Picture Courtesy: Wikipedia Commons

C3S Issue Brief VII – Relations & the China Factor

Karishma Angela Vincent Research Intern Chennai Centre for China Studies July 29 2020

India – Nepal Relations & the China Factor

Facets of Cooperation

History stands witness to the deep rooted bilateral relationship of the two very close neighbours of South Asia, India and Nepal. Both the neighbours being predominantly Hindu majority nations along with strong influence of Buddhism, share arich religious and cultural heritage which laid a strong foundation for cordial bilateral relations which developed to establish strategic and diplomatic ties as well. As close neighbours, India and Nepal share a unique relationship of friendship and cooperation characterized by open borders and people to people connection across the borders sharing family ties and culture. Nepal shares a border of over 1850 km with India occupying the States of , West Bengal, Bihar, Uttar Pradesh and .

The start of ties between the states of India and Nepal can be traced back to the 1816Treaty of Sugauli signed between the colonial British masters. As a result of this treaty, Nepal lost one third of its territory on the east, south and west. The British East India Company could not bear Nepal growing into a stronger country and so they defeated the Ghorkhalis in the battle of Nalapani, Jaithak and Makawanpur and forced Nepal to counter sign the Sugauli treaty. Nepal was disadvantaged because of the treaty whereas the British India gained more territorial advantage at the border. Nepal was literally threatened by the British to counter sign the treaty. The treaty had reduced the land area to 1, 47,181 km. This is the border that independent India inherited in 1947. Post Indian Independence in 1947, the 1950 Peace and Friendship Treaty were signed with Articles 5, 6, and 7 of the treaty being the key components. Article 5 offers access to weaponry from India. Article 6 established National Treatment for both Indian and Nepalese businesses. Article 7 established reciprocal treatment of Indian and Nepali citizens in the two countries, in residence, property, business and movement. This treaty also annulled and invalidated all previous treaties and agreements, however the Article 1 of the treaty talks of ‘territorial integrity’ of each nation which meant existing boundaries.1950 also saw the signing of the Treaty of Trade and Commerce which streamlined the customs and duties regulation between the two countries which was an important factor of trade for Nepal which is a landlocked country. 1960s marked the beginning of the growing Chinese interest in Nepal and the historic Tibetan border crisis which became the point of contention between the three nations. During the 1970s and 1980s, India and Nepal signed multiple Trade and Transit treaties which strengthened the bilateral relations in terms of economic development. India played a significant role when the first Parliamentary democracy was set up in 1990 by providing intervention in the conflict resolutions in the newly formed political parties in Nepal. However monarchy prevailed in Nepal and was in existence until 2008 when the Parliamentary system of government was re established and India resumed its political and economic relations with Nepal.

Economic Partnership: Nepal and India enjoy excellent bilateral relations in economic, trade. India is extending economic and technical support to Nepal, especially after 1951. The signing of the India-Nepal Treaty of Peace and Friendship in 1950 established the framework for the unique ties between the two countries. Since the early fifties, India has contributed significantly to the socio-economic development of Nepal. Areas of economic relations include airports, irrigation, agriculture, roads, bridges, power projects, industrial estates, communication, surveys, forestry, building construction, along with some vital social sector areas like health, education, human resource development etc (issued by the Embassy of Nepal, New Delhi). Since 1996, Nepal’s bilateral trade with India was 29% of its total external trade which increased to 66% in 2014. India’s exports to Nepal increased from INR 1525 crore in 1996 to INR 2954 in 2014. The main items of exports from India to Nepal are petroleum products, motor vehicles and spare parts, machinery spare parts, coal, cement, and chemicals. The main items of exports from Nepal to India are polyester, cardamom, G.I pipe, copper wire, shoes, sandals, stones and sand. Indian firms are the biggest investors in Nepal, accounting for about 38.3% of Nepal’s total Foreign Direct investments. There are about 150 Indian investments in Nepal in the areas of manufacturing and services sectors such as banking, insurance, education and telecom, power sector, and tourism industries. Some of the Indian investors in Nepal are ITC, Dabur India, Hindustan Unilever, BSNL, TCIL, MTNL, State Bank of India, Punjab National Bank, LIC, Asian Paints, Berger paints, Tata Power etc. These Indian investments account for Nepal’s 40% FDI.

Defence Cooperation: Since both the nations share common borders, security cooperation has always been of prime importance. The Indian Army and Nepalese Army have a long standing cooperation. Bilateral defence cooperation includes providing assistance to Nepal in terms of providing equipment and training. The Gorkha Regiments of Indian Army are raised partly by recruitment from the hill districts of Nepal. As of 2016, 32,000 gorkha soldiers are serving in the Indian Army. Since 1950, India and Nepal have been awarding Army Chiefs of each other with honorary ranks of General in recognition of harmonious relationship between the two armies. The two countries are also working on Information exchange and Disaster Management Relief. Since Nepal is a longstanding buffer State between India and China, it has always been important for Nepal to maintain the strategic balance between the two super powers of South Asia.The Indian and Nepali armies regularly conduct joint exercises named ‘Surya Kiran’ and Nepali Army officers are trained annually in Indian Military Academy, Dehra Dun.

