The day of his return to the American presidency, Donald Trump published a decree Foreign help galling for 90 days. Among the many projects affected, there was a subsidy of $ 500 million which aimed to develop critical infrastructure in Nepal. This funding, provided by the Millennium Challenge Corporation (MCC), an American government agency, aimed at improving the transmission capacity of Nepal electricity, including a 200 kV transmission line for energy trade with India. The frost not only raises questions about the future of American engagement in Nepal, but also modifies strategic calculation in a region where China and India compete for influence.
The government of Nepal initially signed the compact MCC 2017. However, internal political hiccups, divided opinions among Nepalese politicians and persistent Chinese efforts to dissuade Nepal from accepting the subsidy have delayed its five -year ratification. The Parliament of Nepal finally approved it in 2022 After a lot of controversy.
In August 2024, the account of the Millennium Challenge in Nepal signed an agreement with India To initiate the construction of three high-capacity stations to Damauli, Ratmate and New Butwal, as well as a transmission line connecting New Butwal to the Nepal-India border. Nepal, which generates almost all of its electricity Hydroelectricity, is subject to seasonal variations in its electricity supply. These transmission line projects aim to improve electricity imports during the dry season and exports of the rainy season to strengthen its energy safety with a stable and reliable power supply.
Trump’s decision to suspend the MCC subsidy now throws uncertainty about these developments.
It is important to note that Trump’s decision occurred shortly after China and Nepal managed to conclude a contract within the framework of the Belt and Road initiative On December 4, 2024. Like the MCC contract, this stage followed a long combat of negotiations since Nepal initially joined the BRI in 2017, due to the concerns of Nepal concerning debt and geopolitical signaling. Among the 10 Projects identified to execute as part of “assistance assistance financing”, the centerpiece is a proposal to develop a 220 kV transfective electricity transmission line of 220 kV from Jilong via Kerung in the Chinese Tibetan autonomous region in Rasuwagadhi, Nepal. This plan follows Nepal completed Construction of its interior transmission line of Chillime-Trishuli. The line is designed to transport electricity produced from its hydroelectric projects in the Trishuli river basin to the national network.
Together, the two lines are part of the largest proposed project of Kerung-Rasuwagadhi, which will facilitate the electricity trade in Nepal with China in the future. In addition, reports have surfaced that discussions are underway to build another electricity transmission line connecting the Sankhuwasabha district to Nepal to China, signaling a more in -depth commitment to the electricity trade network.
Sandwich between two Asian giants increasing, Nepal prioritized the increase in its total electricity production in order to export part of this outing. As indicated in his 16th Quinquennial plan, Nepal aims to extend the electricity production capacity from 3,157 MW to 11,769 MW and export 5,500 MW of electricity per year over the next five years. With 90% of its electricity production from hydroelectricityNepal has a technically possible potential capacity of 83,000 MW and an economically viable capacity of 42,000 MW.
This vast hydroelectric potential has acquired a new meaning in the fields of foreign policy of its neighbors, strategically positioning Nepal at the center of evolving power dynamics. India and China seek to secure their energy future and assert their influence in the region. Meanwhile, the United States, through the MCC subsidy, aimed to align Nepal with its broader Indo-Pacific strategy to counter China.
Over the years, China has intensified its influence in Nepal by political and economic means, a development considered with concern by the United States and India. In Chinese strategic discourse, Nepal is considered a “crucial link” to advance its major regional and financial gear plans that would reduce the dependence of Nepal to the duration of India, as well as a full component of the broader development strategy of China in Tibet.
Over time, China has managed to influence the position of Nepal on the Tibetan issue by obtaining its support and recognition of Beijing as the only legitimate authority on Tibet. In this context, China venture into cross -border electrical connectivity projects has a significant strategic value. These electrical projects could accelerate the integration of Tibet into regional commercial networks and promote stability by stimulating industrial growth, by facilitating the transfer of expertise, labor and materials, and to optimize the use of local hydroelectric resources for cross-border electricity trade. By deepening its commitment to Nepal, China not only strengthens bilateral economic links, but also the consolidation of its broader strategic influence in the region while making its development objectives in Tibet progress.
