The Pulse | Diplomacy | South Asia

A Rock and a Hard Place: Nepal’s 2019 Diplomacy in Review

Over the past year, Nepal has been in a tight spot as it seeks to balance between major powers.

Kamal Dev Bhattarai
A Rock and a Hard Place: Nepal’s 2019 Diplomacy in Review
Credit: Indian Ministry of External Affairs

On the domestic front, Nepal secured political stability in 2019 but in its external engagements it faced new challenges, issues, and situations. Communist leader-turned-prime minister K.P. Sharma Oli’s capability to handle those issues will largely shape the course of Nepali foreign policy in 2020.

At the beginning of 2019, Nepal faced a Venezuela fiasco. Pushpa Kamal Dahal (commonly known as Prachanda), co-chair of the ruling Nepal Communist Party, issued a public statement expressing solidarity with the people of Venezuela and President Nicolas Maduro when Prime Minister Oli was out of the country. This prompted the United States, which supported self-declared interim President Juan Guaido, to seek clarification from Nepal’s government. Though Oli personally conveyed to the American ambassador in Kathmandu that Prachanda’s statement was flawed, the incident still created a climate of mistrust in bilateral relations.

On a brighter note, in January 2019, Oli attended the meeting of the World Economic Forum on Davos. This was the first time that Nepal’s prime minister was invited to participate in the meeting. Oli tried to entice international investors to Nepal by emphasizing that the country at long last had political stability and was reforming domestic laws to make them investment friendly.  At home, the prime minister’s participation at Davos was taken as an achievement because it was seen as recognition of Nepal’s newfound political stability.

In relations with India, there have been mixed signals. Some pending bilateral projects and agendas have moved ahead even while new issues strained relation between the two countries.

In August, Indian Minister for External Affairs S. Jaishankar visited Kathmandu to participate in the meeting of Nepal-India joint commission, which reviewed all bilateral projects and issues. In September 2019, Nepal and India inaugurated a 69-kilometer-long cross-border petroleum pipeline, ensuring the smooth supply of petroleum products from India to Nepal. This project will cut costs and help to curb air pollution by reducing the number of tank trucks making the journey. On the other hand, Nepal’s dependence on India for petroleum products will further increase.

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Similarly, Nepal and India laid the foundation stone for the construction of Arun-3 hydropower project, which was pending for a long time. The project aims to produce 900 MW of electricity. Similarly, the construction of postal highways has received new momentum, along with the construction of a cross-border railway line. Outgoing Indian Ambassador to Nepal Majeev Singh Puri highlighted these two projects as big achievements of his tenure in Kathmandu.

However, new issues emerged that strained the bilateral relationship between Nepal and India in 2019.  In November 2019, India’s new political map included Kalapani, a territory claimed by Nepal, which invited a series of anti-Indian protests in Kathmandu. The wave of protests was the second in four years, following the 2015 protests against India’s economic blockade. Nepal has requested that India sit for talks on the issue but there has not been any progress yet. Similarly, the issue of the Nepal-India Eminent Persons’ Group (EPG) report remained unsettled in 2019. The EPG, an expert panel formed in 2016, submitted its report in 2018, suggesting ways to update the bilateral relationship. But their recommendations are gathering dust as India is refusing to receive the report. With the U.S.-China rivalry playing out in Nepal, India seems serious about completing major bilateral projects but both countries are grappling with new issues.

In Nepal’s relations with United States, the Indo-Pacific Strategy (IPS) remained the single dominant agenda in 2019. Though the United States only formally released the IPS in June, it had been a topic of discussion in Kathmandu since Nepal’s Foreign Minister Pradeep Gyawali visited America in December 2018. At the time, officials in Washington said that Nepal could play a central role in the Indo-Pacific Strategy.

Once the IPS was unveiled, however, it mainly left parties in Kathmandu opposed to it. Many believe that it is targeted against China so Nepal should not accept it. Another concern is that the core purpose of the IPS is forming a military alliance and, again, Nepal should not accept such a proposal. This prompted a series of statement by Foreign Minister Gyawali and Defense Minsiter Ishwar Pokhrel that Nepal would not join any military alliance.

On the other hand, American Ambassador to Nepal Randy W. Berry invested a lot of time and energy in Kathmandu to clarify that the IPS is not targeting any country and they have not asked any countries to sign onto it. In 2019, Berry posted a lot of tweets to clarify the IPS, stating that it is not about signing any documents but is simply an overview of how the United States views the Indo-Pacific region.

Of late, the IPS controversy has the ruling Nepal Communist Party (NCP) divided over accepting American aid under the Millennium Challenge Corporation (MCC). Some leaders are of the view that Nepal should not accept aid under it as the MCC is a part of the IPS, while Gyawali keeps on saying that the MCC grant is not linked to the strategy. Under the MCC, the United States is providing $500 million in grants for the construction of a cross-border transmission line and maintaining Nepali roads. However, the United States time and again has made it clear that the MCC is a part of its Indo-Pacific Strategy.

In 2019, the United States also provided some military assistance to Nepal as a part of its engaging partnership with the Nepal Army. In December 2019, the U.S. handed over two Skytruck light planes to the Nepal Army among other activities being conducted between the two countries’ militaries.

Nepal also faced pressure from the United States to repatriate North Korean businessmen and workers as per the United Nationals Security Council resolution adopted in 2017. Following U.S pressure, the Nepal government has sent back all North Korean works and their businesses have been shut down in Nepal.

In 2019, Nepal’s relationship with China was further emboldened with Chinese President Xi Jinping’s visit in October. During the visit, two countries signed more than a dozen agreements in the areas of road connectivity, railway connectivity, tunnel connectivity, and bringing more Chinese investment to Nepal.  Like previous years, 2019 saw a surge in Chinese investment in Nepal and there was growing collaboration between the NCP and Chinese Communist Party on the ideological front. There were increased exchanges of visits between two countries and China further expanded its public diplomacy with Nepal.

China pressed Nepal to sign an extradition treaty over the course of 2019 but it has not materialized. The United States had asked Nepal not to sign an extradition treaty with China, stating that it could be used against Tibetan refugees in Kathmandu. Nepal’s security forces have already effectively curbed the activities of Tibetan refugees in Nepal.

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Along with maintaining a balanced relationship with the big three powers — namely India, China, and the United States — Nepal tried to reach beyond its neighbors, thereby diversifying its diplomatic and economic options. The central component of such engagement has been economic diplomacy. Official bilateral engagements were revived with traditional development partners of Nepal like the United Kingdom, Japan, Australia, France, and Russia. Due to the internal instability and lack of a stable government in Nepal, official engagement with these countries was discontinued for some time, but it has been revived with the formation of a new government. Similarly, Oli visited Southeast Asian countries Vietnam and Cambodia as a part of his bid to expand the horizons of Nepal’s foreign policy, but critics say there was little benefit from visiting those countries, particularly at a time when the prime minister’s health was not good.

Kamal Dev Bhattarai is a Kathmandu-based journalist. He writes on foreign policy issues.