Energy Cooperation: Bilateral ties relating to water resources and hydropower cooperation have always been the highlight of the Indo Nepal relations. Starting from 2008, with the present assistance, the total grant provided for the embankments construction accounts to INR 4.5 billion.The famous Electric Power Trade, Cross Border Transmission Interconnection and Grid Connectivity Agreement was signed in October 2014. Some of the major hydropower projects include the Pancheshwar Multipurpose project, The Arun -3 hydroelectric power project. The Agreement with India’s Satluj Jal Vidyut Nigam Ltd. and the Investment Board of Nepal was concluded in November 2014 and the Power Development Agreement for the 900MW Upper Karnali hydroelectric project was concluded between the Invesment Board of Nepal and M/S GMR in September 2014. As of 2017, a total of about 350 – 370 MW of power was being supplied to Nepal through different transmission lines such as the Dhalkeber-Muzaffarpur. Kataiya-kusaha, Tanakpur-Mahendra Nagar and Ramnagar-Gandak.

The Kosi High Dam Waterway Project popularly known as the Sagarmatha – Sagar waterway aimed to provide Nepal with direct access to the sea by utilizing the Kosi route. The Agreement was signed in 1954 to regulate the flow of the river and to ensure flood management. A barrage straddling the India Nepal border was to be constructed for this purpose and embankments were to be raised on the either side of the river. This project was also designed for power generation and irrigation purposes. The aim was to provide sea access to the landlocked country of Nepal. However it was analysed that this High dam project will have adverse effects on the economy and environment of the mid hill regions where these dams were proposed to be built. India and Nepal had reached an agreement to build the multipurpose project wayback in 1991. Nearly three decades later, the project is yet to see the light of day. Developmental Assistance–Government of India provides development assistance to Nepal, focusing on creation of infrastructure at the grass root level, under which various projects have been implemented in the areas of infrastructure, health, water resources, education, and rural and community development. Few examples are upgradation of roads, development of cross border rail links and establishment of integrated check posts, installation of 2700 shallow tube wells etc. The recent project was the construction of the Nepal Bharat Maitiri Dharamshala at Pashupathi area at Kathmandu and the construction of a Polytechnic institute at Dharan which provided Indian faculty to assist the BP Koirala Institute of Health Sciences. As of 2017, the estimate of the developmental aid provided to Nepal is INR 76 Billion. When a devastating 7.8 magnitude struck Nepal in April 2015, India provided immediate relief assistance by sending the National Disaster Response Force teams along with special aircrafts and relief material including medical equipments, medical supplies, food, water, etc. The total relief aid provided was US$ 67 million. India has been providing close to 3000 scholarships annually for Undergraduate, Postgraduate, Ph.D scholars pursuing subjects such as engineering, agriculture, pharmacology, vetinary sciences, computer application, business administration, music, and fine arts.

Shared Culture - Government of India promotes people-to-people contacts in the area of art & culture, academics and media organized in partnership with different local bodies of Nepal. An MoU between the Sahitya Kala Akademi (India) and the Nepal Academy is already in operation. Four more MoUs have been signed between Doordarshan and Nepal TV, Press Council of India and Press Council of Nepal, Lalit Kala Akademi, India and Nepal Academy of Fine Arts, and an MoU on Youth Exchange between the Governments of India and Nepal.The Governments of India and Nepal have signed three sister-city agreements for twinning of Kathmandu-Varanasi, Lumbini- Bodhgaya and JanakpurAyodhya.. The Archaeological Survey of India (ASI) is involved in the renovation of the Pashupatinath Temple Complex in Kathmandu.An MoU between ICCR and Kathmandu University, andICCR and Tribhuvan University has been signed for setting up ICCR Chair at these Universities. An Indian Cultural Centre was set up in Kathmandu in August 2007 to showcase the best of Indian culture across Nepali cities. The Indian Cultural Centre in Kathmandu has generated considerable goodwill through the various cultural events it has undertaken in the past.

