India’s Emerging Challenge In Bhutan – Analysis

In October, Tandi Dorji became Bhutan’s first foreign minister to visit China. Dr Dorji’s visit has garnered significant attention across the world for two reasons: First, by concluding the 25th round of border negotiations, Bhutan and China are drawing close to ending the decades-old territorial dispute. During this visit, both countries even signed a “cooperation agreement” that outlines the responsibilities and functions of a joint technical team (JTT) tasked with delimiting and demarcating the disputed boundaries.

Second, as negotiations concerning diplomatic relations have surfaced on multiple occasions, the visit also underscores increasing signs of normalisation of relations between the two countries. With these developments, New Delhi has maintained a strategic silence, indicating it understands Bhutan’s situation and does not anticipate these developments to harm its interest. But, with Bhutan’s normalisation of diplomatic relations with China, India will face a new set of challenges.

Bhutan’s relationship with China is determined by its long-standing reservations about opening up to the world and becoming embroiled in great power politics. These concerns were exacerbated by China’s annexation of Tibet in the 1950s, and the subsequent seizure of eight Bhutanese enclaves. As a result, Bhutan cut off its diplomatic relations with its new neighbour, China, was hesitant to have diplomatic relations with the P5 countries, and embraced a special relationship with India. China’s perception of Bhutan being part of Tibet’s five fingers continued to push Bhutan towards India. It was only with the beginning of bilateral talks in 1984 that China explicitly narrowed the disputed region to two sectors: In the north, the Pasamlung and Jakarlung valleys; and in the west, Dramana and Shakhatoe, Sinchulungpa and Langmar Po valley, Yak chu and Charithang valleys, and the Doklam plateau.

For China, diplomatic relations and dispute resolution with tiny-landlocked Bhutan is crucial for its status as an Asian power, and for improving its offensive position vis-a-vis India. Incidentally, China has continued to intimidate and appease Bhutan at different times. The sticks have compelled Bhutan to the negotiation table – Bhutan and China signed an MoU in 1988, finalised an agreement in 1998, and held 24 rounds of negotiations until 2016. However, to expedite the resolution in recent years, China is making new claims in the Eastern sector of the Sakteng region, and promoting border intrusions and settlements in the disputed regions. Therefore, at a time of worsening India-China relations, Bhutan has expedited the negotiations to further deter Beijing’s salami-slicing.

The domestic economy has provided an additional incentive for Bhutan to expedite the negotiations. Unlike in the past, when Bhutan could rebuff China, it now sees China as an inevitable and inalienable part of the new world order. As a result, China’s exports to Bhutan have increased from ~2 billion in 2020 to ~15 billion in 2022. The youth exodus triggered by structural issues and the lack of opportunities has further necessitated the need for reforms. It is here that Bhutan sees China as an inalienable partner for its path to recovery and reforms. Bhutan’s imports are intense with capital and machine goods, durable items, and everyday appliances, indicating that as Bhutan grows, so will its reliance on China. Therefore, Bhutan has been hinting at ending the dispute and opening diplomatic relations with Beijing in recent years.

Despite the pace of developments, New Delhi has not made any public statements, demonstrating its trust in this special relationship and understanding of Bhutan’s security and economic challenges. To date, India and Bhutan enjoy a multifaceted relationship. India imports nearly 70 per cent of Bhutan’s total exports, and their trade has increased from ~94 billion in 2020 to ~134 billion in 2022. India’s assistance with hydropower projects and Bhutan’s hydropower exports form a significant component of this win-win relationship. Similarly, India has offered assistance of nearly ~4,500 crore for Bhutan’s current five-year plan. Both countries also enjoy close security cooperation. The Indian Military Training Team continues to train Bhutanese soldiers, and the 2007 agreement legally obliges both countries to respect each other’s interest. As a result, it is to be expected that Bhutan’s negotiations are unlikely to harm India’s interest. Bhutan’s stance on trilateral engagement over Doklam further reassures its sensitivity towards India.

Although the special relationship might compel Bhutan to be considerate of Indian interests, new challenges will likely arise. First, India will continue to watch as both Beijing and Thimphu move from dispute negotiation to border demarcation. With sensitive sectors like Doklam being unresolved and new claims in the Sakteng region, India will be cautious of Beijing’s ability and intention to alter the status quo. Second, by establishing diplomatic relations with China, Bhutan will be the latest and the last South Asian country to enter the competitive India-China dynamic. And China has already hinted at new areas of economic, cultural, and people-to-people cooperation following the establishment of diplomatic relations with Bhutan. Similarly, Chinese media sources have also applauded Bhutan for recognising and supporting Beijing’s three Global Initiatives. This shows that an emerging new phase of relations will also call for fresh redlines between India and Bhutan.