Divisions are running high in Nepal over a deal with the US that many see as anti-China. Nepal has dramatically leaned towards China, even antagonizing key-ally India, and experts believe that a communist Nepal could now snub the US.
The Nepalese Communist Party led by PM K.P. Sharma Oli is divided over a U.S promise of aid since it risks damaging ties with China. The Millennium Challenge Corporation (MCC) grant agreed in 2017 has become the bone of contention between Oli and influential party members.
The opponents of the MCC argue that the aid from the United States is part of a U.S. Indo-Pacific Strategy to limit Chinese influence in the region. Oli has failed to get the agreement ratified twice since a related piece of legislation was put before parliament in July 2019.
Yuba Raj Khatiwada, the Finance Minister and government spokesperson told Parliament on June 9 that despite differences over the agreement, the final decision should not hurt both friendly relations and international aid.
Politicians eager to polish their nationalist credentials have said accepting the MCC would undermine Nepalese sovereignty by drawing country into Washington’s orbit, and anger China. Early this year, a three-member panel headed by Jhalanath Khanal, a former prime minister, submitted a report to Oli calling for amendments to the agreement between Nepal and the U.S. signed three years ago.
Recently, Nepal had become involved with India over the disputed territory of Kalapani. Kathmandu had continued its cartographic aggression and currently shows areas of Lipulekh, Kalapani, and Limpiyadhura under Nepalese administration.
The dispute kicked off after Indian Defence Minister inaugurated a crucial link road connecting the Lipulekh pass at a height of 17,000 feet along the border with China.
Closer links with China
Experts at EurAsian Times believe that the division within the Nepalese Communist Party is a manifestation of serious rifts. Those who have been sidelined by Oli have taken a united stand against the agreement.
Other observers believe that the controversy displays Beijing’s increasing clout through its Belt and Road Initiative and diminishing U.S. influence in Nepal. Geja Sharma Wagle, a political commentator based in Kathmandu, sees the ruling party’s close ties with the Chinese Communist Party as a key factor.
Before Xi Jinping’s visits last year, a training program on his way of thinking was held in Kathmandu. To solidify relations, Xi pledged $500 million in aid to Nepal, exactly counterbalancing the U.S. grant.
The U.S. had earlier committed to $500 million against a $130 million contribution from Nepal for a 400-kilovolt power transmission line and the upgrade of 300km of roads in the Himalayan country’s southeast.
Speaking to Nikkei Asian Review, Wagle said that both the party and government have close ties with Beijing. He says that unlike before, the current government had adopted a China-friendly foreign policy.
Nepal signed the BRI in 2017 and according to one professor, Kathmandu risks becoming dependent on a single major power. However, the US has also played a part in this shift towards China.
When the MCC was announced, the Department of State issued a statement that Nepal played a “central role in a free, open and prosperous Indo-Pacific.” However, only a year later David J. Ranz, acting assistant secretary for South Asia, told reporters in Kathmandu last year that MCC was one of the most important initiatives being implemented in Nepal under the U.S. Indo-Pacific Strategy.
Debates over the MCC had played across Nepal on various media platforms and with the growing hostility on the streets, American largesse is in danger after 7 decades of bilateral ties. Wagle feels that if the MCC does not proceed, it would discourage Western countries from helping Nepal, assistance the Himalayan nation will need because of the economic impact of the global pandemic.
The outbreak of the coronavirus has left the Nepalese economy reeling. Remittances from the expats and money from tourists have dried up. An economic crunch is on its way and so is more Chinese dependence. Neither can bring any good to Nepal.