Bhutan is bounded on three sides by India. From east to west, the Indian states of Sikkim, West Bengal, Assam, and Arunachal Pradesh (formerly the North-East Frontier Agency) border Bhutan. In view of the long-standing political disputes and border confrontations between India and China, Bhutan has long been part of India's strategic defense plan. In the view of some Indian strategists, Bhutan was a weak link in India's defense against China.
The key document guiding relations with India is the Treaty of Friendship Between the Government of India and the Government of Bhutan of 1949. The ten-article treaty, in force in perpetuity, calls for peace between the two countries and assures Indian noninterference in Bhutan's internal affairs in return for Bhutan's agreeing "to be guided by the advice of the Government of India in regard to its external relations" (Article 2). The treaty provides for compensation by India at a higher rate than provided in the 1865 and 1910 British treaties, and it returned Bhutan's Dewangiri territory seized by Britain in the Duar War. It also guarantees free trade between the countries and duty-free transit across India of Bhutan's imports. Furthermore, the treaty assures the rights of citizens of each country and the extradition of criminals seeking refuge in either country.
Events in Tibet have had causal effects on Bhutan-Indian relations. When the Chinese communists took over Tibet in 1951, Bhutan braced itself against a renewed external threat with a modernization program and a new defense posture. In his first visit to Bhutan in 1958, Indian prime minister Jawaharlal Nehru reiterated India's wish that Bhutan remain an independent country, "taking the path of progress according to your will." Following precedent, Bhutan sided with India when the Chinese army occupied Tibet in 1959 and a border dispute emerged between China and India. Nehru declared in the Indian parliament in November 1959 that "any aggression against Bhutan . . . would be regarded as an aggression against India." A de facto alliance developed between Bhutan and India by 1960, and Indian aid increasingly bolstered Bhutan's strategic infrastructure development. In times of crisis between India and China or between Bhutan and China, India was quick to assure Bhutan of military assistance. Concerns were raised by Bhutan, however, during the 1971 Indo-Pakistani War when there were doubts about India's ability to protect Bhutan against China (which sided with Pakistan) while fighting a two-front war.
In 1960 the Druk Gyalpo had said that Bhutan was not 100 percent independent because of the 1949 treaty, and until Bhutan emerged into the world of international diplomacy by joining the UN in 1971, Article 2 of the treaty seemed intact. Admission to the UN, however, changed Bhutan's perspective on the world beyond India and Thimphu's traditional dependence on New Delhi. Two years later, Bhutan and Bangladesh exchanged diplomatic recognition, hinting further at Thimphu's independent attitude. A new interpretation of the relationship emerged in 1974 when Bhutan's minister of foreign affairs said that whether or not Bhutan followed India's advice and guidance on foreign policy matters was optional. Bhutan had raised its representation in India to the ambassadorial level in 1971 and in 1978 changed the name of its diplomatic office in New Delhi from the Royal Bhutan Mission to the Royal Bhutan Embassy to further reflect its sovereign status. A new trade agreement between Bhutan and India in 1972 provided an exemption from export duties for goods from Bhutan to third countries.
The Druk Gyalpo's statement in 1979 that the 1949 treaty needed to be "updated" was still another move asserting independence. Members of the National Assembly speaking just before the Druk Gyalpo's "update" announcement made the interpretation that Article 2 only required Bhutan to seek India's advice and guidance on matters of external affairs. Bhutan exerted its independent stance at the Non-Aligned Movement summit conference in Havana, also in 1979, by voting with China and some Southeast Asian countries rather than with India on the issue of allowing Cambodia's Khmer Rouge to be seated at the conference. Bhutan's votes in the UN on such issues as the status of landlocked nations also did not follow India's leads.
Despite a history of good relations between Bhutan and India, bilateral border issues went long unresolved. Indo-Bhutanese borders had been delineated in the Treaty of Peace of 1865 between Bhutan and Britain, but it was not until the period between 1973 and 1984 that a detailed delineation and demarcation was made. Border demarcation talks with India generally resolved disagreements except for several small sectors, including the middle zone between Sarbhang and Geylegphug and the eastern frontier with Arunachal Pradesh.
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