Capital Punishment

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For a group that zealously subscribes to the communist doctrine of Chinese revolutionary Mao Zedong, Nepal's rebels last week showed an unsettling knack for finding the pressure points of a capitalist society. Following a firebomb attack on Kathmandu's luxury Soaltee Crowne Plaza hotel, the Maoists demanded the closure of a dozen multinational companies and declared a blockade of the main roads leading into the capital—upon which its 1.5 million residents depend for everything from fuel to food. Vegetable prices rose, tourists canceled their visits and officials warned that fuel supplies could run dry by next week. The companies that closed up shop included tobacco giant Surya Nepal, whose taxes account for up to 4% of the government's revenue; others ceased operation voluntarily, fearing they would be targeted next. Enforced by the threat of "action" against any who defy the Maoists' orders, the moves signal a new tactic in a conflict that has already claimed 10,000 lives: to bring Nepal to its knees economically. "It could be a disaster," warns Bishwambher Pyakuryal, political-science professor at Tribhuvan University. "A contraction is inevitable if this situation continues."

Prime Minister Sher Bahadur Deuba tells TIME that "we are determined to give full protection to the industries and citizens" of Nepal, but the rebels' intimidation continues: last Friday, explosions rocked a Kathmandu government office and a guard post. Nepalese security analyst Indrajit Rai says cutting off Kathmandu could signal a possible endgame. "[The Maoists] are beginning to tighten their grip," he says. "Penetration [of Kathmandu] could follow the blockade, including sabotage attacks in Kathmandu. That's always been the plan." A full-scale siege is unlikely—the Maoists remain an outnumbered guerrilla force—but their war of harassment and attrition shows no signs of slowing. And they are sure to be familiar with one of Mao's tenets: "Fight no battle you are not sure of winning."