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International relations

Nepal's prime minister walks tightrope on India visit

Courted by Delhi and Beijing, Oli wants to extract investments from both

KATHMANDU/NEW DELHI -- A month and half after he took the reins as Nepal's new Prime Minister, K.P. Sharma Oli will kick off what analysts called his "well-balanced diplomacy" on Friday in hopes of garnering as much financial aid as possible from India and China.

During his three-day trip to India, Oli hopes to attract investments in his cash-strapped country. China, too, has invited Oli for a visit. Local unconfirmed media reports suggest that he will be making an appearance at the annual Boao Forum for Asia to be held in China's Hainan province April 8-11 at which Chinese President Xi Jinping is scheduled to speak.  

Nepal is at the heart of the tussle for power between India and China due to its strategic location between the two. Cognizant of this, Oli will attempt to extract the maximum financial assistance from both. But to do that, he has to tread carefully.

Oli's Communist Party of Nepal (Unified Marxist-Leninist) along with his coalition partner former rebel Maoists clinched a resounding victory in general elections held late last year on promises of economic growth and political stability.

The alliance also sold itself as a force that could stand up to India, which has flexed its muscles over its smaller and landlocked neighbor. Now, Oli has to live up to those promises.

During his last tenure as prime minister between October 2015 and August 2016, India imposed a harsh, unofficial blockade on Nepal that starved the local population of food, fuel and medicines for months over Delhi's unhappiness with a new constitution instituted by Kathmandu.

But with Beijing cozying up to Kathmandu, Delhi is now keen to mend fences, to the extent that the government sent foreign minister Sushma Swaraj to Nepal even before Oli was appointed to the top job.

The tensions between Beijing and Delhi work to Kathmandu's benefit. Oli is counting on India and China for investments in infrastructure projects including hydropower, railways, roads and airports. 

In his half-hour address to parliament on Tuesday, Oli offered assurances to lawmakers, emphasizing that his "government wanted to build trust and friendship [with India] based on mutual respect and interest." He also said that an increase in industry and production investment and exports was needed to narrow the "dismal" trade deficit with India.

Oli will lead a 44-member delegation to India where he will also hold one-on-one talks with Prime Minister Narendra Modi. But Geja Sharma Wagle, a Nepalese geostrategic analyst, said that the main purpose of Oli's trip is a face-giving exercise to "reassure India" and that deals, if any, will come later.

After ties with India soured during the blockade, Oli had shifted allegiance significantly toward China. In March 2016, Nepal signed long-term trade and transit agreements with China aimed at ending India's monopoly on incoming supplies. Nepal, much to India's chagrin, also agreed to be part of China's ambitious Belt and Road Initiative in May last year after the two sides inked a deal in Kathmandu, though details have yet to be worked out.

Purna Basnet, chief editor of digital news platform Nepal Khabar, said that Oli is looking to Beijing as a trusted ally that could help him deliver his election promises.

"The real deal will be with China," Basnet said. "His strategy is to sweet-talk India into supporting his government. He will work in partnership with China to increase investment and trade in Nepal."

For India, Nepal is an important buffer: Last summer, India and China fell out over a border dispute that resulted in  a two-month-long military stand-off at Doklam, a junction between China, India and Bhutan, at the edge of the Himalayas.

"Nepal, as it is sandwiched between China and India, does offer some kind of buffer for India in strategic and military terms," said Srikanth Kondapalli, a professor of Delhi-based Jawaharlal Nehru University.

How Oli treads the tight rope between the two economic and political giants will determine his legacy. China is currently involved in building a regional airport in the tourist town of Pokhara in western Nepal and is upgrading a major ring road in Kathmandu.

In November last year, a subsidiary of China's Three Gorges Corp. signed an agreement with Nepal's state utility to form a joint venture to develop the 750 megawatt West Seti hydropower project in the country's far west.

Oli has also said that he would revoke a decision by the previous Nepali Congress government, seen as being close to India, to scrap an agreement with a Chinese company to develop the 1,200 MW Budhi Gandaki hydro plant in central Nepal.

But during his India visit, Oli and Modi are also likely to inaugurate the construction of a 900 MW Arun 3 hydropower project funded by India in northeastern Nepal. Kondapalli said India could also benefit from such a project.

"If the Nepalese build such hydroelectric power plants, then [India] would be able to subsidize the economic growth rates in Uttar Pradesh and Bihar, where electricity consumption is going up because of industrialization," he said.

For now, Nepal will continue to pull the strings as India and China wield their regional influence. At heart, Oli may already know who his side is with, but pretending that he is undecided may be the best option at least for a while, analysts said.

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