FINANCE MINISTER CONCERNED ABOUT MAOIST INTENTIONS

C O N F I D E N T I A L KATHMANDU 002879

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/27/2016
TAGS: PGOV ECON EAID PTER NP
SUBJECT: FINANCE MINISTER CONCERNED ABOUT MAOIST INTENTIONS


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

Summary
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1. (C) On October 26, Finance Minister Ram Sharan Mahat
expressed his concern to the Ambassador, World Bank Country
Director Ken Ohashi and IMF Resident Representative Alexander
Pitt that bilateral and multilateral donors not give
legitimacy to the Maoists by signing assistance agreements
with them as long as they continued their illegal activities.
Mahat admitted that he was one of the few ministers who had
not yet met with the senior Communist Party of Nepal (Maoist)
(CPN-M) leadership. He was skeptical of Maoist economic
policies and critical of efforts by the leftist parties
generally to enshrine those policies in the interim
constitution. He agreed with the Ambassador that the draft
document was too long, but seemed resigned that the final
result would be unsatisfactory. Mahat shared the
Ambassador's concern about Maoist intentions. Where he
differed was in his assessment of the result if the People's
Liberation Army went into camps. In his view, that step
alone would start to reduce the public fear. The Ambassador
argued that separation of the Maoist combatants from their
weapons also had to take place for that process to begin.

Maoists Illegitimate Actors
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2. (C) In his meeting with the Ambassador, World Bank Country
Director Ken Ohashi and IMF Resident Representative Alexander
Pitt, Finance Minister Ram Sharan Mahat made his view of the
Maoists abundantly clear: they were illegitimate actors.
Their efforts to cloak their actions and their so-called
"People's Governments" with a veneer of respectability were
not persuasive. In response to a question from the
Ambassador, Mahat said informal contacts with the Maoists
were acceptable, but that donors should on no account take
steps that indicated they recognized the authority of the
Maoists to govern. There was one government and one
authority. That included signing assistance agreements. The
Government of Nepal (GON),he said, had chosen not to
exercise its law enforcement powers against Maoist abuses and
claims in the interest of the peace process. The Communist
Party of Nepal (Maoist) (CPN-M) had taken advantage of the
GON's generosity -- Mahat referred to it as an "appeasement
policy." The Finance Minister added that the GON was
tolerating the existing situation only because it anticipated
there would be a peace deal in a few weeks.

No Love Lost Between Mahat and the CPN-M
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3. (C) Mahat explained that he was not as well informed as
some about the peace process because he was one of the very
few members of the cabinet who had not met with Maoist
Supremo Prachanda, his deputy Baburam Bhattarai or other
senior insurgent leaders. As Finance Minister, Mahat did not
think it would be appropriate. At the same time, CPN-M
leaders were also in no hurry to meet with him. In fact,
according to all the reports he had heard, he and Foreign
Minister Oli were seen by the Maoists as the two ministers
most hostile to their cause, a characterization Mahat seemed
happy to embrace. On this line, Mahat voiced a little
wistfulness about the old days when CPN-M activists could not
travel the world so freely, a time when, as the Ambassador
noted, the Government of Nepal, not just the U.S. and Indian
Governments still considered the Maoists terrorists.

Inappropriate Economic Policies
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4. (C) Minister Mahat expressed disdain for Maoist economic
policies, particularly the CPN-M's efforts to characterize
socio-economic goals as fundamental rights which had to be
incorporated in the interim constitution. The other leftist
parties, as fellow "Communists," he stated, had the same
objective. (Note: The second-largest party in the governing
Seven-Party Alliance is the center-left Communist Party of
Nepal - United Marxist Leninist.) Mahat hoped his proposed
changes in language for the interim constitution draft would
prevail, but he was not confident they would. Ken Ohashi of
the World Bank remarked that he was of the impression that
the Maoist economic program consisted mostly of populist
slogans. In his limited contacts with the CPN-M's
leadership, he had challenged their more outrageous economic
proposals on property ownership and other issues and
encouraged them to act more like a party which might soon be
in the government and responsible for implementing its
demands. Ohashi stated that he was not sure how much
influence the World Bank had over the Maoists.

Unwieldy Interim Constitution
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5. (C) The Finance Minister agreed with the Ambassador that
the draft interim constitution with its 175 sections made no
sense. The document should have been much shorter and
addressed itself only to general principles and to those
specific matters that it had to address, such as the
procedure for inclusive elections to the constituent
assembly. It would have been better to leave nearly
everything else to the constituent assembly itself. The
problem, Mahat saw, however, was that now there was no
turning back. He was resigned that the final product of the
negotiations would be unsatisfactory.

Difficult to Guess the Outcome of Peace Talks
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6. (C) Mahat stated that he was not as optimistic as others
in the GON that a peace deal with the Maoists would be
reached. Prime Minister Koirala seemed to think it would
happen. No one knew, however, when the talks would resume.
The issue of Maoist arms management had dragged on for
several weeks without any resolution. Meanwhile, the GON,
the Finance Minister remarked, was very much aware of threats
by CPN-M hardliners that the Maoists would resort to a third
people's movement and even a return to open insurgency if the
Seven-Party Alliance government did not accede to its
demands. The Ambassador said we too found it hard to predict
what would happen. With the onset of colder weather in
Nepal, the Maoist window of opportunity for launching another
people's movement was closing. If the GON did not buckle in
the coming months, the Maoists would find themselves in a
worse bargaining position. The question, the Ambassador
noted, was whether the CPN-M realized the precariousness of
their position.

Disagreement on the Effect of Maoists in Camps With Arms
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7. (C) The meeting concluded with a spirited discussion of
the likely effect on the Nepali public if the Maoist fighters
went into camps under UN supervision. Mahat agreed with the
Ambassador that it was not enough to talk about the Maoist
People's Liberation Army (PLA). The CPN-M's militia, not the
PLA, was usually the instrument of Maoist terror.
Nevertheless, the Finance Minister was of the opinion that if
the PLA went into cantonments, even if it retained control
over its weapons, the people's fear of the Maoists would
begin to drain away. The Ambassador, however, suspected fear
would not begin to dissipate until the PLA was separated from
its weapons. Moreover, a single-key proposal would not work
-- if Prachanda were the one with the key. If the UN
Secretary General's personal representative to the peace

SIPDIS
process, Ian Martin, had the only key, that would be a
different story. Only then would the Maoist militia be
stripped of its longstanding ability to threaten eventual
harsh retribution by its much better armed PLA colleagues
against any who dared to opposed the CPN-M. The Ambassador
also emphasized that the GON would need to accept a large
international presence if the peace process and the proposed
constituent assembly elections were to succeed. Mahat did
not disagree.

Comment
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8. (C) Finance Minister Mahat and Foreign Minister Oli
provide a welcome antidote to those in the Seven-Party
Alliance cabinet, such as Home Minister Sitaula, who seem
determined to bend over backwards to accommodate the Maoists.
While Mahat is not a key player in the negotiations
themselves, we have the impression that his views count with
the person in the Government of Nepal who matters most,
namely Prime Minister Koirala. We will continue our efforts
to work with the Finance Minister to help keep this
government on a firm course. While many of the European
donors appear inclined to embrace the CPN-M at the earliest
opportunity, at least World Bank Country Director Ohashi, who
has often seemed of like mind with the Europeans, will now
think twice, we hope, before rushing to recognize an
unrepentant CPN-M.
MORIARTY