Nepalese Prime Minister Oli wanted to show off his Chinese ties with India, but he was misled by Beijing

Pictures, as the saying goes, are worth a thousand words. And footage from a meeting earlier this week between Chinese President Xi Jinping and Nepalese Prime Minister Khadga Prasad Sharma Oli only reinforces the truth of this aphorism.

The Nepalese Prime Minister was on a four-day visit to China starting Monday (December 2) with a wish list. He desperately hoped that China's leaders, whose wishes he had respected repeatedly in the past, would oblige and allow him to display his closeness to the powers that be in Beijing.

Oli wanted a lot of largesse from China: giving up a $216 million loan and Chinese grants, in lieu of loans, for BRI projects in Nepal. But Beijing refused to comply and Oli was deeply disappointed.

The nervous but docile look on Olis' face during a perfunctory handshake with a sour-faced Jinping when the two met on Tuesday (December 3) spoke volumes. The fact that the Jingping-Oli meeting took place at a state guest house in Beijing, and not at the Great Hall of the People where Chinese leaders usually meet with world leaders, was itself an indication of the disappointment of Beijing towards its proxy, Oli.

After all, China expected Oli to sign on the dotted line and accept the Beijing-dictated financing model for BRI projects. Under this model, China's Exim Bank provides loans at significantly higher rates than international lending institutions like the World Bank, and contracts for project execution must be awarded to Chinese companies.

But Oli did not, or rather could not, accept the Chinese conditions for financing BRI projects. He wanted 100% funding from China for BRI projects, but Beijing flatly refused. Accepting Nepal's request would open the floodgates to similar requests from other countries that have, rather foolishly, signed up to BRI projects.

Why Oli tried this time to ward off Chinese diktats

Oli, known for his cunning, became prime minister last July after forging an alliance with the Nepali Congress (NC) which until then supported the Communist Party of Nepal (Maoist) led by Pushpa Kamal Dahal. The NC is the main partner of the current ruling alliance.

The NC had, at the time of forming the alliance with the Communist Party of Nepal (Unified Marxist-Leninist) of Olis, or CPN-UML, made it very clear that it would not accept the flagship projects of the Initiative of Jinping's Belt and Road Initiative (BRI) in 2017. Nepal is financed by Chinese loans. China, the NC predicted, would have to finance the projects in the form of grants if it wants Nepal to accept BRI projects.

The NC insisted on this condition as it knew that Oli would be keen to please China and agree to implement massive BRI projects with Chinese loans that would impose a huge debt burden on Nepal.

NC executives are well aware of the predatory nature of Chinese loans for infrastructure projects and the bitter experience of many countries falling into huge debts.

These countries were then forced to grant numerous concessions that undermined their security and strategic interests and made them veritable colonies of China. The NC does not want Nepal to suffer the same fate.

This is why Oli, despite his desire to please China, could not do much. Before leaving for China, NC leaders expressly barred him from signing any BRI agreement that would involve financing projects in Nepal with Chinese loans.

NC leaders told Oli that he would be welcome to get a good deal – Chinese funding for BRI projects in the form of grants – from Beijing, but that he should not do anything that would increase Nepal's debt burden.

But Beijing managed to defraud Oli

Nepal joined the BRI in May 2017, but no project under this initiative, aggressively pushed by China, has been launched in Nepal in the last seven years.

Beijing has relied heavily on Kathmandu in recent years to sign agreements to start work on mega infrastructure projects under the BRI.

Officials and political leaders from both countries have been involved in lengthy negotiations on BRI projects in Nepal. A working group composed of leaders from CN and CPN-UML was created to finalize the projects and financing arrangements for BRI projects.

The four-member working group rejected China's proposal to finance BRI projects in Nepal through a hybrid model of 90% loans and 10% grants. The task force recommended that all BRI projects be financed only by unconditional grants.

The proposal prepared by the working group was sent to Beijing last week before Oli embarked on his visit to China. But the Chinese side returned it by replacing the word subsidies with investments. This disconcerted Nepal, whose officials and leaders found themselves unable to decipher the true importance of the investments.