Facets of Contention:

 The Citizenship Act of 1952 allowed the citizens from both the countries to freely immigrate to the other country and easily acquire citizenship. This policy continued until 1962. Several restrictions were laid on Nepal’s Constitution during this time. This fuelled resentment on both the sides.  1952 saw the establishment of the Indian Security Forces at the Northern Frontiers of Nepal which was considered by Nepal as a overbearing attitude of India at the borders.  Nepal chose to vote against India at the UN in the year 1950 over common issues of contention such as the transit facilities and access to sea.  In 1969, Challenges grew in terms of the Mutual Security arrangementwhen Nepal demanded the withdrawal of the Indian check posts. India reluctantly withdrew its military check posts.  Events such as the Indo-Soviet Friendship Treaty in 1971, Absorption of Sikkim into India in 1974, increased unofficial support to the Nepali Congress Party leadership in India and India’s Nuclear explosion in 1974 were perceived as security threats by Nepal.  Relations between the two countries became tenser in 1988 when Kathmandu signed an agreement with Beijing to purchase weapons soon after a report that China had won a contract for constructing a road in the western sector to connect China with Nepal. India perceived these developments as deliberately jeopardizing its security. India also was annoyed with the high volume of unauthorized trade across the Nepalese border, the issuance of work permits to the estimated 150,000 Indians residing in Nepal, and the imposition of a 55 percent tariff on Indian goods entering Nepal.  The economic consequences of the trade and transit deadlock were enormous. India put Nepal under a virtual trade siege. In March 1989, upon the expiration of the 1978 treaties on trade and transit rights, India insisted on negotiating a single unified treaty in addition to an agreement on unauthorized trade, which Nepal saw as a flagrant attempt to strangle its economy. On March 23, 1989, India declared that both treaties had expired and closed all but for two border entry points. Shortages of Indian imports such as fuel, salt, cooking oil, food, and other essential commodities soon occurred. The lucrative tourist industry went into recession. Nepal also claimed that the blockade caused ecological havoc since people were compelled to use already dwindling forest resources for energy in lieu of gasoline and kerosene, which came mostly via India.  Indian policy of exerting influence over its neighbors was seen as The ‘Big Brother attitude’ by Nepal. This is evident through the dependence of the monarchs from Nepal on India for political and diplomatic supervision. The monarchs were focused on a “Hindu” identity to sustain their rule against a Maoist uprising. This Hindu identity linked them to India.  The Maoist presence and increasing tilt towards China after the end of the Hindu monarchy in 2008 has prompted the Indian administration to use different economic incentives to wean away Kathmandu. New tensions have arisen in Indo Nepal relations after the passing of a new Nepalese constitution that sparked protests in Nepal and a new unofficial Indian blockade that has led to more suffering and hardship.  India has applied the method of coercion on Nepal which was manifest through the application of a blockade in 1989 and 2015. India employs this phase once its political interference fails and the other government moves to a more independent position instead of a client state more desirous to New Delhi.  The Economic blockade initiated by India against Nepal in 2015 was due to the allegations on the Nepal constitution for the lack of equal representation of the Madhesi and Tharu communities who lived on the common Northern Indo Nepal terrain. Nepal perceived this blockade as a purposeful move by India to support the protesters. This episode saw a diplomatic debate between the Foreign office Spokespersons of both the countries, where the Indian Foreign Office spokesperson Vikas Swarup made a statement that Nepal is a sovereign country and is free to have diplomatic friendship with all her neighbours but the “Roti-Beti ka Rishta” which India and Nepal share can never be replicated by any other country.  India Nepal relations were growing in 2019 with high level bilateral visits, and energy collaboration including the inauguration of the first-ever cross border petroleum pipeline in South Asia. Issues began when Nepal banned the use of the Indian currency notes of Rs 2000, Rs 500 and Rs 200 denominations which had an impact on the Indian tourists. In November 2019, the Nepal government lodged a protest against the inclusion of the Kalapani area in India’s far west, claiming it as Nepal’s territory. Nepal claims Kalapani as a part of the Darchula district, while the Indian map placed it under the of Uttarakhand. The claims against the Indian maps were that according to the Sugauli Treaty of 1816, British India inherited the territory from Nepal, but after the Peace and Friendship Treaty of 1950, both the countries mutually agreed on the principle territorial integrity. At present the Indo Tibetan Police have stationed their troops at the area and the Kalapani territory remains as a common possession of both the nations. Another territory dispute revolved around Narasahi-Susta in Bihar.  A chunk of the area in green is the source of a long discord between Nepal and India.

Picture Courtesy – The Outlook magazine

The China Factor in the Indo-Nepal Relations

Picture Courtesy – The Outlook magazine

The relationship between China and Nepal was by no means new. On the contrary, it can be said that the two countries were in constant contact because of their geographical proximity. China’s interest in Nepal was largely due to their religious affinities, as China also had a large Buddhist population and naturally Chinese showed great interest in getting information about Buddhism, its culture and tradition. Early History

The political and economic relation between China and Nepal started with Tibet serving as the link. It was the emergence of a powerful kingdom in Tibet in the seventh century A.D. with its capital at Lhasa that transformed the Kathmandu valley into the intellectual and commercial connect between Nepal and central Asia. The sixteenth and seventeenth centuries were critical periods for the relation between Nepal and Tibet. During this period Tibet underwent an internal crisis in the competing Buddhist sects. Nepal took advantage of this situation to seize control of the vital border-pass areas through which most of the trans-Himalayan trade passed. In early eighteenth century, China established a presence in Tibet and became for the first time, an important factor in the Himalayan-area politics.

