Nepal was created from an amalgam of small principalities in 1768 under King Prithvi Narayan Shah. Under the control of a hereditary king, Nepal then became a 'buffer state' between the British empire and the territories to the north. The main instrument of British rule from the mid-19th century onwards was a hereditary prime minister drawn from the Rana family. The country became formally independent in 1923, but it was not until 1947 (the year of Indian independence) and the total withdrawal of the British from the region that Nepal achieved genuine independence. In 1951, the Ranas, who were still in power, were overthrown in a coup organised by the Nepali Congress, and a hereditary monarchy was restored under King Tribhuvan.
Four years later he was succeeded by his son, King Mahendra. In 1959, Mahendra established a parliamentary constitution, and the ensuing elections were won by the Nepali Congress (led by BP Koirala) which had played a key role in the re-establishment of the monarchy. A year later however, a royal coup led to the banning of all political parties and the establishment of a constitution based on the traditional village councils (the Panchayat system). Mahendra ruled until his death in 1972 when he was succeeded by his son Birendra.
Birendra persevered with the Panchayat system, bolstered initially by the result of a referendum which gave a narrow majority in favour of its continued use. In the face of substantial and growing opposition, which increased steadily throughout the 1980s, Birendra resorted to a mix of repression, censorship and cosmetic administrative reforms to defuse the situation. In 1986, a member of the minority Newari community, Marich Man Singh Shrestha, became Prime Minister for the first time. Then, in 1990, growing public unrest forced the King to accept political parties and introduce a draft constitution allowing for direct elections to a bicameral parliament.
The first two polls under the new system, held in 1991 and 1994, were won by the Congress Party (linked to the Indian party of the same name) and the United Marxist-Leninist Party (UML) respectively. Both parties are rife with factional infighting with the result that Nepal lacked a truly stable government throughout the 1990s. The Congress Party was returned to office once again at the most recent poll in May 1999. Since then, Nepal has been consumed by more dramatic events.
The Maoist-inspired Nepalese Communist Party pulled out of constitutional politics in 1996 and launched an armed struggle, roughly akin to the campaign conducted by the Peruvian movement Sendero Luminoso. The guerrillas have attracted large-scale support from the impoverished peasantry and have an estimated 15,000 personnel under arms. Their leader is Pushpan Kamal Dahal, better known as 'Comrade Prachanda', a Maoist ideologue who is based outside the country (probably in India) along with most of the NCP political leadership.
In June 2001, the monarchy, the bedrock of the Nepali state, almost self-destructed through a bizarre and bloody incident when the heir apparent to the throne, Crown Prince Dipendra, went berserk in the royal palace and murdered several members of his immediate family - including King Birendra - before committing suicide. The senior remaining Royal, Gyanenda, assumed the throne. The new monarch lacked the popularity of his predecessor amongst ordinary Nepalese and, along with his government, faced some formidable problems, including the Maoist insurgency, a squabbling parliament and a very weak economy.
He also inherited a new Prime Minister, Sher Bahadur Deuba, after his predecessor, the deeply unpopular Girija Prasad Koirala was forced out of office. By late 2002, there had been little improvement on any front. The Maoists controlled much of the countryside and had established their own state-within-a-state in the western Nepal; their insurgency spread to the capital also. In addition, the collapse of the tourist sector was undermining the whole economy. In October 2002, Gyanendra sacked premier Deuba and the Cabinet, and assumed some executive powers himself. National elections due for mid-November were postponed. The Nepali government now began negotiations with the rebels, and managed to reach an accord on political reforms and a new constitution. In January 2003, the rebels announced a ceasefire. This held until the following September, by which time the Nepali government was in disarray, mainly due to profound disagreements over negotiating strategy. Nepal had its third prime minister in nine months: Surya Bahadur Thapa was appointed to the post by King Gyanendra in mid-2003 following his predecessor's failure to form a government. Almost farcically, Thapa also resigned in May 2004, after weeks of street protests by opposition groups against his Royalist stance, only for Sher Bahadur Deuba to be reinstated by the king. The violence of the rebels has not abated; indeed, it culminated, as of August 2004, in a week-long blockade of Kathmandu. This sorry affair was sadly complemented by the hostage-taking of 12 Nepalese citizens in Iraq, later murdered by their captors.
On February 1 2005, King Gyanendra caused global shock when he sacked - for the second time - the Nepali government, kept politicians under strict surveillance, curtailed press freedoms and declared a state of emergency. Since assuming direct control, he has sought to appoint a mainly pro-monarchist cabinet. King Gyanendra claimed that the former government under prime minister Sher Bahadur Deuba had failed to restore peace and quell the Maoist insurgency in the face of imminent elections. The country is now enduring controversial press restrictions, with some newspapers even deliberately leaving their pages blank as a muted form of protest. There are concerns that the King may be seeking to impose an Absolute Monarchy in Nepal. Although the Maoist insurgency have also been responsible for gross injustices and violations of peace (reputedly having killed more civilians than soldiers), there are worries that King Gyanendra's latest manoeuvre will only strengthen the insurgency by highlighting the ineffectiveness of democracy and the downfalls of a monarchy that asserts interventionist power. It is hoped that the UN commission on human rights, who have sent an investigator to Nepal, could influence the King into retracting his latest actions. King Gyanendra has assured the world that his measures are only temporary and that he wishes to re-install democracy within three years.
Nepal has fewer immediate problems abroad. Relations with India, which reached crisis point during the mid-1990s, when the Indians imposed a trade embargo, have since improved. Outstanding border disputes have been settled (as with the Makhali River basin) or are in abeyance. Relations with Nepal's other large neighbour, China, have also been good. Nepal is still coping with up to 100,000 refugees who crossed the border from its third immediate neighbour, Bhutan, to escape political strife in their own country. But all of Nepal's neighbours are concerned about the consequences of the widening insurgency and the possible fall-out. King Gyanendra may have severely hampered relations with his neighbours by his recent actions and it remains to be seen how the issue will be resolved.