Nepali Prime Minister Khadga Prasad Sharma Oli is scheduled to visit China on December 2-6.
New Delhi has traditionally been the first port of call for newly sworn-in Nepali prime ministers. However, with the invitation from India not materializing in the four months since Oli became prime minister, and with Indian Prime Minister Narendra Modi accepting Oli’s invitation to visit Nepal but not showing up in Kathmandu yet, the Nepali prime minister decided to accept China’s invitation. He will head to Beijing first.
Oli is chairman of the Communist Party of Nepal-United Marxist Leninist (CPN-UML) and is widely perceived, in New Delhi, Beijing, and Kathmandu to be “pro-China.” His China visit will add to that perception.
His visit will focus “on implementing the agreements reached during the state visit of Chinese President Xi Jinping to Nepal, as well the deals signed during the China visit of Nepali presidents and prime ministers,” Pradeep Gyawali, deputy secretary general of the UML, said last week. Nepal and China have signed scores of agreements in recent years, though few of these have been implemented.
Another item on Oli’s agenda in Beijing is the loan taken for the construction of Pokhara International Airport. Nepal borrowed $216 million from China’s Exim Bank for the project, but the airport has failed to generate much revenue. With repayment of the loan scheduled to start in 2026, the Oli government is keen to get China to convert the loan into a grant.
Then there is the question of implementation of Belt and Road Initiative (BRI) projects. As one Nepali government official told The Diplomat, “Not a single BRI project has been executed in the seven years since Nepal joined BRI.”
There are several reasons for the lack of progress in BRI projects. One is Nepali apprehension over “overborrowing from China and getting caught in a debt trap,” the official said. The economic crisis in Sri Lanka, which was in part the outcome of large Chinese loans incurred on BRI projects that turned out to be “white elephants,” has served as a cautionary tale for Nepal. “Pressure from India,” which apprehends China’s mounting influence in Nepal via BRI projects has also prompted “Nepali politicians and officials to go slow on finalizing and implementing BRI projects,” the Nepali official said.
Oli is a strong champion of China and BRI. In 2018, he proposed 35 projects to the Chinese to be executed under BRI, which the Chinese subsequently slashed to nine. BRI is a deeply contentious subject in Nepal; unlike the communist parties, the Nepali Congress (NC) is “not too keen on BRI partly because it involves high-interest Chinese loans. The NC prefers grants and concessionary loans to finance BRI projects,” the Nepali official said. Importantly, the NC is close to India and therefore “more amenable to India’s demands to ease off on cooperation with China.”
The NC is now the CPN-UML’s coalition partner. Building a consensus position on BRI projects ahead of Oli’s visit is therefore essential as Nepal and China are keen to sign an implementation plan.
China had proposed an implementation plan in early 2020. However, differences over how to take BRI forward have kept the plan hanging, a former Nepali diplomat told The Diplomat. The Oli government has now formed a joint political mechanism to build consensus on the BRI implementation plan. The fact that the NC’s Arzu Rana Deuba is foreign minister will facilitate the consensus building at home, she added.
India will be closely monitoring Oli’s visit to China.
Oli’s previous prime ministerial terms saw a marked warming in Nepal’s relations with China, which resulted in a decline in the landlocked Himalayan country’s dependence on India. Nepal’s first-ever fuel supply agreement with China, which broke India’s monopoly over fuel trade with Nepal, was signed in October 2015 during Oli’s first term. Months later, in March 2016, a Transit and Transportation agreement was signed, which included a connectivity plan for a high-speed railway from Kathmandu to the Chinese border. In August 2019, Oli signed a protocol on implementing the Trade and Transit Agreement, which provided Nepal with access to seven Chinese sea and land ports for third-country trade.
Not surprisingly, Oli’s prime ministerial terms have seen a fraying of India-Nepal ties. India’s months-long blockade of Nepal in 2015-2016 dominated Oli’s first term.
The Indian establishment is “deeply suspicious of Oli’s intentions and this is not without reason,” an official in India’s Ministry of External Affairs said, pointing to his stoking of “anti-India sentiment to burnish his Nepali nationalist credentials to cover up his own lapses in governance.” Oli has repeatedly provoked India by raking up controversial issues.
In 2020, for example, the Oli government amended the Constitution to change Nepal’s official map to include Limpiyadhura, Kalapani, and Lipulekh – disputed territories at the India-Nepal-China trijunction that have been under Indian control for decades – as part of Nepali territory.
In addition to accusing India of conspiring to topple his government, he has stoked anti-India violence in Nepal.
Oli has persisted with fueling contentious issues with India in his current term as well.
Although it was under his predecessor Pushpa Kamal Dahal that the Nepali government decided to use an image of the controversial 2020 Nepali map on its redesigned 100 rupee note, the Oli government could have put the decision on the back burner. Instead, it has fueled Delhi’s ire early in his fourth term by awarding the contract for printing this currency note to the Chinese.
Indian traders, who have hitherto accepted Nepali currency in their daily business with Nepali nationals, have warned that they will not accept the new controversial currency notes. This is likely to impact border trade.
Oli’s repeated riling of India, especially with regard to Limpiyadhura, Kalapani, and Lipulekh, is bound to have pleased the Chinese as it not only adds to India’s border woes but also, importantly for China, these territories lie at the India-Nepal-China trijunction.
India believes that Oli has repeatedly raised the border issue at China’s prodding. Back in June 2020, when Nepal objected to India building a road to Lipulekh Pass, India’s then Army Chief Gen. M M Navarane said “There is reason to believe that they (Nepal) might have raised this issue at the behest of someone else.” He was hinting at a possible Chinese role.
Oli has been careful to not raise the issue of Chinese encroachments into Nepali territory. In 2020, the Oli government dismissed allegations of Chinese encroachment in Nepal’s Humla district, claiming that the buildings were on China’s side of the border.
Oli’s India baiting on the territorial dispute may endear him to the Chinese. It may result in him sealing more deals with Beijing during his upcoming visit.
However, as Sanjeev Satgainya points out in an opinion piece in Kathmandu Post, “While Nepal could benefit from its northern neighbor’s economic and technological might, it is not in a position to ignore its southern neighbor, with whom it not only shares historical, cultural, and people-to-people ties but also carries out a majority of its trade.”
The fate of the China-built Pokhara Airport is instructive. New Delhi’s refusal to allow Indian flights to land at Pokhara is the main reason underlying the airport’s failure to generate profits.
Leaning on China while ignoring India’s security concerns is not in Nepal’s best interests.