Given Nepal's geo-strategic location, major nations have had open or covert roles in trying to influence its domestic affairs. The conflicting geopolitical interests of the big powers may impact development projects, such as the BRI and Transit and Transportation Agreement with China, which, in turn, may adversely affect Nepal's economy and relations with other countries
The framework under which diplomacy operates varies from one situation to another, which, in turn, is based on a common understanding of the variables unique to that scenario. Such deliberations, most often than not, take place behind closed doors, given the potential sensitive nature of the interactions.
Nonetheless, the on-going diplomatic and political episodes regarding the Millennium Challenge Corporation (MCC) provide an opportune moment for one to assess the models of diplomacy being practised by Washington and Beijing and their averments towards one another.
Diplomacy and war are perceived to be counter-productive. Nonetheless, diplomacy may be used to form alliances during conflicts in order to preserve the balance of power or to create a scenario in which a war on favourable terms becomes plausible.
Wedge states are those small states that are able to enlarge their strategic autonomy and accrue material benefits from two rival powers, due primarily to their geographic location, ideological inclination or strategic self-interest. Is Nepal, as a "wedge state", likely to become a pawn between Washington and Beijing's rivalry? Will Nepal benefit materially from its inherent position? The MCC deal, a US$ 500 million grant by the US for building electricity transmission lines in addition to improving the road infrastructure, is viewed by many as an attempt by America to counter China's Belt and Road Initiative (BRI), under which Beijing aims to expand its influence in Asia, Europe and Africa by reviving the silk route.
Furthermore, MCC is also viewed as part of Washington's Indo-Pacific Strategy (IPS) that has military components to deal with a range of transnational threats and challenges, possibly aimed at countering China. This strategy recognises India as "a like-minded partner and leader in South Asia and the Indian Ocean" ... "a driving force of the QUAD and other regional fora, and an engine for regional growth and development."
Another school of thought views the MCC as a positive step in the direction of overall development of Nepal. MCC had long been debated along these lines by the ruling coalition and other parties. Amidst apprehensions of it being violative of the sovereign interests of Nepal, the MCC deal was ratified on February 27, 2022, with the condition that failure to accept the attached "interpretative declaration" by the US would result in non-implementation of the compact by the Government of Nepal.
The Chinese Ministry of Foreign Affairs has welcomed the ratification by Nepal's House of Representatives.
On most occasions, China is accused of interfering in Nepal's internal affairs, and the issue of ratifying the MCC was heavily politicised due to the question of national sovereignty. Critics argued that China could be behind the initial opposition to the MCC, opposed as it is to the IPS. Nepal's long border with Tibet is yet another contentious issue for China in its engagement with Nepal.
China, as a communist state, accuses the US as an imperialist power trying to initiate a 'new war' by triggering hostilities against China and strengthening ties with India and other allies such as Japan, Australia and the UK on its behalf.
This is because Nepal is viewed as territory of strategic importance by China. On certain issues, such as the deadline set by America for the ratification of MCC, China emerged as Nepal's ally in opposing "coercive diplomacy" and supporting the Nepali people's right to choose their path of development independently.
India chose to remain silent on the MCC controversy stating it was a bilateral issue between Nepal and the US. The MCC project involves a cross-border electricity transmission line between Nepal and India, a part of which is to be built on Indian territory and may thus be regarded as a win-win situation for the two countries.
China, on the other hand, has been criticised by the US for pursuing its own national and political interests by enhancing its global leadership and world dominance under the guise of providing financial aid and assistance, especially Third World nations.
Chinese assistance is seen by low-income countries, such as Bangladesh, as an important source of development funds when international institutions such as the World Bank and the Asian Development Bank are reluctant to finance infrastructure projects.
It would be relevant to note that Chinese assistance to Nepal can be categorised as grants, interest-free loans and concessional loans. Some of the major ongoing projects being undertaken with Chinese assistance include the Upper Trishuli Hydropower Project - power station and transmission lines (concessional loan); food/ material assistance (grant) at 15 bordering districts of northern Nepal; Kathmandu Ring Road Improvement Project with flyovers (grant); and Pokhara International Regional Airport (loan). However, caution is required in Nepal's negotiations with the Chinese side owing to the obscurity of China's terms and conditions regarding BRI projects.
Given Nepal's geo-strategic location, major nations have had open or covert roles in trying to influence its domestic affairs. Big powers, in particular, have attempted to influence the Nepali establishment in order to further their own interests.
The conflicting geopolitical interests of the big powers may impact economic and development projects, such as the BRI and Transit and Transportation Agreement with China, which, in turn, may adversely affect the economy of Nepal as well as its diplomatic relations with other countries. The transit agreement has seen no progress since its inception.
The status is similar with respect to BRI as well. It will be interesting to see the mode of implementation of the MCC compact and whether it brings positive or negative consequences with it.
Adhikari is an LLM graduate from Bangor University, UK
A version of this article appears in the print on March 18, 2022, of The Himalayan Times