Among diverse political turbulences being seen in Nepal, one which is being less talked about is Nepal’s indecisiveness over the US aid amounting to $500 million under the Millennium Challenge Corporation (MCC). While the government is inclined to accept it, Finance Minister Yubaraj Khatiwada incorporated this in the new budget before its parliamentary endorsement – and now the grant is facing opposition, inter alia, from within the ruling Nepali Communist Party (NCP).

The opponents are forwarding the arguments that accepting the aid may damage its blossoming ties with China. Prima facie, there may be some element of truth in this argument, but it is shorn of any understanding of Nepal’s national interest.

Nepal is sandwiched between two Asian giants which share great ambitions for its future and whose geopolitical interests are colliding as they try to sell off their versions of worldview. Nepal is, of late, becoming hotbed for this bilateral competition. History is witness to the fact that when two big powers compete for their interests in other nations it has resulted in unbearable consequences. The two examples are of the Gulf nations and Afghanistan.

Fear of the dragon

The fear of China’s reaction over a sovereign decision, essentially economic in nature, speaks volume about the intrusion of that country in Nepalese political landscape. Discussions in Nepalese media platforms and among policymakers are revolving more upon the US Indo-Pacific agenda versus China’s Belt and Road Initiative (BRI). It should, in no way, be Nepal’s immediate priority. Surprisingly, what is absent in the discussions are the cost-benefit ratio of these projects. A perusal of the MCC aid and geopolitical events of recent past shows that the cost-benefit scale skews in favour of economic advantage to the country.

Firstly, the MCC aid is a grant, not a loan. Thus, it comes with a benefit sans any obligation. There are no legal or political conditions attached to it and thus a claim that Nepal’s sovereignty will be compromised by accepting the aid is wholly fallacious. Secondly, these projects relate to electricity transmission and road maintenance. As per MCC, the electricity projects include, inter alia, laying of 300 km of high voltage power lines, equivalent to one-third the length of Nepal; the addition of a second cross-border transmission line to facilitate greater electricity trade with India; and activities to improve sector governance to increase private investment. The road project is chiefly concerned with maintaining key roads, measuring 300 km, which are vital for the movement of goods and people. 

An aid amounting to nearly 1.5 percent of the GDP must not be rejected for imaginary fear of the dragon. Thirdly, China must not be expected to react negatively just because of the fact that the aid is coming from a rival nation. If it is so, India should have acted in a similar imaginary way in 2017 when Nepal became a party in BRI, an initiative India rejects as it passes through 'Pakistan Occupied Kashmir'. Also, the sensitivity of India’s concern, which relates to the geopolitical issue, is graver than that of China’s as it concerns an economic project.

Concerns relating to the issue of provisions of MCC may be alleviated by having negotiations with the US over it. For example, Nepal can negotiate that in place of the US law, it will have provisions of international law, and that there would be an independent international tribunal to settle any disputes, whatsoever that would arise pertaining to the project. In the past, we have seen Nepal’s compulsion as it has accepted its fate of playing a role between India and China, and thus making itself more vulnerable to the whims and caprices of these two countries. 

Multi-alignment approach

US aid under MCC is a golden opportunity for Nepal to look beyond India and China and seek greater engagement with other powers and to derive economic benefit and relinquish meaningless geopolitical adventures. The best example in South Asia is of India that followed a non-aligned policy, although a shaky one, throughout the Cold War which enabled it to get benefits from both the superpower blocs and wrath of none. 

Now, of course, there has been a shift in strategic alignment of India – it is now undertaking appropriate diplomatic manoeuvring – as China’s claim of peaceful rise seems rather flimsy in view of a perennial projection of its hard power against its neighbours, while the US under Donald Trump looks more unstable now. But the time has not come, till now, for Nepal to take any sides.

Economic cooperation should not be halted due to a geopolitical competition wherein Nepal does not have any significant stakes. Nepal must free itself from China-India paranoia and should start asserting its strategic autonomy. Nepal should seek greater engagement with other powers too and not just with the US. Rather than outrightly rejecting the MCC aid, it must undertake further negotiations to ward off its concerns relating to its sovereignty. The message should go out to both Asian giants that Nepal could not be taken for granted as it will follow a multi-aligned approach in contradiction to its hitherto China-India balancing approach. This will ensure more diplomatic leverage and clout for Nepal vis-à-vis India and China.

(The writer is pursuing LLM in International Law from Faculty of Legal Studies, South Asian University, New Delhi. The views expressed are personal. He can be contacted at vksharmaahiyapur@gmail.com)