Nepal a valued partner in the Indo-Pacific: US

Foreign Minister Narayan Prakash Saud held talks with US Secretary of State Antony J Blinken in Washington, DC on Monday, focusing mainly on matters of bilateral, regional and international concerns, including the Millennium Challenge Corporation (MCC) compact, bilateral cooperation in multilateral forums and the unfolding situation in the Mideast. 

The high-level talks in the American capital, which come in the wake of a series of visits by senior US officials to Nepal, bear special significance, also because opportunities for Nepal’s foreign ministers to engage in bilateral talks with the US are relatively rare.

Before Saud, his predecessor, Pradeep Kumar Gyawali, had held official meetings with the then American Secretary of State Mike Pompeo in 2018. However, Foreign Minister Gyawali’s visit courted criticism as some leaders within his own party accused him of aligning with America’s Indo-Pacific Strategy (IPS). Importantly, there has been no reciprocal visit by a US Secretary of State to Nepal since Colin Powell’s visit in 2002.

Matthew Miller, spokesperson at the Department of State, said Saud and Blinken highlighted the ‘recently launched $500m Millennium Challenge Corporation Compact that will build infrastructure, increase access to electricity and support cross-border power trade.’ The Nepali Embassy in Washington stated in a press release that Secretary of State Blinken expressed the US wish to “see Nepal as a strong and prosperous democracy”.

The two sides also exchanged views on Nepal-US cooperation in multilateral forums, and other matters of regional and global concerns, including the situation in the Mideast, per the statement. The United States and Nepal established diplomatic relations in 1948, and the US has consistently been Nepal’s largest donor country. US policy objectives in Nepal have revolved around the promotion of a peaceful, prosperous, resilient and democratic nation, observers say. 

Over the past decade, American engagement with Nepal has substantially increased, notably seen in increased financial support through USAID and MCC, technical assistance in trade, deepened cooperation in security and defense, humanitarian assistance and disaster response.  This expansion in cooperation is reflected in the growing number of US visits to Nepal, according to the experts. 

A growing rivalry between the US and China, the Russia-Ukraine conflict, the US withdrawal from Afghanistan, climate change and other global concerns have prompted the US to intensify its engagement with Nepal. To counter the growing influence of China in the Indo-Pacific region, the US introduced the IPS, first unveiled by the Trump Administration in 2018 and further developed by the Joe Biden administration in 2022.

A vital role in the Indo-Pacific

Although Nepal is not explicitly mentioned in the IPS, the Trump administration recognized Nepal's potential central role in the Indo-Pacific in 2018. As a result, Nepal is considered a high-priority country in the region for US policymakers. Nevertheless, Nepal has consistently maintained that it does not intend to become a part of the IPS, despite all bilateral cooperation and assistance between Nepal and the US operating within its broader framework.

A key US priority in Nepal is the successful completion of projects under MCC, which entered its entry into force phase in August, accompanied by a five-year deadline. Two months have already passed since the deadline began, but there is much work still to be done. US officials view the MCC compact as a significant milestone in the 75-year partnership between the two countries. Given China’s strong opposition to the compact, the US anticipates potential roadblocks and is making additional efforts to ensure its smooth implementation.

In the meeting with Foreign Minister Saud, Secretary of State Blinken underlined the importance of timely implementations of projects under MCC. After the meeting, Blinken said, “I met with Nepali Foreign Minister Narayan Prakash Saud to highlight US investment in Nepal, including a $500m compact from MCC to support economic growth.”

As China advances its debt-lending mega-project, the Belt and Road Initiative (BRI), in an attempt to attract developing countries, the US aims to showcase the benefits of MCC projects, funded by US grants and substantial financial contributions from the government of Nepal. Simultaneously, the US perceives strong anti-MCC sentiments in Nepal as reflective of growing Chinese influence in the country. For their part, Chinese analysts say they are not opposed to American projects but seek a level-playing field for all players in development cooperation.

Combating corruption is another top US priority in Nepal. The US is closely monitoring developments like investigations into corruption cases, including the Bhutanese refugee scam. US Anti-Corruption Coordinator Richara Nephew visited Nepal in August of this year, engaging with representatives of anti-corruption institutions, law enforcement and civil society.

President Joe Biden has framed current global tensions as a struggle between democracy and autocracy. Since 2021, the Biden administration has been hosting the Summit for Democracy, highlighting the ability of democracies to address the world’s most pressing challenges and deliver for their citizens. Nepal is one of the few South Asian countries invited to participate in the summit.

Under the Democracy Delivers Initiative launched in 2022, the US provides support to mobilize resources for countries undergoing democratic renewal, maximizing the likelihood that their democratic gains endure. The US recently pledged over $145m, with more than $35m in new funding through USAID for the Democracy Delivers cohort, which includes Nepal. Additionally, the US’ International Development Finance Corporation announced $110m to support new private sector-led projects.

In 2022, the government of Nepali and USAID signed a new development cooperation grant amounting to $659m spread over a five-year period. This February, USAID Chief Samantha Power announced that USAID would provide up to $58.5m to advance democratic progress in Nepal. Following transparent and peaceful elections in 2022, Nepal has an opportunity to strengthen federalism, advance the inclusion of women and marginalized communities, empower its young people and demonstrate that democracy can deliver for its citizens.#

In addition to these initiatives, the US has intensified its defense cooperation with the Nepali Army and other security agencies. 

Saud’s visit to the US should be analyzed in the context of a growing engagement between the two countries and rising geopolitical tensions. Nepal’s two close neighbors India and China will be closely watching Saud’s visit to America. There is a convergence between the US and India on the issue of countering Chinese influence in Nepal, while China is more concerned over growing American influence in Nepal.  

An important partner

Antony Blinken, US Secretary of State

We have 76 years of diplomatic relations between Nepal and the United States, and Nepal is today a very valued partner in the Indo-Pacific. We’re working together to ensure that we have a free, open, secure, prosperous region. And in so many ways, Nepal is leading, not just in the region but globally, as a very constructive actor in international organizations—of course, with so many peacekeepers, who are trying to help people move from conflict to peace around the world. And in our own bilateral relationship, we’re working to deepen it and strengthen it even more, particularly with more people-to-people as well as economic ties.