Until the 19th century. the ruling dynasty adhered to a policy of isolating the country from the main political forces in the region – British India and China. However, after the Anglo-Nepalese War of 1814-1816, Kathmandu began to focus on establishing unofficial good-neighborly relations with the colonial
authorities of India. Thus, Nepal sided with Great Britain in suppressing the Sepoy uprising in 1854–1856 and in two world wars of the 20th century. The state sovereignty of Nepal was recognized by the Anglo-Nepalese Treaty of 1923, although diplomatic relations with Great Britain, the USA and India were established after the latter gained independence. In the 1950s, an exchange of embassies took place with China, the USSR, and after Nepal joined the UN in 1955, with many other states of the world.
Nepal usually considers itself a member of the Non-Aligned Movement and in external contacts seeks not to give preference to any one country. In fact, however, the historical significance of Nepal’s political, economic and strategic ties with India continues to be acutely felt. This became apparent in 1988 when Nepal and China negotiated a commercial military deal. India’s dissatisfaction manifested itself in the closure of the border with Nepal, which entailed grave economic consequences for it. China has voiced cautious criticism of the Indian side, but has made no effort to intensify economic ties with Nepal. In mid-1988, just in the midst of the conflict, China raised its currency against the Nepalese rupee, which affected the prices of Chinese goods delivered through the passes in the Himalayas.
In 2001, the Joint State Border Committee was formed with India to resolve 53 disputed border sections covering an area of 720 sq. km; approximately 100,000 Bhutanese refugees live in Nepal, 90% of whom live in seven camps of the United Nations High Commissioner for Refugees.