Maoist leaders could be foreseeing that serious instability caused by the insurgency could be used by the former autocratic forces to regain their lost powers, or even cost Nepal its independence.

If the government gets its paramilitary ordinance passed, the insurgency could see a dangerous escalation. With semi-automatic weapons, helicopters and better equipment on both sides, casualty rates would rise. The government has anticipated the generals' displeasure and stipulated in the draft ordinance that the paramilitary would be under the army's command in situations where they are deployed simultaneously. (After the Dunai massacre in September, the army has been partially deployed in 16 district headquarters.) The new force will initially be staffed with transfers from the army and the police.

With daggers drawn on both sides and peace talks stalled, most political observers fear the worst as the Maoists move into the occupy political space left vacant by government inaction. The Maoists say they are now taking their struggle from the "Strategic Defence" phase to "Strategic Balance". In Mao jargon, that means creating alternative governance structures to fill the governance vacuum in the mid-western hills. During this stage, Mao said, guerrilla armies must also be ready for frontal warfare with the enemy. If that is what his Nepali disciples are preparing for, the Dunai siege could be a sign of bigger battles to come.

The Maoist leadership does have their own internal challenges to face: their junior cadre are armed and impatient, but not adequately politicised. They don't want the violence to spiral out of control even as they reign in a guerrilla force that has tasted blood. Escalating violence will help rightist forces who want to go back to pre-1990 days, while a negotiated solution is likely to benefit the UML. "The dilemma for the Maoists is that by agreeing to a peaceful resolution now they would have to settle for a constituent assembly after sacrificing 2,000 lives. That would be an unacceptable price to pay," says Hari Roka.

Recently the Maoists have been sounding out centre/left parties about an alliance for a "people's struggle"-this could be taken as an indication that they are looking for a soft landing. Maoist leaders could be looking at the long term where they foresee a scenario where serious instability caused by the insurgency may be used by the former autocratic forces to regain their lost powers, or even cost Nepal its independence.