August 2023 Analysis: International Relations and Foreign Affairs
In August, Nepal witnessed developments in its international relations, with the commencement of the Millennium Challenge Corporation (MCC) project in partnership with the US. A US anti-corruption official's visit underscored the commitment to transparent governance and anti-corruption efforts. Power agreements with India, China's security assistance, and territorial disputes added complexity to Nepal's diplomatic landscape. Participation in the China-South Asia Expo aimed at boosting economic ties, while Prime Minister Prachanda's upcoming visits to the UN General Assembly and China held diplomatic and developmental significance, highlighting the intricate interplay of diplomacy, security, and development in Nepal's foreign relations.
The US-Nepal MCC Project officially began on 30th August when Finance Minister Dr. Prakash Sharan Mahat and MCC Vice President of Compact Operations Cameron Alford exchanged a letter about the 'Entry into Force' (EIF). Confident leaders within the ruling parties and splinter Maoist groups have voiced opposition to the US grant, citing a range of apprehensions. Chief among these concerns is the potential impact on Nepal's sovereignty and alignment with broader US strategic initiatives. However, the US Embassy in Kathmandu has sought to allay these concerns by confirming that Nepal's Constitution takes precedence over the MCC Compact.
The project is significant for both the US and Nepal. The MCC is providing $500 million, and Nepal is contributing $130 million, with an extra $67 million for this year to cover the project's needs. Nepal will manage the project, with oversight from the Millennium Challenge Account (MCA). It must be completed by August 29, 2028, or risk losing further US funding. The project includes building a 315 km-long electricity line and improving a part of the East-West Highway, which can boost connectivity and power distribution in Nepal and have geopolitical implications.
Starting the MCC Compact in Nepal is essential for both countries and involves international relations, strategic interests, domestic politics, and development goals. The success of these projects depends on cooperation, diplomacy, and negotiating common and differing interests.
Nephew's visit is part of the US-led Summit for Democracy initiative, which seeks to bolster democracy, combat authoritarianism, address corruption, and advocate for human rights. During his visit, Nephew engaged with senior Nepalese officials, including Prem Kumar Rai, Chief Commissioner of Nepal's Commission for the Investigation of Abuse of Authority (CIAA). Their discussions revolved around collaborative efforts to combat corruption and advance good governance. They also explored avenues for sharing international information to combat corruption on a global scale.
In August, Nepal made significant strides in power agreements, which can boost its economy and enhance relations with neighboring countries, following commitments made during Prime Minister Dahal's visit to India, such as India's plan to import 10,000 MW of electricity from Nepal in the next decade, and Nepal has already sent 600 MW to India since May 2023. Another noteworthy development is the ongoing approval process for a trilateral arrangement involving Nepal, India, and Bangladesh, potentially allowing Nepal to export 40 MW of electricity to Bangladesh via India's transmission network, while also working on a 25-year framework for electricity sales to India to export 10,000 MW.
The action of China in showcasing disputed regions cast doubts about the legitimacy of Nepal's claims. The land dispute extend to other countries like the Philippines, Malaysia, Vietnam, Taiwan in the South China Sea, and India, highlighting broader power dynamics and the complexity of international relations. Nepal faces the challenge of managing the relationship while asserting its claims and must engage in bilateral talks with China to resolve these issues diplomatically. PM Prachanda's upcoming visit to China should address this, underscoring the importance of strategic diplomacy in safeguarding Nepal's sovereignty amid powerful neighbors.
Simultaneously, Nepal and China are set to resume their military and defense engagements, marking a step forward after the disruptions caused by the COVID-19 pandemic. This renewal involves joint exercises between the Nepali and Chinese People's Liberation Army and participation in China's national defense course. As Nepal forges deeper military ties, it must navigate these dynamics carefully, considering the region's geopolitical complexities and the potential implications for its security posture.
These collaborations with China in the security domain complicate Nepal's diplomatic landscape, especially with China's proposal for Nepal's involvement in the Global Security Initiative (GSI). Nepal's longstanding non-alignment policy, a cornerstone of its foreign policy, may conflict with participating in strategic international security initiatives. This situation underscores the delicate balance that Nepal must maintain between its core diplomatic principles and the evolving landscape of global security cooperation. Finding this equilibrium is crucial as Nepal determines its role in broader security frameworks, shaping its position within the regional and broader realms of international relations.