Chinese policy in Nepal was non-interference in its internal affairs. The Nepalese learned the value of an association with China, a different factor in Kathmandu's periodic confrontations with the British. Thus, Nepal's foreign policy in the post 1814 period was based on the principle of balancing British and Chinese powers. However, Nepal in 1846 recognized that China was neither willing nor able to challenge the British in the Himalayan area.

In the peace negotiations between Nepal and Tibet, the Chinese officials ensured that Nepal still recognized and respected the Imperial authority of China. China also came to realize the strategic importance of Nepal as a buffer between China and British India. By 1860, the British hoped to create a direct land route for trade with Western China via Tibet. This constituted a direct threat to Nepal's virtual trade monopoly in Tibet. With the outbreak of the 1911 revolution in China and the expulsion of China from Tibet, the question of Nepal was safe but at no point during this period did the Chinese Government concede the independence of Nepal or the British government’s paramount authority.

The Beginning of the Triangle Diplomacy

Following the reassertion of Chinese military control over Tibet in 1950, Nepal came to have a common boundary with China. It was after the conclusion of the 1954 Panchsheel agreement between India and China that an active phase of diplomatic interaction between Kathmandu and Beijing began. King Mahendra was the chief architect of Nepal's China policy. At the Bandung Conference in 1955, leaders of Nepal and China met face to face. Diplomatic relations between the two were established in 1956. A treaty was signed by the two sides where Nepal surrendered all rights she was enjoying in Tibet. Thus began the phase of Nepal's foreign policy of the so called Equal friendship with India and China.

One objective for Nepal to open diplomatic and trade contacts with China was to reduce her overdependence on India and use China card against India whenever needed to extract some concessions from India. There was also the objective necessity on Nepal's part to deal with China in view of the apprehensions regarding China's assertive role in Asia and the changing dimensions of regional and international politics in South Asia, particularly, the Sino-Indian relations. In 1959- 60 there were a number of developments which seemed to have cooling effects on Sino-Nepalese ties. Tibetan Revolt of 1959 and its ruthless suppression by the Chinese was, of course, one development. Meanwhile a democratic government under the leadership of B.P. Koirala had assumed power in Nepal. Koirala was considered "Pro-India". He was interested in introducing some kind of balance between the two powerful neighbors. The diplomatic relationships between Nepal and China restarted with the signing of the Peace and Friendship Treaty 1960. The treaty was signed by Prime Minister B.P. Koirala on behalf of Nepal and Prime Minister Chou En-Lai on behalf of the Chinese Republic. Both countries also signed a two-year trade agreement in Kathmandu. The volume of trade between Nepal and Tibet-part of China nearly doubled in three years since till mid 1960s.

Points of Contention

China put forward her claims on Mount Everest, which produced a strain between Sino-Nepalese relations. Nepal-China relations during this period assumed highly controversial forms from time to time despite the deep understanding and cordiality shown by the two countries. The Chinese army fired upon a group of unarmed employees of His Majesty's Government who were engaged in their routine activities in the Nepal-China borders near Korepas in Mustang. This tragic incident agitated the minds of the Nepali people.

Following the dismissal of Koirala Ministry in 1960, King Mahendra once again became the supreme policy maker in Nepal. He visited China in 1961, signed a boundary agreement and another agreement providing for the construction of a road linking Kathmandu with the Tibetan town of Kodari. This road agreement disturbed India a great deal, as it was considered a breach in the Himalayan barrier and hence a security risk. During the Sino-Indian conflict of 1962, Nepal followed a well conceived policy of neutrality and fully exploited the strategic significance of Nepal to India and extracted some concessions from the Indian side including in the field of trade. In the post-1962 period, the Chinese influence in Nepal had increased considerably. Nepal understood India's concern regarding growing Chinese influence in the Kingdom and agreed to drop some of the Chinese aided projects. The Sino-Nepalese relations had been on an even keel ever since early sixties. At the same time Nepal came to realize that the use of China card has only a limited utility, more so because the seventies saw a more confident and assertive India in South Asia.

In 1971 India's help led to the triumphant emergence of Bangladesh and in 1974 India carried out a successful nuclear explosion. In 1974-75, the Nepalese dominated Sikkim became an integral part of the Indian Union. All this seriously disturbed the Nepalese monarchy which found that it was no longer possible to pursue the traditional policy of balancing India with China. The events of 1974-75, when India showed some definite signs of having acquired increased capability, aroused the Chinese and Nepalese and they attacked India for her "hegemonistic imperialistic" ambitions in the Himalayan region, and in South Asia. Nepal declared itself a Zone of Peace in order to ensure security and noninterference guarantees from both its neighbors, particularly India. In any case, the Chinese response to this proposal was quick and positive. Once again, China was successful in projecting a better image to Nepal as a neighbor, in contrast to India.

