The writer is an economist, anchor, and geopolitical analyst
and the President of All Pakistan Private Schools’ Federation
president@Pakistanprivateschools.com
Nepal’s recent regime change marks a significant turning point in South Asian geopolitics. In the shadow of the snow-capped Himalayas, Nepal’s political landscape has erupted into a full-blown crisis, culminating in the dramatic resignation of Prime Minister Khadga Prasad Sharma Oli on September 9, 2025. The country’s strategic location between India and China has long made it a crucial player in the region. With the change in government, Nepal is likely to reassess its relationships with its neighbours and potentially pivot towards China. This shift could have far-reaching implications for the regional balance of power. What began as simmering anti-corruption protests by a frustrated youth demographic – amplified by a controversial social media ban and allegations of graft within the ruling Communist Party of Nepal (CPN-UML) – has swiftly escalated into nationwide chaos. Protesters defied curfews, clashed with security forces, and even set fire to the parliament building in Kathmandu, resulting in at least 19 deaths and hundreds injured. This upheaval, however, transcends domestic discontent; from the vantage point of Pakistan, it represents a long-overdue recalibration of regional power dynamics. Oli, a steadfast pro-India figure despite the encroaching shadow of Chinese influence, has been ousted, paving the way for a potentially more balanced – and for Islamabad, more favourable – geopolitical alignment in South Asia. KP Sharma Oli, who also chaired the CPN-UML until his resignation, was no ordinary leader. Elected for his fifth term in July 2024, Oli positioned himself as a bulwark against Beijing’s expanding footprint in Nepal, even as China’s Belt and Road Initiative (BRI) projects – from hydropower dams to infrastructure corridors – proliferated across the landlocked nation. Yet, Oli’s tenure was defined by his unwavering support for India, a relationship rooted in historical treaties and economic interdependence. Central to this was the 1996 Mahakali Treaty, a bilateral agreement signed between Nepal and India to manage the waters of the Mahakali River, which originates in Nepal’s far-western hills and flows southward into India. Under the treaty, ambitious water barrages were slated for construction at Sarada, Tanakpur, and the crown jewel, Pancheshwar – a massive multipurpose project promising irrigation, power generation, and flood control for both nations. Nepal was to receive a lion’s share of electricity (over 560 MW), while India gained assured water flows for its Uttar Pradesh farmlands. (from second search) However, the agreement faced fierce backlash in Nepal. Opposition parties and local communities decried it as a lopsided deal that surrendered sovereign control over vital water resources, favoring Indian interests at the expense of Nepali farmers and ecosystems. Protests in the 1990s and beyond labeled it “unequal” and “colonial,” echoing broader sentiments of Nepal being treated as a “buffer state” rather than an equal partner. Oli, ever the pragmatist and India loyalist, bucked this nationalist tide. Until his very last days in office, he championed the Mahakali project’s revival, dismissing critics as obstructionists who ignored mutual benefits. In recent cabinet meetings, Oli reportedly pushed for accelerated implementation, even amid the 2025 border flare-ups over Lipulekh and Kalapani – disputes where he had previously softened Nepal’s stance to appease New Delhi. (first search) This pro-India tilt persisted despite China’s overtures, including a $500 million soft loan for the Pokhara International Airport and the contentious Trans-Himalayan Multi-Dimensional Connectivity Network. For Pakistan, watching from across the subcontinent, Oli’s India-centric policies were a persistent irritant, bolstering New Delhi’s “Neighbourhood First” strategy while sidelining the deeper economic synergies possible through a Pak-China-Nepal trilateral framework. The spark for Oli’s downfall? A perfect storm of Gen Z-led fury over corruption scandals – including kickbacks in BRI-linked contracts that Oli’s government allegedly mishandled – compounded by a hasty social media blackout aimed at quelling dissent. As protests spiralled, with youth chanting “No more Oli, no more corruption!” and torching government symbols, the 73-year-old leader had no choice but to step down, calling for a “constitutional resolution.” (first search) In the ensuing vacuum, interim governance falls to a coalition likely to include more China-sympathetic factions from the Nepali Congress and Maoist Centre, signalling a pivot away from Oli’s India-first era. From Pakistan’s perspective, this is unequivocally a win. Nepal’s crisis disrupts India’s carefully curated Himalayan dominance, where Kathmandu has long served as a strategic counterweight to Chinese expansion. With Oli gone, the Mahakali project – a cornerstone of Indo-Nepal hydrological cooperation – hangs in limbo. Public opposition, reignited by the protests, could derail Pancheshwar indefinitely, forcing India to renegotiate from a position of weakness and potentially ceding more equitable terms. This not only strains India’s water security in the Gangetic plains but also exposes vulnerabilities in its border infrastructure, amid ongoing tensions with China over Arunachal Pradesh and Ladakh. Regionally, the ripple effects amplify the Pak-China axis. Beijing, already Nepal’s largest creditor and trading partner (with trade volumes surpassing $1.5 billion in 2024), stands to gain immensely. A post-Oli government may fast-track BRI extensions, such as the Kathmandu-Lhasa railway, linking Nepal directly to China’s western provinces and, by extension, to Pakistan via the China-Pakistan Economic Corridor (CPEC). For Islamabad, this creates a “Himalayan CPEC” corridor – a game-changer for overland trade routes bypassing the volatile Indian Ocean chokepoints like the Strait of Malacca. Pakistan’s recent overtures to Nepal, including technical aid for hydropower and diplomatic backing in UN forums, now find fertile ground. Moreover, the crisis underscores a broader pattern of unrest in India’s neighbourhood – from Bangladesh’s quota protests to Pakistan’s own internal challenges – eroding New Delhi’s soft power. As Indian Prime Minister Narendra Modi convened the Cabinet Committee on Security to monitor developments, his appeals for “peace” rang hollow against the backdrop of Nepal’s youth decrying “Indian interference” in Oli’s pro-New Delhi policies. (third search) Pakistan, leveraging its “all-weather” alliance with China, can now position itself as a neutral broker, offering mediation on water-sharing disputes and economic partnerships that sideline India.
