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03KATHMANDU1357 2003-07-18 09:14:00 CONFIDENTIAL Embassy Kathmandu
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					  C O N F I D E N T I A L SECTION 01 OF 06 KATHMANDU 001357 



E.O. 12958: DECL: 07/17/2013


Classified By: Ambassador Michael E. Malinowski for reasons 1.5 (b) and

1. (U) This cable contains an action request at paragraph 17.

Summary: Issues the Secretary Intends to Address in
============================================= =================

2. (SBU) On July 17, the Ambassador, DCM, and poloff met
with Nepal's Foreign Secretary, Madhu Raman Acharya, to
discuss his upcoming visit to Washington. In a very cordial
session, a well-prepared Acharya walked through the key
points presented in his non-paper (provided in its entirety
at paragraph 19). Key issues discussed included:
-- The strong and increasingly cooperative U.S.-Nepal
-- Nepal's security situation;
-- Nepal's political situation, including prospects for
-- Nepal's application to the World Trade Organization;
-- Bhutanese and Tibetan refugees;
-- Senator Feinstein's languishing bill on Nepali garmetn
exports to the U.S.;
-- Article 98 Agreement entry into force;
-- Progress in settling Bhote Koshi Power Company dispute;
-- South Asian Association for Regional Cooperation (SAARC);
-- Counter-terrorism cooperation; and
-- Security cooperation, including Nepalese troops to Iraq
and U.S. military assistance.
End summary.

Security Situation

3. (C) Overview: Maoist-Government dialogue has continued
informally. The Maoists have requested written commitments
on constitutional amendments or a constituent assembly. The
Government has made a firm offer, in writing, to renew
official dialogue. A Maoist response was expected later that
day. Acharya reported that during informal discussions, the
Maoist leadership refused to acknowledge continued extortion
by members of the Maoist party. The Maoists' refusal has
forced the Government of Nepal (GoN) to make some arrests.
Acharya stated that these arrests pose some risk to the
ongoing peace talks, but he seeks USG understanding.

4. (C) Integrated Security/Peace Development Plan (ISDP)
Implementation: In addition to the points in the Acharya's
non-paper, he added that a Secretariat is being created for
ISDP implementation. This step will breathe life into the
long-dormant plan intended to restart government services in
conflict affected areas and re-build much needed

5. (C) Negotiation Assistance: The Ambassador asked Acharya
if international monitors/facilitators would be useful in
negotiations with the Maoists. He replied that international
assistance might be necessary but not at this stage. Acharya
stated that offers of assistance would be interpreted as
expressions of support and concern by the international
community. They would not be dismissed out of hand.

6. (C) Human Rights: Acharya called the Ambassador's and
DCM's attention to the recent prosecution of Royal Nepalese
Army personnel for human rights violations (septel). He
stated that these cases are the first but would not be the
last. Acharya stated that earlier investigations and
prosecutions of human rights abuses were not possible due to
the inability of the army, due to Maoist threats, to bring
investigators to the scene of alleged violations.

Political Situation

7. (C) Acharya affirmed the GoN's commitment to holding
elections. He reported that the Prime Minister is optimistic
about eventually bringing more political parties into his
interim administration. (Note: The budget for the next
fiscal year released later the same day has a budget
allocation (septel) to cover election expenses should they be
held. End note.)
World Trade Organization (WTO)

8. (C) The GoN is currently negotiating in the Third Working
Party meeting in Geneva. Acharya stated that the GoN has
responded to all U.S. bilateral requests regarding industrial
goods. Legislation in accordance with the GoN's WTO action
plan is being drafted. Technical assistance from the USG
would be appreciated. Acharya requested US understanding on
being unable to meet all U.S. requirements for agricultural
goods, and that the current offer to greatly liberalize
Nepal's services industry should be seen as a great step
forward, especially when compared with restrictions in
neighboring countries.

Senator Feinstein's Garment Bill

9. (C) Secretary Acharya will be prepared to discuss both
the deportation of Tibetans and the payment dispute of the
Bhote Koshi Power Company, and their effect on the garment
bill's prospects.

10. (C) Bhote Koshi Power Company (BKPC) Dispute: The GoN
has deducted payments due to BKPC without explanation. The
amount of deductions has grown to USD 1.5 million. The U.S.
Secretary of State has received a number of letters from

concerned Members of Congress on this issue. In a new
developemnt, Acharya revealed that Nepal's Cabinet had
directed the Nepal Electricity Authority (NEA) to accept an
offer tendered during informal meetings, whereby NEA will pay
the full amount of the invoice. Discrepancies in the average
versus actual charges will be reconciled at the end of the
contract year. This resolution needs to be approved by the
NEA Board. (Note: This decision has not yet been briefed to
the local representatives of the BKPC. End note.)


