NEPAL: MAOISTS THREATEN NEW PROTESTS AS TALKS

1. (C) Summary: Even as the Maoists threaten new protests,
optimism is growing that Nepal's political parties may reach
agreement on a deal that will bring the Maoists back into
government. Maoist leader Prachanda's meeting in Singapore
with senior (and ailing) Nepali politician G.P. Koirala
fueled speculation that a deal may be imminent. However,
reports of "imminent" political deals in Nepal are frequent,
and frequently wrong. Post will continue to press key
leaders to resolve the political differences, so the parties
can resume the important work of governing, drafting a new
constitution, and concluding the peace process. End Summary.

Maoist Demands, Threats


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2. (C) The Unified Communist Party of Nepal-Maoist threatened
a new round of "mass action" beginning November 20 unless
their political demands are met. The Maoists continue to
block parliament from functioning -- as they have since
August 2009 -- although the party has allowed legislators to
meet to draft the new constitution. The lack of
parliamentary approval for the budget is creating strains on
the Government of Nepal's ability to function, as they have
used up the existing authority to fund ongoing operations.



3. (C) The Maoist demands have varied from the reasonable to
the impossible, with various party leaders making
contradictory statements the same day. Some observers
contend that the mixed messaging is part of a coordinated
strategy, although we tend to believe it reflects confusion
and internal divisions. Maoist demands have focused on two
issues, the first largely a figleaf for the second:

-- "Civilian supremacy": The Maoists are demanding a debate
and vote in parliament on the President Ram Baran Yadav's May
2009 move to overturn the decision of then-Prime Minister
Pushpa Kamal Dahal (aka Prachanda) to fire Chief of the Army
Staff Katawal. Prachanda resigned in protest, a clumsy
political move that the Maoists have likely come to regret.
The Maoists continue to claim that the President's decision
was unconstitutional, and believe a parliamentary vote on the
President's action would undermine the legitimacy of the
current government and lay the groundwork for their return to
power. Home Minister Bhim Rawal told Charge November 12 that
the governing coalition and Maoists had essentially reached
agreement on the text of a parliamentary "civilian supremacy"
motion, before the Maoists presented new demands.

-- Return to Power: As the parties neared consensus on
civilian supremacy in late October, Maoist leaders began
demanding that they, as the party with the largest numbers of
seats in parliament, lead the government. Prachanda himself
has generally been less explicit, suggesting that the Maoists
must take part in, but need not lead, the government. Prime
Minister Nepal and others have flatly rejected the demand,
suggesting that the Maoists bring a "no confidence" motion in
parliament, which presumably the 21-party coalition
government would defeat.

G.P. Koirala to Singapore, Prachanda Follows


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4. (C) With Maoist protests looming, the Chairman of the
Nepali Congress party, G.P. Koirala, flew to Singapore on
November 15 for medical treatment. While he has lost some
power within his party, the ailing 86-year-old Koirala
remains a key figure in Nepali politics, with significant
symbolic power. On November 16, Maoist Chairman Prachanda
and advisor Krishna Bahadur Mahara also took a last minute
visit to Singapore, leading many to speculate that Prachanda
and Koirala will enter into political negotiations. In a
November 17 meeting with Charge, UNMIN head Karin Landgren
speculated that the two are meeting in Singapore to avoid
Indian interference, whereas Kathmandu Post Editor Akhilesh
Upadhyay told EmbOffs that India is engineering the Singapore
meeting.

KATHMANDU 00001037 002 OF 002



Optimism about Possible Deal


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5. (C) Prachanda's trip to Singapore has fueled optimism in
Kathmandu that the parties may soon reach a political
agreement that will bring the Maoists back in government.
Before departing on his trip, Maoist leader Prachanda told
UNMIN head Landgren that he was "confident" they will "find a
way out." Home Minister Rawal also admitted to Landgren that
the Maoists "have to be involved" and that consensus was
possible. Embassy sources report that mid-level leaders of
the three major parties, the Maoists, Nepali Congress, and
Communist Party of Nepal - United Marxist Leninist (UML),
have been meeting over the last few days to attempt to find
common ground.

Cautionary Note - State of Emergency?


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6. (C) UNMIN lead Landgren also said that two senior Nepali
Congress leaders, Ram Chandra Paudel and former Prime
Minister Sher Bahadur Deuba, as well as UML party head
Jhalanath Khanal, separately suggested that the lack of
budget approval could provide a basis to declare an "economic
state of emergency" that would lead to presidential rule. In
Landgren's view, this would be "catastrophic" to the peace
process, and she sharply cautioned the leaders against such a
move.

Comment: Keep Pressure On


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7. (C) We're encouraged by the recent flurry of political
activity. However, Nepali politicians are notorious for
meeting and talking, but achieving little. We will continue
to work with the UN and like-minded countries to keep the
pressure on all the political parties. The ongoing fight
over short-term power is an unfortunate, if predictable,
distraction from the core tasks of drafting a new
constitution and concluding the peace process.
BERRY