US embassy cable - 03KATHMANDU1358

C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 001358 
 
SIPDIS 
 
DEPT FOR SA/INS, SA/RA 
LONDON FOR POL/GURNEY, NSC FOR MILLARD 
 
E.O. 12958: DECL: 07/18/2013 
TAGS: PGOV, PREL, ECON, PTER, NP, U.S-Nepali Relations 
SUBJECT: NEPAL: AMBASSADOR'S MEETING WITH PRIME MINISTER 
THAPA 
 
REF: KATHMANDU 1138 
 
Classified By: Ambassador Michael E. Malinowski for Reasons 1.5 (b,d). 
 
1.  (C) Summary.  In a meeting with Prime Minister Surya 
Bahadur Thapa on July 16, the Ambassador, accompanied by the 
ambassadors of the UK, India, Germany and France and leaders 
of their respective bilateral chambers of commerce, discussed 
their intention to issue a joint statement condemning growing 
extortion demands by Maoists.  The Prime Minister expressed 
gratitude for the ambassadors' active involvement and 
welcomed issuance of the joint statement.  He said he was 
aware of escalating Maoist extortion, had voiced this concern 
to the Maoists during informal talks, but had to balance his 
government's commitment to law enforcement with its interests 
in maintaining a peace dialogue.  Thapa also offered 
reassurance to international companies in Nepal and pledged 
to protect their interests.  The draft joint statement has 
been approved by the chambers and ambassadors, except the 
Indians, who wish to obtain New Delhi's approval before 
joining the collective effort.  End Summary. 
 
2.  (C) On July 16 Ambassador Malinowski called on Prime 
Minister Surya Bahadur Thapa with other members of the 
"Industrial Security Group," a collective comprised of the 
ambassadors of the US, UK, India, Germany and France and 
their respective bilateral chambers of commerce.  Chaired by 
the British ambassador, the group was created several years 
ago to share information and work collectively on the threat 
that the Maoist insurgency posed to international businesses 
in Nepal.  The meeting was requested by the ISG to raise with 
the Prime Minister the Group's proposed release of a joint 
statement condemning the recent drastic increase in extortion 
by the Maoists against foreign and foreign-connected 
businesses.  Our Embassy originally had raised the initiative 
with the ISG and provided the draft joint statement. 
 
3.  (C) British Ambassador Bloomfield opened the meeting with 
a quick overview of the activities and goals of the 
Industrial Security Group.  He proceeded to voice serious 
concern over the impact that the insurgency continued to have 
on businesses despite the cease-fire, and expressed the 
Group's desire to be helpful.  Ambassador Bloomfield stressed 
that the Maoists were breaking systematically the "code of 
conduct" agreed to by both sides as the basis of the current 
cease-fire.  He reiterated Britain's support for the peace 
process and cease-fire, but expressed concern over the 
"dramatic rise" in Maoist exactions.  Ambassador Malinowski 
added that the extortion activities by the Maoists hurt the 
very "fabric of life" in Nepal, affecting not only the 
businesses and the economy, but also humanitarian and 
development groups, schools, NGOs and everyday people. 
 
4.  (C) German Ambassador Rudiger Lemp expressed concern that 
international businessmen these days are wary of investing in 
Nepal because of continued violence throughout the country. 
He warned the Prime Minister that "capital is mobile," 
businesses are risk-adverse and, therefore, foreign 
businesses operating in Nepal may decide to leave the 
country. 
 
5.  (C) French Ambassador Claude Ambrosini added that, 
although there were relatively few French joint business 
ventures in Nepal, he supported the joint statement fully. 
 
6.  (C) Indian Ambassador Shyan Saran agreed in full with 
these statements and pledged the Indian government's support 
for GON efforts to end extortion.  He said that India has 
many joint ventures in Nepal and a vested interest in seeing 
companies protected.  Saran questioned the Prime Minister on 
what the diplomatic community should tell their businessmen 
to do when confronted by Maoists and what measures were being 
taken to protect them.  In response, Prime Minister Thapa 
pledged to protect the companies, but no specific plan of 
action was discussed. 
 
7.  (C) Representatives of the chambers of commerce spoke 
bitterly about the "enormous and unrealistic amounts" of 
money that the Maoists were demanding from major businesses. 
Managers are threatened with beatings, kidnappings, and 
murders if they do not comply.  In addition to extortion, the 
Maoists are now penetrating the labor unions and pressing 
them to demand untenable pay increases as populist measures. 
Apart from the ethical dilemma that these demands pose, they 
are a serious drain on business morale and threaten to drive 
many companies out of business.  Discussions of leading 
businessmen with Maoist leaders like Mahara indicate that the 
latter see the US and the Royal Nepal Army as their principal 
enemies.  US interests, the chambers believe, may be under 
particular pressure.  The Maoists have made it clear that if 
they decide to break off talks and go back to war, their 
violence will be even worse than before. 
 
8.  (C) The Ambassadors presented to the Prime Minister a 
draft of the ISG joint statement condemning Maoist extortion. 
 The Ambassador stressed that joint action, rather than 
unilateral action, would be much more effective in pressuring 
the Maoists to stop extorting from foreign businesses. 
 
9. (C) The Prime Minister thanked everyone for their concern. 
 He said the GON was aware of the extortion attempts and had 
increased its vigilance.  Extortion, he said, is a violation 
not only of Nepali law but also of the code of conduct and 
may challenge the viability of the state.  When government 
negotiators had voiced their concern to the Maoists during 
informal talks, the Maoists have justified the collections as 
"donations."  The Prime Minister asserted that the Maoists 
are in need of money to finance their return to warfare. 
While he emphasized several times the need to keep the code 
of conduct intact, the Prime Minister said the main goal of 
the GON was two-fold: to keep the peace process moving 
forward while preserving law and order.  The Prime Minister 
disclosed that a high-level Maoist in Kathmandu, holding a 
large sum of money, had been arrested on extortion charges 
and would be prosecuted according to the law.  He welcomed 
the idea of a joint statement and said it would have a 
positive impact.  The Prime Minister reassured the group that 
the Government of Nepal was committed to protecting foreign 
business interests.  He approved a suggestion from a chamber 
leader that a 24/7 command center be created in the Home 
Ministry to coordinate information on extortion attempts and 
oversee appropriate responses. 
 
10. (C) Comment.  The general consensus at the meeting was 
that Maoist extortion demands are showing no sign of abating 
despite the prohibition of such activity under the cease-fire 
code of conduct.  Extortion demands are targeting companies, 
individuals and associations, and the amounts demanded have 
increased immensely.  It is clear to this Embassy, and all 
the other members of the Industrial Security Group, that the 
GON leadership feels constrained in reacting decisively to 
combat this escalating criminal activity by its concern that 
it not provide the Maoists with an excuse for breaking off 
the peace talks.  All the ambassadors in the ISG are prepared 
to endorse the joint statement against the extortion except 
for the Indian, who wants to obtain New Delhi's approval. 
Ambassador Saran has said he is hopeful that his government 
will agree to sign as well.  Post expects a response from the 
Indians soon, but is prepared to issue the statement with 
other ISG members should the Indian government not approve. 
The Prime Minister obviously is grateful for the diplomatic 
community's firm public stand.  End Comment. 
MALINOWSKI