Nepal: Between The Dragon And The Peacock

Having been upstaged by China at two Asian forums in as many months, strategic thinkers and policy analysts in New Delhi have begun deliberating in public what they surely must have been counseling in private for some time.

Despite the subsequent gloss provided by Indian Prime Minister Manmohan Singh, China's inclusion as an observer in the South Asian Association for Regional Cooperation at last month's summit in Dhaka came against the wishes of India. The sop of tagging Tokyo as a fellow observer in the forum does not seem to have soothed New Delhi's anxieties.

While Nepal emerged as the convenient whipping boy for India, having linked Afghanistan's full membership to observer status for China, New Delhi could not have been oblivious to the support Kathmandu's position enjoyed in Islamabad, Colombo and Dhaka.

After his Dhaka "gesture", King Gyanendra was presented with a 12-point accord between the mainstream parties and Maoist rebels that had been in the works in New Delhi for quite some time. To what extent the Indian government is officially prepared to advance that platform to tame the "wayward" monarch remains unclear. At least in public, Indian Foreign Secretary Shyam Saran sounded a conciliatory note during his three-day visit to Kathmandu earlier this month.

As the full range of India's options in what it has long considered its exclusive sphere of influence was being debated, New Delhi got another view of China's growing regional clout. At the East Asian Summit in Kuala Lumpur earlier this month, Beijing succeeded in keeping the U.S. out of the forum and in preventing India, Australia and New Zealand from playing a central role in propelling the region's economic integration.

Worse, from New Delhi's perspective, Beijing wants future East Asian summits to be confined to Asean+3—South Korea, Japan and itself. In the words of the Indian Express, these developments show that China has acquired a veto over future economic and political arrangements in Asia, something India needs to respond to urgently.

Such tensions between the regional giants would scarcely have been news to anyone firmly rooted in the realities of the recent upswing in their ties. Beijing and New Delhi have resolved not to let the political differences stand in the way of a robust economic partnership. Even such relationship would contain distinct dimensions of cooperation and competition. Areas of complementarities, such as developing the high-tech sector, would have to be juxtaposed with spheres of rivalries, such as attracting foreign investment.

The Chinese government's recent announcement that it would revise its national income statistics in line with a recent census is bound to accelerate competition with India. The new figures would establish China firmly as the world's fourth largest economy. The luster of that distinction alone would be sufficient to attract those without the time or patience for precise details on, say, the cost of capital in China and stock market returns in what is still essentially a state-driven economy.

Coupled with China's calm but consistent campaign to preempt what it considers U.S.-led efforts at encirclement, the different sub-regions within Asia are bound to become even more conspicuous theaters of Beijing's engagement.

For Nepal, precariously perched between China and India, these developments have ominously raised the stakes. Following King Gyanendra's takeover of full executive powers on February 1, Sino-Nepalese relations have acquired unprecedented momentum in different spheres, including military cooperation. Weeks after dispatching 18 truckloads of arms and ammunition to Nepal, China has sent a team from the People's Liberation Army to the kingdom.

Nepal has become an arena where some Indians analysts are tempted to believe they are best positioned to challenge China. The kingdom remains that part of South Asia which has been traditionally most vulnerable to Indian pressures. It is also the least able to resist such pressures.

Since China has stepped up its cooperation with the kingdom with considerable deftness, allowing the Nepalese side to announce and explain new initiatives, India has received few opportunities to publicly voice displeasure at Beijing's growing involvement. The circuitous route, however, is becoming clearer.

India has begun talking about a "reappraisal/rationalization" of trade and transit facilities Nepal has been enjoying. Over time, that posture can be expected to morph into a wider articulation of the consequences of Nepal's inability to address Indian security concerns.

The last time Nepal incurred India's wrath for cozying up to China, the kingdom suffered from what was in effect a stifling trade and transit embargo. Whether Nepal has improved its ability to withstand such restrictions 15 years later remains unclear. Judging from the public pronouncements of key palace aides, the royal regime appears no less inclined to fight to the finish.

There is an ominous addition to the dynamics. Madhav Kumar Nepal, general secretary of the Unified Marxist-Leninist party, has emerged as the principal critic of China for its support of an otherwise internationally isolated royal regime. There is a potential for greater instability in the kingdom, should ongoing street protests take an anti-Chinese turn.

For India, such an escalation would no doubt amount to another manifestation of the demonstrators' desire for total democracy. Whether Nepal can bear the fallout is what Nepalis should really be worrying about.

ENDS

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