US embassy cable - 02KATHMANDU1970

C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 001970 
 
SIPDIS 
 
STATE FOR SA/INS AND DS/IP/SA 
STATE ALSO PASS USAID/DCHA/OFDA 
LONDON FOR POL - RIEDEL 
MANILA FOR USAID/DCHA/OFDA 
 
E.O. 12958: DECL: 10/09/2012 
TAGS: PTER, PGOV, NP, Maoist Insurgency 
SUBJECT: NEPALI MAOISTS ATTACK FOREIGN HYDRO PROJECT; 
CONFIRM BANDH DATES 
 
REF: A. (A) KATHMANDU 1853 
     B. (B) KATHMANDU 1938 
 
Classified By: DCM ROBERT K. BOGGS.  REASON:  1.5 (B,D). 
 
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SUMMARY 
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1. (C)  On October 8 Maoist insurgents attacked a Norwegian 
hydropower project northeast of Kathmandu, cutting its power 
production in half.  The motive for the attack, according to 
a Nepali employee of the company, was "out-and-out 
extortion," rather than anti-Western ideolgoy.  The same day 
suspected insurgents also set off a bomb in the bathroom at 
the Kathmandu offices of the largest business association in 
the country.  No one was injured.  On October 7 Prachanda, 
the Maoist Party Chairman, released a statement reconfirming 
the program of agitation announced earlier (Ref A), including 
the November 11-13 general strike, or "bandh."  End summary. 
 
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KHIMTI CUT-OFF 
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2.  (U)  Late on October 8 approximately 150 Maoist 
insurgents attacked the intake mechanism at the 60 MW Khimti 
power project on the border between Ramechhap and Dolakha 
districts northeast of Kathmandu.  The plant is now 
functioning at only 50 percent capacity, according to a 
source at Himal Power Company, a private Nepali shareholder 
in the project.  Army troops stationed six km away at the 
power house were apparently unaware of the attack when it 
occurred because communications lines were cut.  No one was 
injured in the attack.  A consortium of Norwegian investors, 
including the state-owned Statkraft, holds an 85 percent 
share in the USD 140 million project, which went on line in 
late 2000. 
 
3.  (C)  An official at Himal Power Company described the 
attack as having been motivated by "out-and-out extortion." 
Maoists had been regularly extorting money from local project 
employees, but had recently upped their demands to two 
percent of profits, which would amount to USD 800,000.  After 
project employees refused to meet the increased demand, the 
Maoists retaliated by destroying the intake.  (Note:  Power 
supply to the Kathmandu Valley has not been affected by the 
attack, since there is currently an oversupply of electricity 
in the grid.  End note.) 
 
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BOMB AT BUSINESS ASSOCIATION 
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4.  (U) Earlier in the day on October 8 suspected Maoists set 
off a small explosive device in a bathroom in the Kathmandu 
offices of the Federation of Nepal Chambers of Commerce and 
Industry (FNCCI), Nepal's largest business association and a 
frequent and outspoken critic of the insurgency.  No one was 
injured in the blast. 
 
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NO BREAK IN BANDH SCHEDULE, SAYS PRACHANDA 
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5.  (U)  On October 7, Communist Party of Nepal (Maoist) 
Chairman Prachanda and insurgent ideologue Baburam Bhattarai 
released a lengthy press statement expanding on an earlier 
diatribe against the King's action in dismissing the 
government (Ref B).  The King's anti-corruption admonitions 
are intended only to divert public attention "from the 
offenses of (Crown Prince) Paras Shah, who has for a long 
time been involved in smuggling . . . and also many murder 
cases."  The statement urges all Nepalis to launch "a strong 
protest program" against the King's action by organizing "a 
roundtable conference of all political parties inside and 
outside Parliament, and patriotic national powers and 
organizations to form an interim government to hold elections 
to a constitutional assembly, disarm the Royal Army, and form 
a national army."  Toward this end, Prachanda reiterated his 
appeal to all Nepalis to observe the Terai general strike, or 
"bandh," he had called for October 27 and the nationwide 
strike called for November 11-13 (Ref A). 
 
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COMMENT 
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6.  (C)  The motivation for the attack on the Khimti power 
plant appears to have been venal, rather than ideological or 
specifically anti-Western.  Whatever the reason, however, the 
attack is a serious setback to a government eager to attract 
foreign investment to its hydropower sector.  So far public 
reaction to the King's dismissal of the government has been 
generally positive, and we expect little popular enthusiasm 
for a three-day national bandh to protest his action.  At the 
same time, however, we do expect the Maoists will be able, as 
in the past, to enforce support for the strike through fear 
and intimidation. 
MALINOWSKI