Background:
In 1865, Britain and Bhutan signed the Treaty of Sinchulu, under
which Bhutan would receive an annual subsidy in exchange for ceding
some border land. Under British influence, a monarchy was set up in
1907; three years later, a treaty was signed whereby the British
agreed not to interfere in Bhutanese internal affairs and Bhutan
allowed Britain to direct its foreign affairs. This role was assumed
by independent India after 1947. Two years later, a formal
Indo-Bhutanese accord returned the areas of Bhutan annexed by the
British, formalized the annual subsidies the country received, and
defined India's responsibilities in defense and foreign relations. A
refugee issue of some 100,000 Bhutanese in Nepal remains unresolved;
90% of the refugees are housed in seven United Nations Office of the
High Commissioner for Refugees (UNHCR) camps. Maoist Assamese
separatists from India, who have established themselves in the
southeast portion of Bhutan, have drawn Indian cross-border
incursions.