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The firm's website, which was declared in 1999 as the best "Best Military Affairs Web Site", described by Jane's Intelligence  Review as the “a reliable barometer on what the USA thinks”, and declared by Time magazine as “Among the firms making the biggest  splash in this new world", in its The Global Intelligence Update published Jan 04 writes: Nepal is likely headed toward even more difficult times with the probable change of its entire political system, from multiparty democracy to communist state....this will give a dramatic advantage to Beijing's geopolitical position on the continent while causing major problems for India. Whether the future Nepal government becomes Maoist or communist, the government will likely lean toward Beijing, and will allow for establishment of Chinese surveillance and listening posts...That would position China's forces close to New Delhi and other vital Indian centers. It would also help Beijing gain geostrategic leverage over not only India but also larger areas, from Central Asia through Southeast Asia....China’s presence in Nepal would also complicate positions of the U.S. Navy in the Indian Ocean. With early warning, surveillance, intelligence and navigation systems in Nepal, Beijing would keep a vast part of Asia and military forces there under constant electronic watch....India will be forced to counter Nepal’s apparent slide toward Beijing through other means, perhaps increasing contacts with Bhutan, another buffer state in the region. India might also conduct a more active policy in Tibetan affairs while using the fact that it remains on good terms with the Dalai Lama and the Tibetan Buddhist hierarchy...India could also increase dialogue with other countries along China's perimeter, such as Mongolia and Vietnam. The cautious attitude of these countries toward Beijing is no secret to New Delhi."

The following is the full report, courtesy of Stratfor:

Crisis in Nepal Could Change Regional Balance
04 January 2001

Summary

Dissent in the ranks of Nepal's ruling party is causing a political crisis, compounded by an increasingly successful Maoist insurgency. The central government controls only about one-fourth of the country, anti-Indian riots and communal violence have broken out. Change in the political system is likely. And given the isolated nation's invaluable geostrategic location, China will gain an advantage -- at the expense of Indian interests.

Analysis

Nepalese Prime Minister Girija Koirala barely survived a no-confidence motion initiated against him by factions within his own party, the Nepali Congress, reported the Nepal News Jan. 4. 

Deepening dissent within Nepal's ruling party adds to a serious systemic crisis experienced by the government. If current trends are not changed, they could lead to the government’s collapse and a possible takeover by Maoist insurgents. This will lead to significant geopolitical changes in the region that will favor China.

A landlocked country, where only tourism matters for international economy, Nepal has a strong geostrategic value to world powers. The power that stations its space-linked surveillance, intelligence and navigation systems on Nepal's high mountains gets geostrategic leverage over several Asian regions, from Central Asia to South-East Asia.

Bordering only China and India, Nepal also offers a geopolitical advantage to whichever takes the upper hand there. Such a situation would be especially dangerous to India, since Nepal’s border is 185 miles from New Delhi. Though major conflict is unlikely in even the distant future, Indian strategists appreciate the military capability China would gain. Attacking from Nepal would represent a deadly threat to the Indian capital.

Nepal's developing crisis has political, security, social and economic dimensions.Only recently a kingdom with medieval rules, Nepal chose a path of multiparty democracy 10 years ago. It became a constitutional monarchy where real policies have been a result of parliamentary compromise between the Nepali Congress and its main opposition, the Nepal Communist Party (Unified Marxist Leninist).

But last year witnessed a bitter feud within the ruling party that led to the current political crisis. Escalating inter-party rivalry could break the Nepali Congress into smaller parties. This may bring the Nepal Communist Party to power through elections.

At the core of the political crisis is a crisis of government. Nepal’s government effectively controls only one-fourth of the country, reported the Kathmandu Post Jan. 3. The no-confidence motion was unleashed when the government was accused of failing to maintain law and order, widespread corruption and inability to govern. All political forces and mainstream media attest to these accusations

Such poor governance contributed to the security crisis. Maoist insurgents have already captured one-third of the country and announced the creation of a provisional government that aims to take over the country within one or two years. Whole units of Nepalese police have abandoned their posts and fled from the line of confrontation with rebels, reported the Kathmandu Post Jan. 3. The army prefers to stay neutral, even if Maoist detachments are nearby. The population in Maoist-dominated regions seems to support the insurgents while some in government-controlled districts sympathize with them.

A social crisis complicates the situation. Communal violence has become the norm. Recent anti-Indian riots caused by the misinterpreted remarks of an Indian movie star led to casualties with seven people killed by police. This led to an ongoing general strike called by the opposition. Nepal's economy has taken a hit. Tax revenues dropped drastically due to the strike and to fleeing Indian businesses. Foreign tourism revenues are also in decline.

Nepal is likely headed toward even more difficult times with the probable change of its entire political system, from multiparty democracy to communist state. If current trends are unchanged, the chaos could ultimately lead to the government’s collapse and the potential victory for the Maoist rebels.

Given the country's invaluable geostrategic location, literally at the top of Eurasia, this will give a dramatic advantage to Beijing's geopolitical position on the continent while causing major problems for India. Whether the future Nepal government becomes Maoist or communist, the government will likely lean toward Beijing, and will allow for establishment of Chinese surveillance and listening posts

That would position China's forces close to New Delhi and other vital Indian centers. It would also help Beijing gain geostrategic leverage over not only India but also larger areas, from Central Asia through Southeast Asia.

China’s presence in Nepal would also complicate positions of the U.S. Navy in the Indian Ocean. With early warning, surveillance, intelligence and navigation systems in Nepal, Beijing would keep a vast part of Asia and military forces there under constant electronic watch.

India will be forced to counter Nepal’s apparent slide toward Beijing through other means, perhaps increasing contacts with Bhutan, another buffer state in the region. India might also conduct a more active policy in Tibetan affairs while using the fact that it remains on good terms with the Dalai Lama and the Tibetan Buddhist hierarchy. 

India could also increase dialogue with other countries along China's perimeter, such as Mongolia and Vietnam. The cautious attitude of these countries toward Beijing is no secret to New Delhi.

The Stratfor Report on Nepal ends here.

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• Who is Stratfor? How reliable is this Intelligence firm?
• Stratfor Home Page
• Webcopy of Stratfor Report On Nepal
• Kathmandu Riot Full Coverage from Newslook
• Nepal-India Diplomatic Row Full Coverage from Newslook