11. (C) Bhutanese: Acharya thanked the Ambassador for his
recent public statement calling for the engagement of UNHCR
in the repatriation of refugees from Eastern Nepal back to
Bhutan. He stated that despite concerns, Nepal and Bhutan
need international support for the bilateral progress to
continue. Acharya is concerned that repeated condemnations
of the bilateral process will undermine the recent forward
movement achieved towrad resolving the twelve year-old issue.
He reported that the GoN is about whether with the
citizenship and property of the returning refugees will be
reinstated, but stated firmly that Nepal cannot raise these
issues directly with Thimpu. Acharya requested that the USG
and other international parties work constructively with
Bhutan to establish a presence there to monitor repatriation.

12. (C) Tibetans: Acharya repeated the Prime Minister's
June 16 statement that the deportation of the 19 Tibetans was
an error. He reported that the GoN was under tremendous
pressure by the Government of China to deport them. The
negative publicity has, in his view, discouraged the Chinese
from making such demands in the future. Acharya asserted
that the GoN has demonstrated its seriousness in returning to
previous policies by handing over undocumented Tibetans to
UNHCR in two separate cases and continuing to allow busloads
of UNHCR-processed Tibetans to transit the country to India.
(Note: While in Washington, the GoN may seek quiet meetings
with Representatives of the Dalai Lama in order to coordinate
on areas of mutual interest. End note.)

Counter-Terrorism Cooperation and Listing of the Maoists
============================================= ============

13. (C) Acharya briefly covered joint cooperation between
the U.S. and Nepal on counter-terrorism. He urged the U.S.
to avoid language referring to cooperation on border
security. The language on this issue in the recently signed
Anti-Terrorism Agreement caused some surprising concern in
India. He also wanted to alert the USG that should the peace
talks move forward, the GoN may request that the U.S. remove
the Maoists from its terrorist watch list. The Ambassador
reminded Acharya that the murderers of two Embassy guards
have not yet been brought to justice and that the Maoists
have issued a fresh threat to U.S.-affiliated Nepalese
(septel). Acharya stated that he understood and repeated
that such a request would be made only if there was progress
towards peace.

South Asian Association for Regional Cooperation (SAARC)
============================================= ============

14. (C) Acharya offered to brief interested parties in
Washington on the recently completed meeting in Kathmandu of
the SAARC Standing Committee of foreign secretaries. Acharya
chaired the meeting as Nepal was the host for the conference.
He reported that Indo-Pak dialogue was assisted in the
recent meeting. He requested, however, additional U.S.
assistance in reducing Indo-Pak tension, for the benefit of
the entire South Asian region.

U.S. Military Assistance

15. (C) The Secretary requested that the USG continue to
deliver military assistance. He cited the fragility of the
current cease-fire and the need to maintain Nepalese security
forces in the longer term for peacekeeping. He stated that
he will pursue the items identified in the Pacific Command's
Assessment Team Report, including items that fall outside
current funding levels, such as helicopters. Since Nepalese
troops may deploy to Iraq and will certainly continue to be
active participants in future UN-led peacekeeping operations,
Acharya argued that larger U.S. military assistance would be
a "good investment."

Nepalese Deployment for Iraq Stabilization

16. (C) Acharya stated that he would be prepared to discuss
issues related to the deployment of Nepalese troops to Iraq.
Nepalese troops will require airlift to the theater and
support once on the ground.

Action Request

17. (C) Acharya is a young and intelligent Secretary,
prepared to hold wide-ranging discussions on Nepal and South
Asia. In order to facilitate a constructive interaction,
Acharya has offered to address a roundtable with
representatives of interested bureaus in the Department and
of other USG agencies. Post urges the Department to take
advantage of this opportunity to hear directly from one of
our key interlocutors. End action request.


18. (C) Acharya is clearly heading to Washington to provide
damage control on Tibetans and request greater security
assistance. As sweeteners, the Cabinet has moved to resolve
a nagging business dispute, reaffirmed support for democracy,
and addressed human rights abuses. For a Secretary working
without a separate Foreign Minister (the Prime Minister is
now the titular Foreign Minister), Acharya has done
remarkably well in convincing the Cabinet to take USG
concerns seriously. The fragility of the cease-fire and the
large uncertainties of the political environment put a strong
pressure on Acharya to return with tangible benefits. In
many ways, the expectations placed by the GoN on this trip
are similar to those placed on former Prime Minister Deuba
during his visit last year.

