In 2017, when Nepal joined China’s Belt and Road Initiative (BRI), India had expressed its reservations through various channels.
Nepal assuaged India’s concern by telling its leaders that projects under the BRI would be limited to connectivity and hydropower and would not affect India’s security.
Now it is China that is expressing reservations over the $500 million American grant under the Millennium Challenge Corporation (MCC) compact, putting Nepali leaders in a spot. India, meanwhile, has maintained a studied silence on the controversy.
A senior Indian official has said India does not have any say on MCC matters as it is a bilateral issue between Nepal and the US.
But a senior ruling party leader in Nepal told ApEx that Indian leaders have intimated to their Nepali counterparts that Nepal should ‘independently’ decide.
One project under the compact is a cross-border electricity transmission line between Nepal and India, a part of which is to be built on Indian soil.
According to the senior ruling party leader, India is silent on the MCC controversy also because the country has a massive investment in Nepal’s hydropower, which can be exported to India via the new transmission line.
New Delhi-based political analysts see the political and public divisions in Nepal over the compact as a sign of growing Chinese influence. The MCC itself is not a concern for India, they say, as it is not going to impact Nepal-India bilateral relations.
“As it [MCC compact] has become highly controversial in Nepal, India does not want to comment on it. Franky, India is not bothered about whether or not the compact is endorsed,” says Nihar R. Nayak, a Nepal-India relations expert. “Regarding the American role in the region, there is a good understanding between India and the US.”
Perhaps India reckons any kind of comments on the compact, a highly charged topic in Nepal, could backfire. “India has adopted a silent approach while dealing with Nepal in recent years, as the public sentiment in Nepal can quickly turn on an outsider’s remark on domestic issues,” says Chandra Dev Bhatta, a foreign policy expert.
“Yet India being taciturn does not mean it does not have any say on issues like the MCC compact. India will have to face the consequences if the geopolitical games in the region get out of hand.” India, Bhatta adds, would also not want to completely lose its influence on Nepal.
While India is silent, countries allied with the US, such as the UK, Japan, Korea and Australia have asked Nepal’s leadership to endorse the compact. Ambassadors from these countries have been meeting Nepali leaders to convey their ‘implied message’ on the compact.
Suresh Chalise, a former Nepali ambassador to the US, says the constituents of AUKUS and QUAD obviously want to push the MCC compact forward.
“These countries want to promote clean energy in this region to tackle climate change and the transmission line [under the MCC] serves this purpose,” says Chalise. So it is only natural for the ambassadors of these countries to be actively pushing the compact.
While the US has pressed Nepal’s political parties to get the compact endorsed by February 28, China has denounced what it has called “coercive” American diplomacy.
Wang Wenbin, Chinese foreign ministry spokesperson, on February 18 said China opposes coercive diplomacy and actions that pursue selfish agendas at the expense of Nepal's sovereignty and interests.
“China is glad to see the international community conducting development cooperation with Nepal to contribute to its economic growth and livelihood improvement,” he said. However, such cooperation should be based on full respect for the will of the Nepali people and “come with no political strings attached”.
Media reports also suggest that the Chinese side has been urging the Nepali leaders not to ratify the MCC compact.
Over the past few years, Chinese officials had been mum on the compact; but of late, Chinese government media, including the vocal Global Times, have been publishing stories portraying the compact in a bad light. Now, Chinese officials are publicly opposing MCC compact.
In their conversations with Nepali leaders, US officials have conveyed that the delay in ratification owing to ‘external pressures’ would be unacceptable. The compact’s rejection, they have hinted, could also hamper US-Nepal bilateral ties.
Senior Maoist leaders including Pushpa Kamal Dahal have been vocal about American pressure on them to back the compact. Some party leaders even claim the US officials threatened economic sanctions were the compact to be rejected.
The US officials have objected to such claims of Maoist leaders. They have, however, said that some leaders could be held accountable on human rights violations and corruption cases, but that there will be no sanctions.
Prakash Sharan Mahat, spokesperson of Nepali Congress, disagrees that the US is putting pressure on Nepali politicians for the compact’s ratification.
“As far as I know, the US is just telling Nepali leaders to take a prompt decision. There is no pressure,” he says.
The US embassy on February 19 said in a statement that whether Nepali leaders ratify the compact is “a decision for Nepal to make, as a sovereign democratic nation, and Nepal’s decision alone”.
The compact was tabled in parliament on February 20 amid protests by the CPN (Maoist Center) and CPN (Unified Socialist), both parts of the ruling Nepali Congress-led coalition.
Prime Minister Sher Bahadur Deuba has expedited efforts to put the MCC compact to the vote in the parliament meeting scheduled for February 24.
The Unified Socialist has decided to vote against the compact. Meanwhile, the Maoist Center is yet to publicly state its voting intent.
With his coalition partners up in arms against the compact, Prime Minister Deuba has reached out to the main opposition CPN-UML for support.
The February 28 deadline issued by the US for the ratification of the MCC Nepal compact is just days away. The Americans are waiting with bated breath—as is the whole of Nepal for that matter.
