29 November 2020, NIICE Commentary
Ashay Abbhi
When the Pangong lake in Ladakh was echoing with the thumping boots of Indian and Chinese military, the reverberations were being felt in the political corridors of their strategically located neighbour, Nepal. Since 5 May 2020, the skirmishes along the Indo-China border have been a consistent source of diplomatic tensions in the region. The clashes have resulted in multiple casualties on both sides. Several rounds of talks between the various officials of the two countries have taken place to deescalate the situation, but none have so far resulted in a complete pull back.
Historically, Nepal has succeeded to keep the waters calm with tact and tried to avoid any major conflict with either of the countries. However, Nepal’s relationship with the two countries is not as mutually exclusive as it was until now. Despite not being an active party to the ongoing clashes between India and China, Nepal is pivotal to the stability in the region. It may become the coveted prize that both countries will try to attract to exert their dominance. The current situation has all the elements for Nepal to emerge as the winner. This, however, will depend on how well it can play the hand that it has been dealt with by fate.
Energy Ties
Nepal’s relationship with both India and China has fluctuated in the past. Given its geostrategic location between the two giants in the region, Nepal’s fate has often hung delicately, trying to balance the diplomatic, trade and cultural pressures from both India and China. A critical element of Nepal’s foreign relations has been its energy security. Nepal is mostly dependent on hydropower and biomass for its power generation. Generating only about 780 MW, it presently falls short of meeting its current power demand of about 1,000 MW. Cross-border power trade with India fulfils a large part of the demand-supply gap. India is also Nepal’s largest trade partner and the primary source for petroleum products.
China is an important ally for Nepal’s multiple development projects. Roads, a hydropower project, some transmission lines, and upgradation of other infrastructure are some of the key areas where China provides assistance to Nepal. The roadmap for closer collaboration has already been inked with Nepal signing China’s Belt and Road Initiative (BRI) in 2017. China still remains Nepal’s second largest partner despite the shift in political relations more than a decade ago.
A key missing point in China-Nepal relations, however, is energy cooperation. China is an established renewable energy giant from whom India imports about 80 percent of its own solar equipment. However, the lack of solar energy activity does not allow China to engage Nepal in solar trade. Moreover, the hydropower diplomacy between India and Nepal has been going on for a long time to give China an opportunity to enter that domain. Save for one hydropower project, the Upper Trishuli Project, which is being built with China’s assistance, energy cooperation between the two countries has remained nearly non-existent. India also fulfills the demand for a key ingredient to run Nepal’s economy, petroleum products. India’s status as an established refining hub in the region has ensured that Nepal gets the desired products at a competitive price than what China can deliver, no matter where the political powers may shift.
Geopolitical Shift
Abolishing the 240-year rule of the King, Nepal moved from monarchy to a republican with parliamentary form of government in 2006. With the emergence of the Maoist government after the first Constituent Assembly election, Nepal inclined towards China, raising serious concerns for India. Nepal, however, made sure that India’s concerns did not lead to any economic damage. There were no trade issues, the joint projects progressed, and the two countries eventually let time mend the gap, coming closer over the years. At the same time, its relationship with China has also blossomed well. Amidst the political seesaw, Nepal’s GDP growth rate almost doubled in the past ten years, from 4.5 per cent in 2009 to 6.9 per cent in 2019.
The year 2020 saw significant shift in geopolitical relations between India and Nepal, fueled by a cartographic clash. In June 2020, Nepalese parliament decided to redraw its map and included three regions – Limpiyadhura, Kalapani, and Lipulekh, covering about 370 square kilometers. It closely followed India’s redrawing of the map of Jammu and Kashmir and Ladakh in November, which showed these disputed territories inside India’s sovereign borders. This seriously strained the relations between India and Nepal.
The timing of Nepal’s cartographic move brought its leadership under scrutiny. At the time when Indo-China dispute was at peak, Nepal’s map revelation was seen as the country’s stand with China and against India. This could have severely damaged the relations. A slew of hydropower projects that are being built with India’s assistance and are essential to Nepal’s energy security along with upgradation and building of transmission lines would have suffered. In all likelihood, the current power trade would have been suspended. Most importantly, petroleum products that are supplied from India to Nepal, would have halted, in a grim reminder of the fuel blockade in 2016 owing to the blocking of the Terai border with India. In the middle of a pandemic, when the entire world was reeling with economic downturn, Nepal would have spiraled into a recession.
Considering that Nepal can’t afford to antagonize either of its neighbours, efforts to control the damage were made, with careful reciprocation shown from the Indian side. In early November 2020, Indian Army’s Chief General MM Narvane visited Nepal with the agenda to restore the bilateral ties, which will followed by the successful visit of Indian Foreign Secretary Harsh Vardhan Shringla in the same month.
What must Nepal do?
First of all, Nepal should remain as neutral as it can and keep its cards close to its chest, especially at the time of conflict between China and India. There are a few things that Nepal must keep in mind when dealing with two neighbours who are engaged in a standoff –
- Practice the Virtue of Silence: All that Nepal has to do at present is to listen to the offers being made by both India and China. By simply waiting and watching while engaging the two countries in talks, it has to bide its time until an upper hand emerges at the end of the skirmish.
- Power at Stake: The stakes are the highest for Nepal among the three countries. In case of a full-blown war, Nepal will not remain unscathed. Its backyard will be used in one way or the other and, most probably, at China’s insistence, it will either have to use its forces or allow Chinese troops to open another front at the Nepalese border in addition to Ladakh, Sikkim and Pakistan. If this happens, Nepal may become a humanitarian and economic casualty. Its energy supplies will go for a toss and China may not be able to fill the gap.
- Push Energy Projects: Nepal can engage in energy diplomacy with both countries and push for expedition of ongoing projects. This will help divert the attention from Nepalese political proximity with either country. If it works, it may lead to a stronger energy profile within Nepal.
- Secure Petroleum Supplies: In the event of a war between India and China, both countries will need their own energy supplies. Therefore, Nepal should secure and store a considerable amount of petroleum products to fulfill its energy demand and mitigate the impact of war on its economy.
Nepal position in the current clashes could be termed as precarious or absolutely robust, depending on the point of view. Further, depending on how it decides to take advantage of the situation, it could emerge as a victim or a gamechanger. Either way, Nepal’s role in stabilising the region has become greater than ever with rewards that could provide long-term energy security to Nepal.