Since 1978 a new chapter of normalization of relations between India and China had begun. But when the trade and transit problems in Indo-Nepalese relations appeared in 1970s and 1980s, China made it clear to Nepal that they should not compensate for their losses which had incurred due to the economic blockade imposed by India. Therefore, while Nepal did not intentionally want to play the China card against India, India was well aware of the latent Chinese influence in the Indo Nepal relations.

As of 1991, the Kathmandu to Kodari highway remained the only major artery linking the two countries. Nepal generally preferred to keep relations with China low-key to avoid offending India. Despite any agreements between China and Nepal, the volume of trade had not shown any increase in these periods. Thus, despite its best efforts, China had not exactly succeeded in offsetting the Nepalese dependence on India. It was also observed that Nepal had utilized its strategic location as a buffer between the two powers to a great extent to extract concessions from both China and India. Particularly, India had, time and again, announced relaxations and concessions to Nepal just to keep this small Himalayan Kingdom at its periphery from coming under Chinese sphere of influence. India had compelling reasons to do so because Nepal's closeness to China would have threatened its security.

The special relationships between India and Nepal was duly appraised by China, but China avoided taking any offensive policy against Nepal, for that would definitely cause displeasure to India and create problems for China's interests in Tibet. However India was instrumental in blocking the establishment of direct diplomatic relations between Nepal and China. The Sino- Indian negotiations for solving the mutual problems in the Himalayan states went on for a long time. The broad understanding between them implied that China had accepted India's primacy in the sub-Himalayan states, not only in Sikkim and Bhutan but in Nepal as well.

The Government of Nepal would consult Government of India with regard to any matter relating to its foreign policy or relations. Nepal remained in close touch with India regarding any step it took towards China. India adhered to its earlier policy on the assumption that Nepal would develop relations with China within limits prescribed by it and that Kathmandu would respect the political understanding reached between India and China.

China back in Action

India sensed that it was losing its grip on Nepal in the 1980s to 1990s. The Chinese Premier's declaration was that "Nepal and China are blood brothers and nothing can poison their relationship". He also pointed out that "national economic development was an essential means of safeguarding full national independence" and added that "China would be willing to aid Nepal within its capabilities". The statement implied that as long as Nepal was dependent on India it was virtually not enjoying independent status; Kathmandu, therefore, should diversify its policy in order to preserve its independence. Throughout this period China never explicitly undermined India's presence in Nepal. China did not take any positive steps to break its political understanding with India and did not challenge India's special relations with Nepal and thereby avoided a tactical error. But it was clear that China had entered into competition with India in Nepal and it would be difficult for India to steer Sino-Nepalese relations in the same baseline manner as it did in the earlier phase.

The Indian approach towards Sino-Nepalese relations was quite clear to resolve its differences with China, by negotiations and to create a sound relationship. India encouraged Nepal to resolve its mutual problems with China. Nepal being so vital to India's security system, it was in India’s interest the Nepal's northern border should be finally settled and put beyond controversy. The development of Indo-Nepalese relations would show that Nepal, while dealing with China, not merely took India into confidence at every stage but also successfully resisted any Chinese move to undefined Indo-Nepalese friendship. China took deliberate steps to move Nepal further away from India. It hastened the boundary agreement with Nepal and made quite a few concessions to Nepal. It offered economic aid to Nepal and managed to get the approval of the construction of the Kathmandu-Kodari road. It was the deteriorating Sino-Indian relations that made China bring Nepal closer to it. Whatever responses China made over the Indo - Nepalese relations were calculated keeping the Sino-Indian relations in perspective.

India’s turn to bear the brunt

After the 1962 India-China war, India lost prestige in Nepalese eyes as it proved incapable of defending its own border against China, ie, not being able to protect Nepal against China. If China had proved its capability against India that also meant China could mount an offensive against Nepal, if it became necessary. Nepal, hence was expected to play a more careful diplomacy with China considering it as a friend, not antagonizing it and remaining close enough to India to balance China as far as possible. India here was only "a determinant". India realized thatit had to give a new perspective to Indo-Nepalese relations and give more concessions and economic assistance to Nepal. Moreover, since Nepal had to get everything from India, India alone could play a vital role in its economic development.

