– By Animesh Pratap Singh
Resuming Trade Through Lipulekh: India-China Partnership Amid Nepal’s Enduring Territorial Claims
Introduction
In a significant move signaling a potential thaw in bilateral relations strained since the 2020 Galwan Valley clash, India and China have agreed to resume border trade through the Lipulekh Pass in Uttarakhand, along with other routes like Shipki-La in Himachal Pradesh and Nathu-La in Sikkim. This development, announced in mid-August 2025, comes amid broader efforts to normalize ties, including the resumption of direct flights and discussions on visa relaxations. However, the decision has reignited tensions with Nepal, which staunchly claims Lipulekh as part of its sovereign territory. Kathmandu has sent diplomatic notes to both New Delhi and Beijing, protesting the move as a violation of its borders. This article delves into the historical facts underpinning the dispute, the stands of the involved countries, any notable blunders, recent measures, and the broader geopolitical implications of this evolving scenario.
Historical Context of Lipulekh Pass
Lipulekh Pass, situated at an altitude of about 17,060 feet in the Himalayas, has long served as a vital link in ancient trade routes connecting the Indian subcontinent with Tibet (now part of China). Historically, it facilitated the exchange of goods like salt, wool, and borax from Tibet in return for grains and textiles from India. The pass’s strategic importance was formalized in the 1954 India-China agreement on trade and intercourse between Tibet and India, which designated Lipulekh as one of six passes for border trade. However, the 1962 Sino-Indian War disrupted these arrangements, leading to a prolonged closure.
The roots of the modern dispute trace back to the 1816 Treaty of Sugauli, signed between the Kingdom of Nepal and the British East India Company following the Anglo-Nepalese War (1814-1816). The treaty defined Nepal’s western boundary along the Kali River (also known as Mahakali or Sharda River). Nepal interprets the treaty as placing the river’s origin at Limpiyadhura, thereby including Lipulekh, Kalapani, and Limpiyadhura—areas totaling about 370 square kilometers—within its territory. In contrast, India maintains that the Kali River originates from a smaller stream below Lipulekh Pass, based on British-era maps and surveys from the 19th century, thus placing these areas under Indian control. Post-independence, India stationed troops in Kalapani in the 1960s for strategic reasons, particularly after the 1962 war with China, viewing the area as a critical vantage point overlooking potential Chinese incursions.
The issue remained largely dormant until the 1990s. Nepal first formally raised objections in 1997 when India and China discussed reopening Lipulekh for trade and pilgrimage. Tensions escalated in 2015 when India and China signed an agreement to use Lipulekh as a route for the Kailash Mansarovar Yatra (a Hindu pilgrimage to Tibet), without consulting Nepal, prompting Kathmandu to protest vehemently.
The Triangular Dispute: Claims and Counterclaims
The Lipulekh dispute is inherently triangular, involving India, Nepal, and China, each with distinct positions shaped by history, strategy, and geopolitics.
Nepal’s Stand: Nepal asserts that Lipulekh, Kalapani, and Limpiyadhura are integral parts of its Dharchula district in Sudurpashchim Province, based on the Sugauli Treaty’s delineation of the Kali River as the border. Kathmandu argues that British maps from before 1816 support its claim, and it accuses India of unilateral occupation since the 1960s. In 2020, Nepal amended its constitution and released a new political map incorporating these areas, a move seen as a nationalist response to India’s inauguration of a strategic road to Lipulekh that year. Nepal views any India-China activity in the area as a infringement on its sovereignty and has consistently demanded bilateral talks to resolve the boundary based on historical evidence.
India’s Position: New Delhi maintains that Lipulekh has always been part of its Pithoragarh district in Uttarakhand, supported by revenue records, censuses, and maps dating back to the British Raj. India rejects Nepal’s claims as “artificial enlargement” and “untenable,” arguing they lack historical or factual basis. The Ministry of External Affairs (MEA) has emphasized that the 2020 Nepali map was issued without consultation and contradicts ongoing boundary discussions. India remains open to dialogue through established mechanisms like the Joint Boundary Working Group but insists on maintaining its administrative control for security reasons.
China’s Stance: Beijing has historically treated Lipulekh as a bilateral matter with India, recognizing it as part of the India-China border in agreements like those in 1954 and 2015. China has not publicly endorsed Nepal’s claims but has occasionally supported Kathmandu diplomatically, possibly to counter Indian influence in the region. For instance, in 2020, amid Nepal’s map controversy, China avoided direct involvement but emphasized “friendly consultations” among all parties. Critics argue China uses the dispute to drive a wedge between India and Nepal, aligning with its broader Belt and Road Initiative interests in South Asia.
Recent Developments in 2025
As of August 2025, the resumption of trade through Lipulekh is part of a broader India-China reset, influenced by global economic pressures such as potential U.S. tariffs under a re-elected Donald Trump. The agreement includes reopening three border points, with Shipki-La already seeing progress and discussions ongoing for Lipulekh. This could boost local economies in India’s border regions by reviving traditional trade in commodities like herbs, handicrafts, and machinery.
Nepal’s response has been swift and unified across political lines. Prime Minister KP Sharma Oli’s government sent diplomatic notes on August 23, 2025, reiterating claims and urging both neighbors to respect its sovereignty. Opposition leaders have called for raising the issue during Oli’s upcoming visits to India and China. Social media discussions on X highlight Nepali frustration, with users pointing to historical “bypassing” of Nepal since 1954. India has dismissed these objections as unjustified, while China has remained silent, focusing on bilateral gains.
Potential Blunders and Missteps
Several blunders have exacerbated the dispute. India’s 2015 agreement with China and the 2020 road inauguration were perceived as unilateral, ignoring Nepal’s sensitivities and fueling anti-India sentiment in Kathmandu—possibly a diplomatic oversight amid strained Sino-Indian ties. Nepal’s escalation in 2020, including constitutional amendments, has been criticized as politically motivated, potentially influenced by China, leading to economic repercussions like India’s informal blockade in 2015. China’s opportunistic support for Nepal without direct claims has been seen as a strategic error, risking regional instability.
Measures and Diplomatic Efforts
Efforts to resolve the issue include the India-Nepal Joint Boundary Working Group, which has met sporadically but made little progress on Lipulekh. Nepal’s recent diplomatic notes call for evidence-based talks, while India advocates dialogue without preconditions. Trilateral discussions have been suggested but remain unlikely due to sovereignty concerns. Confidence-building measures, such as joint surveys or economic incentives for Nepal, could de-escalate tensions. Nepal’s PM Oli has hinted at addressing it bilaterally during his 2025 visits.
Broader Implications
This resumption highlights shifting geopolitics: India-China detente could stabilize supply chains amid global uncertainties, but it risks alienating Nepal, pushing it closer to China. Economically, trade revival promises benefits for border communities, yet unresolved disputes could lead to protests or blockades. Regionally, it underscores the Himalayas’ fragility, where climate change and infrastructure projects amplify territorial sensitivities. For South Asia, it serves as a reminder that historical treaties like Sugauli need modern reinterpretation to prevent escalation.
Conclusion
The Lipulekh trade resumption marks a pragmatic step in India-China relations but underscores the perils of ignoring historical disputes. With Nepal’s claims rooted in colonial-era ambiguities and India’s stance backed by administrative continuity, resolution demands nuanced diplomacy. As global powers navigate these Himalayan heights, prioritizing dialogue over unilateralism could transform a point of contention into a bridge for regional prosperity. The coming months, with high-level visits on the horizon, will test whether this thaw extends to mending ties with Nepal or deepens the rift.