UPDATE ON NEPAL'S MAOIST INSURGENCY, JULY 19-25

UNCLAS SECTION 01 OF 06 KATHMANDU 001391

SIPDIS

STATE FOR SA/INS AND DS/IP/NEA
STATE ALSO PLEASE PASS USAID/DCHA/OFDA
STATE ALSO PLEASE PASS PEACE CORPS HQ
USAID FOR ANE/AA GORDON WEST AND JIM BEVER
MANILA FOR USAID/DCHA/OFDA
LONDON FOR POL/GURNEY
TREASURY FOR GENERAL COUNSEL/DAUFHAUSER AND DAS JZARATE
TREASURY ALSO FOR OFAC/RNEWCOMB AND TASK FORCE ON TERRORIST
FINANCING
JUSTICE FOR OFFICE OF THE DEPUTY ATTORNEY GENERAL/DLAUFMAN
NSC FOR MILLARD
SECDEF FOR OSD/ISA LILIENFELD

E.O. 12958: N/A
TAGS: PINS PTER CASC PGOV NP
SUBJECT: UPDATE ON NEPAL'S MAOIST INSURGENCY, JULY 19-25

REFERENCE: KATHMANDU 1388

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


1. Maoist leaders responded to the Government of Nepal's
(GON) invitation to sit for a third round of talks by
issuing more demands as a prerequisite to dialogue
(Reftel). The GON maintains that the peace process is not
in jeopardy, but senior Maoist leaders increasingly talk of
notably absent from Kathmandu amid reports of their
attendance at a regional conference in India of the
Revolutionary Internationalist Movement (RIM). The Indian
Ambassador to Nepal acknowledged to reporters on July 25
that there was cooperation between Maoists in Nepal and
terrorist groups in India. Security forces reportedly have
been put on high alert amid concern over increasing Maoist
activities, and the possible failure of peace talks, which
a high-ranking police official was quoted as saying would
result in "colossal casualties." A female Maoist was shot
to death on July 25 during a confrontation with security
forces.


2. Summary continued. International donor agencies have
expressed concern that the Maoists will resume hostilities,
causing essential development projects to be halted.
Maoist extortion demands to the United Mission to Nepal
(UMN),an umbrella organization of inter-faith
professionals providing medical assistance and development
projects, has caused programs to be shut down. The
Industrial Security Group (ISG) issued a statement on July
21 demanding an immediate end to extortion by the Maoists.
Citing GON harassment, the Maoists closed down their
Kathmandu contact office. Maoists continue to extort money
from civilians and businesses, and reportedly murdered a
retired policeman in the eastern district of Ilam after he
refused to donate money and food to them. Maoists abducted
thirteen civilians in four separate districts over a five-
day period. End Summary.

MAOISTS ISSUE MORE PRECONDITIONS FOR FURTHER PEACE TALKS
-------------- --------------


3. In response to the GON's formal invitation to sit for a
third round of talks (Reftel),Maoist leaders declared
there is no reason to continue peace negotiations until the
GON immediately implements agreements allegedly reached
during the second round of talks. These agreements include
the controversial issue of restricting the Royal Nepal Army
(RNA) to within five kilometers of its barracks, the
release of senior Maoist leaders, and publication of the
whereabouts of missing Maoist cadres. In a statement
issued through peace talks facilitators on July 23, Baburam
Bhattarai, head of the Maoist negotiating team, said the
non-implementation of those alleged agreements is
"tantamount to the unilateral end of the ceasefire and
peace dialogue." Bhattarai reportedly also demanded that
the King play a direct role in the talks, or provide a
public statement authorizing full authority to the GON's
negotiating team, which Bhattarai lambasted as "powerless
and helpless."

4. In their response Maoists continued their rhetoric
against the USG and the RNA, demanding the "immediate
expulsion of all U.S. military advisors and experts" as a
prerequisite for continued dialogue. In a scathing
criticism, Maoists accused the RNA of turn ng itself into
the "Royal American Army," and alleged the establishment of
a "foreign puppet military regime."

5. Kamal Thapa, Minister of Information and Communication,
and head of the GON's negotiating team, confirmed that the
GON had received the Maoists' response, and that it would
be studied very carefully. Minister Thapa indicated that
the talks might be delayed because the Maoist demands are
"every tough." The GON is expected to issue a reply within
the next few days.

CONFLICTING MESSAGES
--------------


6. The Maoist refusal to sit for another round of talks,
which the GON has continually promised would be held soon,
illustrates the very different perceptions of the peace
process held by the two sides. Minister Thapa, who has
consistently maintained the GON's commitment to the peace
process, said on July 22 that "there is no obstructions" to
a third round of talks, and that the GON had maintained
"maximum flexibility" during the six-month ceasefire.
Thapa cited six informal talks with the Maoists as proof
that the peace process has not been derailed, and said the
GON was determined to hold talks "at any cost."


