A major objective of contemporary Nepal has been to reduce the land-locked Himalayan country’s total dependence on India and establish solid economic and military ties with China.
The present government aims to pursue that strategy, but without spoiling the relationship with its western neighbor India. Nevertheless, Nepal has sealed an agreement on transit rights through China that would considerably reduce it’s over dependence on India.
Nepal’s new Prime Minister K. P. Sharma Oli embarked upon his first visit to China on March 20 to strike transit rights and economic deals with Beijing. Oli arrived in China on March 20 and the two sides signed 10 agreements including for a transit treaty and rail links during his talks with his Chinese counterpart Li Keqiang. The transit treaty reduces landlocked Nepal’s dependence on India as it sources most of imports and exports through Kolkata port.
Nepal looks to source its supplies through the arduous Himalayan route through Tibet, which many analysts say will be an expensive proposition for Nepal considering easy proximity through the Indian border. During the recent Madhesi agitation, Prime Minister Oli and other leaders had alleged that India had imposed an “undeclared blockade” on Nepal to back the Indian-origin Madhesis. India had firmly denied imposing the blockade.
Oli’s visit to China has been a subject of speculation since he came to power in October 2015. News reports had suggested that the visit to China may include landmark agreements on border trade and extradition of wanted criminals. Reports said Oli would also conclude agreements on building of multiple train routes connecting Nepal with China’s key production centres.
Strongly defending ties with China, Sharma Oli on March 20 Nepal’s Prime Minister Oli said Nepal wants good relations with both China and India to draw “developmental benefits” for the Nepali economy. “Nepal is smaller in size and has limited resources. We have to benefit also from the developmental activities in the neighbouring countries. We don’t want to fight with any country nor do we want to distance ourselves from any of our neighbours. We are a small country seeking development of our people,” Oli said in a TV interview which was telecast a on an Indian channel, a day before he is scheduled to. Oli defended his policy with India indicating that New Delhi’s lack of support to the Nepali Constitution was due to “lack of mutual understanding” which was addressed during his February visit to India.
Underlining the growing role of China in South Asia, Nepal on 21 March secured transit rights through China following an agreement in Beijing between PM Sharma Oli and his Chinese counterpart Li Keqiang. China extended a ceremonial welcome to Oli who held official talks with the Chinese leadership.
However, playing down the impact of the agreements between Nepal and China, official sources said that the future of the agreements depended on the issue of “economic viability” of the transit facilities and train connectivity projects.
Sign up for the Eurasia Review newsletter. Click here to have Eurasia Review's newsletter delivered via RSS, as an email newsletter, via mobile or on your personal news page.
India at present has two rail lines under construction and three more are being planned to increase Nepal’s trade ties. The Indian ministry of External Affairs, however, refused to issue an official statement immediately, considering that the agreements were between two sovereign countries. Officials pointed out that in comparison to the Nepal-China agreement, India and Nepal had 25 crossing points, two integrated checkpoints and 2 more checkpoints were under construction. During the February visit of Prime Minister Oli to New Delhi, India agreed on giving dedicated access to Nepal to the port of Vizag.
However, officials pointed out that ‘India-Nepal ties’ could not be compared or curtailed by Nepal’s agreements with China. “After all, 98 per cent of Nepal’s third country trade goes through India and to the port of Kolkata,” an official pointed out.
Even as official sources played down the impact of the transit rights through China, Nepal PM Oli clinched the proposed agreements for rail connectivity with his Chinese counterpart Li Keqiang in Beijing – the development, for India, represents a challenge not just for India but for entire South Asia. China would have to ponder about how it could implement a rail and transit agreement for Nepal without opening up the Tibet region to the world. Rail connectivity from Nepal to China would be used by the non-Chinese to travel to China through Tibet.
The agreements, however, will take some time before being implemented on the ground and political developments may impact the deals concluded. However, the implementation of the deals would depend on how far China was willing to invest in Nepal considering the economic and political risks associated with the deals.
The five month-blockade on the Nepal-India border which ended in February, “pushed Nepal to open its northern borders with China for transit trade. Historically, the Himalayas were seen as barrier but now the Himalayas can be a connector between Nepal and China, underlining that transit and train agreements to create new dynamics in South Asia.
Nepali Minister for Supplies, Ganesh Man Pun declared that Oli’s visit would lead to the conclusion of a bilateral agreement on fuel supply from China. Pun also announced that the Chinese government would build fuel storage depots in three locations in Nepal for which plans have begun.
Nepal’s expanding relations with China should not “irritate” India, a senior leader of the ruling Communist Party of Nepal (Marxist-Leninist) said on Friday, asserting that Nepal would not accept anyone’s “hegemony”. “We want to establish relations with both the neighbouring countries (China and India) on the basis of equality, which should not cause irritation to any of the countries,” said Pradip Gyawali, a Central Committee member of the party. “As an independent and sovereign country, it is upto Nepal to decide what type of relations we want to maintain with which country, and we will not accept anyone’s hegemony,” he said talking to journalists in Banke district of western Nepal.
The ruling CPN-UML hailed the agreements inked by Nepal with China during the ongoing visit of PM Sharma Oli. “These bilateral cooperation deals are highly significant which help achieving long-term socio-economic development goals to Nepal on its own,” the CPN-ML said in a statement. The deals have opened new gateway for diversifying Nepal’s trade, the party said underlining the need for a swift implementation of these accords. “The bilateral deals reached between the two countries on trade diversification, cross border connectivity, infrastructure development, investment, reconstruction, energy, tourism and business have a long-term significance for Nepal’s socio-economic development,” the party said.
However, Nepal could not seal a vital fuel supply agreement with China which Nepali sources said would also come up for detailed discussion during the seven-day visit of Oli to China.