Since the second half of the twentieth century, Nepal’s foreign policy has predominantly revolved around India and China, against the backdrop of India’s independence in 1947 and China’s takeover of Tibet in 1950. The policy focused on safeguarding sovereignty and territorial integrity in addition to achieving economic wellbeing and prosperity, and has not seen much change ever since. In the recently integrated yet challenging world of internationalisation, often called a multipolar world, Nepal must re-visit and re-frame its foreign policy paradigm.

In reengineering its foreign policy, Nepal should move away from “traditional neutrality” that has been chiefly guided by the principle of non-alignment. As an alternative course of action, I offer a foundational overview of “strategic hedging” and gauge the potential alterations in Nepal’s foreign policy.

Strategic hedging

The concept of strategic hedging in foreign policy is relatively new. However, this practice is prevalent in all kinds of states—small, emerging or great powers. Strategic hedging helps a country evade confrontation or excessive dependence on the state’s immediate or distant neighbours. To put it plainly, this hybrid strategy minimises the threats to its stability and secures its existence in an anarchic world. It is not meant to garner material gains or alter its comparative position but to safeguard it.

On economic size, strength and capabilities, Nepal falls under the category of a smaller power. The country has failed to influence the international order, and so in today’s highly competitive global environment, it should employ strategic hedging as an element in its foreign policy. Nepal cannot administer a hard balancing strategy with its immediate neighbours, India or China. But by hedging, Nepal is not to be beholden to them either. The broader aim is to diversify meaningful alliances with other major world powers more engagingly.

However, Nepal’s security environment is not meant to be based on the rigid logic of an alliance bloc. The country should play a pivotal role through soft balancing with its immediate neighbours, rigorous engagement with other multilateral organisations, and forging congenial relations with other power blocs aligning with major and regional powers, notably the United States and the European Union.

Hedging allows Nepal to maintain good relations with all powers. The country should hedge them and maintain multiple policy options, such as by applying combined strategies of selective involvement, restrained opposition and partial compliance in line with its national interest. However, hedging as a policy is put into practice without any formal announcement. Major powers of the world would naturally condemn such practices if applied explicitly.

Nepal has for long defined its foreign policy as “non-aligned,” “neutral” or “equidistant.” Be that as it may, and as the foundation of this article entails, the country’s foreign policy should consist of balancing or bandwagoning.

Avoiding confrontation

Modern nation-states possess vital and peripheral national interests linked to their sovereignty, territorial boundary and political autonomy, among other factors. These interests lie beyond the realm of domestic political alterations. Besides, these aspects of foreign policy render continuity or evolution depending on the interactions between the domestic political environment and changing international (or regional) order. In Nepal’s foreign policy priorities, a noticeable disparity exists between its intentions and the actual results achieved thus far—it has experienced a series of wake-up calls.

Lately, it faces challenges of maintaining strategic autonomy against the backdrop of intensified Sino-Indian and Sino-US showdowns. In May 2017, Nepal signed up to China’s Belt and Road Initiative (BRI). The BRI memorandum seeks to foster collaboration in policy exchange, infrastructure connectivity, trade connectivity, financial integration and people-to-people ties, among others. This agreement was contrary to the interests of the southern neighbour, India. Similarly, in February 2022, Nepal’s Parliament ratified the Millennium Challenge Corporation (MCC)—a $500 million grant compact, as if it was easy money for the country’s development. The compact was ratified amid reservations from Beijing.

Nevertheless, Nepal vouched to join the MCC and the BRI, reflecting an “amity with all, enmity with none” policy. Rejecting either (or both) the MCC and the BRI would have been an economic folly, as the country urgently requires investment to support its development aspirations. Obviously, China is operationalising its BRI tools to increase its sphere of influence in Nepal, where India has historically enjoyed its clout, just as the US seems to have rekindled its interest in the country. However, the predicament for Nepal is ensnared in preventing this competition from becoming confrontational in real time.

National interest

In light of these circumstances, Nepal needs to adopt a more assertive approach by clearly defining and actively pursuing its priorities and national interests. Nepal needs to redefine its traditional non-alignment foreign policy towards a stance of “constructive neutrality.” This would involve engaging in smart diplomacy to build trust with both neighbouring countries and strategically enhancing its relations with Western nations to gain greater access to the Western world.

Nepali politicians and bureaucrats should reflect Nepal’s internal dynamics, especially in light of its political traction, and promote effective bilateralism and multilateralism while maintaining multiple alignments with different world powers. It must elevate its proficiency in foreign policy by onboarding individuals with the skills to analyse and execute strategies that serve Nepal’s best interests. This would enable the country to effectively prioritise its international relationships, balancing realism and self-confidence to maximise the benefits via collaborative partnerships.

Most of all, Nepal should adopt an open-minded and all-embracing approach when seeking foreign direct investment in the country and aid and grants from the world’s economic powerhouses. These collaborations should be focused on advancing the prosperity of Nepal and its people. The specific partner, whether a Chinese dragon, an Indian elephant, an American eagle, a Russian bear, or others, is of secondary importance as long as it aligns with Nepal’s national interests.