Title: Managing Regional Rivalries and Extraregional Interests as a Buffer State: The Nepalese Case Study

As a small landlocked country between India and China, Nepal has long been considered a buffer state—a small country sandwiched between larger rival powers—with its challenging geography in the Himalayan mountain range lending to this conceptualization. Nepal has sought to maintain close ties with India and China. However, China and India’s economic rise as well as their border disputes have challenged Nepal’s ability to walk the diplomatic tightrope. As China has increased its presence in Nepal, India has sought to respond through infrastructure investment in the country. China’s continued attempts to exert political and economic influence in South Asia have alarmed New Delhi, which has historically considered the region within its security umbrella. In 2016, Nepalese Prime Minister  Prachanda framed Nepal’s role as a “dynamic bridge” between India and China and called to maintain equidistance. To avoid being beholden to Indian and Chinese interests, Nepal has committed to multilateralism in international politics and engagement with non-regional and international actors. It has actively participated in the United Nations (UN) and built relationships with the United States and Europe. Thus, Nepal seeks to maintain its state agency despite being a small state in a geopolitical context heavily influenced by India and China.

Nepal’s Challenge

Nepal has strong cultural, linguistic, and religious ties with India. The two countries’ leaders often emphasize the civilizational and religious links between the world’s only two Hindu-majority countries. China has sought closer ties with Nepal since the 2008 riots in the Tibetan Autonomous Region and the subsequent pressure to stabilize its restive frontier provinces. Since then, China has ramped up its trade and investment ties with Nepal, accounting for 14 percent of Nepal’s international trade in 2022. Chinese investments are vital for infrastructure development in Nepal, which has long sought international investors. For example, in January 2023, Pokhara International Airport started operations after being constructed by China CAMC Engineering, a Chinese state-owned enterprise. The international airport was built at an estimated cost of $216 million. These developments are a major concern for India given its history of cooperation with Nepal. Growing Chinese investments have invoked fears of a reduction in Indian influence, which have occasionally sparked tensions between India and Nepal.

Maintaining amicable relations with both of its neighbors remains a challenge for Nepal. Since opening its borders to international tourism in 1951, Nepal’s foreign policymakers have carefully navigated its international relationships. Today, the country faces major challenges tied to changing political dynamics and power capabilities in the region. The country’s foreign policy must address the security concerns of both of its neighbors, as Sino-Indian tensions continue to simmer with the powers’ latest major border clash occurring in 2022. Nepal has also accrued considerable debt due to investments from Chinese state-owned enterprises; some fear that Nepal could have a similar fate as Sri Lanka due to extensive debt from infrastructure development. Nevertheless, Nepal’s main challenge remains to manage its equidistant approach towards India and China amidst increased pressure from both powers.

Non-regional Engagement as a Foreign Policy Strategy

Nepal has long pursued engagement with non-regional actors to strengthen its political agency. Having joined the UN in 1955, Nepal has been active in UN peacekeeping missions and, as of August 2023, is the second largest contributor of the UN’s troops and police. In addition, Nepal has historically been enthusiastic about joining international normative conventions. For example, it is the first country in South Asia to abolish the death penalty. Nepal is also the only South Asian party to the Second Optional Protocol to the International Covenant on Civil and Political Rights, which seeks to abolish the death penalty globally. Furthermore, Nepal participates in regional and international organizations and explicitly supports UN principles in its foreign policy principles. Accordingly, it was also the first country in South Asia to decriminalize homosexuality in 2007, enshrine protections for LGBTQI rights in its constitution in 2015, and legalize same-sex marriages in 2023. Nepal also maintains strong ties with numerous European actors,  such as the European Union, in promoting international development.

In line with its goal of engaging with non-regional actors, Nepal has built strong relations with the United States. In 2017, Nepal’s government signed a $500 million grant agreement under the US-led Millennium Challenge Corporation (MCC), mostly geared towards infrastructure development in Nepal. In February 2022, debates about the implementation of the MCC prompted protests in Nepal against increasing the US presence in the country. Chinese officials also lobbied against the MCC and claimed that the MCC represented coercive diplomacy. Despite these protests, Nepal and the United States agreed that the MCC would enter into force on August 30, 2023. The MCC presented Nepal with the opportunity to bolster its infrastructure, particularly in the energy sector. The grant included funds for constructing transmission lines to deliver energy from the country’s hydroelectricity dams, which are projected to produce 12,000 megawatts of power by 2030. Some argue that the MCC constituted a US response to Nepal joining the China-led Belt and Road Initiative (BRI). Strategic concerns abound in China regarding this development, reflecting how Nepalese relations with China may suffer if Nepal pursues further US engagement. Nevertheless, the MCC presents Nepal with an opportunity for infrastructure investment while bolstering ties with an extra-regional power—preventing India and China from “boxing in” Nepali diplomatic relations.

Nepal building ties with European and American development partners seeks to ensure that Nepal’s foreign policy does not revolve around regional powers India and China. Seeking extra-regional partnerships and committing to international normative frameworks not only help attain some of Nepal’s development needs but also diversify its foreign relations. While this approach may not fully overcome Nepal’s geopolitical contentions, it reinforces the country’s commitment to multilateralism and international norms to expand its agency in international politics.

Managing the Challenge  

Nepal finds itself increasingly under pressure from India, as China increases its influence in the country. The challenge for Nepal remains to manage ties with its neighbors amidst closer US-India ties and increasing Sino-US contentions. The MCC demonstrates that Nepal has garnered attention from the United States. US investment may strain Nepal’s relations with China, as Sino-US tensions become more pronounced. The country has consistently shown a keen interest in maintaining its agency by engaging in international politics and partnering with Western powers.

To manage the dynamic geopolitical changes in the region, Nepal must continue its equidistant approach vis-à-vis India and China. However, other regional ties would also help Nepal maintain its geopolitical agency. Nepal could improve its regional engagement by bolstering regional connectivity through the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).

Concurrently, Nepal’s efforts in strengthening ties with extra-regional powers should continue. This approach may allow Nepal to garner international prestige while not sacrificing the country’s limited resources and capabilities. Nepal should also maintain its close development partnership with European actors and the United States. Such relations are essential for both the country’s material development and the diversification of Nepal’s diplomatic and strategic ties. Nepal should also reiterate its commitments to international multilateral efforts by supporting UN peacekeeping missions, LGBTQI rights, women’s rights, multilateralism, and non-violent conflict resolution. Nepal could further promote its agency internationally through initiatives among other landlocked developing countries in the UN. Such ties would likely prevent Nepal from being geopolitically boxed in the region. Thus, despite its limited capabilities and resources, Nepal can partake in regional and international initiatives and strengthen its international presence.

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Dr. Bibek Chand is an Assistant Professor in the Department of Political Science and International Affairs at the University of North Georgia. His work largely focuses on the foreign policy and security of small states in international relations, Sino-Indian relations, and the Indo-Pacific.

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