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By S.G. Jilanee | February 2020

Friendly relations between China and Nepal are only natural. With a 1,414 kilometre common border, it could not be otherwise. China is the largest source of Foreign Direct Investment in Nepal. It is also the second largest source of foreign tourists coming to Nepal.

Nonetheless, Chinese President Xi Jinping‘s recent visit to Nepal - the first visit by a Chinese president to the country in more than two decades - underscores Beijing’s increasing interest in South Asia as a strategic hub for defence and transit projects.

During the visit, China and Nepal signed twenty agreements on subjects ranging from connectivity to security. Most of the agreements, including Nepal’s support to the Belt and Road Initiative (BRI) and rail and road connectivity between China and Nepal, would further reinforce mutual ties. Through these agreements, Beijing promised around $500 million in economic grants to Nepal. Furthermore, China reaffirmed its commitment to build the Trans-Himalayan Multi-Dimensional Connectivity Network, which includes linking China to Kathmandu through the Himalayan railway.

Under these agreements, Beijing promised around $500 million in economic grants to Nepal. Moreover, China reaffirmed its commitment to build the Trans-Himalayan Multi-Dimensional Connectivity Network, which includes linking China to Kathmandu through the Himalayan railways.

However, the growing intimacy between the two Asian neighbours has caused gripes to the United States, half the world away. It therefore agreed to take its seven-decade long bilateral ties with Nepal, to the next level during a meeting between visiting Foreign Minister Pradeep Kumar Gyawali and US Secretary of State Michael R. Pompeo at the State Department.

In the meeting, Foreign Minister Gyawali highlighted the priorities of the Government of Nepal in line with its goal to graduate from Least Developed Country (LDC) status at an early date and become a middle-income country by 2030.

The two sides exchanged views on enhancing political relationship through exchange of visits and the ways and means for promoting economic cooperation between the two countries, with particular focus on trade, investment and development assistance .

Gyawali and Pompeo also underlined the importance of early implementation of the Millennium Challenge Corporation Compact to realize the benefit it offers. As part of the program, the United States has already extended a grant assistance of $500 million for strengthening Nepal’s energy and transport network.

Notably, the visit of the Nepali foreign minister to the United States comes at a time when the United States is willing to establish a ‘strategic partnership’ with Nepal as part of its Indo-Pacific strategy, which aims to use political, economic, diplomatic, military, and other means to co-opt China’s neighbouring countries, including India and Nepal, to contain China’s rise.

Even though India treats Nepal as its hinterland, it does not invest in Nepal’s development.

In fact, since 1951, the United States has provided more than $791 million in bilateral economic assistance to Nepal. In recent years, annual bilateral U.S. economic assistance through the U.S. Agency for International Development (USAID) has averaged $40 million. USAID supports agriculture, health, family planning, environmental protection, democratization, governance, and hydropower development efforts in Nepal. USAID had also supported Nepal’s peace process, as well as its preparation for Constituent Assembly elections. The United States also contributes to international institutions and private voluntary organizations working in Nepal. To date, U.S. contributions to multilateral organizations working in Nepal approach an additional $725 million, including humanitarian assistance. The US Peace Corps was also active in Nepal through the years, but terminated its operations there in 2006 due to rising security concerns.

In an effort to address the increasingly strained bilateral relationship between Washington and Kathmandu, a senior US official was sent to Nepal in February 2019 on a diplomatic mission. Joseph H Felter, the US deputy assistant secretary of defence for South and Southeast Asia, who is the most senior US official to visit the Himalayan nation since President Donald Trump was elected, told a gathering of selected Nepali journalists in Kathmandu that “from the defence perspective, Nepal is an important US security partner with an important role to play in regional stability.”

But his specious explanation of US foreign policy in Asia did little to soothe suspicions in Kathmandu. Nepal’s geographic position means it is sandwiched between Asian giants China and India. Even though India treats Nepal as its hinterland, it does not invest in Nepal’s development.

China, on the other hand treats Nepal as an important neighbour and pours assistance for its ambitious projects, as indicated by the Chinese president’s visit to Nepal and signing of 20 agreements.

But, it is the United States that tries to muddy the waters and disturb the tranquility of the region by its intrusive policies, due to its rivalry with China. The reality is that Nepal is, geographically, within China’s sphere of influence. The United States should reconcile with this reality, instead of trying to tilt the balance by the use of aggressive methods.

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