Setback to China as Nepal ratifies US grant

For India and the US, the green signal to the Compact also means it can be a counter to China's BRI, which Nepal has joined

Just when it appeared that Nepal was headed the Sri Lanka way and would have the $500 million infrastructure grant offered to it by the US under the Millennium Challenge Corporation (MCC) Compact scrapped, with China quietly working towards that end, Kathmandu has pulled back from the brink.

Nepal's Parliament finally ratified the long-pending MCC Compact on February 27, just a day before the US deadline. Both the US and India have reasons to be pleased. Earlier, Sri Lanka was offered a $480 million grant under the MCC, but its China-leaning government rejected the financial aid.

The PM Sher Bahadur Deuba-led government in Nepal was under immense pressure from Washington to ratify the deal. Washington had not just threatened to scrap the MCC Compact but indulged in some uncalled for sabre-rattling, too, saying it would review bilateral ties if the MCC weren't ratified by February 28.

Also Read | Nepal must get on with US-funded projects

The ratification will enable Nepal to avail of the grant to build roads and high voltage transmission lines. The US Secretary of State, Antony J Blinken, "noted" that "Nepal's decision to move forward with the MCC Compact would allow the electricity transmission and roads project to create jobs, infrastructure and improve the lives of the Nepali people".

India is obviously pleased. For one, the Deuba-led coalition government is no longer headed for a collapse on account of the festering differences over the MCC.

India has always viewed with great concern political instability in any of its neighbouring countries, more so now with China lurking in the region, ever willing to take advantage of the rift between political parties and their leaders as has been the case with Nepal. Indeed, its role in Nepal's polity has been growing with the Chinese envoy publicly trying to play the role of peace-maker among rival groups during K P Sharma Oli's tenure as PM.

Nepal's politicians, and not just the Left-leaning ones, have thought nothing of the Chinese meddling in Nepal's domestic politics. Besides, the jostling for power among Nepalese politicians and parties has been so intense that it has come at the cost of the country's political stability and consequently good governance.

Also Read | Irked by Nepalese Parliament approval to MCC, China asks US to respect Nepal’s sovereignty

If Deuba's predecessor Oli was busy fending off challenges to his leadership from rival factions within his party, Deuba, too, has had his share of troubles. His bid to see the MCC Compact get the parliamentary nod had led to political jousting and opposition.

In the case of the MCC, Leftist parties like the Pushpa Kamal Dahal-led Communist Party of Nepal (Maoist Centre) and the Madhav Kumar Nepal-led CPN (United Socialist) were opposing the Compact tooth and nail, threatening the coalition's break-up.

Also not on board was another coalition partner, the Janata Samajbadi Party (JSP), one of whose leaders is former PM Baburam Bhattarai. But this outfit, too, decided to finally support the ratification.

Those opposing the Compact ever since it was signed in 2017 contended that Nepal's sovereignty was at stake amidst the belief that it was a part of Washington's Indo-Pacific stratagem, with a military component to it. Therefore, the Compact signed in 2017 could only be ratified after five years.

This too after the Deuba government came up with an 'interpretative declaration' to go along with the MCC Compact. The aim was to assuage the concerns of the Left parties, and the declaration has done so by stating, among other things, that it is not above Nepal's Constitution and is only a development grant.

Also Read | Nepal's ruling coalition divided on endorsing US-funded MCC

For India and the US, the green signal to the Compact also means it can be a counter to China's Belt and Road Initiative (BRI), which Nepal has joined. India sees the BRI as a part of China's hegemonic ambitions. Ironically, China has often hinted at Nepalese sovereignty at stake in the context of the MCC Compact.

The Compact's ratification is also a setback for China which was believed to have been working behind the scenes to have the deal scuttled. The battle for influence between the US and China will only get more intense in Nepal, with the MCC seen as a geo-strategic counter to the BRI. And New Delhi, with its pronounced US-tilt, is unlikely to complain as the MCC-funded projects would help check China's growing influence in Nepal.

India also stands to gain from projects under the MCC, both in terms of regional connectivity and to meet its ever-growing energy needs. Apart from the roads to be constructed with the US grant, a 315-km long 400 kV transmission line is also envisaged, which is expected to help Nepal export surplus power from its electricity grid to India via the Butwal-Gorakhpur transmission line.

Nepalese politicians do not hesitate to play the China card with India, and of course, increasing meddling by Beijing in Kathmandu's domestic politics have given New Delhi many sleepless nights. So, the MCC Compact at least should bring India some cheer.

(The writer is a senior journalist.)

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