Nepal’s relations with India, China and the US are in a state of flux and may become clearer with the next change in government. It may be the reason why Nepal’s political instability has generated concern among Nepal’s immediate neighbours, prompting increased diplomatic activity. The ambassadors of China and India met Sher Bahadur Deuba in his residence after the Supreme Court decision, indicating their interest in Nepali domestic politics.
India and China appear eager to engage with PM K P Oli although both of them are wary of his future politics. Some groups in India are lobbying the government against supporting PM Oli. India’s relationship with K P Oli has not been easy. It has no choice but to engage with Oli as he is the head of Nepal’s federal government. However, from time to time, India has sometimes cozied up to him and sometimes cut off communication.
BJP leader Subramanian Swami welcomed the Supreme Court’s decision saying, “Nepali democratic leaders have been in touch with me and my hope is democracy will be restored. India Nepal relations can be repaired then.” Statements like these indicate that BJP is also looking for a change in government.
The Foreign Ministry, meanwhile, is revising its white paper on foreign policy after critical comments from the media and experts. The Foreign Policy, published in December 2020 lists protection of Nepal’s border, MCC, and geo-political rivalry among the 13 critical threats. The foreign policy indicated in clear terms that India and its strategic interests were Nepal’s primary foreign policy challenges. The revision could indicate a softening of stance by Nepal’s political leadership following resumption of political dialogue and border talks with India.
Relations with India
Foreign Minister Pradeep Gyawali had visited India in January, where he was refused meeting with Indian Prime Minister Narendra Modi. The rebuff was seen as an indication that India was not happy with PM Oli’s government.
Nepal and India held the meeting of Inter Government Committee led by the secretaries of commerce on December 7. The IGC indicated that Nepal and India are working on a range of important issues including issues of connectivity (eg, BBIN, Motor Vehicle Agreement, railway links, dry ports, integrated check posts, trade and access to sea ports). During private conversation, senior government officials told CESIF that Nepal and India have begun talks on border differences as well.
Given Indian foreign minister S Jaishankar’s statements and opinion, India is likely to take a determined stand to pursue its strategic interests in Nepal while being careful not to be on the wrong side of history or be seen to be against democratic values.
Last month, India published a “Procedure for Approval and Facilitating Import/Export (Cross Border) of Electricity by Designed Authority, which will facilitate export of electricity from Nepal but with some restrictions on electricity produced with third party involvement. According to CRI, India’s intention is to allow only electricity produced by its companies to India. Two Chinese companies, Sutlej and GMR are constructing hydropower projects with a total capacity of 1800 MW.
India is beginning to expand development assistance to northern districts of Nepal that have close relations with China. In February India signed a MoU with Nepal Reconstruction Authority to support reconstruction of health posts in Dhading and Sindhupalchowk districts. This fits in a pattern of India and the US increasing activities in the northern districts of Nepal bordering China, while China is increasing activities in the southern plains.
Media reports say Indian intelligence agencies are closely tracking Islamai Sangh Nepal (ISN) for working together with The Foundation for Human Rights and Freedoms and Humanitarian Relief or IHH in Nepal’s southern plains. The IHH has close ties with the Turkish government.
China has obvious greater political affinity with the Nepal Communist Party political grouping led by Pushpa Kamal Dahal Prachanda and Madhav Kumar Nepal, who have been opposing the US-funded MCC.
The MCC bill is one of the legislations that has been affected by the dissolution of the parliament and conflict between the two NCP factions. PM Oli’s legal representatives, while pleading in the Supreme Court, claimed that internal differences regarding MCC was one of the reasons why the PM had dissolved the federal parliament.
The Prachanda-Nepal faction of the NCP is opposed to the MCC, but the leaders have changed their position in recent weeks. For example, when protestors began to chant slogans against MCC, Dahal had asked Pampha Bhusal to stop the chant. Some of most vocal opponents of the MCC include Jhalanath Khanal, Bhim Rawal and Dev Gurung. Some of them, including Khanal, appeared to have softened their stance to MCC.
China’s Ambassador to Nepal, Hou Yanqi, gave an interview to Kantipur, where she portrayed China as a close friend of Nepal and the opposite of India.
Indian and Chinese communications outlets are engaged in propaganda war over vaccine diplomacy, each side denigrating the other’s efforts at production and distribution of vaccine. On February 3, China announced that it would provide 10 million doses of vaccine to COVAX.
After receiving a grant of one million doses of vaccine from the Indian government, Nepal is buying 2 million doses of Covishield vaccine from Serum Institute of India. The government released Rs 1 billion through the Finance Ministry in February.
The Chinese government, meanwhile, has pledged to grant about 800,000 doses of vaccine, an increase from the 500,000 pledged earlier. The information was posted by China’s Ambassador to Nepal, Hou Yanqi in Twitter. She said: “Let us join hands to achieve the victory at an early date!” Nepal’s Department of Drug Administration granted emergency use authorization of Chinese vaccine produced by BIBP under Sinopharm on February 17.
In recent days, PM Oli is moving ahead with certain BRI projects that are seen as a security threat by India.
One example is the Nepal-China Cooperation Industrial Park in Damak, which is being built by a Chinese company under BRI at a cost of Rs 65 billion. Last month, PM Oli inaugurated the development of the park, which will have multiple industries including plants to manufacture mobile phones, electric cars, and household appliances.
Tripura Chief Minister Biplav Kumar Deb, during a speech, quoted BJP leader Amit Shah as saying that the BJP has plans to form a government in Nepal. Nepali Embassy in New Delhi objected to the statement. Deb’s statement is indicative of the aspirations of India’s Hindu ruling class to extend influence in Nepal.
Nepal’s Hindu Swayamsevak Sangh, which has close ties to Rastriya Swayamsevak Sangh of India, is increasing activities in Nepal, recruiting youngsters and opening branches in various parts of the country. Political parties in Nepal with a strong religious base, like the RPP, also have a strong nationalist posture. Therefore, they have an ambivalent relationship with India. The relationship between Nepal’s different Hindu religious groups and identity politics requires further scrutiny.
 Based on an interview with a former senior government official and diplomat with direct knowledge of the situation.