7. Senior Maoist leaders, however, seem to have a
different view of the direction of the talks. Ram Bahadur
Thapa (Badal),Maoist military chief and negotiating team
member, declared on July 18 that a third round of talks was
"impossible" unless the RNA's movements were restricted.
Maoist rhetoric has increasingly referenced a return to the
jungle and a "decisive war" if peace talks fail.

MAOISTS MEET REVOLUTIONARY GROUP IN INDIA
--------------


8. On July 14 senior-level Maoists reportedly attended the
regional conference of the Revolutionary Internationalist
Movement (RIM) held for the first time somewhere in the
bred areas (Maoist controlled) of India, including the
states of Bihar, Chattisgarh, Orrissa and Jharkhand.
Pushpa Kamal Dahal (Prachanda),Maoist Chairman, and
Baburam Bhattarai reportedly attended along with Dev
Gurung, senior Maoist and negotiating team member. Other
groups from India and Bangladesh. The conference hailed
the Maoist-led peoples' wars in Nepal, Peru, India, Turkey
and the Philippines, and praised the advances made against
alleged American imperialism and Indian expansionism. A
statement released at the conclusion of the RIM meeting
said the Maoist-led wars are the "beginning of a
proletariat movement in the world." (Note: The continued
absence of senior Maoist leaders in recent weeks has fueled
speculation that they have gone underground in India,
meeting with various organizations to garnet support. End
note).


9. Shyam Sharan, the Indian Ambassador to Nepal, told
reporters on July 25 that his government will not allow
anti-Nepal activity on its soil. Ambassador Sharan
acknowledged there was cooperation between Maoists in Nepal
and terrorist groups in India, declaring that "we know that
the Maoists were working together in drawing action plans
with terrorist organizations" in Bihar, Andhra Pradesh and
Orissa. He said in order to take effective action against
the Maoists, a better exchange of information between the
two governments was needed.


10. In addition to traveling to India, Pushpa Kamal Dahal
(Prachanda),Maoist Chairman, reportedly has been meeting
with various ethnic groups in Nepal. Even before returning
to India, Prachanda reportedly attended a rally of the
"Tharu Liberation Front," a tribal organization
concentrated in the southern lowlands. According to the
Kirant National Front (KNF),a Maoist affiliated ethnic
political organization, Pracha
nda subsequently inaugurated
the group's first national convention, and reportedly
declared that the strategy for the next phase of the
insurgency in Nepal would be different. Speculation
persists that the Maoist Chairman is attempting to stir up
ethnic revolutionary fervor. On July 23 it was announced
that the KNF had merged with the Kirant Workers' Party to
form the Unified Kirant Front, and then promptly demanded
"Kirant autonomy" in the eastern part of Nepal.

SECURITY INCREASED
--------------


11. A female Maoist was shot to death on July 25 during a
confrontation with security forces in the far western
district of Kalikot. A joint team of army and police
personnel were on routine patrol when Maoists allegedly
attacked them. Colonel Dipak Gurung, RNA spokesman, said
his forces had to return fire in self-defense, and
condemned the attack as "a serious violations" of the
over increasing Maoist activities. The local press quoted
an unnamed government official on July 23 as saying that
the GON has ordered all security personnel on leave to
return to their bases. Security personnel reportedly have
been told also to monitor and, if necessary, restrict the
purchases of pressure cookers and iron pipes, items used
extensively in the past by Maoists to make bombs.


12. Security reportedly has been increased also in the
Kathmandu Valley and in the western region of Nepal,
particularly after the closure of the Maoists' office in
the capital. Joint teams of army and police personnel have
intensified patrols and security checkpoints in the
districts of Rolpa, where Maoists reportedly have continued
to extort and abduct, as well as Doti and Dang, a Maoist
stronghold. A Maoist program scheduled for July 21 in Dang
was banned by local officials, who cited security concerns.
In response to reports of increased Maoist activities in
Dipayal District, security personnel have imposed curfews,
resumed checkpoints and resorted to frisking of travelers.
Security personnel said they are following orders from
their high command. Many of the villagers, fearing a
resumption of hostilities, have fled.


13. A high-ranking police official was quoted in the local
press on July 21 as saying that the Maoists have increased
their military strength and could possibly switch tactics,
targeting urban areas and district headquarters instead of
returning to the jungle. The official warned that the
Maoists would target urban areas "to meet their financial
needs," and that if the peace talks failed it would result
in "colossal casualties."


14. According to reports, Nepal Electric Authority (NEA)
has handed over security of major power projects to the
RNA. The RNA has been responsible for the security of
several power plants since the Maoists destroyed nine of
them during the declared state of emergency last year.

INTERNATIONAL DONORS CONCERNED OVER STALLED PEACE TALKS
-------------- --------------


15. As the peace negotiations remain stalled,
international donor agencies have expressed concern that
the Maoists will resume hostilities. On July 21 David
Wood, head of DFID Nepal, the British Government agency for
international development, declared that it was essential
for Nepal to sustain the peace process, noting that peace
"is a prerequisite for progress." He said the possibility
that the Maoists will return to violence is "extremely
worrying."


