226. Memorandum From the Director of the Office of Bhutan, India, Maldives, Nepal, and Sri Lanka Affairs, Bureau of Near Eastern and South Asian Affairs, Department of State (Schaffer) to Members of the Nepal Interagency Group1


  • November 28 Nepal IG: Record of Discussions

At the invitation of Assistant Secretary of State Harold H. Saunders, the above addressees sent representatives to a November 28 Interagency Group Meeting on our policy toward Nepal. Deputy Assistant Secretary Jane Coon chaired the meeting, substituting for Assistant Secretary Saunders; a list of other participants in the meeting is attached (Attachment A).2

The principal recommendation which emerged from the meeting was that U.S. assistance to Nepal should be increased for FY–81 as a reflection of our desire to demonstrate support for the fragile but more democratic government that may emerge from the present referendum process. The meeting also endorsed other recommendations made in the attached discussion paper (Attachment B).3


Mrs. Coon described the situation in Nepal as it bears upon our interests in the region. We have few direct interests in Nepal, and our presence and influence there are appropriately modest. However, developments in Afghanistan show how the political problems of seemingly small and quiet border states can suddenly impact on regional stability in ways which do affect important U.S. interests.

The referendum process presently under way in Nepal aims at bringing about more popular participation in political institutions.4 [Page 560] Success in this attempt would contribute to regional stability with minimal cost to us.

Failure, however, would threaten the institution of the Monarchy which remains Nepal’s only cohesive force and could lead to widespread disorder. We could see far more active Sino/Soviet competition in backing various left-wing political factions, each seeking to prevent the other from dominating Nepal’s weakened government. If the situation unraveled further, the Indians would certainly be tempted to intervene in order to counter the perceived Chinese threat. Chinese counteraction to Indian military intervention is unpredictable, but the U.S. might well be faced with awkward choices. Indian intervention in Nepal would also contribute to further regional instability as other neighbors of India felt threatened by the prospect of Indian “hegemony” on the subcontinent.

Ambassador Heck elaborated on the importance to us of continued orderly political development in Nepal. In addition to the regional concerns described by Mrs. Coon, he noted Nepal’s constructive role in non-aligned fora and its UNIFIL contribution in Lebanon. Nepal is also a critical actor in any international effort to develop the potential of the subcontinent’s eastern rivers.

The Ambassador described the referendum process and the elements which will affect the outcome. Disorder in many parts of Nepal has recently increased as extreme rightist and leftist factions attempt to undermine the referendum and prevent administration of a fair and orderly vote. So far, the Government has been equal to such challenges and remains committed to the referendum, although there are important elements, even in the Palace, which are opposed. The success of the referendum process probably depends upon the ability of the King and the most prominent political leader, B. P. Koirala, to prevail against extremist pressures and come to some sort of working relationship.

We retain significant influence in Nepal due to Nepal’s perception that we are without ulterior motives and genuinely interested in the country’s continued viability and development. We can use this influence quietly to encourage successful completion of the political process beginning with the referendum and followed by constitutional changes and subsequent elections. If this process does succeed we should demonstrate our support of the government which will emerge. The discussion paper recommends a course of action which would implement this strategy at extremely modest cost.

The IG then considered the “courses of action” described in the discussion paper, and participants made the following observations:

A. Until the Completion of the Referendum.

1. Public Statements. Mr. Thornton recommended public statements at this time of our support for the referendum process. Ambassador [Page 561] Heck said that we are already making appropriate statements in response to questions in Kathmandu.

2. Privately Counsel Major Leaders. Mrs. Coon observed that Ambassador Heck’s personal relationships with both the King and B. P. Koirala uniquely qualify him to execute this role.

3. Food Assistance. Ambassador Heck, Mr. George5 and Mr Paarlberg reviewed steps we have taken to implement our recent decision to provide emergency food assistance to Nepal.

4. Foreign Interference. Mr. Schaffer commented that, following the Indian elections,6 we will be better able to gauge our ability to discourage foreign interference.

