When the Central Committee meeting of the ruling Nepal Communist Party started on Wednesday, the Millennium Challenge Corporation’s Nepal Compact was conspicuously missing from a host of contemporary issues up for discussion.

But during his inaugural speech, which lasted around two hours, party Co-chair and Prime Minister KP Sharma Oli brought up the MCC and said why the US programme, which will provide $500 million in grants to Nepal, is important for the country and why it must be ratified at all costs. Oli and Co-chair Pushpa Kamal Dahal also presented a political document, which incongruously has a line that clearly says, “the Indo-Pacific Strategy is aimed at countering China”.

And despite not being on the agenda for discussion, a debate over the MCC took centre stage in the five-day Central Committee meeting, with a majority of members raising questions about the Washington-led grant programme.

“The MCC dominated all other agendas during discussions, which were held by dividing members into 15 groups,” said one Central Committee member who spoke on condition of anonymity. “More than two-thirds of the Central Committee members were against endorsing the US programme in its current form.”

The major bone of contention, according to party leaders, is that many believe the MCC is part of the US’ Indo-Pacific Strategy and its military component.

While early opposition to the MCC was primarily from former Maoist party members, objection is now coming also from former UML leaders, with Bhim Rawal leading the pack.

Rawal has already made his aversion to the MCC clear in public as well as on party platforms.

On Sunday, before the conclusion of the meeting, the Central Committee formed a study team under senior leader Jhala Nath Khanal, with Pradeep Gyawali and Bhim Rawal as members. The team has been given 10 days to gather suggestions and make recommendations after studying “facts”.

The MCC debate at the Central Committee, however, has put the Oli administration in a fix.

“I think the government feels trapped as the Central Committee spent a majority of its time discussing the MCC,” said Rekha Sharma, a Central Committee member and former minister. “Oli can neither ignore the concerns of his central committee members nor jeopardise Nepal’s foreign relations.”

The problem, however, has its genesis in the internal tussle between co-chairs Oli and Dahal, which became all the more apparent during the recent Speaker selection.

Just as Oli and Dahal were haggling over the Speaker candidate in December last year, Dahal told members of the party’s standing committee that the government would seek clarity from the United States on the MCC. Dahal’s statement came at a time when Oli had publicly made it clear that the US programme would be ratified from the winter session of Parliament, which commenced on December 20.

Leaders say they are not sure if Dahal made that statement just to assuage the standing committee’s concerns or if he really meant to gain clarification from the United States. Dahal has for years had a love-hate relationship with the United States, which once branded his Maoist party a terrorist group. In September last year, a statement by Dahal against the US’ “meddling in Venezuela” led to a diplomatic kerfuffle.

Dahal’s relationship, however, was believed to have “improved” after he took his wife Sita Dahal to the United States for medical treatment.

The political document jointly presented by Oli and Dahal says that “the IPS was brought to encircle China”. Party leaders, including Oli himself and government spokesperson Gokul Baskota, have criticised the sentence on the grounds that the party should not use such statements about friendly nations. Dahal has subsequently said that the offending sentence will be removed.

Nonetheless, Dahal’s statement to the Standing Committee could have prompted Oli to become more assertive about the US programme.

“There was no need to raise an issue that was not even on the agenda of the central committee meeting,” said Hemraj Bhandari, also a central member. “Now Oli faces a dilemma—his government cannot push the MCC in the House until he addresses the concerns of the majority of his party members.”

Though it appears that the MCC had led to a divide between the former UML and Maoist members, it appears to have drawn the battle lines between pro-Oli members and others, according to leaders.

Dahal’s influence is growing in the Nepal Communist Party (NCP) and that is becoming a cause for concern for the Oli camp and the MCC could emerge as a major dividing line, according to leaders. The MCC is likely to play a crucial role in defining the dynamics in the party, they say.

But Dahal has already professed that he is ready to make concessions.

The study team formed by the central committee is also likely to prompt the Maoist camp to take exception, as all the members are from the former UML.

In the three-member team, Gyawali, by virtue of being the foreign minister in the Oli Cabinet, is certain to defend the MCC while Rawal is not likely to make a concession. Khanal may not have been very vocal but he has made it clear that the American programme should not be ratified by Parliament in its existing form.

Recommendations in the government’s favour are only likely to come if Gyawali manages to convince Khanal and Rawal, both long-time colleagues of his.

This, however, is not the first time the party has tried to address concerns surrounding the MCC.

A December Standing Committee meeting had entrusted the party’s nine-member Secretariat to sort out issues related to the MCC after a number of members questioned some of its provisions.

“The Secretariat had the mandate from the Standing Committee to hammer out an agreement. Had it found a solution, the issue would not have reached the Central Committee and become a major agenda,” said Barshaman Pun, a Standing Committee member who is also the energy minister in the Oli administration. “The government will have to abide by whatever decision the party takes.”

According to Rajendra Rai, a Central Committee member who represents the former UML, leaders have said that the MCC will affect the national interest and, therefore, the study team will need to ascertain how it could affect Nepal’s sovereignty.

“If the study team recommends a middle path, the government could seek a review from the US government to save face,” said Rai.