NEPALI MAOISTS ATTACK FOREIGN HYDRO PROJECT;

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
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).

--------------
SUMMARY
--------------


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.

--------------
KHIMTI CUT-OFF
--------------


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.)

--------------
BOMB AT BUSINESS ASSOCIATION
--------------


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.

--------------
NO BREAK IN BANDH SCHEDULE, SAYS PRACHANDA
--------------


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).

--------------
COMMENT
--------------


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