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Nepal – China Transit deal: Implications for India

S K Sahi writes: Geo-politically, Nepal is trying to maintain a delicate balance between the giant neighbors. The question perhaps is for how long it would give up on India completely.

Mr. KP Sharma Oli, Prime Minister of Nepal is on seven days visit to China. He was given a red carpet welcome by Premier Li Keqiang at the Great Hall of the People. He also called on Chinese President Xi Jinping. The two sides exchanged views on further strengthening and consolidating mutual trust and understanding as well as promoting mutually beneficial cooperation in various fields. Both the countries signed 10 agreements, including a transit and transportation treaty, to help boost latter’s connectivity, trade and tourism, a move that is likely to come as a setback for India that accounted for about 60% of the total imports in the landlocked Himalayan nation. It will end the Himalayan nation’s total dependency on an Indian sea port for third-country trade links.

With the signing of the Transit and Transport Agreement, Nepal will utilize the Tianjin sea ports of China while conducting its third country trade. The other agreements included a feasibility study on the establishment of a Free Trade Agreement (FTA), China’s assistance to build a new airport and a border bridge. China has also agreed to explore oil and gas resources in Nepal and will provide all technical and economic support. Similarly, one of the commercial banks in China will open its office in Nepal as per another agreement. Nepalese banks can also open their branches in China. China will help in installation of solar panels in 32,000 households.

Prime Minister Oli also mooted extension of China’s strategic railway link with Tibet further to Nepal.  Prime Minister wanted to explore two rail lines beyond the Nepal border.  China was already planning to extend the railway from the Tibetan city of Shigatse to Gyirong on the Nepal border by 2020.Historically, the Himalayas were seen as barrier but now the Himalayas can be a connector between Nepal and China and transit and train agreements will create new dynamics in South Asia.China’s expansion into Nepal is part of a wider plan to contain and encircle India. The Chinese are making inroads across South Asia. Chinese infrastructural developments in Nepal, combined with the build-up of its military capabilities in Tibet, will enable the PLA to deploy rapidly to India’s borders.

Though India seems to be following a non-intrusive foreign policy in South Asia, at no point would India like to concede its existing leverage over crucial neighbours like Nepal to any other external actors. Beijing has already qualitatively improved its relations with all of India’s neighbours and has enhanced its political and strategic presence in the Indian Ocean Region. With this vulnerability already reflecting on India’s South Asia policy, Nepal would be among the last few frontiers where India would compete with China to sustain its political sway. The presence of external forces in Nepalese territory means that they can have easy access to separatist and Maoist outfits operating within the Indian Territory to foment anti-India activities. Strong Chinese presence and open border between India and Nepal will have adverse security implications.  While India has been coping with growing Chinese influence in Nepal, Pakistan’s proven anti-India activities in Nepalese soil complicates the situation further.Oli’s visit and Nepal-China transit deal holds greater significance for India as its relationship with Kathmandu said to have turned bitter when Madhesis imposed a blockade on trade from India in protest against the Himalayan nation’s new constitution for five months. The blockade had caused acute shortage of fuel, cooking gas, medicines and other supplies to Nepal. The Nepal government had blamed India for the trade blockade, claiming New Delhi supported the Madhesis.

India will have to craft and review its policies that would mitigate the negative effects of an unstable Nepal and the growing influence of china. India needs to formulate a comprehensive and long-term Nepal policy. Shaping of perceptions should be an integral part of this strategy. Instead of playing favourites amongst the political parties, India should engage with all of them and with other stakeholders like the Army and civil society. It needs to be recognized that Nepal will have to be helped to grow along with India lest it should be a drag on India’s own growth. India has to resist the temptation to micro-manage Nepalese politics. It will take considerable time for Nepal’s democracy to stabilise and its leaders to start thinking of the country before them. They have to be allowed to make mistakes and learn.

China is at a disadvantage when compared to India regarding the question of soft power. India’s soft power has to translate into hard power and thus counter the influence of China in Nepal.China’s presence in Nepal will definitely challenge Indian security. By not taking Nepal seriously, by not developing its own border infrastructure and by not making Nepal a part of India’s economic dynamism, India has provided China the strategic space which it has quite happily filled.

Geo-politically, Nepal is trying to maintain a delicate balance between the giant neighbors. The question perhaps is for how long it would give up on India completely. The Chinese expansion and its growing influence in Nepal has been paying off well for the landlocked country and promises even more in the future while Kathmandu affirms its “One China” policy and keeps a lid on Tibetan activism on its soil. For Nepal-China relations – the future equation appears quite beneficial, but worrying for India that has realized late that the mighty Himalayas are no more a border between Nepal and China.

S K Sahi is Senior Research Fellow at the USI, New Delhi.

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