As the July-end deadline to ratify the $500 million United States’ Millennium Challenge Corporation’s Nepal Compact approaches, two senior ruling party leaders have written a joint letter to Prime Minister KP Sharma Oli asking for “proper discussions” within the party.

The US programme, which is awaiting ratification by Parliament, has long divided the ruling Nepal Communist Party.

In a six-page letter, senior leader and former prime minister Jhala Nath Khanal and Standing Committee member and former deputy prime minister Bhim Rawal have reminded prime minister and party chair Oli of the suggestions made by a task force formed by the party to study the MCC compact and make recommendations.

The three-member task force was led by Khanal, and Rawal was one of its members. Standing Committee member Pradeep Gyawali, who is also the foreign minister, was the other member. The task force had submitted its report to Oli and Pushpa Kamal Dahal, the other party chair. The report was leaked to the media earlier this month.

The letter from the two leaders comes a day after Oli vowed to approve the US grant project via Parliament and sought support from parliamentarians.

Khanal and Rawal have long been at the forefront of opposition within the ruling party, saying that the MCC is part of the larger US Indo-Pacific Strategy and its provisions could undermine Nepal’s sovereignty.

According to one ruling party parliamentarian, Oli on Sunday held consultations with a number of lawmakers in Baluwatar to learn their position on the MCC, and the ongoing border dispute with India.

“Oli told the lawmakers that Nepal would not gain anything by quarreling with India, China and the United States and would instead lose many opportunities,” the parliamentarian told the Post on condition of anonymity. The prime minister was clear that the US compact must be ratified at the earliest, said the parliamentarian.

A section of ruling party leaders, including Khanal and Rawal, believe that the MCC was included in the government’s recently announced policies and programmes due to Oli’s direct intervention. The policies and programmes, presented by President Bidya Devi Bhandari on Friday in Parliament, says that two 400KV transmission line projects—Lapsiphedi-Ratmate-Hetauda and Lapsiphedi-Ratmate-Damauli—would be built in 2020-21. These projects are part of the projects envisioned under the MCC.

The letter by the two senior leaders, according to party insiders, contests their own government’s policies and could once again spell trouble for the ruling party, and ultimately, Oli.

The ruling party has been debating whether to ratify the MCC via Parliament for quite some time, even though an agreement for the same was signed back in 2017.

During the party’s Central Committee meeting, held in the first week of February, the MCC had become a major point of discussion, even though it was not on the agenda. The party had then decided to form the Khanal-led task force with the mandate to study the compact and provide recommendations.

The task force concluded that the MCC is part of the US's larger strategic interest and that there are lots of conflicting and contradictory clauses in the agreement. The task force had hence suggested that the MCC should be widely discussed and some clauses amended before ratification.

Those opposed to the MCC also see the compact as an attempt to counter Beijing in Washington’s bid to expand its influence in the region and provide an alternative to China’s Belt and Road Initiative.

Officials at the US embassy in Kathmandu said that they are monitoring the situation unfolding in Kathmandu with regards to the MCC.

“We are aware there is an internal Nepal Communist Party document on the compact that has been made public,” US embassy spokesperson Andie De Arment said in an email response to the Post. “The $500million grant under the MCC, which was signed in September 2017, would fund projects that were proposed by and in line with Nepal’s own priorities.”

On Monday, US Ambassador Randy Berry met with Foreign Minister Gyawali to discuss the fate of the MCC.

According to officials at the Foreign Ministry, the US ambassador inquired if the government was going to ratify the MCC via the House.

“Minister Gyawali reiterated Nepal's position that the MCC will be ratified from the House and that efforts are underway to reach consensus within the party,” a source told the Post.

Party insiders, however, say that that’s easier said than done.

A former Maoist leader, who is also a Standing Committee member, said that party chair Dahal is in favour of a wider discussion on the MCC before it is ratified by the House.

The letter by Khanal and Rawal has been copied to Dahal as well as all Secretariat and Standing Committee members. Party insiders say that Khanal and Rawal have now compelled the party to discuss the issue at the party committees.

