Relations among South Asian countries after 1947 can be characterized as oscillating between Indian attempts to gain greater influence and counter-efforts by its neighbours to resist them. One of their successful counter-strategies has been to play the “China card” vis-à-vis India long before the Belt and Road initiative (BRI) was established.

Bhutan and Nepal represent two extreme cases of this scenario. Bhutan was and still is India’s most reliable ally, whereas relations between India and Nepal have seen more extreme ups and downs. Despite these differences, the two countries share some commonalities in their relations with India. First, both are linked with India by a series of treaties which have far-reaching political, economic and military implications. Second, because of their geographical location, both countries have been dependent on India for their international trade for decades. Third, both countries are among the largest recipients of India’s development assistance. The different domestic constellations and security concerns explain why Bhutan and Nepal chose very different policies in order to cope with India and how they have dealt with China.

Bhutan: India’s most reliable ally

Relations between India and Bhutan can be seen as a mutually beneficial constellation in security, economic and political matters. The friendship treaty of 1949 gave India substantial influence over the kingdom’s foreign policy. In reaction to the Chinese takeover of Tibet, India helped to set up a national militia in Bhutan in 1958, which developed into a standing army in 1963. In 2003, India supported a military operation of the Bhutanese army against militant groups from India’s northeast, which had set up camps in the southern part of Bhutan. Like India, Bhutan faces territorial disputes with China in its northern and western parts. This conflict escalated into the Doklam crisis of 2017, when Indian forces intervened in favour of Bhutan. More recently, during the India-China standoff in the summer of 2020 in Ladakh/Aksai Chin, Bhutan was confronted with new territorial demands from China in its eastern part.

Economically, Bhutan and India also have established a beneficial cooperation. India’s development assistance is used by Bhutan to develop its hydropower resources with the support of Indian companies. The generated power is sold to India and is the foundation of Bhutan’s affluence. Politically, India also supported the decision of the Bhutanese monarchy to introduce a democratic system in 2008.

Bhutan still has no diplomatic relations with China and is, like India, not part of the BRI. But China has increased trade and cultural relations with the Himalayan country in recent years. Moreover, there are sporadic voices in Bhutan who want less dependency on India. But the strong bilateral links and the common threat from China seem to be a solid foundation so that Bhutan will remain India’s oldest and most reliable strategic ally.

Nepal: balancing the giants

India and Nepal have a unique relationship. Nepal was the only Hindu country until 2008, Nepali is an official language in India, and the open border has resulted in high labour migration from Nepal to India.

The friendship treaty of 1950 as well as secret agreements restricted Nepal’s foreign policy in favour of India. Since the 1960s, governments in Kathmandu have time and again played the “China card” in order to elude India’s influence. In 1988, Nepal’s arms purchase from China and controversies over the renewal of the trade and transit treaty caused relations with India to deteriorate. The following economic blockade by India in 1989 paved the way for the democratic transition in Nepal in 1990.

Moreover, Nepal has experienced more interventions by India in its domestic politics than any other country, starting with the Kathmandu agreement in 1951 up to New Delhi’s mediating efforts in the civil war between 1996 and 2006. This has led to an ambivalent constellation in Nepal. On the one hand, the major Nepali parties have established close links with India. On the other hand, there is a controversial debate both between and within the parties on the role of India in Nepal. India’s intervention in favour of the Madheshis in 2015 and the following blockade of the border again stirred anti-India sentiments in Nepal.

Hence, it was not difficult for China to gain more influence in Nepal. In 2015, Nepal joined the BRI and China stepped up its energy supplies during the border blockade. In 2018, both sides agreed on the Trans-Himalayan Multi-Dimensional Transport Network that included cross-border connectivity of railway, road, and transmission lines. China also granted Nepal access to several of its dry and sea ports.

China has also intensified its military collaboration with Nepal, which was traditionally an exclusively Indian sphere of influence. Nepal may not only be an economic and political theatre in India’s and China’s rivalry over South Asia, since the conflict also has a cultural component in that both Asian giants also vie for influence over the Buddhist heritage in Nepal.

During the stand-off between Indian and Chinese troops in the summer of 2010, Nepal approved a new national map, which redrew its national boundaries to the detriment of India. This underlined the new self-confidence of the government in Kathmandu in dealing with India.

Prospects

Bhutan and Nepal represent two opposite cases in the ongoing rivalry between India and China in South Asia. Bhutan has always been an outlier, because India and Bhutan share common security interests vis-à-vis China and the domestic discourse in Bhutan about India is much less controversial compared to other South Asian countries. Nepal on the other hand represents the experience shared by other countries like Bangladesh and Sri Lanka, where longstanding bilateral problems with and the controversial domestic discourse about India have given China an easy opportunity to gain greater influence. In contrast to India, China offers much needed investments and infrastructure projects and its image is, so far, not burdened by negative historical experiences. However, as China faces more criticism about the BRI, this may give India new room for manoeuvring to reshape relations with its neighbours in South Asia.