In the US, the Prime Minister will attend the 78th UN General Assembly, aligning with the 2030 Agenda for Sustainable Development. He is scheduled to address the UN General Assembly on September 21. Prior to that, Nepali delegations will participate in various meetings, including the Sustainable Development Goals (SDG) Summit on September 18 and 19, representing the least developed countries.
In China, discussions is aimed to revolve around agreements for cross-border transmission lines, bilateral power trade, and infrastructure projects like the Hisla-Surkhet road section and corridor upgrades in Gandaki and Koshi. The meeting should also focus on China's Belt and Road Initiative (BRI) implementation plans and recent developments regarding China's national map, which shows Nepal's territory on the Indian side.
Nepal's ministries are preparing requests concerning border infrastructure, past agreements, and economic cooperation. Foreign Minister NP Saud confirmed that preparations are underway, and the agenda will be finalized after comprehensive consultations.
Timeline of Major Events
| Date | Event |
| 8th August | The Nepal government has decided to accept the 21 remote-controlled drones from China. |
| 10th August | Richard Nephew, the US Department of State's Coordinator on Global Anti-Corruption, visited Nepal. |
| 16th August | Nepal and China are set to resume their military and defense engagements. |
| 16th- 20thAugust | Vice President Ramsahay Prasad Yadav and government officials participated in Kunming, China's 7th China-South Asia Expo. |
| 9th August | The export of 40 MW of electricity to Bangladesh and 500 MW to India from Nepal reached the final stage. |
| 28th August | China rejected Nepal's new map and unveiled its national map. |
| 30th August | The MCC project began with a visit from MCC Vice President Cameron Alford. |
Nepal-US
US-Nepal MCC Project Officially Began
The US-Nepal MCC Project officially began on 30th August when Finance Minister Dr. Prakash Sharan Mahat and MCC Vice President of Compact Operations Cameron Alford exchanged a letter about the 'Entry into Force' (EIF). Confident leaders within the ruling parties and splinter Maoist groups have voiced opposition to the US grant, citing a range of apprehensions. Chief among these concerns is the potential impact on Nepal's sovereignty and alignment with broader US strategic initiatives. However, the US Embassy in Kathmandu has sought to allay these concerns by confirming that Nepal's Constitution takes precedence over the MCC Compact.
The project is significant for both the US and Nepal. The MCC is providing $500 million, and Nepal is contributing $130 million, with an extra $67 million for this year to cover the project's needs. Nepal will manage the project, with oversight from the Millennium Challenge Account (MCA). It must be completed by August 29, 2028, or risk losing further US funding. The project includes building a 315 km-long electricity line and improving a part of the East-West Highway, which can boost connectivity and power distribution in Nepal and have geopolitical implications.
Starting the MCC Compact in Nepal is essential for both countries and involves international relations, strategic interests, domestic politics, and development goals. The success of these projects depends on cooperation, diplomacy, and negotiating common and differing interests.
US Anti-Corruption Official Assesses Nepal's Progress
The visit of Richard Nephew, a US anti-corruption official in August to address corruption issues and foster cooperation underscores the US's commitment to aiding Nepal in its anti-corruption endeavors and promoting transparent governance. Nephew's trip also assesses Nepal's dedication to anti-corruption measures, particularly within global summits focused on democratic values and principles.Nephew's visit is part of the US-led Summit for Democracy initiative, which seeks to bolster democracy, combat authoritarianism, address corruption, and advocate for human rights. During his visit, Nephew engaged with senior Nepalese officials, including Prem Kumar Rai, Chief Commissioner of Nepal's Commission for the Investigation of Abuse of Authority (CIAA). Their discussions revolved around collaborative efforts to combat corruption and advance good governance. They also explored avenues for sharing international information to combat corruption on a global scale.
Nepal-India
Nepal-India Power Agreements
In August, Nepal made significant strides in power agreements, which can boost its economy and enhance relations with neighboring countries, following commitments made during Prime Minister Dahal's visit to India, such as India's plan to import 10,000 MW of electricity from Nepal in the next decade, and Nepal has already sent 600 MW to India since May 2023. Another noteworthy development is the ongoing approval process for a trilateral arrangement involving Nepal, India, and Bangladesh, potentially allowing Nepal to export 40 MW of electricity to Bangladesh via India's transmission network, while also working on a 25-year framework for electricity sales to India to export 10,000 MW.