Non-Paper Presented by Foreign Secretary Acharya
============================================= ====

19. (C) Begin Text:

Title: Foreign Secretary's Visit to Washington, DC (July
20-25, 2003)

Purpose: This will be a consultation visit in continuation
of the exchange of such visits in recent years. Among other
things, the Foreign Secretary intends to discuss with the
concerned U authorities the ongoing bilateral cooperation
(security and development), current political situation in
Nepal, matters related to Nepal's accession to the WTO,
Bhutanese and Tibetan refugee issues, proposed bill for
granting "duty free quota free access" to the US market,
cooperation against international terrorism, US request for
Nepalese troops to Iraq, and the progress in the recent
meeting of the SAARC Foreign Secretaries held in Kathmandu.

Political Situation: Government is committed to continue to
seek resolution with the Maoists through negotiations.
Informal negotiations are being held. There are some issues,
such as implementation of the previously agreed points, which
are causing problems. Maoists are also seeking the written
confirmation of the government's position on each of the
issues they had proposed earlier as "substantive agenda."
Formal negotiations will be held very soon. There are
occasional violations of the cease-fire, but not threatening
the peace process itself. Reports of extortion from
businesses and people and from foreign establishments are
increasing in frequency. Their leadership is denying the

Among the government's agenda is the effort to reconcile with
the main political parties, which are agitating in the
streets demanding an all party-government, restoration of the
parliament and now some political demands as well as
transparency in the assets of the late and present King. PM
is taking a very soft and conciliatory approach, and is
confident of their support at the end. At least, he is
hopeful of the support of the Nepali Congress.

The government is committed to holding elections as soon as
possible. The chances of declaring the parliamentary or
local elections very soon are limited, as it is extremely
unlikely that the Maoists will support this before a
political settlement.

Security Cooperation: Although cooperation in
counter-insurgency training matters is progressing very well,
other materials and equipment under the Foreign Military
Financing (USD 14 million) pledged by the US have not
arrived. The security forces prefer helicopters (two MI-17
and Huey II armed helicopters) and other items (M16A2 rifles,
M203 grenade launchers, night vision sets, HF radio sets,
pilot protective gear). The US assessment team has also
identified these items. In view of the fragile cease-fire
situation, strengthening the capability of the security
forces still remains a top priority. Apart from the
deliveries (Dec. 2002 and July 2003), purchase of M16A2
rifles will continue as planned.

Nepal is for continuation of the "Enhanced International
Peacekeeping Capability (EIPC)" (USD 1.3 million, since 2000)
under the US support for training and procurement of
equipment to enhance Nepal's peacekeeping capabilities.

Integrated Security and Development Program (ISDP): His
Majesty's Government is committed to this concept. But its
implementation needs to be made simple and workable, since
most of the program will be implemented at the field level.
His Majesty's Government has allocated additional funds in
the coming year's budget to expand the ISDP project. The
Cabinet is considering a proposal for establishing the ISDP
Secretariat in Kathmandu. We intend to expand it to eight

additional districts around Kathmandu Valley, in addition to
the existing eight in the mid-west hilly region. The
nomenclature from "security" (ISDP) to "peace" (IPDP) should
not be a major problem. The security agencies still want to
call it ISDP.

Terrorism: There is a special political significance of
signing a bilateral cooperation between the two countries on
cooperation against international terrorism. We also intend
to benefit from the training opportunities offered by the US
Government. We need to avoid using the words "control over
international border" in view of the regional sensitivity.
We have informed our neighbors that this relates to training
of personnel only and it is not directed against them. The
inclusion of the Nepalese Maoists in the "other terrorists"
list of the US Government has a irked them a little bit. But
it will not affect the negotiations. We think this is
something the USG can review on basis of development in the
negotiations and their commitment to peaceful pursuit of
their cause.

