Nepal’s diplomacy: A look back at 2023 and prospects for 2024

As 2023 draws to a close, ApEx looks back at how Nepal conducted its foreign policy and what it looks like in 2024. Unlike in the years prior, Nepal had a rather smooth relationship with major powers—US, China and India—in 2023. This was largely because Prime Minister Pushpa Kamal Dahal made it a point to not raise the long-standing issues with these countries. Though the CPN (Maoist Center) and its primary ruling ally Nepali Congress have different outlooks on foreign policy, there were no serious disagreements when it came to the conduct of foreign policy.

Dahal, who came to power at the end of 2022, paid official visits to India and China, and attended the 78th United Nations General Assembly in the US, where he engaged with several world leaders. Amid these engagements, Nepal faced new challenges, such as the tragic Hamas attack that claimed the lives of 10 Nepali students, with one still held hostage. Additionally, Russia recruited Nepali nationals into its army, placing them at the forefront of the conflict with Ukraine.

But overall, Nepal’s bilateral engagements in the year 2023, particularly concerning the US, India and China, were smooth. Reciprocally, all three countries engaged with Nepal through exchanges of the visits at different levels. 

Throughout the year, the US sent its high-level officials to engage with the Nepal government as well as a wide section of Nepali society. Similarly, Chinese officials mainly from the Communist Party of China visited Kathmandu. China also invited scores of Nepali leaders and people from diverse fields to participate in various events. With India, the Dahal administration adopted a cautious approach. During his India trip in May, he steered clear from raising crucial issues such as border dispute, Eminent Persons’ Group report, and the 1950 treaty with his counterpart Narendra Modi. Instead, the prime minister focused on development cooperation, primarily on the energy sector.

India has agreed to buy electricity from Nepal as well as allow energy export to Bangladesh. The three countries are working on regional energy cooperation. 

“The relationship between the two countries has gathered momentum, mainly in the areas of energy trade, connectivity and security,” said an Indian official. 

One of the landmark achievements of the Nepal-US cooperation was the formal implementation of projects related to the construction of transmission lines and road upgradation under the US’ Millennium Corporation Challenge (MCC) program. The US extensively engaged with the Nepal government to make this happen, because even after the parliamentary endorsement of the MCC Nepal Compact, there were suspicions about smooth project implementation, mainly due to China’s objection.

There are still doubts regarding timely completion of the MCC projects due to technical and bureaucratic hurdles, and the US has said that there should be discussions in Washington about possible extension of the project deadlines. 

The US also pledged to further assist Nepal through development cooperation and investments in a meeting held between Foreign Minister Narayan Prakash Saud and the US Secretary of State Antony Blinken. As the US is advancing its influence in the Indo-Pacific region, it is in its interest to engage more with Nepal, which is strategically located between China and India. Advancing democracy everywhere is one of the key aspects of the Biden administration’s foreign policy, so the US is engaging with Nepal on this front as well.

According to US officials, though Nepal’s democracy is a beacon for the entire South Asia, failure to make progress on the economic front may put it in jeopardy. Washington wants to advance economic cooperation to support the democratic process. 

During Minister Saud’s visit to the US, American officials showed renewed interest in Nepal’s tourism, agriculture, and health sectors.

In China, there are more optics than real substances. During the prime ministership of Sher Bahadur Deuba of the Nepali Congress, the level of trust in the bilateral relationship between Nepal and China had reached a low point. Dahal’s ascendance to power helped mitigate the environment of mistrust, as Beijing naturally feels more comfortable with a communist prime minister in Nepal.

During his trip to China, Prime Minister Dahal did not raise some issues that Beijing perceives as sensitive, including alleged border encroachment. He went a step ahead by agreeing that Nepal opposes Taiwan’s independence and the one-China principle to convince Beijing that he is serious about China’s security interests.  

China had some high expectations with the Dahal government, such as clear progress in the Belt and Road Initiatives (BRI) and endorsement of its Global Security Initiatives (GSI), but Dahal—despite appreciating GSI in private talks with Beijing officials—did not sign any agreement on those issues. Dahal may have pledged to make some progress on BRI in the future but it depends on how his relationship evolves with New Delhi and Beijing. 

“The prime minister did not make progress on BRI because he believed it would upset New Delhi and Washington,” said a government official.

Besides bilateral engagement, PM Dahal also engaged in some multilateral forums such as COP28 in Dubai and the United Nations General Assembly in the US. The primary focus of Dahal was the impacts of climate change in the Himalayas and resolving the transitional justice process.

Looking ahead to 2024, all three countries will continue their engagement with Nepal, though India and the US will be preoccupied with national elections. Uncertainties loom in the US, with speculations about Donald Trump's potential return. Nepal’s relations with these countries will hinge on major-power dynamics, with ongoing debates about whether Nepal should abandon its non-alignment policy amid growing global geopolitical tensions. This debate is likely to intensify as big countries vie for Nepal’s alignment in their orbits.