NEPAL: COCA-COLA FACES CONTINUED MAOIST EXTORTION

C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 000352

SIPDIS

STATE FOR SA/INS AND DS/IP/SA
LONDON FOR POL - RIEDEL
TREASURY FOR OFAC - NEWCOMB

E.O. 12958: DECL: 02/26/2013
TAGS: PTER PINS ASEC CASC BEXP NP
SUBJECT: NEPAL: COCA-COLA FACES CONTINUED MAOIST EXTORTION

REF: A. (A) 02 KATHMANDU 2440


B. (B) KATHMANDU 0138

C. (C) KATHMANDU 0311

D. (D) KATHMANDU 0262

Classified By: AMB. MICHAEL E. MALINOWSKI. REASON: 1.5 (B,D).

Summary
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1. (SBU) Nepal's Coca-Cola bottler is continuing to receive
extortion demands from the Maoists, despite the cease-fire
and a claimed commitment by Maoist leader Prachanda to stop
such practices (Ref C). In coordination with Coca-Cola's
Country Manager and its corporate offices in Atlanta and
Bangkok, the Embassy is executing an action plan aimed at
ending the continued extortion. End summary.

Threats to Coca-Cola in Nepal
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2. (C) In December 2002 and January 2003, the Maoists sent
extortion letters to Coca-Cola's local representative in
Kathmandu, demanding USD 38,000 from the company, and
containing implied threats of further violence at company
facilities (Refs A and B). (Note: The Maoists have set
bombs at Coca-Cola facilities here on three separate
occasions since 2001. End note.) In a January 22 meeting
with the RSO, DCM, and econoff, Coca-Cola security officials
presented a strategy they described as "defer and deflect,"
in which the bottler would spin out discussions with the
Maoists without ever paying the insurgents any money.
Emboffs suggested a public relations campaign calling
attention to the extortion activities, highlighting the
potential damage to the local economy if foreign investors
and employers like Coca-Cola leave Nepal. The Coca-Cola
security officials undertook to discuss the idea with company
public relations officials.


Extortion: A Grandfather Clause?
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3. (C) One week after the meeting, the Maoists declared a
ceasefire with the Government of Nepal (GON). Apparently
stung by public criticism that Maoist extortion persisted
despite the ceasefire, on February 16 insurgent leader
Prachanda announced that he had instructed his cadre to
desist from collecting any funds other than "voluntary
donations" (Ref D). On February 25, however, N.N. Singh,
Coca-Cola's Country Manager, reported to Emboffs that two
Maoists had come to his office again on February 22 to pursue
their earlier demands. (Note: One of the visitors Singh
said he has met with several times; the other he had not seen
before. End note.) Singh said that when he raised
Prachanda's directive to his cadre to cease extortion, his
interlocutor replied that the demand remained valid because
it predated Prachanda's Feb. 16 order. In fact, the Maoist
claimed that the ceasefire had actually raised his local
funding requirements, since he now must pay to feed and house
the many Maoist cadre streaming into Kathmandu. Singh said
he told the Maoist representatives the demand would have to
be referred to corporate headquarters in Atlanta, and asked
them to contact him on February 28 for a formal response.


4. (C) Singh told emboffs he knows that Coca-Cola will not
pay, and is worried about his Feb. 28 appointment with the
Maoists. He doubts they would use violence against him
during the ceasefire, but fears they may exact revenge after
the ceasefire ends (which he apparently believes will be just
a matter of time). When asked if he had notified the GON of
the demand and requested police protection, he noted ruefully
the last time he had done so the drunken carousing of the
five policemen assigned to his house had kept him up all
night. He added that the Maoists had themselves said they
prefer not to visit him at home anyway because of his
proximity to a U.S. Embassy house. (Note: Mr. Singh's
residence is on the same street as that of the DATT. End
note.) He asked that the Embassy pass a message to the
Maoists, possibly through Physical Planning Minister Narayan
Singh Pun, who is coordinating GON efforts to begin
negotiations, to desist from extortion. Emboffs undertook to
include this suggestion in its ongoing consultations with
regional Coca-Cola officials about possible future actions.

Embassy Action Plan
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5. (C) On February 25 Lee Winfield, Coca-Cola's Director of
Public Affairs and Communications for South East and West
Asia, contacted econoff to relay approval of the public
relations strategy outlined in Para 2 above. Econoff, noting
Singh's visit earlier in the day, proposed a three-part
strategy for Embassy action: a) contacting Minister Pun to
urge him to raise the issue with the Maoist leadership; b)
sending a parallel message to other Maoist intermediaries;
and c) should these efforts fail to prevent continued
extortion, issuing a public statement condemning Maoist
threats to U.S.-affiliated businesses. Winfield endorsed the
strategy with the support of Coca-Cola's corporate offices in
Atlanta, with the proviso that Coca-Cola not be specifically
mentioned in any public or private communication.

At Ambassador's Request, GON Support
--------------


6. (C) The Ambassador called Minister Pun on February 26 to
request that the GON raise the continued extortion of
American businesses as a point of concern with the Maoist
leadership. The Ambassador did not mention Coca-Cola, but
emphasized that threats to U.S. business are taken seriously
by the USG, which continues to review the possibility of
adding the Maoists to one of its terrorist lists. Pun
committed to raising the issue during a February 27 meeting
with Maoist representatives.

Working with the Chambers of Commerce
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7. (SBU) At a February 27 breakfast with the Nepal-USA
Chamber of Commerce, the Ambassador asked other businessmen
if they were continuing to receive extortion demands. Most
said no, but a few, while not acknowledging direct threats,
indicated that the practice is continuing. Noting the
Maoists' continued need for funds, some speculated that the
demands might resume shortly. The participants all said they
believed a general statement from the Embassy condemning
extortion (but not mentioning any company or individual
names) might prove beneficial. The members' also agreed with
the Ambassador's suggestion to raise the matter with other
bilateral Chambers of Commerce and their respective embassies
and explore the possibility of issuing a joint statement
condemning extortion. The Ambassador has raised the problem
with the British and Indian Ambassadors and with the head of
the Nepal-India Chamber of Commerce.

Comment
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8. (C) It is difficult to determine whether the extortion
demands are persisting with the complicity of the Maoist
leadership, or whether this is an independent local
initiative. Whatever the source of the demands, we are
hopeful that Pun's message will succeed in turning them off.
If not, we are prepared, with Coca-Cola's blessing, to
publicize the Maoists' hypocrisy.
MALINOWSKI