Troops Issue: His Majesty's Government of Nepal is
considering a US request for troops for Iraq. There are
diverging views. Public opinion is divided for an against
the case of Nepalese troops to Iraq. Increased involvement
of the UN in the peacekeeping role would sort out this
problem in the long run. Our military does not have the
capacity to airlift the troops and equipment and would
require assistance. We can adopt the Haiti model, in which
troops and equipment were airlifted by the US. This can be

WTO Accession: Nepal's accession to the WTO has reached a
crucial stage. We have submitted our revised consolidated
offer, including the legislative action plan. Our offer has
gone quite far in view of our economic situation as a least
developed and landlocked country, and our proposed tariff
rates are much lower than that of the other countries in the
region. At present, the Nepalese team is in Geneva
negotiating with the working group. We urge the US
Government's support for our case. Our commitment to trade
liberalization is known to the US Government. We are also
committed to our plans. We are ready to negotiate the
specific issues raised by the US Government. If there is US
support, we are confident that we will be able to accede to
the WTO this fall in Cancun. There is good political
commitment and a lot of preparations. We are ready to use
the offers of US technical assistance in various pieces of
legislation and other capacity building matters.

US demands for chemical harmonization and textile
harmonization are commitments difficult to achieve under WTO
negotiations. In the services sector, we have opened many
sectors, whereas an LDC can limit to three sectors only. It
would be difficult for us to give more concessions in
agriculture, which is the mainstay of our economy. But our
agricultural tariff is already lower than others in the

Nepal urges the USG to support our "fast track" entry that is
envisaged for the LDCs. We do not want to "miss the boat"
now and wait for years of additional negotiating.

Garment Bill: Nepal has a strong case in favor of "duty free
quota free access" of Nepalese ready-made garments to the US
market. We are basically very appreciative of the support
the US Government agencies have given to our cause. We are
urging the Senator who had introduced the bill to pursue for
approval. We are ready to discuss and address the concerns
expressed by the Senators and Congressmen on the Tibetan
refugee issue and issue of Panda Energy's dispute with Nepal
Electricity Authority.

Tibetan Refugees: We value the humanitarian concerns
expressed in the US and elsewhere about the Tibetan refugees.
In view of the realization that the deportation of the 18
Tibetans in May was an error, which provoked such an uproar
and negative publicity for Nepal, His Majesty's Government of
Nepal has pledged to continue its earlier policy and handed
over another 19 Tibetans to UNHCR in July. Thanks to the
reaction, even the Chinese are now receptive to the idea that
such a deportation, although rare and legally correct, could
be politically damaging to both sides. The Right Honorable
Prime Minister himself has written to the US Senators and
Congressmen and Congresswomen explaining Nepal's policy on
refugees and committing not to repeat such cases. This
should solve the problem.

Bhutanese Refugees: We would also appreciate similar concern
for the over 100,000 Bhutanese refugees languishing in seven
camps in eastern Nepal since 1991. We have taken positively
the recent statement by the US Ambassador to Nepal, His
Excellency Michael Malinowski, on the situation of Bhutanese
refugees after the publication of the joint verification team
results and after unilateral disclosure of the conditions of
return by Bhutan. There are concerns of the refugees and
irregularities in the report of categorization, which need to
be addressed during the ongoing process of appeals. We would
appreciate the USG's good offices to impress upon Bhutan to
become a little more flexible. In particular, they need to
allow the UNHCR to conduct repatriation, allow the returnees
to go back to their original land and property and not to
transit camps, and to simplify the reapplication procedure
after their return. Other conditions also need to be made
simpler and acceptable to the refugees so they could choose
to return voluntarily.

South Asia Regional Development: The latest meeting of the
SAARC Foreign Secretaries hosted by Nepal on July 9-10 was
successful in clearing the agenda of the regional cooperation
held due to the postponement of the Summit-level meeting.
Agreeing to accelerate progress on major agenda items such as
the South Asian Free Trade Area (SAFTA) draft and agreeing to
the next Summit dates, the Secretary-level meeting has
contributed to a better confidence building and further
normalization of relations between India and Pakistan. We
appreciate the US Government's constructive role of engaging
the two countries. From the current chair of SAARC, Nepal is
playing a modest role to further enhance regional cooperation
despite the kind of environment existing between the two
archrivals. Nepal held delegate-level bilateral talks with
both the Foreign Secretaries after the SAARC meeting. We
have urged both that we want to see their relations improve.
Though the Indian and Pakistan Foreign Secretaries did not
meet bilaterally, they were very relaxed, informal and open
during the discussion of the agenda items under SAARC.

Other Matters: His Majesty's Government is readying itself
to notify the USG of the entry into force of the agreement
signed last year between the two sides on the non-extradition
of persons under Article 98 of the statue of the
International Criminal Court (ICC).

20. (U) End Text.