INDIAN AND UK AMBASSADORS BRIEF BOUCHER AND NSC

C O N F I D E N T I A L KATHMANDU 001191

SIPDIS

SIPDIS

E.O. 12958: DECL: 05/09/2016
TAGS: EAID PGOV PTER NP IN UK
SUBJECT: INDIAN AND UK AMBASSADORS BRIEF BOUCHER AND NSC
MILLARD ON NEPAL'S SITUATION AND NEEDS

REF: NEW DELHI 2991

Classified By: Ambassador James F. Moriarty, reasons 1.4 (b/d).

The Transition
--------------


1. (C) In a wide-ranging discussion with A/S Boucher, NSC
Senior Director Elisabeth Millard, the Ambassador and Acting
DCM, Indian Ambassador Shiv Mukherjee and U.K. Ambassador
Keith Bloomfield said they expected the remaining seats in a
21-member cabinet would be filled May 3 or 4. Mukherjee
suggested that the Nepali Congress and the government could
handle a transition if Koirala had to step down as prime
minister, although there was no clear succession plan in
place. Deputy PM Oli (from CPN-UML) probably would take
over, but only until a new Nepali Congress person was
selected. Bloomfield said a key issue facing the government
would be civilian control of the military. Mukherjee agreed.
Both thought Koirala would not be able to serve as both
Prime Minister and Defense Minister (he currently holds both
portfolios). A politician would have to be found to do the
job. No retired general would be politically acceptable.

Economy and Aid
--------------


2. (C) Mukherjee said Nepal faced serious economic
challenges. He noted that the competent head of the Planning
Commission had just resigned, reportedly to give the new
government a free hand in personnel. Both Ambassadors
thought the government would not have a hard time coming up
with an economic plan. Both former Prime Minister Deuba and
the CPN-UML had written proposals in recent years.
Bloomfield said a major challenge would be getting
development assistance to the local level, given the presence
of the Maoists. There already was a considerable amount of
aid stuck in the pipeline because aid agencies had not been
able to deliver it to the countryside. We may need Maoist
agreement for aid programs to go forward, especially in areas
under de facto Maoist control, Bloomfield said.


3. (C) Mukherjee said food was not a big problem, although
there were distribution issues. Fertilizer was needed,
however, especially now when farmers were entering their
planting season. He said much of the fertilizer could come
from India. Mukherjee said the government also was facing a
liquidity crunch. It was short Rs. 3.5 billion now, in part
because it had been unable to collect revenues during the
recent crisis. India had just expedited excise duty refunds
to Nepal that would cut the gap by a third, but problems
would remain. (Note: Newly sworn-in Finance Minister Ram
Sharan Mahat subsequently told us that the Government of
Nepal might soon see a quick infusion of cash. End note.)
Mukherjee said Nepal seemed to have adequate fuel. One
problem: The fuel came from India and Nepal has not been
paying its bills. He said New Delhi would not seek payment
immediately. Other development needs were in the areas of
health, education and infrastructure. He expected India to
provide a major assistance package. Bloomfield noted that
both the World Bank and International Monetary Fund would
need to be involved.

Dealing with the Maoists
--------------


4. (C) Mukherjee said he expected the government would
announce a reciprocal ceasefire May 4, but rules of
engagement would have to be worked out to make it stick. He
said India would like to see the army return to its
traditional mandate of protecting Nepal. It should not be
used against Nepali civilians. The past months had turned
the army into an "enemy force" in the eyes of many Nepalis.
The police, which falls under the Home Ministry, needed to
take up the responsibility for internal law and order; and
would need a lot of training to do so. Both Ambassadors said
their countries were looking at reviving their police
training programs -- India's program had been training 10,000
policemen, and the UK had a $1 million program -- that were
stopped after the King seized power February 1, 2005. It was

the police rather than the army that needed immediate help,
they said. While acknowledging that some assistance might be
resumed to the army, Mukherjee said he could not see
providing the army with 80mm mortar shells to be dropped from
helicopters. Boucher said he had told Prime Minister Koirala
and others that the U.S. would be willing to provide military
assistance and training, but through a civilian government.


5. (C) Bloomfield said international monitors would be
essential for any ceasefire. They would be seen as
independent and credible. They also would have experience
that local civil society groups did not have. Mukherjee did
not comment. Bloomfield said a third party also would be
needed to help with decommissioning Maoists and getting them
to turn in their weapons. Mukherjee added this would not be
easy. The Maoists would need some assurances, either amnesty
or safety, before they would agree to participate. When
asked where the negotiations with the Maoists might take
place, Mukherjee suggested they occur in Kathmandu through
Maoist affiliated student and trade organizations, and under
the "full glare of publicity."


6. (C) Mukherjee said he expected the government to lift the
Interpol terrorist tag on the Maoists imminently. That would
mean that countries would not be obliged to arrest and send
Maoists back to Nepal. Ambassador Moriarty expressed
concern, saying that the government should not grant such
concessions before negotiations even began. Noting reports
that the government also might release Maoists in custody,
Ambassador Moriarty said this would not sit well with the
army. One of the army's top generals had been killed by a
Maoist that had been released from custody in a 2003 amnesty.
Boucher asked both Ambassadors what they were hearing from
the Maoists. Would the insurgents join the political
process? Mukherjee said Communist Party of India leader
Yechury -- who had recently visited Kathmandu -- had talked
to the Maoists at length, and believed they sincerely wanted
to join the mainstream in Nepal. Ambassador Bloomfield said
the U.K. has conveyed to the Maoists that they need to be
patient and show their sincerity.

U.S., U.K., and Indian Coordination
--------------


7. (C) A/S Boucher said the U.S. wanted to make the
political parties more effective. We also hoped to help the
election commission and the anti-corruption agency.
Parliament had to function better than it had in the past.
Mukherjee agreed that the parties were facing a big test.
When asked whether a contact group, a "friends of Nepal,"
should be established, Ambassador Mukherjee said such a group
would not add value to the close coordination already
underway, including in Kathmandu, between the U.S., U.K. and
India. He said India would not join such a formal group,
adding that expanding the group would likely lead it astray
into discussions of lesser issues. Ambassador Bloomfield
agreed, saying something along these lines had been tried in
2002, but had not gotten anywhere. Bloomfield also expressed
doubts about a donors' conference, saying that his conflict
resolution and aid people thought it would unnecessarily
raise expectations. He argued that the Sri Lankan donors'
conference had not helped the peace process in Sri Lanka. In
contrast, Mukherjee was not opposed to a donors' conference.

Comment
--------------


8. (C) Indian Ambassador Mukherjee repeated New Delhi's
position that India is not in favor of a contact group, but
preferred to work in Nepal by coordinating our bilateral
approaches. The U.K.'s disinclination to explore a donors'
group could be due to its belief it would not be able to find
any more resources to bring to the table.


9. (U) A/S Boucher did not have the opportunity to clear
this cable.
MORIARTY