Reports claim that the Government of Nepal is preparing to grant uranium processing rights in Mustang to the United States. According to these accounts, a 30-square-kilometer area in Lo Manthang, Upper Mustang, would be designated as a “Mustang Special Zone,” giving the U.S. and Australia exclusive processing rights under the so-called “Pax Silica” coalition. Although former Prime Minister Sushila Karki and Finance Minister Rameshwor Khanal have denied any such agreement, leaked documents reportedly indicate that an in-principle consent was granted in March 2026. The plan is said to link energy from the MCC project with new AI data centers while ensuring data sovereignty. Other potential uranium sites mentioned include Makwanpur and Sindhuli.
If accurate, these reports raise serious concerns for Nepal. Their authenticity remains unclear, but media coverage has prompted citizens to demand transparency, citing their constitutional right to information. So far, the government has remained silent.
Mustang, which borders China, is a highly sensitive region. While Nepal is a sovereign nation, involving third parties in border areas—formally or informally—carries geopolitical implications. The United States and China are strategic rivals competing for global influence, economically and militarily. Any U.S. activity near the Chinese border could therefore be viewed as provocative by Beijing.
Historically, Nepal has managed such sensitivities with caution. Until the 1990 People’s Movement, the monarchy maintained a careful balance, respecting the security concerns of both India and China. Chinese teams were not permitted to operate near the Nepal–India border, and Indian teams were similarly restricted near the Nepal–China border. In one notable case, a Chinese company that had won a contract to build bridges along the East-West Highway in the Far-Western Region saw its contract cancelled, with the project reassigned to India.
There were also strict internal measures. Immigration offices in the Tarai were reportedly instructed to restrict the entry of Tibetan refugees returning from Dharamshala, India, citing security concerns. Nepal consistently upheld the “One China” principle, both in principle and practice.
Nepal’s foreign policy has long been guided by non-alignment and the Panchasheel principles, maintaining balanced relations with its neighbors and other friendly countries. This approach fostered trust, particularly with China. Any departure from this path could carry significant risks for the country.
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