In Nepal: 'We are trying our best to understand democracy'

It is not easy securing a meeting with the Maoist guerrilla leader poised to become prime minister of the new republic of Nepal.

Prachanda, which means "awesome" or "the fierce one", came out of the jungle two years ago, but his journey from insurgent commander to mainstream politician is far from complete. As if to emphasise his distance from the Kathmandu political establishment, which he calls "feudal", he lives in a run-down area of the city, close to a rubbish-strewn canal. His house, with sandbagged emplacements at each corner, is guarded by unsmiling male and female cadres in camouflage fatigues and caps with a red star on the peak.

The presence of these guerrillas in the heart of the capital is chilling for Kathmandu's people. If they were able to shut out thoughts of the Maoists' 10-year rural rebellion, in which more than 13,000 people died, they cannot do so any longer. One of the most difficult issues in the new Nepal – with which Britain may be asked to help – is how to integrate more than 23,000 Maoist fighters into an army whose generals refuse to have anything to do with them.

A newspaper showed the mustachioed Prachanda morphing into Stalin, with the headline: "Same to Same". Yet emissaries from the old political elite, foreign ambassadors and nervous businessmen have no choice but to seek an audience with him, since his Communist Party of Nepal (Maoist) won more than a third of the seats in the Constituent Assembly two months ago. The interim prime minister, G P Koirala, whose Nepali Congress Party was soundly defeated in April, has finally given up his struggle to cling to some shreds of power and has resigned, clearing the way for the 53-year-old Maoist to take over.

After prolonged negotiations through several intermediaries, including Nepal's leading movie star, who had played an insurgent in one recent production, I was told to be at Prachanda's house at 6.30am for one of the few interviews he has ever given the British press. As I arrived, the sun was just picking out the white stupa of Swayambhu, one of Buddhism's most sacred sites, which overlooks Kathmandu. A once-over by suspicious bodyguards and a hushed wait in a packed anteroom heightened the sense of occasion.

In person, however, Prachanda – real name Pushpa Kamal Dahal – is plump and jovial, almost twinkly. Though he had been up far into the night in stalemated negotiations, he betrayed no sign of weariness. He commands a movement known to have been responsible for extortion and summary executions, but his manner is more reminiscent of the schoolteacher he once was. And it soon emerges that his brand of Maoism would not be recognised by the founder of Communist China, or the leaders of Peru's Shining Path, supposedly Prachanda's inspiration.

In good English, he declares that "we are trying our best to build a new Nepal", in which the feudal political and economic structures will be replaced by "a more dynamic, more capitalistic, mode of production". Did he say capitalistic? "You are surprised to hear that from the mouth of a Maoist," he chuckles. "The main thing is that we are against feudalism," by which he appears to mean a political and business establishment, working closely with the now-abolished monarchy, which was noted for a high degree of corruption. "We have to have capitalism before we can have socialism."

The CPN (M) is well short of a majority in the assembly – ironically, it might have won one if it had not insisted on strict proportional representation – and Prachanda will have to go into coalition to form a government. But this too is part of his ideology. "We are trying our best to understand democracy," he says. "Even in socialism, multi-party competition is a must. I derive this conclusion from Comrade Lenin. Just before he died, he introduced a bourgeois economic policy. If he had lived another five years, Lenin would have introduced multi-party competition." Even more heretically, he insists that the author of Soviet Communism "made many mistakes". As for the Shining Path, its way was "too one-sided – it could not mobilise the masses".

There has always been a strong surrealist tinge to politics in the Himalayan nation. Apart from Prachanda's Maoists, there are several other communist parties of Nepal – the United, the Unified, the Marxist-Leninist and the Unified Marxist-Leninist or UML, the third largest party in the assembly. It is all reminiscent of the squabbles between the Judean People's Liberation Front and the People's Liberation Front of Judea, but nothing unusual for a country which for centuries was the world's only Hindu kingdom, and is now in the midst of a transition to the world's first elected Maoist administration.

Prachanda is in earnest, however, when he argues that his government will be a historic break with the past. For the first time, the hill peoples and rural peasants, almost half of the country's 26 million people, will have a voice; what he calls "the old parliamentary parties", Congress and the UML, "don't understand the whole dynamics of change". If the new president, vice-president and prime minister were all from the upper castes, "I don't think it will be tolerated by the mass of people".

