Nearly three months after the much-publicised visit of the vice-president of the Compact Operations of Millennium Challenge Corporation (MCC) Fatema Z Sumar and her team to Kathmandu, the pact’s fate still hangs in the balance. Frustrated with unnecessary dillydallying by the recipient, the United States government has upped the ante. The MCC is not just an operational issue anymore. The pact has acquired strategic significance with overt and covert campaigns of global and regional powers.

The US government assigned Assistant Secretary for South and Central Asian Affairs Ambassador Donald Lu of the State Department to issue an ultimatum to the coalition partners at Singh Durbar: Ratify the pact by December 14 or be prepared for its cancellation. The date of expiry seems to have been chosen carefully. The 14th general convention of the Nepali Congress is scheduled for December 12-14. Prime Minister Sher Bahadur Deuba, who heads the Nepali Congress, hopes to come out stronger from the mega meet and use his renewed legitimacy to push the pact through. Addled with the compulsions of a desperate coalition, it will not be easy for Deuba to get the ruling alliance to reconfirm the Compact before taking it to the floor of Parliament.

Pushpa Kamal Dahal continues to lead the political remnants of the decade-long armed conflict that calls itself the Maoist Centre. Madhav Kumar Nepal comes from a long career in Marxism-Leninism-Maoism politics of Jhapalis even though he has renamed his outfit the Unified Socialist. Upendra Yadav has been an apparatchik of both these communist worthies before forming the People’s Socialist Party. Getting the Compact through Parliament will require the acquiescence of the main opposition CPN-UML. It is chaired by none other than the demagogic populist of Nepali politics, Khadga Prasad Sharma Oli.

Travelling on the tongues of Marxist, Leninist and Maoist cadres, the anti-MCC propaganda has penetrated deep into the countryside of Madhes. In Masurpatti, a small village in Jaleshwar Municipality of Province 2, an evening walker was stopped by a stranger who harangued the visitor to make his position clear on the MCC debate!

Indian quandary

The Indian propaganda machinery reverts to mobilising Hindu preachers whenever it finds itself in a bit of a fix. This time, they have resorted to the multi-billion conglomerate and a popular callisthenics instructor. Ramdev was recently in town to launch two television channels simultaneously. Investigations have since shown that he may have to acquire an operating licence from the competent authority despite the fanfare of the inaugural ceremony. But the tried and tested propaganda instrument of cultural diplomacy may be too little and a little too late this time. With the US and the Chinese wrestling it out in the ring of influencing public opinion, Indians have been left out as mere spectators.

It seems Indians are as worried about the direct involvement of the US government in the political economy, which will be legitimised by parliamentary ratification of the MCC, as they are concerned with the expansion of the Chinese role in the organisational politics of Nepal. Indians and Americans have been "frenemies" for a long time. Once the Cold War began to intensify in the 1950s, the US replaced the United Kingdom as the chief patron of the ruling regime in Kathmandu. Initially, Washington synchronised its Nepal policy with New Delhi due to shared concerns about communism.

The relationship of US-India coordination towards Nepal changed within a few years in the early 1970s with the initiation of ping-pong diplomacy, the Nixon-Mao rapprochement, the Indo-Soviet treaty, the liberation of Bangladesh, the overthrow of the monarchy in Afghanistan and the merger of Sikkim into India. An influential section of the establishment in New Delhi is still under the spell of Cold War convictions. It considers Nepal to be an unofficial client state of Washington, just as Kathmandu was considered more loyal to London than the formal colonies of the British Empire. As long as the US and China remained on the same page against the Soviets in South Asia, Indians could do very little to counter the duo.

Almost isolated on the world stage due to the domestic policies of its illiberal regime—the geostrategic QUAD stalwart was pointedly kept out of the more vigorous AUKUS grouping—India is unwilling to cede its pre-imminence to the US despite their convergence of interest in countering Chinese influence. The MCC will formalise the US government’s role in the political economy of Nepal and may serve as precedence for future collaborations. That perhaps explains Indian ambivalence. Nitin Gadkari's virtual address to the inaugural ceremony of the unlicensed television stations of the celebrity callisthenics instructor was meaningful. The headquarters of Sangh Parivar—the "family" of Hindutva organisations—in Nagpur is likely to keep a keen eye on US-China rivalry in Kathmandu.

Chinese heft

Despite its seductive ideology and humongous military might, the Union of Soviet Socialist Republics disintegrated mainly because of its industrial weakness resulting in economic vulnerability, internal contradictions of the ageing leadership and a significant paucity of cultural capital. The Chinese have learned the Cold War lessons and added them to their considerable repository of exercising imperial hegemony. Confrontational rhetoric of "wolf war diplomacy" may be new, but the Chinese have practised it for millennia before what they call their century of humiliation.

On the geostrategic chessboards, pawns are moved first to test the acumen and resolve of the opponent. There was a reason, President Xi Jinping, the very first 21st century political emperor of China, decided to grace Kathmandu with his presence two years ago. The Chinese no longer consider Nepal to be under India’s sphere of influence and seriously doubt New Delhi’s ability to counter US pressures. In order to prevent the agony of Afghanistan, though mercifully the risks in Nepal are nowhere near the same degree, Kathmandu has to strengthen its capacity to cope with the curse of location as geostrategic rivalry intensifies.

The Deuba government needs to proceed with the ratification of the MCC for the very same reason that makes India ambivalent about it—bring in the US as an economic stakeholder. The ethnonational chieftain of Khas-Arya, Sharma Oli, needs to remember that China is still no match for "the indispensable nation" exercising complete hegemony over its faltering attempts in the region and the world almost all post-1945 global structures of economy, monetary policy and international relations. The economic costs and benefits of the MCC are marginal at best. But the geostrategic implications of cancelling the compact are beyond contemplation. Celebrated for long as the blue-eyed boy of the US in Nepali politics, Prime Minister Deuba needs to put his credentials at stake to prevent an undesirable fallout of his vacillations.