India Gains as Fall of Nepal Leader Marks Setback for China

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Nepalese Prime Minister KP Oli Sharma, center, leaves the Parliament Building in Kathmandu on July 21, 2016.

Photographer: Prakash Mathema/AFP via Getty Images
  • Pro-China leader resigned ahead of no-confidence vote
  • Another delay to Nepal’s post-earthquake reconstruction

The resignation of Nepal’s prime minister marks another gain for India and setback for China in South Asia. 

Nepali Prime Minister K.P. Sharma Oli stepped down on Sunday ahead of a no-confidence vote in the country’s parliament, ending a nine-month reign in which increasing tensions with India prompted him to boost ties with China. His likely successor, who will be Nepal’s ninth prime minister in a decade, is seen leaning more toward India.

“It’s certainly a new opening, the end of a chapter that didn’t go too well for India," said Ashok Malik, a distinguished fellow at the New Delhi-based Observer Research Foundation.

Indian Prime Minister Narendra Modi has sought to prevent China from gaining a foothold in a region with about a fifth of the world’s population that sits near strategic energy routes. Last year, Sri Lankan voters kicked out a pro-China government and installed leaders seeking stronger ties with India.

The political wrangling in Kathmandu has delayed decisions on allocating funds for reconstruction following a catastrophic earthquake in 2015 that killed more than 8,000 people. The International Monetary Fund said in November that government investment was key for a sustainable economic recovery.

India and China have often jostled for influence in Nepal, a nation of 28 million people sandwiched between the two Asian giants. While Chinese investment in Nepal recently surpassed India, the practical difficulties of transporting people and goods across the world’s highest mountains have always pushed Nepal toward India, its largest trading partner.

India Clout

India accounts for 60 percent of the land-locked nation’s imports, including most of its fuel. That economic clout has given it an out-sized voice in Nepalese politics, such as in 2006 when it helped broker a peace agreement that ended a violent Maoist insurgency.

Of late, however, that influence has exacerbated tensions, particularly between the traditional elite in higher elevations and ethnic Madhesis who live in the plains bordering India.

After the earthquake, Nepal’s government moved to push through a new constitution opposed by Madhesis who sought greater representation in the political system. Protesters began blocking fuel imports from India, leading to miles-long lineups at gas stations in Kathmandu and forced airlines to reroute flights.

China Rails

Oli responded by increasing ties with China, courting infrastructure investments and signing agreements on trade and energy. The prime minister recalled Nepal’s ambassador to India in May, and was viewed as being "hostile" to India, says C. Raja Mohan, a foreign policy analyst based in Delhi who heads Carnegie India.

Nepal’s strained ties with India led coalition partners to withdraw from the government, prompting Oli to blame India for meddling, according to First Post. On Sunday, Oli told parliament that he worried Nepal’s next government would not proceed with a planned a railroad project linking Tibet and Nepal.

Chinese President Xi Jinping was due for a state visit to Nepal in October, according to local reports. The Nepalese prime minister’s office and India’s foreign ministry had no comment. On Tuesday, China’s Foreign Ministry said in a statement that its bilateral relationship with Nepal won’t change as a result of Oli’s resignation.

Nepal’s current cabinet will continue to serve until a new government is formed in roughly one week. Local newspapers say the leader of the Maoists, Pushpa Kamal Dahal -- commonly known as Prachanda -- is set to become Nepal’s new prime minister. Indications are that he would be more favorable toward India.

‘Psychological Victory’

Prior to Oli’s resignation, Prachanda sent a close confidant to Delhi to "canvass for support," according to a report in The Hindu. Other Indian newspapers noted that Prachanda is "engaged closely" with New Delhi and that a government led by him would have the "full support" of India.

While India has won a “a psychological victory," China retains supporters in all of Nepal’s political parties and will probably continue to push its interests, according to Madhukar S.J.B. Rana, a former Nepalese finance minister. Still, he said, it represents another diplomatic setback in the region after an international tribunal this month rejected China’s claim to exclusive control of most of the South China Sea.

“There is a feeling among the Chinese that they are being cornered," Rana said. “This may be seen as a step in this direction."

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