Donor countries which have watched billions of dollars in aid end up in private bank accounts might welcome cleaner government in Nepal, but the US still has the Maoists on its list of terrorist organisations. The previous administration sought to persuade George Bush's White House that the insurgency was part of the international "war on terror", and the Nepalese army received some heavy US weaponry and training before the 2006 truce. Delhi, meanwhile, is watching anxiously to see whether Nepal, traditionally a buffer state between India and China, will lean towards Asia's other superpower under a Maoist leader. Among those waiting for an audience in Prachanda's anteroom was India's ambassador to Nepal.

Critics argue that the CPN (M) leader's talk of historic change masks a rejection of the country's traditional instinct to seek peaceful compromise. They say he began his revolt just when Nepal was beginning to enjoy greater democracy and economic growth, and that the insurgency ruined the economy and encouraged banditry. Many people voted for the party, it is claimed, simply because they feared it might otherwise restart the conflict. Slightly defensively, Prachanda says his party tried to "convince the people" through peaceful means first, but demonstrators had been killed and rural people subjected to "brutal oppression". The Maoists had offered many times to stop fighting in exchange for the settlement which has now been reached, he insists. But even though the constituent assembly abolished the monarchy – a few days before our interview the last king, Gyanendra, left the royal palace in the centre of Kathmandu and became plain Mr Shah – Nepal has otherwise been in a stalemate for the past 10 weeks.

Whether Mr Koirala's resignation breaks the deadlock remains to be seen: Prachanda has many other opponents, not least the army, which was commanded by the king and rejects the idea of being subject to a politician's orders, especially such a radical politician.

Near Pokhara, Nepal's second city, I saw a white UN helicopter taking off to monitor the Maoist guerrillas, most of whom have been in camps since the truce, awaiting integration with the military. Britain agrees that the present situation is "not sustainable", and says it is ready to provide technical support and guidance to reform the security sector, if asked. Prachanda seems likely to request such assistance if he forms a government – Britain has been "directly involved" in the peace process, he says, and could help in a "very effective way" with creating a unified force. In his view, it could even play a role in persuading the US to stop listing his movement as terrorists.

There has been speculation that if the Maoists came to power they would stop Gurkhas joining the British Army, but their leader is happy to quash it. "They should have proper jobs in Nepal rather than needing to join foreign armies," he says. "But until that is the situation, we will continue to allow their recruitment, though we support their demands for equal treatment with British soldiers."

It is easy to imagine Prachanda in front of a class as he expounds the party line. "Marxism is not a sectarian or a dogmatic philosophy," he says. "Anyone who is really scientific, who is really sincere about Marxism, about dialectical materialism, would understand that he has to develop his ideology according to the changed situation." This seems to be his way of preparing his faithful for the many compromises that may lie ahead.

The leader's aides are beginning to get restless, and there is time for just one more question. If Mr Gyanendra Shah, the ex-king, wants to form his own political party and enter politics, as many have speculated he might, would the Maoists prevent him? Not at all, says Prachanda, whose benevolence extends even to the former monarch: "If he respects the verdict of the masses, he can enjoy all the opportunities open to the common citizen."

It is not quite how the Bolsheviks dealt with the Romanovs, but Nepal has a habit of doing things its own unique way. The country could end up having a Maoist prime minister and a former king as leader of the opposition. Who knows? Perhaps Gyanendra will call his political vehicle the Communist Party of Nepal (Monarchist).

From civil war to democracy

In 1996 the bloody Nepalese civil war began, sparking fighting that went on for 10 years which was believed to have killed at least 13,000 people. The Maoist rebels' multiple demands included land redistribution, equal rights for women and a communist republic.

Based in Nepal's mountains and jungles, the rebel army included both female soldiers as well as children, for which they were condemned in 2005 by the EU. A peace deal was brokered in 2006, with the rebels' arms monitored by the UN, and Prachanda declared that it marked "the end of the 238-year-old feudal system".

Despite the rebels' admiration for Chairman Mao, the Chinese Communist Party had shunned the revolution, choosing to arm the Royal Nepalese Army. Chinese officials are now more eager to forge ties with the Maoists and Prachanda has praised China's pragmatic approach to capitalism.

The Maoists have to convince non-supporters that they have transformed from guerrilla fighters into a working, democratic party. They remain on the US list of terrorist organisations.

Their youth wing, the Young Communist League, has been blamed for abduction and torture. Around 19,000 ex-rebels still live in UN-monitored camps created by Nepal's 2006 peace deal. The Maoists want them to become part of the Nepal army but the its chief disagrees.