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The Americans seldom fail to remind the world of the perils of falling into China’s ‘debt trap’, as embodied in President Xi Jinping’s Belt and Road Initiative (BRI). US Deputy Assistant Secretary of Defense for South and Southeast Asia Joe Felter did the same during his brief stay in Nepal earlier this week. As reported in The Kathmandu Post, and speaking like a spokesperson for the Nepal government, Felter said: “We welcome a constructive relation with China, we welcome the investment by China, but as long as that investment is designed to serve the interest of Nepal and not just China.”

The Chinese were not amused. A day later, Chinese Ambas­sador to Nepal, Hou Yanqi, told the Global Times, “The sup­port and assistance China has offered have no political strings attached and [China] does not interfere in [Nepal’s] domestic affairs.” It is “very ridiculous” for someone to try to interfere in friendly relations between China and Nepal, she added.

Those fearful of ‘autocratic’ China’s influence have long invoked the dangers of getting close to the dragon

Those fearful of the rise of ‘autocratic’ China’s influence in Nepal have long invoked the dangers of getting too close to the fire-breathing dragon. “Look at what happened in Hambantota!” is their most common refrain. But as Ameet Dhakal recently reported in Setopati, there is an alternative narrative to Hambantota. Accord­ing to the prominent Sri Lankan economist Nis­han de Mel he quotes, the Lankans also offered the US and India a chance to operate the port. Both declined. This correspondent has himself heard more than one Sri Lankan intellectual say there should be a more nuanced reading of the monolithic ‘BRI is evil’ narrative.

It is also interesting that the US is reminding Nepal of the dangers of the BRI when the Chinese are themselves skeptical of the big infrastructure projects Nepal wants them to build under the initiative. For instance, they have in recent times told Nepali officials that a costly cross-border rail may not be in Nepal’s economic interest. “Even if China builds the rail line, who will ensure its upkeep in Nepal? Does Nepal have enough railway engineers, for instance?” one Kathman­du-based Chinese official recently asked this correspondent. Instead, “why not focus on more economically feasible and bilaterally beneficial projects?”

Far from looking to trap Nepal in debt it cannot repay, the Chinese approach in Nepal has been more business-minded in recent times, which is perhaps how it should be. And who says good business decisions don’t make geostrategic sense?

No foreign policy expert from either India or Nepal that this correspondent talked to believed India and Pakistan would go to a full-blown war, even as tensions have considerably risen following the terrorist attacks in Jammu and Kashmir last week. “No doubt things are going to escalate. We do not know how India will retaliate,” says Brookings India’s Constantino Xavier (See interview this week). But “I do not see a possibility of war.”

Nepali analysts like Nishchalnath Pandey of the Center for South Asian Studies in Kathmandu, a private think-tank, and Indra Adhikari of the Institute of Foreign Affairs, a government one, also doubt there will be a large-scale war. What is interesting though is that all three analysts believe recent developments will further weaken SAARC, an organization that was already stuck in limbo after India refused to take part in the 2016 summit slated for Islamabad.

In Xavier’s reckoning, the mounting Indo-Pak tensions will naturally make India pursue alternative regional connectivity projects like BIMSTEC and BBIN that do not include Pakistan and downplay the utility of an organization like SAARC, which includes Pakistan, as “Pakistan has consistently blocked the way” to regional cooperation via SAARC. Xavier believes SAARC is not the only game in town.

Pandey has a slightly different take. “Yes, SAARC is already dysfunctional,” he says. “However, it has at least provided a platform for leaders of member countries to meet and have free and frank discussion.” Not just that. As Nepal is the current chair of SAARC, “it’s our responsibility to ensure that even at a time like this regional cooperation endeavors aren’t left in the doldrums”.   

Adhikari of the IFA also rules out an all-out war. But she says pressure could mount on Nepal to pick sides. “Forced to make a choice, the sentiment will naturally be in favor of India,” she adds. “Nepal and India are treaty allies, our soldiers serve in the Indian army and we depend on India for so much.”

Yet she is confident that even in the event of a war, Nepal won’t be coerced to choose sides. “India never consulted us during its previous wars with Pakistan. There is no reason things should be different this time,” Adhikari says.

Unlike in India, there is still a huge constituency in Nepal that believes SAARC is still the best platform to deal with regional issues. As its current chair as well as the permanent host of its secretariat, Nepal will continue to fly the SAARC flag.

