US embassy cable - 03KATHMANDU2444

C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 002444 
 
SIPDIS 
 
STATE FOR SA/INS, DS/IP/SA, DS/DSS/OSAC, DS/T/ATA AND S/CT 
FOR AMB. COFER BLACK; LONDON FOR POL/GURNEY; NSC FOR MILLARD 
 
E.O. 12958: DECL: 12/14/2013 
TAGS: ASEC, PTER, CASC, ECON, NP, BXEP, Maoist Insurgency 
SUBJECT: NEPAL: MAOIST EXTORTION DEMAND AGAINST COCA-COLA 
FACILITY 
 
REF: A. A) KATHMANDU 2042 
     B. B) KATHMANDU 1822 
     C. C) KATHMANDU 2429 
     D. D) KATHMANDU 2332 
 
Classified By: DCM Robert K. Boggs for reasons 1.5 (B,D) 
 
 1.  (C) Summary.  According to NN Singh, General Manager for 
Coca-Cola in Nepal, the Coca-Cola bottling plant in 
Bharatpur, Chitwan District, received an extortion letter 
from the Maoists on December 11 followed by a telephoned 
deadline of December 15.  During a follow-up meeting on 
December 15 with Embassy officials, Singh reported that 
because of a Maoist called strike (bandh) in the area, the 
factory closed early on December 15.  Coca-Cola's Chief 
Security Officer in Nepal has contacted the Army and the 
Chief District Office with information on the extortion 
demand.  Embassy officials advised that payments to the 
Maoists would violate U.S. law and that passive postures 
taken in the past might not stop the demands.  Embassy 
officials suggested that Coca-Cola consider a media 
initiative to highlight the economic costs of Maoist 
extortion. End Summary. 
 
2.  (C)  According to NN Singh, General Manager for Coca-Coca 
in Nepal, the Coca-Cola bottling plant in Bharatpur, Chitwan 
District received an extortion letter on December 11 
demanding NRs 1 million (equivalent to USD 13,500).  During a 
follow-up meeting on 15 December with RSO, Econoff and the 
Embassy's Senior Security Investigator, Singh indicated that 
he had received a follow-up phone call earlier in the day 
indicating that Coca-Cola had until 1700--or another three 
and a half hours--to make a decision.  The phone call, traced 
by the Army to a local public phone, indicated that if 
Coca-Cola did not pay the demand, it would "face the same 
fate of Surya Nepal" (a local tobacco company).  (Note: Last 
week, Surya Nepal reportedly received a extortion letter that 
the Maoists copied to the Kathmandu Post, a local English 
newspaper.  The Kathmandu Post published an article about the 
extortion demand, which alleged that the Maoists demanded 
NRs. 5 million (equivalent to USD 67,000) by 26 December or 
the factory and its employees would face "dire consequences." 
 On December 16, Surya Nepal's Managing Director confirmed 
the news story.  Despite numerous telephone calls from the 
Maoists reiterating their demands, the Maoists have not yet 
followed through with their threats.  End Note.) 
 
3.  (C)  Singh mentioned that Col. Mohan Singh, Coca-Cola's 
Chief Security Officer in Nepal, has passed information to 
the local Army commander and to the Chief District Office 
(CDO).  Because of a Maoist-called strike (bandh) in the 
Terai today, many local government offices are closed.  Singh 
requested that the RSO pass this information to his contacts 
in the Nepali police.  RSO indicated that he would share the 
information, but noted that the Embassy cannot guarantee 
security to Coke's facilities and that GON resources are 
stretched in this area already.  Singh acknowledged the 
Embassy's and GON's limitations and noted that the Embassy's 
past efforts had led to increased security around the plant. 
 
4.  (C) Singh reluctantly reported that Coca-Cola 
distributors in Butwal recently paid the Maoists.  The head 
of the distributorship paid a total of NRs 700,000 
(equivalent to USD 9,500). 
 
5.  (SBU) Embassy officials noted that since the addition of 
the Maoists to the U.S. terrorism finance list on October 31, 
payments to them are prohibited by U.S. law.   Econoff noted 
that a U.S. affiliated company (viz., Colgate Palmolive) was 
in a similar predicament recently and decided to close 
temporarily until the Maoists withdrew their demand (ref A). 
Econoff also pointed out that a public media campaign might 
be an option.  The media campaign could highlight: 
-- Coca-Cola's global policy against the payment of extortion 
and Coca-Cola's history in Nepal; 
-- Possible consequences of continued Maoist threats against 
Coca-Cola's facilities and investment in Nepal; 
-- The trickle-down effect on the 400 Nepalese directly 
employed and the 30,000 indirectly employed by Coca-Cola; 
and, 
-- The good public relations work that Coca-Cola does in the 
area of employee pensions and benefits, free health care for 
its workers, and its new high school scholarship program for 
young women in rural Nepal. 
6.  (C) Singh stated that he had e-mailed Coca-Cola's 
regional office in Bangkok about the demand on December 15 
and that it is likely that Bangkok will contact Coke's 
headquarters in Atlanta.  Singh remarked that Coke HQ in 
Atlanta has a tendency to contact Department of State's 
security offices in Washington when threats to its investment 
are made.  Finally, Singh stated that he would keep the 
Embassy informed of the status of this issue. 
 
7.  (C)  This is not the first extortion demand that 
Coca-Cola has received (ref B) and weathered successfully. 
The previous demand had a "firm deadline" of September 30, 
which reportedly was not paid by Coca-Cola.  Following this 
demand the Embassy unofficially recommended that Singh and 
two of his top managers leave Nepal over the Nepalese 
holidays of Dasain and Tihar (in September/October) until the 
situation calmed down.  During the meeting on December 15, 
RSO mentioned that if Singh had personal safety concerns 
perhaps he should consider another extended holiday away from 
Nepal.  Singh remarked that he did not view the recent demand 
as a personal threat, rather it was a threat to Coca-Cola's 
viability in Nepal. 
 
8.  (C)  Comment.  Extortion by the Maoists are at an 
all-time high. This underscores the need for Anti-Extortion 
Investigative training, which Post requested in ref C.  Per 
ref D, it appears that the Coca-Cola facility in Bharatpur is 
becoming a more visible target for the Maoists. (Note: Singh 
mentioned that Coke makes an annual profit of only USD 2 
million from its activities in Nepal, so in economic terms if 
the threats continue, Coke might close operations. End Note.) 
 No one has attempted a media counter-attack against the 
Maoists.  If Coca-Cola's headquarters generates the press 
release, it might actually reinforce to the Maoists that 
Singh and Coca-Cola Nepal have no say in the matter. 
 
9.  (C)  Comment Continued.  Although previous extortion 
demands have been made by the Maoists (ref B) and have not 
been acted upon, given the low profit margin, growing 
insecurity and increased demands, it appears that Coca-Cola's 
options are shrinking.  If the investment climate does not 
improve in the near future, Coca-Cola might decide to close 
operations altogether.  In the end, if the Maoists continue 
to threaten Coca-Cola's investment in Nepal, the real losers 
could well be the Nepalese people and economy.  End Comment. 
MALINOWSKI