B. If the Referendum Succeeds.

1. State Visit to United States by the King; Visit to Washington by the Prime Minister. Mr. Thornton said that “a visit” involving a one-hour official call on the President might be feasible during 1981, as opposed to a “state visit” per the discussion paper. Mr. Thornton also suggested that we attempt to include such an official call in the rubric of a larger visit to the United States—e.g., perhaps to receive an honorary degree, etc. Mrs. Coon said that the Department of State would attempt to arrange similar appropriate treatment for the Prime Minister. Mrs. Coon also endorsed the recommendation that senior USG officials be encouraged to visit Nepal if the referendum succeeds.

2. AID, IMET, ICA. Mrs. Coon commented that all of these budgetary recommendations are extremely modest in proportion to their positive impact on the situation.

a. AID. Mr. George said that it may be possible to increase the FY–81 budget to $20.5 million. This proposal is presently pending before OMB.

b. IMET. Mrs. Coon observed that world-wide impact of the IMET program in proportion to its dollar cost is generally very favorable; and the impact is comparatively greater in smaller countries such as Nepal. Ambassador Heck described the structure of Nepal’s small army, pointing out its important contribution to UNIFIL, and also the fact that the King’s two closest aides are recent IMET graduates. Mr. Edgar7 and Lt. Col. Sexton8 pointed out that we favor a viable IMET program in Nepal but our declining budget makes it difficult to increase the program at this time. Mr. Thornton stated that an increase would [Page 562] be possible if the Department of State gave the Nepal program a higher priority.

c. ICA. Ms. Robins-Mowry said that although financial resources for Nepal’s IV program remain unclear, she is optimistic that with fallout from other countries’ programs it may be possible to increase the number of IV grants. She suggested that Embassy Kathmandu recommend more IV grantees and look into increased use of partial grants.

C. If the Referendum Fails.

1. Dissociation. Mr. George agreed with Ambassador Heck’s observation that AID’s budgetary process will probably prevent decrease in AID levels in the event the referendum fails. Mr. Thornton pointed out that even so, we can demonstrate our disappointment by signing implementing agreements at a slower rate.

2. Diplomatic Representations. Mr. Schaffer reiterated that our ability to act on this alternative will depend upon our relationship with India and other circumstances at the time.

3. Continued Modest Presence. Mr. Gall pointed out that the Peace Corps would probably want to stay in Nepal regardless of political developments, and would decrease its presence only if law and order deteriorated.

Conclusion. There was a general consensus supporting the proposed courses of action. Mr. DuSault (OMB) noted the tight budgeting situation in FY–81 and was not sure that OMB could support AID’s $20.5 million “proposed” figure. Moreover it is possible that Congress will cut the AID budget. If so, then the question of implementing this course of action would probably depend upon readiness within AID to reprogram money for Nepal programs.

  1. Source: Carter Library, National Security Affairs, Staff Material, North/South, Thornton Country File, Box 95, Nepal: 9/77–12/80. Secret. Sent to McGiffert, [name not declassified] (CIA), Bowdler, Thornton, Lieutenant General Lawson (JCS), Derian, Bartholomew, Falco, Curren, Sullivan, Bergsten (Treasury), Sanders (OMB), Kreisberg, Holbrooke, Celeste (Peace Corps), and Saunders. Drafted by Donald Paarlberg (NEA/INS); cleared in draft in NEA/RA, ICA, INR, Peace Corps, CIA, HA/NEA, PM/ISP, OJCS/J–5, OASD/ISA/NESA, AID/ASIA/PNS, OMB, and INM, and by Coon; approved by Schaffer.
  2. Attached but not printed.
  3. Not attached
  4. See Document 225.
  5. Bryant George (AID/ASIA/PNS).
  6. See Document 165.
  7. James S. V. Edgar (PM/ISP).
  8. Lieutenant Colonel Sexton (JCS/J–5).