Nepal-China
China unveiled a national map falsely claiming Nepal`s land as a part of India
The move of China unveiling its national map on August 28, 2023, claiming Nepal's land in the Kalapani, Lipulekh, and Limpiyadhura regions as part of India disregards Nepal's territorial claims, stemming from a long-standing issue that originated in 2014 when India and China agreed on a trade transit route through Nepal without considering Nepal's concerns. In 2015, Nepal expressed objections to Lipulekh being designated as a bilateral trade route between India and China, citing a violation of the 1816 Sugauli Treaty between Nepal and India, which designates these areas as Nepali territory. India's release of a political map in 2019 that included these disputed regions heightened tensions, prompting Nepal to respond with its own revised map, asserting its territorial claims.The action of China in showcasing disputed regions cast doubts about the legitimacy of Nepal's claims. The land dispute extend to other countries like the Philippines, Malaysia, Vietnam, Taiwan in the South China Sea, and India, highlighting broader power dynamics and the complexity of international relations. Nepal faces the challenge of managing the relationship while asserting its claims and must engage in bilateral talks with China to resolve these issues diplomatically. PM Prachanda's upcoming visit to China should address this, underscoring the importance of strategic diplomacy in safeguarding Nepal's sovereignty amid powerful neighbors.
Security Assistance from China and its Challenges
Nepal recently accepted 21 drones from China, allotted to Nepal’s police force for border surveillance and disaster response. However, the initiative comes with strategic and complex challenges. The move raises important questions about potential security vulnerabilities associated with adopting foreign technology. Striking the right balance between leveraging technological advancements and safeguarding national security interests is paramount for Nepal, necessitating a meticulous assessment of the potential security risks of these developments.Simultaneously, Nepal and China are set to resume their military and defense engagements, marking a step forward after the disruptions caused by the COVID-19 pandemic. This renewal involves joint exercises between the Nepali and Chinese People's Liberation Army and participation in China's national defense course. As Nepal forges deeper military ties, it must navigate these dynamics carefully, considering the region's geopolitical complexities and the potential implications for its security posture.
These collaborations with China in the security domain complicate Nepal's diplomatic landscape, especially with China's proposal for Nepal's involvement in the Global Security Initiative (GSI). Nepal's longstanding non-alignment policy, a cornerstone of its foreign policy, may conflict with participating in strategic international security initiatives. This situation underscores the delicate balance that Nepal must maintain between its core diplomatic principles and the evolving landscape of global security cooperation. Finding this equilibrium is crucial as Nepal determines its role in broader security frameworks, shaping its position within the regional and broader realms of international relations.
Nepal's Participation in China-South Asia Expo
The participation of Nepal's Vice President Ramsahay Prasad Yadav and government officials in the 7th China-South Asia Expo in Kunming, China, from August 16th to 20th, 2023 demonstrates Nepal's dedication to regional cooperation and bilateral economic ventures across trade, investment, tourism, education, and healthcare sectors. With Nepal's exports to China facing challenges and a trade deficit persisting, this expo offered an opportunity to showcase Nepali products, explore new partnerships, and drive favorable agreements for sustainable economic growth, potentially addressing Nepal's declining exports and fostering mutually beneficial collaborations. The event aimed to bolster economic ties between South Asian nations and China, evolving from a commodity exhibition to a platform for multifaceted trade discussions. During the expo, Nepal's delegates held strategic dialogues, interacted with dignitaries, and participated in forums like the China-South Asia Cooperation Forum.Prime Minister's Upcoming US and China Visit
Prime Minister Prachanda's upcoming visits to the US and China carry significant diplomatic and developmental importance for Nepal. These visits aim to strengthen Nepal's diplomatic standing and establish economic partnerships. Success hinges on effective diplomatic discussions and implementing agreements to enhance Nepal's regional stature.In the US, the Prime Minister will attend the 78th UN General Assembly, aligning with the 2030 Agenda for Sustainable Development. He is scheduled to address the UN General Assembly on September 21. Prior to that, Nepali delegations will participate in various meetings, including the Sustainable Development Goals (SDG) Summit on September 18 and 19, representing the least developed countries.
In China, discussions is aimed to revolve around agreements for cross-border transmission lines, bilateral power trade, and infrastructure projects like the Hisla-Surkhet road section and corridor upgrades in Gandaki and Koshi. The meeting should also focus on China's Belt and Road Initiative (BRI) implementation plans and recent developments regarding China's national map, which shows Nepal's territory on the Indian side.
Nepal's ministries are preparing requests concerning border infrastructure, past agreements, and economic cooperation. Foreign Minister NP Saud confirmed that preparations are underway, and the agenda will be finalized after comprehensive consultations.
CESIF Nepal