Nepal’s Tactic

Amidst these compulsions Nepal found an opportunity to impress both of its neighbors with its own importance and thus to gain greater maneuverability. India felt disturbed at China's efforts to involve itself in Nepal's affairs more than ever before, and it sought to neutralize those efforts by greater assistance and, concessions to Nepal. This was welcome to Nepal and it quickly moved to improve and redefine its relations with India. The basic idea in the newly attempted equation was that Nepal had an identity separate from both the neighbors and that its geographical situation had made it a true buffer between the two giants. Nepal concentrated more on economic dimension and utilized this opportunity for improving the economic situation. However, Indian activities in Nepal were viewed by China as reactionary and expansionist. India was bracketed with "United States imperialist" and "Soviet revisionists" as the powers operating contrary to the interests of Nepal. China used all Kinds of diplomatic and propaganda sticks to keep India at bay in Nepal. Sino-Nepalese relations reveal that China had always been deciding its policies towards Nepal keeping India in view. Thus, one could say that China's attitude towards Nepal was all along conditioned by its state of relations with India. One could also say that Sino-Nepalese relations were made a second fiddle to Sino-Indian relations by China.

Sino-Nepalese Relations during the 2000s

After Nepal became a republic in 2008, China lost its most reliable partner, The King, who used to serve the security interest of China. China needed a trustworthy partner in Nepal. It became obvious that it has to choose between two major political forces in Nepal - the democratic parties, which were mostly pro-India, and the Maoists, a large party with anti-India and anti-US sentiments. China started establishing good relations with traditional Maoist political parties. Interestingly, China supported the Maoist party only after they emerged as the single largest party in the Constituent Assembly election of April 2008.

China developed its links with the Maoists to serve its security interests in Nepal. The Maoists in Nepal are sympathetic to China due to ideological affinities. Maoists extended hand towards China as they were in dire need of support from a strong power. China accepted Maoists because they viewed India and US as ‘imperialist power’ and stated that they were fighting against their interference in Nepalese politics.

A few important developments in the Sino-Nepal relations are as follows:

 On 24 October 2005, China pledged military assistance of $989,000 to Nepal to curb the Maoist insurgents.  China pledged to provide US $2.6 million as military assistance for Nepal’s security sector. Earlier in September 2008, China had announced military aid worth $ 1.3 million, the first of such assistance to the Maoist government in Nepal.  In December 2009, China agreed to provide military aid worth 20.8 million Yuan to the Nepal Army.  China provided financial assistance worth Rs. 10 million for construction of a library, science laboratory and school building with computers in Chhoser village in the area of India influence.  China also established Chinese Study Centers and The Chinese Mutual Cooperative Society at Kathmandu which were funded by the Chinese Embassy.  As of 2011, the total FDI contributed by China to Nepal was 7.9 million. China has provided assistance in 64 projects of Nepalese Government which amounts to 1.4 billion.  One major complaint from China was that the media coverage of Chinese projects in Nepal is less when compared to the Indian aid projects. Chinese projects were equally important such as the Trolley bus service, Civil Service hospital, Ring road, and the International Convention Hall which later became the Constituent Assembly building.  Chinese aid in the focused on promoting industries along with infrastructure building in Nepal to have a direct multiple effects to its aid program and indirectly decrease its economic dependence on India.  Since 2014, there were tremendous increase of Chinese investments in the infrastructure, energy and other sectors of the Himalayan country. The new Chinese Belt and Road (BRI) initiative was proposed to give further momentum for China-Nepal development cooperation.  The first joint military exercise between both countries, was the 10-day ‘Sagarmatha Friendship 2017’, which took place in April 2017. The conducting of such joint military exercises will be a crucial element in the future security cooperation of Nepal and China.

Future Prospects

 An agreement has been signed to interlink both countries linking Kerong of Tibet through Rasuwa in Nepal by railway. There is an urgent need to develop transport system between two countries and construct a dry port in Nepal in order to enhance the bilateral trade between Nepal and China.  Nepal has already signed the Bilateral Investment Promotion and Protection Agreement (BIPPA) with India. BIPPA is also necessary between Nepal and China to increase the Chinese investment in Nepal. Chinese investment is also necessary to focus on marginalized regions of Nepal like Madhesi, Karnali and far-west region. Triangle Diplomacy: India’s way forward:

