VZCZCXRO4444
PP RUEHBI RUEHCI RUEHNEH
DE RUEHC #1990/01 0110615
ZNR UUUUU ZZH
P 082041Z JAN 10
FM SECSTATE WASHDC
TO RUEHKT/AMEMBASSY KATHMANDU PRIORITY 4186-4187
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 8668-8669
INFO RUEHLM/AMEMBASSY COLOMBO PRIORITY 6565-6566
RUEHKA/AMEMBASSY DHAKA PRIORITY 2507-2508
RUEHCG/AMCONSUL CHENNAI PRIORITY 0009-0010
RUEHNEH/AMCONSUL HYDERABAD PRIORITY 0170-0171
RUEHCI/AMCONSUL KOLKATA PRIORITY 3517-3518
RUEHBI/AMCONSUL MUMBAI PRIORITY 3112-3113

UNCLAS SECTION 01 OF 02 STATE 001990 
 
SENSITIVE 
 
C O R R E C T E D  COPY (SENSITIVE CAPTION ADDED) 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: IN NP PGOV PREL
SUBJECT: NEPAL AMBASSADOR SHARMA DISCUSSES PEACE PROCESS, 
TRADE WITH SCA ASSISTANT SECRETARY BLAKE 
 
STATE 00001990  001.3 OF 002 
 
 
 ¶1.  (SBU)  SUMMARY:  During a January 7 courtesy call with 
Nepal's Ambassador to the United States, Shankar P. Sharma, 
SCA Assistant Secretary Robert Blake voiced U.S. concern 
regarding the lagging pace of the peace process in Nepal and 
emphasized the need for the Government of Nepal to reach out 
to the Maoists in order to keep them in the peace process. 
A/S Blake further noted U.S. concerns that an overly hasty 
withdrawal of the UN Mission in Nepal (UNMIN) might be 
destabilizing, and stated that the U.S. supported a full six 
month extension for the UNMIN mission.  Ambassador Sharma, 
while recognizing recent positive developments in Nepal's 
peace process, stated that the Maoists still needed to be 
brought into the framework of democratic politics and asked 
for U.S. pressure on the Maoists to help accomplish this end. 
Sharma further pressed for the early completion of a Trade 
and Investment Framework Agreement (TIFA) between the U.S. 
and Nepal.  END SUMMARY. 
 
---------------------- 
PEACE PROCESS CONCERNS 
---------------------- 
 
¶2.    (SBU)  Ambassador Sharma began by noting recent 
positive developments in Nepal's peace process.  In 
particular, he pointed to the January 7 discharge of the 
first batch of disqualified personnel from Maoist 
cantonments.  Sharma stated that the Maoists support the 
GON's action plan to complete the discharge and integration 
of Maoist combatants within the next three and a half months. 
 In response to A/S Blake's note of skepticism regarding this 
point, Ambassador Sharma stated that he had read about this 
development in the press. Sharma further raised the Maoist 
agreement to participate in a high-level political mechanism 
as a further positive development.  He admitted that, despite 
the above positive trends, the Maoists still needed to be 
brought within the framework of democratic politics.  Sharma 
stated that the U.S. could play a helpful role by applying 
pressure on the Maoists in this area. 
 
¶3. (SBU) Noting the long friendship between the U.S. and 
Nepal, A/S Blake voiced U.S. concern over the failure to 
reach key deadlines in Nepal's peace process.  Blake 
emphasized the need for the GON to reach out to the Maoists 
and show them that they have a place in the political 
process.  In this way, the GON could help to prevent the 
Maoists from returning to violence.  Blake stated that the 
U.S. has started a dialogue with the Maoist leadership and 
provided Prachanda with a set of benchmarks, such as 
renouncing violence, reforming the Communist Youth League 
(YCL) and making amends for the killing of two U.S. Embassy 
employees.  The Maoists understand these conditions, Blake 
said, but they have been unwilling to meet these benchmarks 
to date.  Blake noted that the U.S. was glad to see UN 
Special Representative Radhika Coomaraswamy's December visit 
to Nepal, which resulted in an action plan to discharge 
disqualified personnel from Maoist cantonments. 
 
