This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 001036 
 
SIPDIS 
 
LONDON FOR POL/RIEDEL 
 
E.O. 12958: DECL: 05/23/2012 
TAGS: PGOV PREL PTER PINR NP GON
SUBJECT: FINANCE MINISTER RESIGNS IN ANGER, BUT HOPES TO 
HEAL PARTY RIFT 
 
REF: A. KATHMANDU 1007 
 
     ¶B. KATHMANDU 1005 
     ¶C. KATHMANDU 740 (EXDIS) 
 
Classified By: Ambassador Michael E. Malinowski, Reasons 1.5(b),(d) 
 
¶1. (C) Summary.  Three Ministers resigned May 23 because the 
Prime Minister had not consulted them on the decision to 
suspend Parliament, Finance Minister Mahat told Ambassador 
May 24.  Even so, Mahat said he was prepared to stay in the 
Cabinet under the right conditions.  Mahat was especially 
bitter because of his efforts in support of the PM's 
policies.  The rift in the Nepali Congress Party (NCP) would 
have to be mended, but antipathy between Deuba and a faction 
opposed to him would make this difficult.  Holding elections 
would be a challenge under current security conditions, Mahat 
added.  In the past Deuba had had difficulty fighting an 
entrenched and corrupt party machine.  Things seemed to be 
going Deuba's way May 24 as 33 Ministers came out with a 
statement of support and senior stateman K.P. Bhattarai 
indicated he would work to heal the ruling party rift.  A 
split in the NCP would almost certainly mean a loss to the 
main opposition party in the next election.  End Summary. 
 
FinMin Bitter About Not Being Consulted 
--------------------------------------- 
 
¶2. (C) Although he blamed former Prime Minister G.P. Koirala 
for precipitating the crisis, Finance Minister Mahat decided 
to resign because Prime Minister Sher Bahadur Deuba had not 
consulted him on the decision to dissolve Parliament, Mahat 
told Ambassador May 24.  Mahat called the Embassy to speak to 
the Ambassador the day after he and two other Ministers 
tendered their resignations.  (Note:  As of COB May 24 the 
King had not yet accepted their resignations and thus they 
remained as Ministers.  According to an aide to the PM, Deuba 
himself had not yet officially accepted the offers to resign, 
and was holding them in his pocket.  End Note.)  The PM had 
not consulted Parliament either on the decision to dissolve, 
Mahat noted.  Mahat indicated that he would be willing to 
stay in the cabinet provided that the other Ministers were 
"serious people" and he got party permission, as he would 
lose his party ticket without it. 
 
This Is How You Repay Me? 
------------------------- 
 
¶3. (C) As a member of the NPC Central Working Committee 
(CWC), Mahat had supported Deuba against Koirala in that 
body.  Then he joined Deuba when the Cabinet had backed the 
PM's recommendation to extend the state of emergency.  Mahat 
was bitter that - after supporting Deuba to such a degree - 
he had not been consulted on the decision to dissolve 
Parliament.  (Note:  One news report on the press conference 
where Mahat announced his resignation said he was in "an 
aggressive mood."  End Note.)  Mahat was not aware of any 
analysis or consultations done beforehand on the subject of 
dissolving Parliament.  (Note:  Post caught wind of Deuba's 
musings about whether to dissolve Parliament six weeks ago 
(Ref C).  Note.)  The main problem was that Deuba tried to 
please everyone, Mahat judged.  The PM was sincere, but had a 
"weak temperament."  In passing, the FinMin also expressed 
bitterness about Deuba's failure to support his proposals in 
Parliament and about instances when the PM overruled him. 
 
Mahat:  Patch Up Ruling Party Rift 
---------------------------------- 
 
¶4. (C) The rift in the Nepali Congress Party would have to be 
patched up, Mahat believed.  If Deuba were removed from the 
NCP, he would have no locus of power within it and no power 
base.  Deuba could try to form an alternative party, but 
constitutional and regulatory obstacles made it difficult to 
create a new national party.  Furthermore, Deuba was not the 
charismatic type who could pull it off.  Party history and 
symbolism was very important in Nepal, Mahat concluded. 
(Note:  Party symbols are especially important in a society 
where nearly half the population is illiterate.  End Note.) 
Efforts to mend fences would be hampered by an element within 
the NCP who were set on destroying him, Mahat went on.  Even 
so, Mahat felt that Koriala's image had been "sullied" 
because people blame him for forcing the PM's decision to 
dissolve Parliament. 
 
Elections a Question Mark 
------------------------- 
 
¶5. (C) The PM's desire to extend the emergency due to 
security reasons contradicted his claim that elections could 
be held within six months, Mahat said.  Mahat noted that 
local-body elections could not even be held, even though the 
terms of local officials expire in about a month.  Mahat 
mused about possible fears that the military and/or palace, 
in league with the Deuba faction, could try to manipulate the 
elections. 
 
A System Hard to Fight 
---------------------- 
 
¶6. (C) Mahat agreed that Nepal's political system was flawed 
in that the parties played too great a role in dictating 
policy and - more egregiously - in forcing the government to 
dispense patronage.  Unfortunately that was the reality in 
Nepal, Mahat added.  He judged that PM Deuba was not an 
effective leader and thus could not stand up to the party 
machine.  For example, although Deuba was decidedly opposed 
to corruption, Mahat watched as time and again he gave in to 
party pressure to appoint people to high office who were 
either novices or corrupt.  On the corruption count, Mahat 
mentioned the new Chief Secretary, most public corporation 
heads and the Royal Nepal Airlines Corporation (RNAC) 
Chairman as examples. 
 
Going Deuba's Way 
----------------- 
 
¶7. (C) After Mahat's morning call, signs began to appear that 
things may be starting to shift Deuba's way.  In the 
afternoon Nepal's state radio reported that 33 out of 41 
Ministers had signed a letter to the PM saying they "fully 
supported" him.  Former Prime Minister and current MP Krishna 
Prasad Bhattarai, the only surviving founding member of the 
NCP, returned to the capital from medical treatment abroad 
and said he would participate in the new elections.  This was 
widely viewed as a statement of support for Deuba.  Bhattarai 
planned to meet separately with Deuba and Koirala May 25, 
and, according to a close advisor, would ask Koirala to 
withdraw Deuba's suspension from the party.  (Note:  On May 
23 the NCP CWC suspended Deuba's party membership and asked 
him to provide, within three days, an explanation of his 
decision to dissolve Parliament.  Deuba was not, however, 
thrown out of the party, as erroneously reported in Ref B. 
End Note.)  One member of Nepal's upper house viewed with 
significance the fact that no other Ministers had resigned 
despite Koirala's calls that they do so. 
 
Comment 
------- 
 
¶8. (C) The situtation in Nepal remains extremely fluid but it 
is now clear that Deuba has managed to raise a 
counter-attack.  Events on May 24 seemed to be going his way. 
 Comments by elder statesman K.P. Bhattarai - a long-time 
Koirala rival - were especially helpful to Deuba.  The cost 
of a split within the NCP will likely be a certain loss in 
the elections to the leading opposition party.  With 
Bhattarai standing by to mend fences, the NCP may yet be able 
to resurrect itself. 
MALINOWSKI