China’s investment in energy -related global infrastructure is a key pillar of its strategy abroad, almost representing 31% of its total foreign investments. Reports indicate that its electricity transmission lines alone are evaluated $ 7 billionwith plans for additional expansion under the part of his “Global energy interconnection initiative“” In the years to come. Negotiations renewed with Nepal signal China’s intention to resume momentum in the development of electrical transmission infrastructure, an area where progress had previously blocked.
India, on the other hand, has actively engaged in the hydroelectric sector of Nepal by establishing long -term electricity trade agreements and building several electricity transmission lines, Including the electricity transmission lines of Dhalkebar-Muzaffarpur and Dhalkebar-Sitamarhi 400 kV, with plans for an additional expansion and completion in the coming years.
In addition, last year, the two parties inaugurated three other 132 kV Transmission lines cross-border, including Raxaul-Parwanipur, Kataiya-Kusaha and New Nautanwa-Mainhiya lines, and India has agreed to buy 10,000 MW of electricity in Nepal over the next 10 years. In addition, the two countries have entered a tripartite Agreement with Bangladesh last year and Nepal managed to export 40 MW electricity in Bangladesh via India. India considers electricity trade as a key element of its strategic relationship with Nepal, and the increased export of electricity promises to strengthen the links between the two countries.
However, in the past decade THE The relationship between India and Nepal has remained responsible for political sensitivities. Tensions made snowball after the constitutional amendments of Nepal 2015, alleged Indian support for ethnic demonstrations against change, blockade on the border that followed, and India inauguration of a new road in the contested region of Kalapani. All these developments, as well as increasing nationalist rhetoric in Nepal, have fueled anti-Indian feeling, which has Important repercussions in the dynamics of power trade.
Many Nepalese experts argue The fact that the construction projects of the Indian dam in Nepal are confronted with deliberate delays, Indian companies staboring progress to maintain long -term control, in particular in border areas where India is perceived as affirmation of Nepalese rivers and hydroelectric resources. Others argue that the strict of India approval The process for power exports of Nepal, driven by its strategic concerns, has erected substantial obstacles. India explicitly declared that it would not buy electricity from projects involving a form of Chinese investment. To apply this, India has required complete financial disclosure of Nepalese hydroelectric projects, including details of funding sources and the financial institutions involved. In addition, India has made the annual renewal of export approvals compulsory, preventing the process of bureaucratic administrative formalities.
As there is currently no alternative market to sell the excess electricity produced during the rainy season, in the middle of these delays on the supply, Nepal has witnessed occasional power spill. This situation caused the frustration of Nepalese officials and cast doubts about the long -term justification of electricity trade with India. These complexities reinforce the perception that the hydroelectric sector of Nepal is shaped by the strategic interests of India and managed by the Dicton of Delhi rather than by the economic priorities of Nepal and the wider development needs.
In this context, the American suspension of the MCC subsidy still exacerbates these challenges, complicating the electricity transmission projects of Nepal and compromising its global ambitions of electricity trade. For China, the frost presents a window of strategic opportunity to extend its presence in the electricity sector of Nepal. Although the suspension is temporary, China can seek to exploit the anti-American feeling and the perception of the United States as a unreliable partner. The decision could also arouse concerns for India, which had tactically supported the compact of the MCC and was complex in its formulation to counter the influence of climbing China in the region.
With the help of Trump Freeze and the renewed commitment of Nepal with China under the BRI, the Nepal electricity and electricity trade networks are at the crossroads. Although a cross-border electrical connection with China has an opportunity to diversify its electricity trade and strengthen its negotiation power, it also reflects the broader intention of Nepal to assert geopolitical autonomy beyond the influence of India. That said, the Chine -Népal transmission line project is still being studied – and concerns persist regarding the sustainability of debt, transparency and long -term strategic intentions of China by virtue of the BRI. It is essential for Nepal to carefully assess the implementation and methods of financing the project to avoid potential financial trapping.
Since the country seeks to take advantage of its hydroelectric economic growth potential, the Nepal power trade strategy will continue to be shaped by the competing interests of the United States, China and India. That Nepal can successfully browse these geopolitical complexities to maximize its economic and strategic advantages, or if external pressures will dictate its energy future, remains an open question. These evolutionary power dynamics suggest that the role of Nepal as a power in South Asia will be determined not only by its resources endowments, but also by its ability to balance the aspirations of powerful regional and global actors while protecting its own strategic interests.