¶4.    (SBU) In response to Blake's request for Sharma's views 
on how to move forward on the peace process, and how to work 
with India on this issue, Sharma stated that U.S. engagement 
with the Maoists was helpful.  He reiterated that the U.S. 
needed to pressure the Maoists to cooperate with the peace 
process.  Sharma further stated the GON's view that Maoist 
disarmament must be completed before the constitution 
drafting deadline.  He stated that if the Maoists disarm, and 
manage to gain a parliamentary majority, they could form a 
government.  When pressed regarding the Maoist's ability to 
lead a government, Sharma conceded that the existence of the 
current 22-party coalition government, unprecedented in 
Nepal, suggests that many doubt the Maoist's ability to lead 
the government.  He further agreed with Blake's point that 
the Government of India (GOI) seems to have serious doubts 
regarding the Maoists.  Sharma subsequently said that, 
despite these concerns over the Maoist ability to "lead" the 
government, he believed that it was beneficial for the 
Maoists to "join" the government.  On this point, Sharma 
opined that the Maoists should be encouraged to join the 
 
STATE 00001990  002.2 OF 002 
 
 
government, as participation in normal politics would 
ultimately lead the Maoists to respect democratic norms and 
processes. 
 
¶5.  (SBU)  A/S Blake stated that the upcoming UNSC decision 
on the UNMIN extension will be critically important.  He 
relayed U.S. concern regarding press reports that the GON 
planned to seek a UNMIN extension shorter than six months. 
In particular, Blake noted that the termination of UNMIN 
before the May 28 constitution drafting deadline could 
introduce an element of instability into the peace process 
during a critical period.  He pressed that the U.S. supports 
the extension of UNMIN for a full six month term.  Sharma 
responded that the Communist Party of Nepal - United Marxist 
Leninist (UML) and the Nepali Congress Party (NC) had 
concerns over UNMIN failures to adequately investigate Maoist 
violations of the terms of the Comprehensive Peace Agreement 
(CPA).  In particular, Sharma noted UML and NC concerns that 
UNMIN had failed to investigate Maoist involvement in 
violence in southern Nepal. 
 
--------------------------------------------- - 
TRADE AND INVESTMENT FRAMEWORK AGREEMENT (TIFA) 
--------------------------------------------- - 
 
¶6.  (SBU)  Sharma stated his desire to see improved economic 
relations between the U.S. and Nepal, particularly the 
completion of a Trade and Investment Framework Agreement 
(TIFA) between the U.S. and Nepal.  Sharma listed several 
improvements, since 2006, in Nepal's investment climate, 
including an improved human rights record, decrease in 
violence throughout the country, and heightened interest in 
Nepal's hydropower sector.  He claimed that, as of January 1, 
2010, Nepal had opened its service sector in line with 
previous World Trade Organization commitments.  Sharma 
recounted that, in his most recent meeting with the Office of 
the U.S. Trade Representative (USTR), he had received little 
encouragement on the TIFA.  He opined that Embassy Kathmandu 
likely had concerns regarding the TIFA and said that he would 
encourage the Ministry of Commerce to meet with U.S. Embassy 
personnel in Kathmandu on the TIFA issue. 
 
¶7.  (SBU)  In response to Sharma's repeated raising of TIFA, 
A/S Blake stated that a TIFA must be driven by U.S. business 
interest.  Blake said that U.S. businessmen likely had 
concerns regarding violence in the Terai, energy and 
infrastructure limitations, as well as transparency issues in 
Nepal.  In this vein, Blake raised U.S. concerns regarding 
the transparency of the recent bidding process by the Nepal 
Airlines Corporation (NAC), in which Boeing lost to Airbus. 
Blake noted that U.S. businesses pay attention to this kind 
of case as an indicator of the investment climate.  Blake 
expressed his hope that the GON would take a look at this 
case to ensure proper transparency in the process going 
forward. 
 
¶8.    (SBU)  A/S Blake pointed out that, in terms of human 
rights issues, the recent promotion of Toran Singh to 
second-in-command of the Nepal Army is troubling. 
Separately, the GON's moves to arrest Major Basnet, 
implicated in the killing of Maina Sunuwar, was a good step, 
Blake said.  However, the Nepal Army's refusal to transfer 
Basnet to civilian authorities is disheartening.  In short, 
Blake observed, Nepal presents a "mixed picture" to 
investors.  He emphasized that it is incumbent on Nepal to 
make the business climate as attractive as possible.  Blake 
offered that Nepal's proximity to India, in which many U.S. 
companies have become established, offers an opportunity to 
lure these investors to Nepal.  In response to Sharma's 
statement that Millennium Challenge Corporation (MCC) data 
shows Nepal as one of the strongest countries in South Asia 
on measures of economic freedom, Blake supported Sharma's 
plan to work with the U.S. Chamber of Commerce to arrange a 
briefing by a Nepalese minister for interested U.S. 
companies.  Blake further encouraged Sharma to reach out to 
the U.S. Chamber of Commerce in India, as they would have a 
better sense of South Asia.  Blake cautioned that, given the 
current political situation in Nepal, Nepal would be unlikely 
to get MCC support.  If the peace process continues in a 
positive direction, Blake added, Nepal could likely become 
competitive for MCC funds. 
CLINTON