SAF Note 58 of LOA PK-D-YAD and note 73 of LOA PK-D-NAP, it is opined that whereas GOP agrees to take effective measures to protect all US equipment in Pakistan including F-16 aircraft, AMRAAMS, hardware and technical data, it is considered that certain aspects of these notes and their sub clauses are the forte and responsibility of the GOP. These security notes therefore need further deliberation and rationalization. It is requested that discussion for the same may be initiated at the earliest between the two sides.

d. LOAs are being signed. Confirmation will however be subject to approval by the Federal Cabinet of the Islamic Republic of Pakistan.

ISLAMABAD 00019208 002 OF 002

2. As an ally that throughout its existence has always stood by the US, whatever the challenges and risks, Pakistan expects that its difficulties will be appreciated and the US Government will respond positively.

/s/ Maj Gen Additional Secretary (DP) (Tariq Salim Malik)

(End Text.)

CROCKER