Nepal’s Prime Minister K.P. Sharma Oli |
In a move emblematic of his pro-China leanings and unwavering communist ideology, Nepal’s Prime Minister K.P. Sharma Oli has steered his country toward a contentious path by signing an agreement with China to implement the Belt and Road Initiative (BRI). This decision, hailed as a “turning point” in Nepal’s developmental narrative, risks jeopardizing its historic ties with India, which has consistently opposed the risk-laden framework of the BRI.
Oli’s decision reflects a high-stakes gamble that could redefine Nepal’s geopolitical identity. By embracing the BRI, Nepal signals its willingness to depart from its traditionally neutral stance, risking strained relations with India and the U.S. This shift demands deft diplomacy to navigate the competing interests of its neighbours and global powers.
A Risky Gamble
The BRI, with its grand vision of global connectivity, is shadowed by concerns of geo-political risks and economic instability. Diplomatic experts warn that Nepal might be walking into China’s infamous “debt trap” diplomacy—a fate already witnessed by many of the 153 nations that have joined the BRI. Among these, Pakistan is a glaring example, having accrued an estimated $25 billion in debt under the China-Pakistan Economic Corridor (CPEC), a key component of the BRI. This figure underscores the peril of unchecked dependency on Chinese loans for infrastructure projects.
Nepal’s economic fragility amplifies these risks. The nation’s debt burden stands at approximately $38 billion, with significant portions owed to China and India. Beijing has extended loans of around $3 billion, funding projects in hydropower, road construction, and airports under the BRI. In comparison, India has lent about $1.5 billion for infrastructure, health, and education projects, emphasizing grants and lines of credit to foster stronger bilateral ties.
Implications of Oli’s Bold Decision on India
Oli’s inclination toward China aligns with his contentious track record, marked by anti-India posturing. His 2020 unilateral move to redraw Nepal’s map, incorporating Indian territories such as Limpiyadhura, Lipulekh, and Kalapani, strained bilateral relations. Now, by endorsing the BRI, Oli aims to transform Nepal into a regional trade and connectivity hub via the Trans-Himalayan Multi-Dimensional Connectivity Network, encompassing highways, railways, and energy projects.
However, this realignment poses a serious challenge to India’s regional influence. New Delhi views the BRI with suspicion, particularly given the sovereignty concerns raised by the CPEC, which traverses Pakistan-occupied Kashmir. By embracing the BRI, Nepal risks exacerbating tensions with India, which has consistently opposed the initiative at international forums.
Domestic Repercussions
Oli’s decision could also destabilize Nepal’s internal political dynamics. The Nepali Congress, a dominant coalition partner historically aligned with India, has vocally opposed the BRI, citing its debt implications and strategic risks. This divergence may deepen the rift between Oli’s Communist Party of Nepal (UML) and the Nepali Congress, potentially weakening the coalition.
China’s Debt Diplomacy
China’s strategy of extending liberal loans without offering grants has ensnared many nations in crippling debt. Pakistan’s plight is a stark cautionary tale, with its total borrowing under the CPEC ballooning to $62 billion. Beijing’s reluctance to provide grants underscores its predatory economic approach, which could ensnare Nepal in a similar cycle of dependency and financial strain.
Oli’s acquiescence to Chinese expansionism adds another layer of concern. In Nepal’s Humla district, locals have protested China’s encroachment along the remote Himalayan border, where Beijing has erected barbed-wire fences and surveillance towers. Despite these provocations, Oli’s government has remained conspicuously silent, further highlighting his deference to China’s ambitions.
India’s Strategic Dilemma
For India, Oli’s embrace of the BRI underscores the urgency of recalibrating its Nepal policy. New Delhi must strengthen its economic and strategic ties with Kathmandu while countering China’s growing influence in South Asia. The erosion of Nepal’s historic ties with India represents a significant challenge to New Delhi’s regional supremacy.
Oli’s decision to visit China prior to India early in his tenure was a symbolic shift in Nepal’s foreign policy, signalling Beijing’s growing prominence. Now, with the BRI agreement in place, India faces an uphill battle to reclaim its influence in the Himalayan kingdom.
Nepal’s Embrace of China’s BRI: A Strategic Shift
Nepal’s decision to join China’s Belt and Road Initiative (BRI) under Prime Minister K.P. Sharma Oli has set off geopolitical tremors, reshaping regional dynamics and sending ripples across India, the United States, and beyond. While the agreement holds promises of economic growth and infrastructure development for the Himalayan nation, it simultaneously raises alarm bells over sovereignty, strategic autonomy, and geopolitical balance.