It’s been a torrid one year for the KP Oli government. Having cemented the merger of the country’s two biggest communist outfits, and commanding over a two-thirds majority in the federal parliament, the government has cre­ated a semblance of stability in a notoriously turbulent polity. In theory, this should have helped attract the much-needed FDI and goaded our own businesses and industries to invest in job- and capital-creation. But with the federal government blasé about its woeful capital spending, despite the prime minister’s repeated assurance of swift and adequate infra­structure spending, the economy appears wobbly: there is a severe liquidity crunch in the BFIs, the trade deficit continues to tick up steadily, and economic growth has stalled. There has been no meaningful progress in big-ticket proj­ects that PM Oli likes to talk about endlessly—rail-links with both India and China, water-link with India. The government has asked for patience as most of PM Oli’s first year in office was spent “laying the ground”. As proof, the prime minis­ter on Feb 13 unveiled an unemployment allowance scheme and a day later, a ‘people’s hydroelectricity’ scheme. Yet there is no clear modality for either. Meanwhile, corruption has ballooned and the rule of law deteriorated. Press freedom is under threat. Transitional justice has been shelved, to potentially dangerous consequences.

 Oli has tried to diversify Nepal’s foreign relations away from the two giant neighbors

On foreign policy, the government may claim success. Relations with India have been ‘normalized’ following the blockade-time low. The Oli government also seems to be in China’s good books. Further, it has tried to diversify Nepal’s foreign relations away from the two giant neighbors. As a part of this process, Foreign Minister Pradeep Gyawali made a landmark visit to the US, even though NCP co-chairman Pushpa Kamal Dahal’s mistimed comments on the US inter­vention in Venezuela severely dented the US outreach.

To give it the benefit of the doubt, it was the first govern­ment formed under the new constitution and it has had to spend most of the past year formulating laws to make the federal formula work. Yet even on law-making, progress has been slow and there has been little consultation with the stakeholders. As it enters Year Two, the government will make another round of big promises to make up for lost time. Promising big things has always been a strong suit of PM Oli. It is in follow-through that he falters.

Both the sides are trying to dial it down. The Oli gov­ernment has asked the US to differentiate between the Nepal Communist Party (NCP) and the coalition govern­ment the party leads. By calling on Prime Minister KP Oli on Feb 5, the US Ambassador to Nepal Randy Berry also gave a clear signal: while his country is still mightily displeased with the turn of events in Nepal around Venezuela, it is not in a mood to let this single issue spoil overall bilateral relations either. The ‘centrality’ of Nepal in the Indo-Pacific Strategy adds to the urgency of a quick dispute resolution.NCP co-chairman Pushpa Kamal Dahal’s strong statement on the unfolding crisis in Venezuela came only a day after the UN and nine foreign embassies in Kathmandu came out with a strong statement of their own on transitional justice. In their Jan 24 statement the international com­munity had called on Nepal’s government to ensure that conflict victims get timely justice, in line with the Supreme Court verdict. Four years ago, the apex court had ruled out a transitional justice mechanism that provided near ‘blanket amnesty’ in conflict-era rights violations.

Dahal and top lead­ers of the former Maoist party have always sus­pected what they see as the ‘needless interven­tion’ of western powers in Nepal’s transitional justice process. Perhaps their biggest fear is that they could be apprehended and jailed abroad under international juris­diction. Dahal has already had to cancel some of his foreign engagements in fear of arrest. Interestingly, neither India nor China had signed the joint statement on transitional justice. With these two missing, the former Maoist leaders felt the initiative had to come from the US, the third most important foreign actor in Nepal.

On what many top Maoist leaders see a life-and-death issue, PM Oli is also in no position to backtrack from Dahal’s statement issued on the NCP letter-pad. This is also why Dahal has refused to back down either. As noted in this space last week, there were other reasons behind the communist government’s strong stand in favor of Venezuela, chiefly China (a big investor in Venezuela), Nepal’s perceived ‘cen­trality’ in the Indo-Pacific Strategy, and Oli’s yearning to assert himself on the global stage.

The whole episode was also a potent reminder of the risks of lingering on transitional justice, the third vital leg of the peace process after the management of the Maoist arms and army and constitution-writing.