Is the White House using MCC as a political bargaining chip?

WASHINGTON — The integrity of a U.S. government agency lauded for its focus on transparency and aid effectiveness could be at risk due to the Trump administration’s push for a diplomatic win in the Balkans, experts and civil society activists warn. On March 13, the Millennium Challenge Corp., a development agency created in 2004 to work with countries based on principles of mutual accountability, placed an operational hold on its $49 million “threshold program” with Kosovo, and on a country compact currently under development that could be worth $124 million. In a statement, the agency explained that the hold would be lifted if Kosovo’s government removes tariffs it has imposed on goods from Serbia. “This is a dangerous precedent and completely outside the way that MCC is supposed to be used.” --— Sarah Rose, policy fellow, Center for Global Development “The decision to proceed with MCC programs rests on the actions of the Government of Kosovo. It is MCC’s hope that the Government of Kosovo chooses to resolve this tariff issue quickly in order to proceed with MCC programs. Once a resolution is reached, MCC will resume operations as appropriate,” the statement reads. While MCC has always required a wide range of commitments from its partner countries in order to establish and fund compacts with them, the decision to withhold funding from Kosovo in this case represents an unprecedented encroachment of U.S. political motives into the agency’s operations, said Sarah Rose, policy fellow at the Center for Global Development. “This is a dangerous precedent and completely outside the way that MCC is supposed to be used,” Rose told Devex. Rose explained that while foreign policy priorities have occasionally played a role in MCC’s decisions about whether or not to work with a particular country, the agency has rarely, if ever, reneged on commitments that were already mutually-agreed between the U.S. and a partner government in this way. The tariffs that the U.S. government wants lifted in order to allow funding to resume were already in place when MCC selected Kosovo for a compact in December 2018, Rose said. In fact, the agency reselected Kosovo in December 2019 to continue with compact development, effectively putting a stamp of approval on the country’s policy environment at that time. “To turn around three months later and say that MCC has such a significant policy concern all of a sudden about something that’s been in place since before they even started a compact partnership, and their concern is such that they’re willing to cut the program, that’s really disingenuous and goes completely against the way MCC has acted in the past,” Rose said. As it prepares to respond to the COVID-19 outbreak, Kosovo now also finds itself in a political crisis, which the U.S. government has partially instigated, according to some inside the country. On Wednesday, after hours of debate, the coalition government led by newly elected Prime Minister Albin Kurti, was brought down by a vote of no-confidence, ostensibly prompted by a dispute over whether to declare a state of emergency to combat the coronavirus, which had divided political parties. While the governments of France and Germany have called for stability, U.S. officials have appeared to back the effort to replace the democratically elected administration. “Pleased to see the Assembly will hold a session on the no-confidence vote tomorrow,” U.S. Ambassador to Kosovo Philip Kosnett wrote on Twitter on Tuesday. The effort to broker a peace agreement between Kosovo and Serbia is seen as a major White House priority, which is being led by the acting director of national intelligence, Richard Grenell, whom Trump also appointed Special Presidential Envoy for Serbia and Kosovo Peace Negotiations. Grenell’s efforts have garnered some criticism within a country that is typically very pro-American. A human rights and environmental activist currently in Kosovo who wrote to Devex — but requested anonymity out of concern for retribution — put it bluntly. “The country is in a political turmoil thanks to Richard Grenell who has been using all means possible to help overthrow the government in the middle of the pandemic. This does include pausing MCC investments,” the activist wrote. According to the activist, the politicians looking to remove the current government from office have shown a greater willingness to work with the Trump administration on a peace agreement, which the activist suggested could include controversial land-swapping deals that risk provoking further conflict. “People are so upset and feel betrayed by the administration here,” the activist wrote, adding that, “it makes no sense at all for the U.S. admin[istration] to support such an undemocratic transition in the country.” On Thursday, Grenell and Kosnett issued a joint statement about the situation in Kosovo, saying “there is no secret plan for land swaps between Kosovo and Serbia, as some have speculated.” MCC has established procedures for how to respond when partner countries show political declines after a compact is signed, including suspension and termination of country compacts in the most serious cases. The agency might place an operational hold on its funds — as it has in Kosovo — when it appears likely a country might be at risk of moving toward suspension, but that is supposed to be the result of rigorous analysis that demonstrates a pattern of decline, Rose said. “It is not at all clear that that has happened in this case, and I think it is a real stretch — or impossible — to say there is a pattern of actions that demonstrates decline since MCC had previously approved Kosovo for continuing its partnership,” she added. An operational hold also does not have to be approved by MCC’s board of directors, but is put into place by the agency’s CEO — currently Sean Cairncross. In this case, the decision seems to contradict what has been an otherwise consistent public message put forward by Cairncross, who has been “a real champion for MCC” and its model, Rose said. “We will do what we say we are going to do. Making difficult decisions based on available evidence is what MCC is all about, and our model works because we stick to our principles. This is key to our success as an agency,” Cairncross wrote in testimony to the U.S. Senate Committee on Foreign Relations in Dec. 2019. “The decision that MCC made with respect to Kosovo breaks that accountability relationship, because MCC is not upholding its end of the bargain in this case,” Rose said. She added that the implications could extend beyond Kosovo. “With a partnership like this, it really has to be based on trust and mutual accountability,” Rose said. “When MCC appears to be somewhat capricious — as it’s done with Kosovo in terms of demonstrating that it’s willing to upend its part of the deal — it can be really hard for the agency to incentivize the cooperation and reforms that are going to be needed for a successful compact partnership in other countries who might be watching what’s happening in Kosovo,” she added. In response to a request for more information about the decision, MCC’s public affairs office referred Devex back to the March 13 statement.