Nepal Walks Diplomatic Tightrope

Given the unabashedly transactional nature of U.S. President Donald Trump’s foreign policy, what does Nepal have to offer if the Himalayan nation seeks continued assistance from the United States? Even if Nepal were to significantly reduce its dependence on U.S. aid, is the country prepared to recalibrate its strategies to achieve its foreign policy goals and tackle potential challenges? These questions loom large, with few clear answers.

Needless to say, U.S. foreign policy has undergone a radical shift under Trump’s second term. His administration’s approach, characterised by overt transactionalism, has left smaller nations like Nepal grappling with complex dilemmas. For Nepal, the challenge lies in navigating this new reality while safeguarding its sovereignty, development goals and regional stability.

Realigning focus

Nepal must first acknowledge a hard reality: it holds little economic leverage to sustain prolonged U.S. interest. If Nepal is of any significance to Trump, it is purely strategic, given its proximity to China. However, aligning too closely with the U.S. comes with significant risks, particularly in terms of relations with immediate neighbours, India and China. Nepal cannot afford to alienate these rising powers, whose influence is deeply entrenched in its economic, cultural, and geopolitical fabric.

In response to a potential decline in U.S. support, Nepal must redefine its foreign policy priorities. This involves maintaining cordial ties with Washington while strengthening relationships with other global partners. Given the extensive reach of U.S. influence, Nepal cannot remain entirely unaffected by American actions. However, a pragmatic approach that minimises dependency on the U.S. while fostering diverse international partnerships is essential.

Historically, transactional elements — explicit or implicit — have always been at the core of U.S. foreign policy, as national interests dictate diplomatic engagements. From the Marshall Plan to the Panama Canal Treaties, the U.S. has consistently sought returns on its investments. Under Trump, this transactionalism has become more pronounced. Flanked by Elon Musk, the world’s richest man tasked with cutting government spending, and Vice-President J.D. Vance, known for his strong criticisms of traditional U.S. allies, Trump’s decisions — such as pressuring Ukraine to sign a minerals deal in exchange for U.S. weapons, proposing to purchase Greenland, and renegotiating trade agreements — exemplify this approach.

In Nepal, U.S. aid has played a significant role in socio-economic development. USAID has funded projects in health, education, and governance, while the Millennium Challenge Corporation (MCC) aims to bolster Nepal’s energy and transport sectors. However, Trump’s policies have unleashed uncertainties, with all aid frozen for 90 days and significant budget cuts to USAID. Even if assistance continues, it is likely to be tied to U.S. strategic interests rather than Nepal’s developmental needs. This shift raises questions about the sustainability of U.S.-funded projects and the conditions attached to such support.

Nepal’s offerings to the U.S. in exchange for aid are limited. In economic sector such as infrastructure development and hydropower, Nepal’s value to the U.S. is negligible. Moreover, the Trump administration’s conservative stance reduces the likelihood of investments in environmental protection and human rights promotion. Strategically, Nepal’s only leverage is its location between India and China. However, this advantage is a double-edged sword: aligning too closely with the U.S. against its neighbours’ interests could destabilise regional relationships and compromise Nepal’s sovereignty. Thus, Nepal must walk a tightrope, recognising that its strategic position is as much a liability as it is an asset.

In the absence of robust U.S. cooperation, Nepal must explore alternative avenues to achieve its development goals. Strengthening ties with Asian and European partners offers a viable path forward. Nations such as Japan and South Korea, along with European countries both within and outside the European Union (EU), have demonstrated commitments to supporting Nepal through investments in infrastructure, education, and technology. However, strategic partnerships with its giant neighbours, India and China, remain crucial. While these relationships come with their own set of challenges, they present significant opportunities for economic growth and regional integration.

Diplomatic capacity 

European nations, on the other hand, can bring expertise in areas such as environmental conservation, good governance, and human rights. By diversifying its partnerships, Nepal can reduce its dependency on any single nation and create a more resilient foreign policy framework. However, these partnerships are not without challenges. Increased engagement with China, for instance, could raise concerns in India, and vice versa, while deeper ties with European nations may come with stringent conditions on governance and human rights. Balancing these relationships requires diplomatic finesse and a clear articulation of Nepal’s priorities.

A recalibrated foreign policy in the changed global context will have far-reaching implications for Nepal. By reducing its reliance on the U.S. and broadening its international partnerships, Nepal can enhance its sovereignty and resilience. However, this approach demands greater diplomatic capacity, strategic clarity, and domestic political consensus. In a world marked by shifting alliances and growing uncertainties, Nepal must adopt a pragmatic and balanced foreign policy. The goal should not be to choose sides but to navigate the complexities of global relations in a way that safeguards Nepal’s interests and promotes sustainable development.

(A PhD in political science from the State University of New York, Buffalo, the author is a faculty member at IACER. govinda@iacer.edu.np)