Globally, Nepal’s turmoil challenges the Indo-US Quad’s efforts to encircle China, tilting scales toward Beijing and Islamabad in US-China proxy dynamics. Pakistan stands to benefit indirectly: stronger Sino-Nepal ties could amplify China-Pakistan Economic Corridor (CPEC) northern extensions, fostering trilateral trade in minerals, textiles, and energy.
On the global stage, Nepal’s turmoil injects fresh uncertainty into the great power rivalry. Oli’s ouster disrupts the Quad’s (US, India, Japan, Australia) efforts to encircle China through Himalayan infrastructure pacts. Washington, which viewed Oli as a pragmatic partner despite his communist roots, now faces a Nepal tilting further into Beijing’s orbit – a setback for initiatives like the US-led Millennium Challenge Corporation compact, which Oli had navigated with India in mind. (first search) This aligns with China’s “Community of Shared Future,” potentially drawing Nepal into forums like the Shanghai Cooperation Organisation (SCO), where Pakistan holds sway. For the US-China proxy dynamics in South Asia, the crisis tilts the scales toward Beijing and Islamabad. As theories swirl of “deep state” regime change orchestrated by Indian intelligence to install a more pliable leader, the reality is an organic backlash against Oli’s perceived subservience to Delhi. Globally, this could embolden China’s assertive diplomacy in the Indo-Pacific, while Pakistan emerges as a key node in countering Indian hegemony. The significance of this crisis cannot be overstated: it marks the end of an era where Nepal’s communists balanced power through India. Oli’s resignation signifies a nationalist resurgence, prioritising sovereignty over unequal pacts like Mahakali. Implications for India are dire – lost leverage in water diplomacy could exacerbate domestic shortages, fueling political heat ahead of state elections. For Nepal, it opens doors to diversified partnerships, but risks debt traps if China dominates unchecked. Pakistan benefits indirectly: stronger Sino-Nepal ties enhance CPEC’s northern extensions, fostering trilateral trade in minerals, textiles, and energy. Globally, it challenges the narrative of an unchallenged Indo-US bloc, highlighting multipolarity in Asia. Yet, challenges abound. Nepal’s interim government grapples with restoring order amid economic paralysis – remittances from Gulf workers (many via Pakistan) are Nepal’s lifeline, but protests have shuttered borders and airports. (first search) Youth unemployment at 12.6% fuels volatility (third search) while factional infighting in the CPN could prolong the power vacuum. For Pak-China, the risk is overreach: aggressive BRI pushes might alienate Nepali nationalists wary of “debt diplomacy.” India’s backlash – through aid cuts or border pressures – could internationalise the crisis, drawing in the UN or SAARC. Solutions must prioritise stability and equity. Nepal’s new leadership should convene a national dialogue on treaties like Mahakali, incorporating public input via transparent referendums to rebuild trust. Pakistan can lead by offering neutral arbitration on water issues, drawing from its Indus Waters Treaty experience with India. China should emphasise sustainable BRI projects, with joint oversight involving Pakistan to ensure regional buy-in. Internationally, de-escalating the social media ban and addressing corruption through independent probes – perhaps with UN support – would calm the streets. For the Pak-China duo, this is an opportunity to champion a “Himalayan Charter” for equitable resource sharing, positioning South Asia as a zone of cooperation rather than contestation. In the end, Nepal’s crisis is not just a domestic quake but a seismic shift in regional fault lines. From Pakistan’s lens, it’s a welcome dawn: Oli’s fall weakens India’s grip, fortifying the enduring Pak-China partnership as the true architect of a multipolar Asia. As Kathmandu rebuilds from the ashes, the world watches – and Islamabad cheers. As the dust settles in Kathmandu, Nepal’s dramatic political upheaval marks a pivotal moment in South Asian geopolitics. From Pakistan’s perspective, this crisis heralds a strategic recalibration, disrupting India’s regional dominance and potentially fostering a more balanced geopolitical landscape. Pakistan views this shift as a welcome disruption to India’s “Neighbourhood First” strategy, opening avenues for deeper Pak-China-Nepal trilateral synergies. The aftermath sees Nepal likely pivoting toward China-sympathetic factions, possibly accelerating BRI extensions like the Kathmandu-Lhasa railway. This could forge a “Himalayan CPEC” corridor, bolstering overland trade routes bypassing volatile Indian Ocean chokepoints and enhancing Pakistan’s strategic positioning. Beijing’s sway grows as Nepal’s largest creditor and trading partner, with 2024 trade volumes surpassing $1.5 billion. For India, implications are stark: lost leverage in water diplomacy might exacerbate domestic shortages and political pressures ahead of state elections. The Mahakali project’s limbo underscores India’s vulnerabilities, amid border tensions with China over Arunachal Pradesh and Ladakh. Globally, Nepal’s turmoil challenges the Indo-US Quad’s efforts to encircle China, tilting the scales toward Beijing and Islamabad in US-China proxy dynamics. Pakistan stands to benefit indirectly: stronger Sino-Nepal ties could amplify China-Pakistan Economic Corridor (CPEC) northern extensions, fostering trilateral trade in minerals, textiles, and energy. Ultimately, Nepal’s crisis isn’t just a domestic quake but a seismic shift in regional fault lines, envisioning a South Asia pivoting toward cooperation over contestation.