 It is evident that Nepal is no longer a geographical buffer between India and China but is rather of great strategic importance to both the countries because of its relevance in terms of Security and Economic Cooperation. Geographically, Nepal’s location in South Asia makes it more crucial to maintain the balance between India and China because this Triangle Diplomacy is of great significance to the Region’s security and also to keep away the external influences of USA, Russia and Europe from establishing their monopoly over the region. As part of early history, it was observed that Nepal had strong religious and cultural connections with both India and China which made Nepal to develop bilateral relations with both the countries, a mandatory exercise.  Nepal’s Approach to China: The political dynamics changed when Nepal realized the Chinese authority over Tibet and how China threatened Nepal’s trade monopoly over Tibet. This is when Nepal first realized that China was the most powerful player in South Asia and Nepal had to have mutually cooperative relations with China to curb the Communist threat. Nepal also aimed to play the China card against India to keep India at a vulnerable position and to extract benefits from both sides. Without doubts, Nepal clearly understood that the Chinese Friendship is pertinent to establish a firm position in the South Asian region.  Nepal’s relationship with India: In terms of their relationship with India, it was the “Roti beti ka rishta” and the “Open border system” which laid the foundation for the Indo- Nepalese relations. It was always more personal because both the countries were Hindu Kingdoms and Nepal was culturally and geographically more united with India than with China. The Indian leadership has had a profound influence on Nepal’s foreign policy decisions right from the monarchical to the democratic system of administration. The recent Nepalese statement on the Kalapani territory dispute with India and the adoption of a new political map by Nepal including not only the Lipulekh pass but also other areas of the Indian Territory only projected the strain that has developed between the Indo Nepalese relations.  Domestic drifts: Internal political tussles were part of Nepal’s politics. The government led by K.P Sharma Oli of the Communist Party of Nepal (Unified Marxist–Leninist) was formed soon after the promulgation of Nepal’s constitution. The earlier Prime Minister stepped down in 2016, when the key coalition partner the Communist Party of Nepal (Maoist- Center) led by Prachanda, withdrew support for the government. The K.P Sharma Oli government came to power in 2018, but the internal conflicts between the various communist parties of Nepal and the issues of Representation of the Party representing the Madhesi community, posed enormous struggles to the power politics in Nepal. Nepal’s larger neighbors also seek to influence the political turmoil to their own benefit. China reportedly strongly backed the Oli government, as it signed a trade and transit treaty with China, ending India’s monopoly. Similarly, there were reports that India wanted to see the Oli government toppled. Though it is difficult to ascertain the degree of interference, India has huge influence in the internal political affairs of Nepal and China too is increasing its influence among the political parties. Recently the NCP Party Secretariat meeting was held on May 2nd, which was attended by Prime Minister K.P Sharma Oli and other senior leaders. Amidst the heightened intra party row within the NCP, the Chinese Ambassador to Nepal held a series of meetings with the senior leaders of the party in Kathmandu. The Ambassador, met PM Oli and Prachanda and discussed the current political situations, corona control campaign and relations between the two countries. China putting their best foot forward  As for China, their interest was to be the significant player in South Asia and this dream was threatened by the considerable Indian goodwill and soft power in the region and one such area was Nepal where the Indian influence was considerable due to historical ties. Since Nepal has common affinities of Buddhism and Communist ideologies, it was imperative for China to keep Nepal by their side, to reduce India’s influence in their foreign policy and economic decisions. China used Economic aid as the weapon to establish strong bilateral relations with Nepal. They were also instrumental in convincing Nepal that only when Nepal becomes economically independent from India only then will their political standing be reassured in South Asia. The inclusion of Nepal in their massive BRI project is also part the Chinese initiative to keep Nepal economically viable to them. Though the Communists from Tibet living in Nepal were against China, yet China managed to support the Communist parties functioning in Nepal. Nepal was basically an integral part of the Sino Indian conflicts and hence China could not afford to give up on their dominion in Nepal. Implications for India  India’s increasing force posturing along the Nepal border, which, in the first place, was in response to China’s activities along the border. Interestingly, the timing of former PM Manmohan Singh’s government’s considering of border-force enhancement for defensive purposes roughly coincided with the spike in China’s interest in Nepal. China’s engagement in Nepal is either directly correlated with India’s action with China, or completely independent of the same. In either scenario, India’s strategy to keep Nepal’s engagement with China to a minimum is no longer a viable option.  Nepal remains an ally of India and has constitutionally asserted that its foreign policy is “based on the Charter of the United Nations, nonalignment, principles of Panchsheel. Major parties have often reiterated this, and the overall national spirit reflects Nepal’s desire to remain neutral, as it did during the Doklam standoff in mid-2017.  However, during his first tenure Indian PM Modi and Nepal’s Prime Minister Oli have established a relationship of trust, negotiating some important agreements during their visits. The agreement on the historically controversial Arun III Hydroelectric project, and their cooperation in revitalising BIMSTEC (or the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), are some of the indicators of Oli’s good intentions regarding India. The revised controversial map released by Nepal; Picture courtesy – The Kathmandu Post

