NEPAL: ROYAL INSIDER OPTIMISTIC ON PROGRESS

C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 000819

SIPDIS

STATE FOR SA/INS
LONDON FOR POL - GURNEY
NSC FOR MILLARD

E.O. 12958: DECL: 04/28/2014
TAGS: PGOV NP GON
SUBJECT: NEPAL: ROYAL INSIDER OPTIMISTIC ON PROGRESS
BETWEEN PARTIES AND PALACE

REF: KATHMANDU 790

Classified By: CDA JANET BOGUE. REASON: 1.5 (B,D).

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SUMMARY
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1. (C) On April 29 Prabhakar Rana, King Gyanendra's
confidant and business partner, called on Charge d'Affaires
and DCM to brief them on progress toward reconciliation
between the parties and the Palace. Rana expects Nepali
Congress President Girija Koirala will agree to meet the King
soon and credited the Indians with playing a helpful role in
persuading Communist Party of Nepal - United Marxist Leninist
(UML) General Secretary Madhav Nepal to be equally
cooperative. According to Rana, once an all-party government
is formed, the King envisions the ensuing twelve months as
focused on preparations for elections--suggesting that the
timeline for actual polls could be stretched out to autumn

2005. The King reportedly is concerned that centrist
political parties, like the two factions of the Nepali
Congress, have allowed their popular base to wither and would
fare poorly in an early election against the leftist UML and
its allies. The King wants to ensure that the centrist
parties have adequate time to rebuild their popular base,
Rana noted. We have heard optimistic predictions from Rana
several times before over the past two years, none of which
has ever been realized completely. That said, Koirala's
unusually accommodating tone, as well as the Indians'
strenuous advocacy efforts, are hopeful new elements. We
believe Koirala shares some of the King's fears about the
UML's relative strength and may welcome the opportunity to
come to an understanding with the Palace. End summary.

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KOIRALA COMING AROUND?
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2. (C) On April 29 Prabhakar Rana, King Gyanendra's
confidant and business partner, called on Charge d'Affaires
and DCM to brief them on progress toward reconciliation
between the parties and the Palace. Rana, who noted he was
traveling to New Delhi for what he described as religious
reasons, reported indications that "things are moving in a
positive direction." In a recent conversation, Nepali
Congress President Girija Koirala told Rana that he is ready
to meet the King and will try to persuade Madhav Nepal,
General Secretary of the Communist Party of Nepal - United
Marxist Leninist (UML),to do the same upon his return from
Bangkok April 29. (Rana said the Indian Ambassador had
received the same assurances from K.P. Oli, the UML's
second-ranking leader and Nepal's personal political
nemesis.) Koirala had told Rana that it would help if the
Government of Nepal reduced the "red-line" areas (in which
demonstrations are banned) before he met the King, but added
that his request should not be construed as a precondition.
Finally, Koirala also raised the possibility of cancelling a
mass demonstration planned for May 3 if a dialogue with the
King is initiated.


3. (C) Rana said he had urged Koirala to reach an
accommodation with Sher Bahadur Deuba, the President of the
Nepali Congress (Democratic) splinter and Koirala's long-time
rival. When briefing Koirala on Deuba's meeting with the
King (Reftel),Rana said he underscored the King's agreement
to accept Deuba as Prime Minister again, provided that Deuba
could win the support of other parties as well. Koirala
reportedly told Rana that his party would have difficulty
joining a Deuba-led government and suggested lending support
"from outside." Rana said he discouraged that proposal,
adding that Koirala could be counted on to undermine any
government in which his party was not included. Rana said he
urged Koirala not to miss the opportunity to reach an
understanding with the Palace, and suggested, if Deuba is
unacceptable, that Koirala propose several other names to the
King as possible new Prime Ministers. Although Koirala did
not commit to do so, Rana said he had the impression that the
party leader "already had several names in mind."


4. (C) The King is not satisfied with the performance of
the government of Prime Minister Surya Bahadur Thapa, Rana
continued. The small size of the Cabinet has required its
Ministers to assume multiple portfolios, lessening its
efficiency. The King is not even pleased with its
anti-corruption efforts, Rana observed, adding that the
monarch believes the current government--which he
appointed--is just as corrupt as previous ones. Although the
Government's anti-corruption organization is making a sincere
effort, Rana explained, the number of actual prosecutions has
been limited because of the corruption of the judiciary.

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LATER ELECTIONS TO ALLOW
STRONGER NEPALI CONGRESS
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5. (C) Rana told the CDA that the King had expressed concern
that centrist parties like the Nepali Congress had lost
significant ground at the local level to the UML and other
leftist parties since the last elections. The UML is much
better organized than the Nepali Congress factions, which
have let their national organizations wither, he observed.
If there were an election soon, Rana said, the King fears
that the UML and other leftist parties--including, possibly,
the Maoists--would emerge as a single bloc with a plurality.
To avert that, the King wants a sufficiently long period
before national elections to allow the centrist parties to
re-establish their popular bases. Thus, once an all-party
government is formed, the King wants to allow a full year for
election preparations, Rana said, suggesting that national
elections might not take place before autumn 2005. Rana said
he had tried to dissuade the King from pursuing a proposal to
install a neutral caretaker government two months before
elections are held (Reftel),arguing that it is "probably not
realistic" to insist that the parties agree to the plan at
this early stage in discussions.

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U.S. AND INDIA AS FACILITATORS
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6. (C) CDA stressed to Rana that the U.S. has no preference
regarding which party or which individual heads a new
government. Insead, we support the restoration of the
multi-party system, creation of a broad-based government, and
cooperation between the parties and the Palace. She said the
U.S. will continue to play a facilitating role, encouraging
the parties to engage in dialogue with the King. The King
fully understands the U.S. perspective, Rana asserted, and
his views are consistent with it. He reported that the
Indian Embassy is also working hard to promote an
understanding between the parties and the Palace. The Indian
Ambassador had conveyed to Koirala many of the same points
Rana himself made to the Nepali Congress leader and has also
been helpful in urging the UML's Nepal to meet the King
without precondition.

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COMMENT
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7. (C) Rana has optimistically predicted political
reconciliation several times over the past two years.
Unfortunately, none of his scenarios ever came to fruition.
That said, this latest report offers some ground for hope.
First, Koirala's newly flexible stance suggests his sense of
political pragmatism may be outweighing his more typical
inclination toward pettiness and vengefulness. If he sees in
the King's overture a way to outflank Deuba and the UML's
Nepal, he may grab it. The Indians also appear to be playing
a more constructive role. More than any other international
actor, the Indian government has well-established social,
political, and financial influence with Koirala's Nepali
Congress. We do not share the King's purported concern of a
UML-Maoist link in the next election. Despite its name, the
UML is itself a centrist party that has had hundreds of its
activists killed by the Maoists since the beginning of the
insurgency. Instead, the King's reported desire to provide a
longer preparation period before elections may be an effort
to tempt Koirala into supporting a new government.


BOGUE