Walking the Tightrope
As India expands its sphere of influence to its northeast, China vigorously takes note. Nepal is called in to play the balancing act as it attempts to increase diplomatic relations with both neighbors.
Nepal and India share a very unique relationship. Nepal is sandwiched between two huge states of India and China. But we are virtually India-locked, as we have an open border on three sides. Most of our socio-economic interactions take place with India. Two-thirds of our annual trade is with India, while only 10 per cent is with China. Given this historic tilt towards India, our bilateral relationship is unique. When you have more interaction, you have more problems and more friction. At times, there are misgivings and misunderstandings on various issues — some are genuine, while others are born out of skepticism.” - Nepal Prime Minister Baburam Bhattarai, Prime Minister of Nepal, The Hindu, October 19, 2011
The above comment on the eve of Prime Minister Bhattarai’s visit to India reflects the traditional view of Nepal’s problems in balancing its relations between India and China. This delicate balance increases in importance as the two Asian giants flex their political and economic muscle, looking uneasily at each other.
Given the scenario, there is every risk of Nepal becoming a common hunting ground. It will be difficult for the Nepalese government to balance relations with its northern and southern neighbors due to overwhelming Indian influence permeating the country. Apart from sharing common historical, cultural and religious roots, Nepal has a special relationship with India that was formalized with the signing of the India-nepal Treaty of Peace and Friendship (INTPF) in 1950.
Under this treaty, citizens of both nations are treated equally in matters of business, jobs and property ownership. Nepal also conducts bilateral trade and has transit treaties with India. These treaties have opened up opportunities for Nepalese citizens to travel, study and do business freely in India. The extension of non-reciprocal duty-free access for Nepalese goods to Indian markets has huge potential as it allows Nepal to develop further. On its end, India has contributed significantly to Nepal’s infrastructure development and has built major irrigation projects in the country such as Gandak and Kosi barrages as well as small and medium hydro-power projects.
Although Nepal has largely gained from this arrangement, over- dependence upon India has created a backlash. Some clauses of the INTPF state that Nepal has agreed to depend on India for security as well as seek Indian consent to import arms, ammunition and military equipment from other countries. Clauses such as this exemplify Indian domination and over time, Nepal has stopped adhering to them. Trade and transit issues have also been points of contention as Nepal keenly moves to diversify its trade access to other countries.
As Indian diplomat Rajiv Sikri observed, “Landlocked Nepal’s umbilical and all round dependency on India, understandably made antiIndianism the foundation of Nepali
nationalism. Some of the fault for this lies with India. India’s perceived priority to projects that served India’s security and other needs rather than the development of Nepal aroused animosity and distrust of India in Nepal.” Rapid changes in the South Asian environment have also had adverse effects. These include the rise of China as a potential challenger to India’s pre-eminence in the region and the emergence of Jihadi terrorism as a major threat to security in South Asia.
At the same time, Chinese influence in Nepal has slowly increased over the years. The Communist Party of Nepal (Maoists) – CPN ( M) – with strong proChina leanings has emerged as a major political power since 2006 following the end of monarchy. In 2008, it won 270 seats of the total 575 seats in the elections for the constituent assembly, thereby becoming the largest party.
Despite this, CPN (M) was slow in reorienting its ideology and actions to suit a multi-party democracy. Unable to arrive at an agreement on a number of issues, the party has held up the process of finalising the new constitution. However, in early November 2011, the Unified Communist Party of Nepal (Maoist) – UCPN (M) [formerly CPN (M)] arrived at a 7-point agreement with the Nepali Congress (NC), the CPN (Unified Marxist Leninist) and the Madhesi parties, on the peace process, constitution and power shar- ing. The parties also agreed to prepare the first draft of the Constitution by late November.
During Nepal’s period of political instability from 2006 to 2011, India greatly wielded its influence in the country, thereby ensuring a continuation of the peace process. Nepal Prime Minister Bhattarai, who belongs to the UCPN (M) admitted, “India played a positive role in the peace process in Nepal and during our transition towards democracy. My visit, at this juncture when we are at the last stage of completing the peace process, assumes special significance.” This would indicate a softening of the hard line approach UCPN (M) had previously adopted on India.
India has also reciprocated this welcome change in the Nepalese attitude by signing two agreements with Nepal. One related to the extension of a $250 million line of credit for Nepal on concessional terms and the other focused on the Bilateral Investment Promotion and Protection Agreement (BIPAA). The BIPAA will encourage the flow of Indian investments in Nepal. Many Nepalese analysts consider this development a success of the country’s economic diplomacy. Bhattarai himself has called this development historic and a major step towards removing distrust in the bilateral relations between Nepal and India.
India has also agreed to facilitate the speedy execution of construction
‘Two-thirds of our annual trade is with India, while only 10 per cent is with China. Given this historic tilt towards India, our bilateral relationship is unique. When you have more interaction, you have more problems and more friction.’
of roads, rail and Integrated Check Posts along the border areas of Nepal and India. Hiccups in trade and transit issues will be discussed at the ministerial level. For now, India has agreed to the use of Vishakapatnam port to facilitate Nepal’s third-country trade as well as conceded Nepal’s demand for importing 200 MW of power from India.
These developments are significant. In the strategic setting, they also demonstrate India’s strength in ensuring political stability in Nepal if the constitution is finalised successfully.
Much has been written about the growing Chinese influence in Nepal. Given the current state of India-china relations, a stable Nepal is in the interest of both countries, though they may compete aggressively for spheres of influence. Both India and China have focused on building multi-faceted relations and have avoided contentious issues that could lead to a military confrontation. Though the Chinese threat figures prominently in Indian media, India has consciously played down the issue, despite its concerns of China’s increasing influence in the region.
India-china bilateral trade has grown to $59.62 billion during 201011; it is now set to achieve the target of $100 billion by 2015. This carefully orchestrated relationship is not likely to be jeopardised by bilateral initiatives taken by either country in South Asia, as long as it does not aggressively trespass into their strategic security domain. The Nepal peace process and its aftermath, despite some shortcomings on India’s part, have demonstrated that Nepal continues to be in India’s security domain. China is unlikely to miss this. The writer is a retired Military Intelligence specialist on South Asia and is associated with the Chennai Centre for China Studies and the South Asia Analysis Group.
Prime Minister Bhattarai shakes hands with his Indian counterpart,
Dr. Manmohan Singh.