Nepal’s newly elected Prime Minister Sher Bahadur Deuba, who is holding the role for the fifth time in the last 26 years, has a herculean task of maintaining balanced relations with three major powers: China, India, and the United States. As if that wasn’t enough, he will have to reach out to Nepal’s old friends such as the U.K., Japan, European countries, and other key development partners with new vigor, vision, and plan.
As prime minister, Deuba is leading a fragile coalition government with parties having divergent views on foreign policy. His first and most daunting challenge would be forging a consensus within the government itself on key foreign policy issues. Deuba’s key coalition partner is the Communist Party of Nepal (Maoist Center) led by Pushpa Kamal Dahal (also known as Prachanda), whose foreign policy priorities clash with Deuba’s. For instance, Deuba and Dahal have conflicting views on whether to implement the United States’ $500 million grant assistance under the Millennium Challenge Corporation (MCC), which is still pending. The MCC was the subject of internal conflict in the erstwhile governing Nepal Communist Party, a unity party combining the CPN-Unified Marxist Leninist and CPN-Maoist Center. The unified party was dissolved by Supreme Court order in May following internal divisions.
Deuba and his Nepali Congress Party are of the view that the MCC should be endorsed immediately, as it is a grant without any interest, while Dahal argues that some of its clauses should be amended. In a recent television interview, Dahal said, “I am not against accepting America’s financial assistance but it cannot be endorsed under current form, this needs to be amended.” Based on that, it seems difficult for Deuba to secure Dahal’s support to endorse the MCC in Parliament. The United States, on the other hand, has said that it is ready to clarify some provisions, but it is not possible to amend the already-signed compact.
The MCC has been awaiting parliamentary approval since 2019, but there has been no progress due to widely divergent views on the agreement. It has also become the victim of a misinformation campaign, and the MCC Nepal office is busy dispelling such rumors. Former Prime Minister K.P. Sharma Oli, who previously had almost a two-thirds majority in Parliament under the united NCP, did little to endorse the MCC due to electoral calculations: Many members of the two Communist Parties oppose the MCC. Also, Chinese media have been publishing news items against the MCC. Some see a connection between China’s veiled opposition to the MCC and opposition from some political parties in Nepal.
Despite the MCC issue, there are early signs that Nepal-U.S. relations will remain cordial under Deuba’s leadership. Soon after arriving in India, U.S. Secretary of State Antony Blinken called Deuba to talk about a wide range of bilateral issues. Similarly, the U.S. ambassador to Nepal was the first ambassador to congratulate Deuba when he was appointed prime minister by the president, following a court order.
The MCC issue is just one area in which the ruling partners have divergent opinions. Deuba and Dahal have divergent views on several issues related to India and China, too. Dahal has different view than Deuba on the United States’ Indo-Pacific Strategy. In a meeting with Chinese Foreign Minister Wang Yi in 2019, Dahal said that Nepal disapproves of the U.S. Indo-Pacific strategy.
They have divergent views on China’s Belt and Road Initiative (BRI) too, which Nepal has signed on. The Nepali Congress and Maoists differ on taking loans to build infrastructure. Deuba will have to work hard to forge consensus within the ruling parties on his external dealings and agreements.
As if that task wasn’t enough, Deuba, like other previous prime ministers, has to face the big challenge of forging a balanced approach toward major powers. Addressing the Parliament after being elected, following a judicial intervention to reinstate Parliament, Deuba said that balanced relations with neighboring countries would best serve Nepal’s national interest. After Nepal’s neighbors, according to Deuba, the United States and European Union countries remain the top foreign policy priority. Deuba said: “There are no permanent foes or friends but there are permanent interests.”
For every prime minister, maintaining balanced relations with Nepal’s two giant neighbors, India and China, is a herculean task. It is generally perceived that prime ministers are either tilted toward India or China. Deuba is perceived as a leader who has more cordial relations with Western powers than with India and China.
For instance, former Prime Minister Oli was perceived as tilting toward China in his initial years after become prime minister in 2018. However, in his final days in office, he was seen as trying to tilt toward India in order to sustain his post. It is widely believed that India has a big influence in the internal political affairs of Nepal. Oli may or may not have tilted toward either side, but he faced such criticisms from opposition parties.
Deuba will have a difficult time crafting a smart foreign policy that can balance such larger partners well. India expects a continuation of its special relations with Nepal and is always suspicious about any Nepali engagement with China.
China, on the other hand, is working to achieve influence in Nepal on par with India. As China is increasing its political, military, and economic influence in Nepal, India is wary due to growing border tensions with China in recent years. The two countries are also competing in Nepal on connectivity projects, including a railway link, though neither has made substantial progress.
There are some specific issues related to India and China that Dueba will be expected to address. With India, there is a border row. In 2020, Nepal issued a new political map asserting its claim on Kalapani, Lipulekh and Limpiyadhura, a move objected to by India. Nepal has communicated to India that it wants to settle this issue through dialogue. Deuba will be under public pressure to raise and settle the issue with India as soon as possible. There’s political pressure, too, as the matter is sure to be an electoral issue. But India has said that it will not sit for dialogue until it is ensured that any understanding between two countries will be endorsed by Nepal’s Parliament, like it did during the launch of the new map.
Similarly, an expert report prepared on how to revisit bilateral relationship in the modern regional and international environment is gathering dust as India refused to accept it on the ground that some of the recommendations of report are not in its favor. For example, Nepal has consistently pushed for the amendment of the 1950 Peace and Friendship Treaty.
On the China front, Deuba will be under pressure to select projects under the BRI. Though Nepal decided to join China’s BRI in 2017, there has been a delay in selecting specific projects under it. Dahal, a coalition partner, is of the view that there should be a final deal on BRI projects. China and Nepal have been discussing investment modalities but some issues remain unsettled.
Meanwhile, Deuba has the big challenge of reviving Nepal’s economy, hard hit by COVID-19. To do that he needs to increase foreign investment, which has shrunk due to the pandemic. He needs assistance from the United States and other traditional development partners. Similarly, Deuba has the big task of increasing the purchase of vaccines to inoculate Nepal’s population. Nepal has received 3.4 million vaccine doses from China, 1.1 million from India, and 1.5 million from the United States under grant assistance. Similarly, Nepal has received 348,000 vaccine doses through COVAX. Nepal received 1.5 million doses from Japan this week and 200,000 vaccines from Bhutan. Nepal has purchased 4 million doses from China and 2 million from India. This is still insufficient to meet the needs of Nepal’s 30 million people and Nepal is preparing to purchase additional vaccines from China and the United States.
It will be an an uphill battle for Deuba to handle Nepal’s international relations amid growing border disputes with China and India, and growing tensions between China and the United States on host of global issues. Similarly, there is a trust deficit in relation to big powers which needs to be bridged.