Existing archives trace Bhutanese history back to AD450, although many of the intervening events remain a mystery. Bhutan has never been conquered or ruled by another foreign power. Guru Rinpoche is believed to have brought Mahayana Buddhism to Bhutan from Tibet in the eighth century. It first became a coherent political entity around the 17th century, under the direction of a succession of Tibetan lamas who established an administrative and political structure over the area, relying principally on the appointment of a set of regional governors. Spiritual and temporal roles were subsequently divided among the leadership (known as dharma raja and deb raja, respectively). The UK first came into formal contact with Bhutan in the 18th century, as a result of which the East India Company made a treaty with the territory in 1774. Throughout the 19th century, a series of struggles for influence between the regional governors destabilised the country.

In 1910, the British government took control of Bhutan’s foreign affairs, while agreeing not to interfere with the internal ruling. Meanwhile, the first of the present dynasty of hereditary rulers – who reunited the spiritual and temporal aspects of their mission – worked to consolidate their position. In 1947 and 1949, agreements were reached with India, by which the Indian government advised Bhutan on external relations. Trade agreements with India, essential to sustain the Bhutanese economy, have been the subject of regular rounds of negotiation. The most recent pact, concluded in Thimphu in 1990, was accompanied by diplomatic progress on the still-disputed border between the two countries. The presence on Bhutanese territory of Assamese and Bodoland guerrillas, seeking independence for their respective regions of northeast India, has also proved an irritant in bilateral relations. Yet despite its close relations with Delhi, Bhutan has occasionally switched its support to its other great neighbour, China. This has been particularly noticeable in international forums, such as the Non-Aligned Movement and the UN General Assembly, which Bhutan joined in 1971. Over the years, relations with China have been dominated by the issue of Tibet – thousands of refugees entered Bhutan after the Chinese occupation of Tibet in 1959; the country has since become a centre for Tibetan exile politics. Also, there have been clashes with Indian separatist rebels, such as those that fought with Bhutanese soldiers in the attempt to drive them from their bases in the south of the country in 2003.

The refugee issue also dominates relations with Bhutan’s other neighbour, Nepal, which hosts an estimated 100,000 Bhutanese refugees housed in camps in the east of the country. Most are ethnic Nepalis whose citizenship is in dispute. (The Bhutanese population is divided between two main ethnic groups – the Nepalis and the Drupka.) The Nepali government wants them to return to Bhutan; the Bhutanese refuse to take them. Talks to resolve the issue have been underway since November 2001. However, as of June 2005, these had still made no progress.

An important reason for the Bhutanese attitude is that the main domestic challenge to the Bhutanese regime has come from the illegal and Nepali-dominated Bhutan People’s Party (BPP). The BPP has campaigned for greater democracy through demonstrations and occasional acts of violence. The monarch, Jigme Singye Wangchuck (the fourth of the current dynasty), has so far relied on a mixture of repression and controlled development to keep the lid on the unrest, which persisted in most parts of the country throughout the 1990s (without seriously threatening the regime). Anything that could pose a threat to the established social order is excluded from this mountainous, isolated country. However, a momentous turnaround led to the monarch announcing in May 2005 that there would be a referendum on a proposed constitution whereby a parlimentary democracy would be set up in Bhutan. This is all part of an ongoing attempt to modernise Bhutan (although not to impair the beauty, serenity and moral values of the country). Foreign tourists were not admitted until 1974, the country’s only television station only began broadcasting in 1999 and a single Internet provider began operating around the same time. Bhutan was, however, an enthusiastic founder member of the South Asian Association for Regional Co-operation and hosted the inaugural meeting in 1985.

Bhutan has no written constitution and is ruled by a monarchy. Power is shared between the King, the Tshogdu (National Assembly) and the Je Khemp (Monastic Head) of the lamas. Of the 151-member Tshogdu, 105 members are elected for a three-year term, 35 are appointees of the monarch and 10 are representatives of Buddhist religious bodies. A new premier, Lonpo Kinzong Dorji, took office during 2002.