 The current scenario of the Indo Nepalese relations has taken the unfortunate terms. With reference to the ongoing border disputes at the Kalapani and the Lipulekh territories, India has stated that Nepal has violated the principles of the Sugauli Treaty of 1816. Also the recent, statement by Nepal’s Prime Minister Oli, where he said that the people coming from India are spreading the coronavirus in Nepal was vehemently condemned by India. Hence it is clearly evident that the Indo Nepalese relations are currently going through a not so conducive phase of diplomacy. The Way Forward  India must formulate an integrated approach towards Nepal to improve the current reality. Regarding China’s inroads into Nepal, an option for India would be to resolve the status quo by attempting to block Nepal’s options to diversify its cooperation with neighbours, through projects such as the infrastructure development by Chinese investment. However, such a policy is bound to fail because Nepal is determined to take advantage of cooperation opportunities with foreign partners, including China. Since China is winning hearts and minds in Nepal through generous strategic charity, the way forward for India would be to depart from its exclusively traditional security angle and be proactive with innovative strategies and policies.  The first step is to identify the major cause of Nepal’s behaviour towards India. Why has the Nepali establishment consistently resisted India while being so welcoming to China? Second, India must introduce new economic, developmental and infrastructure initiatives with Nepal that will not only bring tangible benefits to Nepali citizens but also address the vulnerabilities that will emerge in Nepal when they engage with China.  Whatever may be the dispute, Nepal cannot dispense with its reliance on India. India is and will remain vital for the country in many ways. However, Nepal is now a member of China’s massive BRI, which puts India in a difficult position. India must figure out where it stands with Nepal and what is the way for forward in the short, medium and long term, Given the shifting regional and global structure, technological breakthroughs, as well as new threats such as terrorism, India and Nepal must figure out in what new ways they can move forward in the best interest of both parties. Since the on-going CoVID crisis is a global pandemic affecting people across borders, this time of crisis indirectly offers an opportunity for both the nations to support each other to restart their amicable bilateral ties to maintain their significance in the region.  As long as the principles of non interference and peaceful co-existence are respected and a high level of political engagement is pursued, there will be bonhomie and cooperation between the leaders of India and Nepal. At the same time, it should balance China’s unease about its security in Nepal as well.

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References:

Secondary Sources. I. Journal Articles :  Uma Shankar Prasad, Study of Nepal's Economic Relations with China, © CEDA/TU, 2015, US Library of Congress, Catalog Card No. : 79-915209, ISSN: 2091-0339 The Journal of Development and Administrative Studies (JODAS), Vol. 23(1-2), pp. 23-32, https://www.nepjol.info/index.php/JODAS/article/view/15446/12479  Siegfried.O,Wolf .S, Growing Nepal-China security cooperation and its ramifications for India, SADF FOCUS, 10 January 2018, Issue n° 35 ISSN 2406-5633  . Bhim Nath Baral, Nepal-China-India : Prospects of Trilateralism, https://www.nepjol.info/index.php/JPS/article/view/26696/22090  Hari Bansh Jha, Nepal’s Border Relations with India and China, http://src- h.slav.hokudai.ac.jp/publictn/eurasia_border_review/Vol41/V4N104J.pdf  , What is Sugauli Treaty ?* , AIMSA Collection For study , . https://indiamadhesi.files.wordpress.com/2008/11/what-is-sugauli-treaty.pdf  Pramod Jaiswal, Caught in the India-China Rivalry: Policy Options for Nepal, 249 Issue Brief, 01 Mar, 2014, http://www.ipcs.org/issue_select.php?recNo=556  Anil Sigdel, China's Growing Footprint in Nepal: Challenges and Opportunities for India, ORF Issue Brief, October 2018, Issue no 260, https://www.orfonline.org/research/chinas-growing-footprint-in-nepal-challenges-

II. Newspaper Article  Cold Neighbourhood: On India-Nepal ties, The Hindu Editorial dated May 23,2020. III. Magazine Article  Explainer: Kalapani territory dispute between India and Nepal, and upcoming talks to resolve it. The Week Magazine, January 02,2020, https://www.theweek.in/news/india/2020/01/02/explainer-kalapani-border-dispute- between-india-nepal-and-upcomingt-talks-for-resolution.html  Nepal’s Unending Political Instability, Kamal Dev Bhattarai, The Diplomat,July 26,2020, https://thediplomat.com/2016/07/nepals-unending-political-instability/ 1V. Website Articles

 Jawad Falak, Indo Nepal Relations: An overview of two Hindu Nations, https://stratagem.pk/setting-the-record-straight/indo-nepal-relations-overview- two-hindu-nations/  Charu Sudan Kasturi, Roti-bet ka rishta (ties of food and family): Bharatam and Nepal, http://bharatkalyan97.blogspot.com/2015/10/roti-beti-ka-rishta-ties-of-food-and.html  Dr .A.B Thapa, From Sagarmatha To Sagar: Nepal’s Access to Sea, April 22, 2018, 4:34 p.m. Published in Magazine Issue: VOL.11, No.19, April 20, 2018 (Baishakh 07,2075) Online Register Number: DOI 584/074-75  History of India-Nepal Relations, http://www.southasiaathudson.org/history  India-Nepal Relations, Issued by the MEA, November 2017, https://www.mea.gov.in/Portal/ForeignRelation/8_Nepal_November_2017.pdf  Andrea Matles Savada, ed. Nepal: A Country Study. Washington: GPO for the Library of Congress, 1991. http://countrystudies.us/nepal/65.htm  China interferes in Nepal's internal political strife amid COVID-19 outbreak https://www.aninews.in/news/world/asia/china-interferes-in-nepals-internal-political- strife-amid-covid-19-outbreak20200502173920/