After Oli's arrival in China, both sides engaged in intense deliberations and agreed to replace the word investment with aid and technical assistance.

The two sides subsequently concluded a cooperation framework for the BRI. A Memorandum of Understanding on the construction of the Trans-Himalayan Multidimensional Connectivity Network (THMDCN) was also signed by the two parties. The Chinese told their visitors that the agreements would transform Nepal from a landlocked country to one tied to the land.

China managed to convince the Nepalese delegation that the financing arrangements for BRI projects had been changed to the satisfaction of Katmandus. Oli was told that aid was just another term for subsidies.

It is learned that Oli was led to believe that if the term subsidies was used in the deal, other countries would also demand Chinese subsidies for BRI projects in their countries. In order to exclude such requests, the term assistance would be appropriate.

But Oli was clearly trapped. The Chinese rely on the written word and if they do not commit to something in writing, they are unlikely to adhere to verbal assurances which also remain deliberately vague.

China had problems with the term subsidy because it did not want to finance BRI projects in Nepal with its own money. Otherwise, he would have accepted the term subsidies. Aid is a vague term, and that's on purpose. That could mean both grants or loans, or a mix of both, a senior CN executive said. Swarajya by phone from Kathmandu.

NC leader and former foreign minister Narayan Prakash Saud said that if the aid consists of a combination of loans and grants, it would go against the NC's stance on financing China's projects. BRI in Nepal.

Senior NC leader Arjun Narasingha KC, who was part of Olis' delegation to China, said there was no clarity on the meaning of the aid.

Another NC leader and former chairman of the National Planning Commission, Govinda Raj Pokharel, said Oli was misled by the Chinese.

Separately, the Chinese refused to even discuss Oli's demand to waive a $216 million loan from Beijing for the construction of Pokhara International Airport. The airport has become a white elephant and Nepal is unable to pay even part of the interest on this huge loan.

Why Oli went to China instead of coming to India first

Oli, who became Nepal's prime minister for the fourth time on July 15 this year, broke a long tradition of Nepali prime ministers making India their first port of call after taking office and arrived in China earlier this week.

Oli had visited New York at the end of September, but it was to attend the 79th United Nations General Assembly. He had met Prime Minister Modi on the sidelines of the UNGA.

But Oli, who has always shown a certain distrust of India, chose to make China the destination of his first official foreign visit.

Shortly after taking office, the Olis officer conveyed to New Delhi that the new prime minister was keen to reach an agreement on the disputed Kalapan-Limpiyadhura-Lipulekh area (read this). The deal Oli proposed was for India to cede this part of Indian territory to Nepal.

Oli also wanted a number of trade concessions and approval from India for the use of Indian airspace for flights to and from the new Chinese-built Pokhara International Airport.

Oli maintained that his visit to India would be fruitful only if New Delhi agreed to all this. Oli's office told India that he (Oli) was not interested in a mere ceremonial visit which would yield nothing for Nepal.

Oli let us know that he would be willing to follow tradition and make India the destination of his first official overseas tour, but that India would have to give him something that would help him show that the visit is beneficial for Nepal. Otherwise, a ceremonial visit would only give the impression that Nepal is subservient to India, a senior Indian Ministry of External Affairs (MEA) official said. Swarajya.

India, predictably, said there was no question of ceding any part of Indian territory to Nepal, nor of allowing commercial aircraft flying to or from Pokhara to use the Indian airspace. India, Oli was told, had made it clear to Nepal a few years ago that it would not grant any concessions or favors to Nepal in order to ensure the viability of projects implemented by China in this country.

Oli publicly stated that he had asked New Delhi for suitable dates to visit India, but was kept waiting. And that's why he finalized his trip to China instead of waiting indefinitely for news from New Delhi.

By visiting China first, Oli wanted to demonstrate to India that China is more accommodating towards Nepal's interests and demands. Turns out he was wrong and deceived by China.