NEW DELHI: China’s strategy in Nepal hinges on an important fact — the unity among the different factions of the Nepal Communist party. But even to China watchers, the sight of Hou Yanqi, China’s ambassador to Nepal conducting a series of meetings with the main faction leaders of the Nepal Communist Party (NCP) — Pushpa Kamal Dahal ‘Prachanda’ and Madhav Nepal (UML) — to work out a compromise that would allow KP Sharma Oli to continue as PM for the full 5-year term was surprising, and to many, worrying.

Official and political sources in India say they have been following the events in the Himalayan state with concern, as allegations of China micro-managing Nepal’s normally fractious politics abound. But the government does not want to make this a public battle for influence in Nepal for two reasons, largely because all the players of the current political drama have separately reached out to the Indian system, and that India reckons China will be the worse for wear getting in the mud of the never-ending chaos of Nepali domestic politics.

Hou Yanqi’s last minute dash among the NCP leaders was preceded, even more strangely, by a phone conversation between Chinese President Xi Jinping and the Nepal President Bidya Bhandari. It’s unusual for the Chinese President to initiate a call of this nature, particularly with the President, who’s not the political head of the country. The upshot of this level of micro diplomacy was to avert a full-fledged political crisis — Prachanda, Madhav Nepal, Bamdev Gautam and Jhala Nath Khanal all fell in line to keep Oli in power. The deal keeps Prachanda as head of the party, Gautam as a member of parliament silencing the main opposition.

Bishnu Rijal of the NCP’s international department was quoted as saying, "We should see these meetings in three contexts. One, China’s diplomatic outreach after the Covid-19 outbreak; second, China’s medical and other assistance to Nepal; and third, China’s interest in the emerging political situation in our party." He also told journalists that China was interested in the unity of the Nepal Communist Party. Chinese investments in Nepal are not doing too well, diluting the potential gains from Xi’s visit to Kathmandu last October after the Mamallapuram summit. Between Covid pandemic and the US pushing its Millennium Cooperation programme in Nepal, even BRI is coming under pressure.

India’s interests remain in the formation of a stronger democratic political front, which should ideally be helmed by the Nepali Congress. Between their indifferent parliamentary strength and a party opposition to Sher Bahadur Deuba as leader, the NC is sort of hobbled at the moment when they could have gained at the Communists’ expense.

Oli’s position had become wobbly because of two ordinances he decided to promulgate — amending the Constitutional Council (Duties, Functions and Procedures) Act and to amend the Political Party Act — came under extreme criticism and opposition to the extent that they were hurriedly withdrawn.

But in the interim, two political parties with a strong presence in the Madhes joined hands — Samajbadi Party and Rashtriya Janata Party, third and fourth largest parties in Parliament merged to form the Janata Samajbadi Party, with Baburam Bhattarai as a potential leader. In a sense, it shows a coming together of democratic political forces outside the NC. The Mashes-strong party would have a more positive approach to India. And, it could be the glue for other democratic parties to form a credible opposition to the NCP in future. As a matter of fact, it was this merger that heaped criticism on Oli and made his position tenuous.

Indian Nepal watchers believe the "compromise" hammered out by the Chinese may come under pressure anyway from the inherent divisions among the Communist leadership of the NCP — the widely divergent backgrounds of the Maoists and UML, as well as the personal ambitions of all their factional leaders may make it difficult to sustain the current peace. Oli’s own hell-for-leather politics will keep him on top for the time being — a remarkable feat given his failing health.

For the moment, Indian observers are watching the Chinese actions closely — "we are concerned, but we need to watch more closely," they said.