For India, Nepal’s alignment with the BRI signifies a deepening Chinese influence in a nation traditionally viewed as a neutral buffer state. This move sharpens concerns over ongoing territorial disputes, such as those in Kalapani and Lipulekh, while also fuelling apprehension about increased Chinese surveillance along the historically open Indo-Nepal border. Moreover, Nepal’s preference for Chinese-funded infrastructure projects risks side-lining India’s regional initiatives, such as the BBIN (Bangladesh-Bhutan-India-Nepal) framework, and could complicate New Delhi’s broader security landscape. Paradoxically, a more economically stable Nepal could indirectly benefit India, provided it adopts a balanced foreign policy and leverages its improved infrastructure for enhanced trade and connectivity with East Asia.
The United States, too, views Nepal’s growing proximity to Beijing with unease. The move undermines Washington’s Indo-Pacific Strategy and dilutes the impact of its Millennium Challenge Corporation (MCC) compact, designed to bolster Nepal’s energy and transport infrastructure. Nepal’s tilt toward China risks eroding its historical policy of equidistance, thereby weakening U.S. influence in the region. Yet, this realignment could spur Washington to reassess its engagement strategy, potentially offering Nepal more competitive alternatives to counterbalance China’s dominance. The spectre of debt dependency and Beijing’s expanding foothold in South Asia further underscores the broader strategic implications for both India and the United States. For the United States, Nepal’s BRI participation highlights the necessity of a robust counter strategy in South Asia. Washington must deepen its engagement with Nepal by presenting competitive and sustainable development options. A reinvigorated MCC compact, coupled with broader economic and educational collaborations, could serve as a cornerstone of this strategy.
Nepal’s embrace of the BRI also highlights China’s growing assertiveness in South Asia. Beijing’s “debt-trap diplomacy,” characterized by extending liberal loans without grants, has ensnared several nations, including Sri Lanka and Pakistan, into economic dependency. For Nepal, the stakes are particularly high, given its geographic vulnerability and economic fragility. Reports of Chinese encroachments along the remote Himalayan border, including the construction of fences and surveillance towers in Nepal’s Humla district, add to the complexities. Despite local protests, the Oli government has largely ignored these incursions, signalling its unwillingness to confront Beijing’s expansionist agenda.
For India, Nepal’s BRI alignment underscores the urgent need for recalibrated diplomacy and strategic investments. New Delhi must strengthen its economic and cultural ties with Kathmandu while offering viable alternatives to Chinese projects. India’s historical role as a partner in Nepal’s development positions it well to counter Beijing’s influence, but only if it acts decisively. Enhancing people-to-people ties, bolstering infrastructure assistance, and ensuring timely execution of ongoing projects will be critical to retaining India’s influence in Nepal.
For Nepal, the BRI offers a tantalizing promise of transformative benefits. The initiative aims to deliver large-scale infrastructure projects, including highways, railways, and hydropower plants, that could propel economic growth, reduce poverty, and diversify trade routes, reducing Nepal’s over-reliance on India. Moreover, it positions Nepal as a key partner in China’s ambitious global development plans, elevating its international profile. However, the allure of these benefits comes with a heavy cost. Historical experiences from other BRI participants illustrate the dangers of falling into a “debt trap,” where unsustainable loans threaten national sovereignty and financial stability. Nepal, already grappling with a sizable debt burden, risks compounding these challenges if it cannot effectively manage its borrowings.
This pivotal moment in Nepal’s geopolitical journey is as much a test of its resilience and diplomacy as it is a challenge to the broader regional order. How Nepal manoeuvres through this labyrinth will have far-reaching consequences not only for its own future but also for the stability of South Asia as a whole.
K.P. Oli’s decision to align Nepal with China’s BRI reflects a dramatic shift in the country’s geopolitical orientation. While the initiative promises transformative infrastructure development, it comes with significant risks of debt dependency, domestic political discord, and strained relations with India. For Nepal, the allure of economic growth through the BRI must be weighed against the potential long-term consequences of entangling itself in China’s strategic web.
The Alienation of Nepal is worrisome for India which has already got strained relations with other neighbours like Bangladesh, Maldives, Sri Lanka and Pakistan hence its needs to Re- Visit the “Neighbourhood First Policy “a brainchild of Modi regime after 2014.India, on its part, must act swiftly to reinforce its ties with Nepal and counter the growing Chinese footprint in the region. The stakes are high, and the outcomes will shape the future of South Asia’s geopolitical landscape.
(Writer has got an experience of six-year stint of representing the country’s Premier English daily in Nepal.)
