An analysis published in The Economics

Nepal, China and India
Rivals on the roof of the world
Great-power rivalry grows in the Himalayas

Sep 16th 2010 | KATHMANDU
Rakesh Sood (right), treading gingerly EARLY in September a group of Nepali newspaper editors were having dinner when, one by one, their phones started ringing. The man on the other end, whom they said was the Indian ambassador, Rakesh Sood, wanted to know whether their papers would be running stories on a sensational audio recording then doing the rounds. The recording purports to be an intercepted telephone call between a senior Maoist leader, Krishna Mahara, and an unknown man, Chinese from his accent; the two are discussing the use of $6.75m to bribe members of parliament to elect a Maoist prime minister.
A great deal about this story is murky. It has not been confirmed either by Mr Sood or Mr Mahara. The Chinese embassy has denied any involvement and the tape’s authenticity has not been established. Still, two things are clear. First, the intrigue comes at a sensitive time for Nepal’s ailing peace process, which is meant to end ten years of Maoist insurgency. United Nations’ monitoring of the process came up for renewal this week. Second, it shows that Nepal’s domestic tussles are increasingly sucking in India and China, the rival powers that surround the country. Aptly enough, just when the editors received the calls supposedly from the ambassador of one giant neighbour, they were dining with the ambassador of the other.
India has long been influential in Nepal, which it regards as a buffer against China. Roughly half of Nepal’s trade is with its southern neighbour and the country ties its currency to the Indian rupee. In contrast, China has played a low-key role in Nepal until recently. But the emergence of the Maoists as the largest party has shifted the balance, with India becoming more closely aligned with the anti-Maoist faction. The prime minister, Madhav Kumar Nepal, says India’s government distrusts them and wants the party to make sweeping changes to its organisation and beliefs.
Parliamentary elections in 2008 gave the Maoists 40% of members of parliament, twice as many as their nearest rival. During a brief stint in government, the Maoists cultivated closer relations with China, much to India’s alarm.
The Maoist-led coalition collapsed last year, to be replaced by an anti-Maoist one backed by India and—some think—cobbled together by it. But the new government has been unable to impose its authority. The process of integrating former Maoist fighters has stalled, along with attempts to write a new constitution. Anti-Maoists are challenging the peace agreements while parliament has been deadlocked since June over the election of a new prime minister.
Political paralysis has given rise to accusations of meddling by India. Last month, for example, after a round of voting for the new prime minister, one MP said his daughter stood to lose her scholarship in India if he voted Maoist. Senior staff at the country’s largest newspaper group, which Indian diplomats think hostile to their country, say they have been unable to get newsprint through India and that Indian companies have been asked to withdraw advertising.
Indian diplomats say such claims are false and that they are victims of a smear. But politicians of all stripes think India is trying to micro-manage Nepal and anti-Indian sentiment runs high. Indian diplomats “swagger around like viceroys,” complains Ramesh Nath Pandey, a conservative former foreign minister.
Meanwhile the peace process is foundering, dragging both sides into the mire. Under agreements signed in 2006, the United Nations monitors the behaviour of the former combatants. But this week the Nepali government wrote to the UN secretary general, without consulting the Maoists, indicating that it wanted the army exempted from monitoring, which the Maoists reject. Although the UN mandate was renewed for four months, the ceasefire is looking ever more threadbare.
Being sandwiched between two giants might seem promising for a poor country. With skill, Nepal could play one off against the other. Instead, with peace in the balance and fears growing that both neighbours are vying to pick the next prime minister, Nepal risks being ground between their vaulting regional ambitions.
http://www.economist.com/node/17049151