Trade Embargo as a Geopolitical Tool: A Case of Nepal-India Trade Relations

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Abstract

As interdependence grows, economic issues are increasingly political in their nature and impact, and political issues are increasingly economic. The interdependence is acute in issues that relate to international trade, and especially in the case of landlocked countries. Nepal is one such land-locked country, being between India and China, whose economy depends on the trade relations with its neighbouring countries. Two-thirds of Nepalese trade depends on India. The article presents a summary of Nepal-India trade cooperation, primarily the Nepalese dependence in trade and transit route to India and its effects. It also presents an overview of the trade pattern between the two countries and focuses on the trade embargoes by India. The article analyses the reason behind the embargoes of 1969, 1989 and 2015 and how the situations have been resolved. The embargoes imposed by India on Nepal seem to be more political in nature and their impacts are both political and economic. The Indian embargoes in Nepal follow an objective of compliance, deterrence and subversion. By analysing India’s pursuance of trade embargoes against Nepal, the article reaffirms that landlocked nations such as Nepal are susceptible to manipulation by geopolitical threats since neighbouring countries adjust trade ties or use trade ties to fulfil their political, security and economic interests.

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