Bhutan came into contact with the British as they conquered India in the 1770s. An 1865 treaty transferred some of Bhutan's border territory to the British in return for annual compensation. In 1907 Britain influenced the creation of a hereditary monarchy to replace the dual theocratic-civil government that had been in place since the seventeenth century. Thereafter, the British agreed to refrain from interfering in internal Bhutanese affairs while retaining the right to guide foreign relations.
After the British withdrawal from the subcontinent in 1947, a now-independent India assumed the task of steering Bhutanese foreign relations. This arrangement was formalized in Article 2 of the 1949 Treaty of Friendship, which also recognized Bhutanese independence. In subsequent years, Bhutanese leaders periodically questioned the effect that this treaty had on their sovereignty. From the 1970s on, Bhutanese leaders adopted a broad interpretation of Article 2 and asserted their own right to shape foreign policy.
In the post-1945 period, Bhutan's foreign policy was primarily shaped by its location between two regional powers occasionally in conflict with each other, the PRC and India. This led Bhutan to adopt a nonaligned position between these two in particular and in the wider Cold War generally. While developments such as the 1951 Chinese occupation of Tibet and the 1962 Sino-Indian border clash seem to have prompted a tilt toward India, Bhutan also asserted its independence from India by engaging directly with the Chinese on boundary and refugee issues. At the same time, Bhutan exploited opportunities to end its isolation and its traditional dependence on India with greater involvement in international organizations, such as the 1962 Colombo Plan, the United Nations, and the Non-Aligned Movement. In 1983, Bhutan became a founding member of the South Asian Association for Regional Cooperation.
Since the 1960s Bhutanese leaders, with economic assistance from India and international institutions, intensified efforts to develop and modernize their country. Such efforts were costly, and the struggle between conservative and progressive forces at times led to internal instability. One such instance was the assassination of the reform-minded prime minister, Jigme Palden Dorji, in April 1964, a murder masterminded by the king's uncle Namgyal Bahadur, the army chief of operations. Bhutan's economy today is largely agricultural and remains one of the less-developed economies in the world, although the government is turning to tourism as a potential source of new revenue.
Soo Chun Lu
Rahul, Ram. Royal Bhutan: A Political History. New Delhi, India: Vikas, 1997.; Rose, Leo. The Politics of Bhutan. Ithaca, NY: Cornell University Press, 1977.; Savada, Andrea Maties. Nepal and Bhutan: Country Studies. Washington, DC: Federal Research Division, Library of Congress, 1993.; Singh, Nagendra. Bhutan: A Kingdom in the Himalayas. New Delhi, India: Thomson, 1972.