Conventionally, small states were invisible in the larger discourses of international politics. But now small political units with strategic locations have become sites of great power rivalries.
South Asia is the world’s least integrated region owing to its intra-regional border tensions. India, the largest power in South Asia, faces a perceived strategic threat from some of its neighbors necessitating a shift in its foreign policy, especially towards China.

The 1950 Peace and Friendship Treaty between India and Nepal incorporated favorable terms of mutual exchange with Article 5 allowing Nepal to access weapons from India. Similarly, Article 7 established reciprocity of similar treatment to both Indian and Nepali citizens in matters of residence, property, and movement. The 1960s ushered in a new era when Kathmandu was seen trying to strike a balance between New Delhi and Beijing.

In 1960 Nepal and China signed a peace treaty and the following year inked a border treaty in which they agreed to build a highway route connecting the two countries. To assuage India’s concern, Nepal signed an agreement with India in 1965 that allowed the then Himalayan kingdom to import arms. However, soon after  Nepal annulled the arms import treaty in 1969 and asked India to pull back its troops from its territory.

Another major development in Indo-Nepal relations was the signing of the Multiple Trade and Transit treaties, symbolizing stronger trade ties in the 1970s and 1980s. The year 1978 marked a rapid rise in the number of joint investments concretized between the firms of these two countries.

Political turmoil in Nepal

The tripping moment came in 1989 when the Nepalese economy was under severe strain and the vital trade and transit treaties between Nepal and China had turned obsolete because of the failure to negotiate a new trade and arms import treaty. The economic strain paved the way for the restoration of parliamentary democracy in Nepal and restoration of suspended ties between India and Nepal along with the resumption of trade ties and treaties.

The bloom in the ties was transient as the monarchy was restored in Nepal under King Gyanendra in 2001 only to be overthrown in 2006 and subsequently abolished in 2008.

With the setting in of democracy, Maoist leader Pushpa Kamal Dahal became Prime Minister and leaned greatly towards China, providing the Communist nation massive investment opportunities.

Recently, just deposed Prime Minister K P Sharma Oli, also a communist, had while in office resented India’s interference in Nepal’s internal affairs and was seen tilting towards China. Sher Bahadur Deuba, leader of the Nepali Congress, is the new Prime Minister. His policies will be tested given the prevailing geopolitical circumstances in the Asian hemisphere.

India-Nepal-China triangle

Both India and China are trying to woo Kathmandu. Writers Geeta Kochhar and Pramod Jaiswal (2016) argue that India, Nepal and China represent a unique triangle. However, in this unique triangle, Kathmandu is turning into a theatre of rivalry between New Delhi and Beijing.

Amish Mulmi in his book All Roads Lead North (2021) asserts that the strategic parleys between Beijing and Kathmandu must be viewed against the backdrop of India’s neighborhood strategy. He cites the imposition of an unofficial blockade against Nepal by India in 2015 as the pretext for Nepal’s diplomatic shift towards the north. That India needs to eschew its skewed policy heavily focused on the security perspective is a significant observation of the author.

On 8 May 2020 Indian Defense Minister Rajnath Singh inaugurated by video conference a 80 km long road between Dharchula, in Uttarakhand to Lipulekh, at the China border, designed to reduce the duration of the Kailash Mansarovar Yatra by Hindu pilgrims by several days.  Nepal's foreign ministry expressed “regret” at India’s “unilateral act” and called upon India to refrain from carrying out any activity on "Nepalese territory".

Kathmandu contended that the road crosses its territory, and accused India of bringing a change in the status quo without holding any diplomatic consultations. After the tension escalated, Nepali police forces were deployed to the region. Nepal resents Indian interference. As the mountainous country turns to China to fulfill its political and economic aspirations by resorting to a hedging policy, the resentment against India is rising.

A new dawn in India-Nepal relations was ushered in when the two neighbors inaugurated the Motihari-Amlekhgunj pipeline, the first of its kind in South Asia. In 2019-20, India provided Rs 1,200 crores to Nepal for its economic development under the “Aid to Nepal” budget. Nepal could be the economic transit point for both the Asian giants.  

India has owned some territory also being claimed by Nepal. Although Nepal refers to the 1815 Sugauli Treaty to legitimize its claims, India’s new road up to the Lipulekh pass is not a change in the existing situation. India has earlier controlled this territory and even built infrastructural capabilities besides conducting its administration and deploying military forces up to the border pass with China.

The region is of strategic importance as the new road now stands as one of the quickest links between Delhi and the Tibetan plateau. China had earlier in 2015 recognized India’s sovereignty by agreeing to trade through the Lipulekh Pass.

Nepal’s foreign policies have become increasingly political and assertive. The clamor over Kalapani territory grabbed headlines in November last year after India announced its new political map post the abrogation of Article 370. While India administers the territory as part of Pithoragarh district in Uttarakhand state Nepal claims it comes under the Darchula district of its Sudurpaschim Pradesh.

China’s growing clout

China’s growing political clout in Nepal ranges from being the largest foreign investor (USD 81.89 million in 2019) to upskilling Nepalese students in Mandarin and mediating and avoiding splits in the erstwhile ruling Nepal Communist Party.

To seek cooperative alliances in the region and to expand its global hold, China utilized the Belt and Road Initiative (BRI) - a global infrastructure development strategy adopted by the Chinese government in 2013 to invest in nearly 70 countries and international organizations.

As part of the initiative, China has been building roads and railways at the Nepalese border to facilitate cross-border trade, including plans to expand the Beijing-Lhasa railway line into the border of Nepal. This will enhance the volume of Chinese trade and investment in Nepal, surpassing that of India.

To assert its regional power status, China has been advocating the idea of building a community of common destiny (Mingyungongtongti), seeking alliances with neighbors playing a constructive role in China's rise. That being the case, Nepal is an important component of this strategy since it will be a route to creating an expanded dependent economic belt in India, according to Kochhar.

Moreover, Nepal’s perception of non-interference of China in its internal affairs has given Beijing an edge over India.

As China scales new heights in the world economy, it has acquired more power to extend its sphere of influence to setting regional and global norms and shaping discourses that suit its interests. China has already become a regional hegemon in the Asian hemisphere. Therefore, clinging to the Chinese bandwagon may ensure greater returns for Kathmandu.

The rising presence of China across the Himalayas forced India to recalibrate its policies towards Nepal by shifting the focus from geostrategic denial to greater economic delivery and subsequent connectivity. India seems to prefer more traditional approaches focused on security, military, and other geostrategic factors. India needs to realize that it will have to continue to respect political sentiments in Nepal.

Kathmandu is adopting a hedging policy towards both New Delhi and Beijing. For Sher Bahadur Deuba’s government, the acid test of preserving Nepal’s core interests and increasing its bargaining capacity vis-à-vis India and China will depend on how the Nepalese leadership responds to the emerging geopolitical and geoeconomic imperatives in the region amid the Sino-Indian rivalry.

(The writer is post-graduate in International Relations, School of International Studies, Jawaharlal Nehru University, New Delhi. The views expressed are personal. He can be contacted at zahoorjnu@gmail.com)