The Russia-Ukraine conflict is now six-month-old, with its economic and geopolitical impacts being felt near and far. Above all, countries the world over are having to grapple with ever-rising inflation. Nepal, whose own inflation rate is now inching close to double digits, is not immune to this global trend. The war has also brought about some changes in the country’s foreign policy and geopolitical conduct.
The government-run think tank Policy Research Institute (PRI) recently came up with a report on the war’s impact on Nepal. So what did it find?
Says Bishnu Raj Upreti, the PRI’s executive chair: “One less-noticed effect of the war is the increasing level of psychological threat small countries feel from their big neighbors.”
The lesson is that, adds Upreti, these countries need to be better prepared at navigating the choppy seas of geopolitics.
The war has also triggered a debate on the conduct of Nepal’s foreign policy. The country’s long-standing policy of non-alignment has come under scrutiny, as politicians and foreign policy watchers are divided over Nepal’s position on Ukraine.
Some argue that Nepal has compromised on its policy of non-alignment and joined the American camp by voting in the United Nations Security Council against Russia’s aggression.
Foreign policy expert Chandra Dev Bhatta says the current war has led to the emergence of new notions of non-alignment, which poses challenges, yet again, to the post-Second World War global order.
“This situation has certainly forced many countries including Nepal to revisit their foreign policies,” he says.
Nepal’s two neighbors, India and China, which remained neutral in the UN voting, are reportedly unhappy with Nepal’s position.
Upreti says the principled position taken by the Nepal government was correct, but it should have avoided the UN voting considering the strategic interests and sensitivity of our neighbors. “It taught us that we should be more cautious in such issues in the coming days,” he adds.
Bhatta is of the view that the war will pose more and more problems for Nepal, “the longer it drags on.”
The PRI research report says Nepal’s UN position on the war has created suspicion that Nepal could deviate from its non-alignment policy.
“From a geopolitical standpoint, just like Ukraine, Nepal too is in a sensitive situation. In some aspects, we are more vulnerable than Ukraine,” the report says while suggesting that the government clarify its position with India and China to avoid misunderstandings. The continued goal of Nepal’s foreign policy, it advises, should be to protect Nepal’s sovereignty and serve the agenda of prosperity.
Prices of daily essentials including petroleum products have skyrocketed, hitting the poor sections of the society.
Nepal used to import cooking oil from Ukraine while it brought food items, mineral oil and industrial raw material from Russia. Russia’s assistance to Nepal, the PRI report predicts, is likely to go down in the coming days.
The rise in commodity prices has forced central banks around the world to readjust their interest rates.
And as the dollar is getting stronger, the Nepali currency is steadily losing its value. The PRI report says this kind of devaluation will further weigh on Nepal’s vulnerable economy.
The war’s continuity could also imperil Nepal’s food security. India has already barred the export of wheat (except to its small neighbors).
Nepal’s agricultural output is low and food imports are rising. If India faces a food crisis, it could limit food export to Nepal as well. There is also the fear of fertilizer shortage. Nepal should take proactive steps to immediately address these issues, the PRI report suggests.
Upreti, for his part, says “we have to be prepared for the worst.”
The PRI report says the Russia-Ukraine war could also affect Nepal’s share market. Over the past few months, Nepal’s stock market has been on a downward trend.
Another issue of concern is Nepal’s position on human rights. Raising the incidents of war crimes committed by Russian soldiers in Ukraine, Western countries may bring sanction proposals in the UN system. They will then try to get Nepal to vote in their favor.
Nepal should be prepared to handle such delicate situations, the report recommends.
The report also suggests ways to mitigate the effects of the war and in dealing with foreign policy challenges. For one, Nepal should brief the international community about its position on the Russia-Ukraine war, stating that it is in line with Nepal’s non-alignment foreign policy.
As Nepal is the current chair of the South Asian Association for Regional Cooperation (SAARC), Nepal should have taken the initiative to come up with a common South Asian position on the war. (The SAARC member states were divided during the UN voting on the Russia-Ukraine war.)
The report suggests Nepal stockpiles petroleum products for at least three months while also taking measures to minimize consumption.
As the war could impact the flow of remittance, it advises, the government should start diplomatic talks with labor-importing countries to find a common way forward.