“But we don’t know when the Standing Committee will meet due to the rising cases of Covid-19,” said a Standing Committee member. “When the party will discuss the issue is uncertain.”

The row over the Washington-led programme has been renewed in the party at a time when Oli is under pressure to respond to Delhi and Beijing after India opened a road link via Lipulekh.

Insiders say that geopolitical dimensions are now back in play and the prime minister has fallen into a diplomatic quagmire.

Diplomatic sources told the Post that the leak of the ruling party’s internal report on the MCC has not gone down well with the United States.

The report was leaked just as Chinese Ambassador Hou Yanqi was holding a series of meetings with Prime Minister Oli, party chair Dahal and senior leader Madhav Kumar Nepal. Since no Foreign Ministry representatives were present at the meetings, there is no documentation of what was discussed, which goes against diplomatic protocol.

Insiders, however, say that Hou’s meetings focused on a wide range of issues—from the simmering conflict in the ruling party to China’s assistance in fighting Covid-19, and other bilateral and geopolitical matters.

Lawmakers from the Oli camp say that the MCC should be implemented without delay.

“The party should make its position clear on the report submitted by the Khanal-led task force and then move the project forward,” said lawmaker Rajendra Gautam. “As the Covid-19 pandemic is going to affect global financial health, Nepal should not lose an opportunity for such a huge grant.”

The US embassy has maintained its position that it hopes Nepal’s Parliament will ratify the compact.

“The compact was jointly developed by the government of Nepal and MCC over a nearly three-year period with support from all major political parties and leaders in the country, and the compact language was finalised after a thorough negotiation period with the government of Nepal,” said Arment, the embassy spokesperson. “The US looks forward to the government of Nepal ratifying the compact as signed so that critical electricity and road infrastructure assets can be built for the benefit of the people of Nepal.”

As per the deal, the MCC funds will be spent on setting up a 400KV transmission line running 400 kilometres along the Lapsiphedi-Galchhi-Damauli-Sunawal power corridor. The funds will also be used to set up three substations en route to infrastructure that will connect to the cross-border transmission line with India in Rupandehi. Around $130 million under the MCC compact will go towards the maintenance of 300 kilometres of roads on the East-West Highway.

Experts say that differences within the ruling party have unnecessarily dragged a three-year-old aid agreement into controversy, which could cost Nepal dearly in the future.

“The way the Nepal Communist Party is functioning, it looks like sometimes it is the ruling party and other times it is the opposition. And this is evident in the report on the MCC by its task force,” said Nischal Nath Pandey, director of the Central for South Asian Studies, a think tank. “Such actions will raise questions in the future as to who is the final authority in Nepal when it comes to taking major decisions on policy matters.”

There are also concerns that the wrangling in the ruling party could result in Nepal losing financial assistance which will be all the more necessary in the changed global scenario in the wake of Covid-19.

Rupak Sapkota, deputy executive director at the Institute of Foreign Affairs, a government-funded foreign policy think tank at the Foreign Ministry, said that the MCC should be ratified without delay, as Nepal will need access to capital after the Covid-19 crisis.

“We can find middle ground by negotiating with the US before ratifying the MCC, ” Sapkota told the Post. “Strategically speaking, for the US government too, it should not withdraw the grant from Nepal, as it could be interpreted as China making inroads into South Asia and that Americans are losing their clout in the region.”

A lot, however, will also depend on the House Speaker as well, according to some ruling party lawmakers.

Oli in the past had publicly expressed unhappiness with former speaker Krishna Bahadur Mahara for delaying the tabling of the MCC compact in the House. After Mahara was forced to resign following attempted rape allegations in early October, Oli wanted a person of his choice as Speaker to facilitate MCC ratification. But he lost that battle to Dahal, who managed to get Agni Sapkota appointed Speaker.

An aide to Sapkota said that Sapkota has no intention of halting the US project.

“He is in favour of national consensus and the country’s national interest,” said the aide. “If the government brings it to the House, the Speaker will proceed accordingly. But for the government to move ahead, the party needs to sort out its differences first.”