As a country situated at a hot spot of power games, Nepal's foreign relations have always been examined under the prism of geopolitics. This sensitivity further shapes Nepal's geopolitical environment and affects its domestic politics. From Millennium Challenge Corporation (MCC) to the latest State Partnership Programme (SPP) issue, relations between the United States and Nepal have achieved remarkable development in the past two years; and at the same time, it has also brought Nepal into a more expansive geopolitical game. Nepal received valuable aid for development from the US. In contrast, domestic disagreements on the intentions behind the assistance and its impact have been strengthened, resulting in more political and social splits in the country. This linkage of internal and external contradictions has pushed Nepal into a dilemma and brought more uncertainty to its foreign policy.

From a historical perspective, US policy towards Nepal has always echoed its China policy. Since the 1950s, the US has begun to assist Nepal through the Point Four Programme to support Nepal's agricultural and rural development, hoping to prevent the rise of communist movements in Nepal and keep it from the influence of China and the former Soviet Union. Its policy logic is that poverty leads to communism.

US Nepal policy

In the 1960s, the US Central Intelligence Agency (CIA) supported Tibetan rebels based in Nepal's Mustang to carry out sabotage and intelligence activities against China. And as US-China relations improved in the 1970s, it gradually ended its support to the rebels. After the end of the Cold War, competition in the ideological field faded out of the centre of international politics. US aid to Nepal also declined significantly in the following period. With the gradual rise of China since the new century, the competition between China and the US has become increasingly fierce. Then the US-Nepal policy also revealed more Chinese factors.

In its 2019 Indo-Pacific Strategy Report, the Trump administration listed Nepal as a critical partner, seeking to expand its defence relationship with Nepal and increase diplomatic resources here. This strategy, aimed at countering China's economic clout, military power and the Belt and Road Initiative (BRI), has been inherited and upgraded by the Biden administration, defining China as America's number one competitor. The Joe Biden version of the Indo-Pacific Strategy released in February this year clearly stated that its objective is not to change the People's Republic of China but to shape the strategic environment in which it operates. It is undeniable that the strategic environment here referred to includes Nepal.

From a realistic perspective, the current Sino-US competition has far exceeded the ideological dimension, its economy and comprehensive influence that has become the critical area. The Trump administration's Indo-Pacific Strategy emphasises security and defence cooperation. In contrast, the Biden administration's version highlights collaboration and empowerment in the economic field and pays more attention to the use of US soft power. This strategic shift has been repeatedly verified in the development of Nepal-US relations in recent years. It is foreseeable that as the Indo-Pacific Strategy continues to advance, the US will invest more resources in Nepal, and the fields involved will be more diversified.

Various interpretations of China-Nepal relations tend to describe China's policy toward Nepal as a passive response to Nepal's relations with other countries, ignoring the endogenous dynamics of bilateral relations. And more importantly, the relationship between China and Nepal is more than bilateral and has regional significance. In 1957, while the two countries had not yet resolved the issue of border demarcation, Chinese Premier Zhou Enlai visited Nepal. During his meeting with King Mahendra, Premier Zhou said that the great Himalaya bind China and Nepal with a border of more than 1,000 km.

The friendly cooperation between our two countries is of tremendous significance to the peace of this vast region. In the following decades, the development of bilateral relations followed the direction of this assertion. Nepal has always regarded China as the primary balancer to maintain its diplomatic independence. From the absolute neutrality of Nepal's Zone of Peace proposal during the Cold War to the more dynamic balanced diplomacy in the new century, it has received firm support from China.

China also puts more importance on developing relations with Nepal. In 2017, China and Nepal signed a memorandum of understanding on the BRI. Before that, the cooperation between China and Nepal in trade, investment and personnel exchanges has made significant progress. The memorandum is more of a summary of the previous cooperation and an overall plan for bilateral cooperation in the new era. In addition to traditional security interests, Nepal plays a key role in China's western frontiers' national security and stability.

Nepal is also an important gateway for China's western inland to open to the outside world, which is an irreplaceable role for other countries in this region. China hopes that Nepal will take the express train of China's economic development and realise its economic independence and diversification of foreign economic relations. This is the fundamental way to maintain Nepal's political autonomy. And China can also expand its economic interests from this process, and more importantly, secure a favourable external environment for the prosperity and stability of its western region.

Nepal's dilemma

The transformation of the geopolitical environment is not a simple ebbing and flowing of nations' strength but the result of a subjective shaping of the relationship between countries. Therefore, evaluating and formulating a country's foreign policy must also be observed in a larger historical dimension. From Nepal's unification in the 18th century to today, surviving the colonial and Cold War eras and the civil war struggle to maintain independence and unity is the best response to geopolitics and its transformation. In this sense, Nepal's foreign policy is destined to maintain neutrality and balance. Even if there will be biases on a specific issue or area, as long as the Nepali people still believe in the decisive significance of independence for the country, there will inevitably be forces to correct it.

However, it is never an easy option for Nepali leaders. Engaging and disengaging among significant powers is like walking on a tightrope with a heavy load; the game with external forces will be transmitted to domestic political development and trigger a chain reaction. For now, the US is continually pushing Nepal to the forefront of its China strategy, shrinking its leeway. At the same time, India, which has maintained special relations with Nepal for a long time, also remains highly concerned about China's role in Nepal and the whole of South Asia. But this strategic convergence has not been enough to make India and the US staunch allies; India is wary of the growing US influence in the Himalaya. As a result, Nepal's diplomatic tightrope walking has become even more perilous.