India is Bhutan’s largest trade and development partner, providing significant amounts of foreign aid and investment. Traditionally, the 1949 Treaty of Peace and Friendship governed relations between the countries. In February 2007, India and Bhutan signed a new treaty removing the clause that India will “guide” Bhutan’s foreign policy and allowing Bhutan to purchase military equipment from other countries. However, bilateral ties remain close, demonstrated by Indian Prime Minister Manmohan Singh’s May 2008 visit to Thimpu during which he addressed the newly elected parliament. Prime Minister Jigme Thinley returned the gesture when he made his first official trip abroad as prime minister to New Delhi in July 2008; King Jigme Khesar Namgyel Wangchuck also visited India in December 2009.

In recent years, insurgents on the Indian side of the border from the United Liberation Front of Assam (ULFA) and the Bodos have used Bhutan as a safe haven. In December 2003, Bhutan military troops expelled Indian insurgents from Assam. Through this joint effort with India, Bhutan strengthened border security and continued cooperation with the Indian military.

Bhutan and China do not have diplomatic relations, although they have engaged in 19 rounds of high-level talks regarding a border dispute over three Chinese-built roads which the Bhutanese Government alleges encroach on its territory. Although the current official trade between the countries is minimal, the Chinese Government announced that trade had increased by 3,000% from 2006 to 2007.

Bhutan and Nepal established diplomatic relations in 1983 and are still negotiating a solution to a protracted refugee situation, in which over 85,000 refugees reside in seven UNHCR camps in Nepal. Most of the refugees claim Bhutanese citizenship, while Bhutan alleges that they are non-nationals or “voluntary emigrants,” who forfeited their citizenship rights. In 2003, a joint Bhutan-Nepal verification team categorized refugees from one camp into four groups, but progress remains stalled. Out of these refugee camps have arisen several insurgent groups, such as the Bhutan Communist Party (Marxist-Leninist-Maoist), the Bhutan Tiger Force, and the United Revolutionary Front of Bhutan. Bhutanese security forces blamed these groups for a series of bombings targeting the country in the lead-up to the 2008 parliamentary elections.

Bhutan became a member of the United Nations in 1971. Bhutan does not have diplomatic relations with any of the permanent members of the UN Security Council. Bhutan was elected to the UN Commission on Human Rights in 2003 and served until 2006.

Bhutan enjoys diplomatic relations with seven European nations, which form The “Friends of Bhutan” group, together with Japan. These countries are Switzerland, Denmark, Sweden, Norway, the Netherlands, Finland, and Austria. Also known as donor nations, they contribute generously to Bhutanese development and social programs. Bhutan also has diplomatic relations with South Korea, Canada, Australia, Kuwait, Thailand, Bahrain, Bangladesh, the Maldives, Sri Lanka, and Pakistan.

Bhutan has 8,000 members in five military branches: the Royal Bhutan Army, Royal Bodyguard, National Militia, Royal Bhutan Police, and Forest Guards. In FY 2002, the Bhutanese Government spent 1.9% of its GDP on the military or U.S. $9.3 million. India maintains a permanent military training presence in Bhutan through IMTRAT, the Indian Military Training Team.

The U.S. Embassy in New Delhi, India, has consular responsibilities for Bhutan, but U.S. citizens also may request assistance from U.S. Embassies in Kathmandu, Nepal, or Dhaka, Bangladesh. The United States and Bhutan do not have diplomatic relations, and the United States does not give foreign assistance to Bhutan. Informal contact is maintained through the U.S. Embassy and the Bhutanese Embassy in New Delhi. Bhutan does participate in a regional program for South Asia sponsored by the U.S. Agency for International Development (USAID) that helps countries develop their power infrastructure (SARI-E). A few Bhutanese military officers have attended courses at the Asia-Pacific Center for Security Studies. The U.S. Government annually brings several Bhutanese participants to United States through its International Visitors and Fulbright Programs.