16. Henning Karcher, resident representative of the United
Nations Development Program (UNDP),echoed the need for
peace before development projects could be successful,
saying that progress could not be achieved in developing
Nepal "unless the conflict is resolved." Karcher also
reiterated the need for a human rights accord. On July 19,
the National Human Rights Commission (NHRC) again condemned
both the GON and the Maoists for failing to respond to its
draft of a human rights accord.

MAOISTS EXTORTING FROM DEVELOPME
NT AGENCIES
--------------


17. Maoists in the western district of Dailekh reportedly
threatened violence against a development agency if it did
not pay them USD 4000. The United Mission to Nepal (UMN),
an umbrella organization of inter-faith professionals
providing medical and development assistance, was warned by
the insurgents to leave the district unless payment was
made. Maoists had forced the UMN to suspend all its
projects two years ago after the insurgents looted supplies
and disrupted programs, but the organization later resumed
its projects, which include humanitarian assistance and
infrastructure development. An official of the UMN told
the local press on July 24 that it has decided to shut down
again because it cannot meet the extortion demand. The
organization includes seventy-five American volunteers and
employs over two hundred local youths.


18. Extortion demands by the insurgents have caused bus
service to stop completely in some parts of the western
district of Surkhet. Due to increasing demands for
donations from bus drivers, the Mid-Western Bus
Entrepreneurs Association has stopped service along some
routes. The insurgents reportedly wanted a "donation" of
almost USD 350 from each bus.

ISG DEMANDS END TO EXTORTION
--------------


19. A statement issued on July 21 by the Industrial
Security Group (ISG),consisting of bilateral Chambers of
Commerce and representatives of the U.S., British, Indian,
German and French embassies, called for an immediate end to
extortion by the Maoists. The ISG also called upon the GON
to address the numerous violations of the code of conduct
committed by the insurgents at the next round of peace
negotiations. In addition to extortion, which has
increased substantially since the ceasefire was declared,
the statement also cites Maoist interference with
MAOISTS CLOSE KATHMANDU OFFICE
--------------


20. Maoists closed their office in Kathmandu on July 20,
alleging that it was under the "constant watch of the
government's security forces." The move follows the
detention of Bharat Dhungana, head of the office, by
security forces on July 17. Dhungana claimed that he was
handcuffed and held for five hours. In a statement
released by Dhungana on July 21, he accused the GON of
keeping him and the office under twenty-four-hour
surveillance, and criticized the GON for failing to
guarantee the security of the office. The insurgents have
demanded a public apology from the GON before they would
reopen the office.


21. Kamal Thapa, Minister of Information and
Communications, and member of the GON's peace talks team,
said the GON was "shocked" that the Maoists had closed the
office, but refuted the accusations of Dhungana, saying
that the GON consistently has assured the security of
Maoist cadres, and "promised to work to strengthen security
if there are flaws." Minister Thapa dismissed the closing
of the office as a "pressure tactics" by the insurgents, and
said security forces took Dhungana in for questioning after
he was implicated in extortion campaigns.

BADAL JUSTIFIES CODE OF CONDUCT VIOLATIONS
--------------


22. In an interview with the Nepali press on July 17,
Badal, Maoist military chief, denied that Maoist cadres
were violating the code of conduct. Badal refuted charges
of abducting civilians, saying that the Maoists have only
taken action against "fake Maoists," and accused members of
the Communist Party of Nepal-United Marxist Leninist (CPN-
UML) of pretending to be Maoists in order to "tarnish our
image." Badal admitted taking money from people, but
insisted that it was given voluntarily. The military chief
defiantly declared that the Maoists have laid down arms but
not given them up, and warned the RNA that it would be a
mistake to think the Maoists would relinquish their
weapons.

MAOISTS MURDER RETIRED
COP
--------------


23. On July 18 a group of Maoists reportedly murdered a
retired policeman in the eastern district of Ilam after he
refused to donate money and food to the insurgents.
Ministry issued a statement on July 18 condemning the
murder, and warning that such incidents could adversely
affect peace talks. On July 20 a group of insurgents in
Parsa District reportedly threatened to kill a Nepali
Congress (NC) activist if he does not provide them with
weapons, ammunition and cash. On that same day in Bara
District, Maoist cadres stole weapons and ammunition from
three separate homes.


24. Maoists abducted thirteen civilians in four separate
districts over a five-day period. On July 19 six people,
including a two-year old child, were abducted by Maoists in
the northeastern district of Sankhuwasabha. Their
whereabouts remain unknown. On July 20 a twenty-two year
old man was abducted from his home in southeastern
Mahottari District, and a former Village Development
Committee (VDC) chairman and CPN-UML activist was taken
from his home in the northwestern region of Humla. In the
western district of Baglung six people were abducted on
July 24 by a group of armed Maoists.
MALINOWSKI