Little is known of the history of Bhutan before the 17th century. Buddhism was originally introduced from India in the 8th century, although the Buddhism of today's Bhutan is very much Tibetan in character. The forebears of the Bhotes (or Bhotias) came from Tibet, probably in the 9th century, when Tibetans invaded the area and met little resistance from the indigenous Tephu tribe. In the middle of the fifteenth century, Shabdung Ngawang Nangyal, a Tibetan lama exercising temporal as well as spiritual power, united the country and built most of the fortified villages ( dzongs ). His successors in power established a dual system, separating the temporal ruler (Desi or deb raja) and the spiritual ruler (Je Khempo or dharma raja).
The first recorded contact with the West occurred in 1772, when the British East India Company repelled a Bhutanese invasion of the princely state of Cooch Behar in India; they concluded a peace treaty two years later. During the 18th century and most of the 19th, British efforts to open trade with Bhutan proved futile, with the Bhutanese frequently attacking the relatively level areas of Assam and Bengal along their southern border. In 1865, the British finally defeated the Bhutanese, and Bhutan formally accepted a British subsidy of r50,000 a year, which was dependent upon their keeping the peace.
With British approval, Ugyen Dorji Wangchuk became the first hereditary king in 1907, replacing the temporal ruler. In 1910, the Punakha Treaty was concluded between the British Indian Government and Bhutan, under which British India agreed explicitly not to interfere in Bhutanese internal affairs, while Bhutan accepted British "guidance" in handling external matters—a role independent India assumed after 1947. A formal Indo-Bhutanese accord concluded in 1949 reaffirmed and amplified the earlier Punakha Treaty. Besides increasing Bhutan's annual subsidy to r500,000 and returning to Bhutan 83 square kilometers (32 square miles) of territory around Dewangiri (wrested by the British in 1865), it made India responsible for Bhutan's defense and strategic communications, committing India to avoid interfering in Bhutan's affairs and affirming Bhutan's agreement to be "guided by the advice of" India in foreign affairs.
In 1959, China published maps of the Himalayan frontier with South Asia that showed as Chinese part of the territory claimed by Bhutan; Chinese representatives also asserted that Bhutan belonged to a greater Tibet. In response, Indian prime minister Jawaharlal Nehru warned that an attack on Bhutan would be deemed an act of war against India. Fighting between India and China in neighboring border regions in the fall of 1962 did not violate Bhutan's borders, although survivors from Indian army units decimated east of Bhutan straggled back to India through Bhutan.
In April 1964, the long-time prime minister, Jigme Dorji, was assassinated, revealing fissures among the ruling elite. The plotters who were caught were executed, including the deputy commander of the army; others fled to Nepal. In the 1960s, Bhutan's advance toward modernization and the end of its insularity were accelerated by economic plans prepared and underwritten by India.
Relations with Nepal have grown difficult in recent years, due to a dispute with Nepal concerning Bhutanese refugees of Nepalese descent. The mostly Hindu "Nepali Bhutanese," comprising approximately a third of Bhutan's population, were granted citizenship in 1958. However, Bhutan changed its citizenship laws in the late 1980s, making the Nepali Bhutanese illegal immigrants. In 1990, the Bhutanese government expelled 100,000 Nepali Bhutanese, who fled to refugee camps in eastern Nepal. In 1993, Bhutan and Nepal established a Joint Ministerial Level Committee (JMLC) to address the issue of ethnic Nepalese refugees.
Nepalese activism, spearheaded by the Bhutan People's Party based in Nepal, continued through the early 1990s. It resulted in violence from both sides, and brought charges of violations of human rights against Bhutan's security forces. In 1996, "peace marches" of refugees from Nepal into Bhutan were met by force, and the marchers were deported by the Bhutanese police. The following year, the National Assembly adopted a resolution (later discarded) that prohibited family members of ethnic Nepalese refugees from holding jobs in the government or armed forces. The government also began resettling Buddhist Bhutanese from other regions of the country on land vacated by the refugees. In 1998, Foreign Minister Jigme Thinley took office with a mandate to settle the refugee issue. Although Bhutan and Nepal originally agreed in principal that the refugees be divided into four categories (1) bonafide Bhutanese; (2) Bhutanese emigres; (3) non-Bhutanese; and (4) Bhutanese who have committed crimes in Bhutan, the question of what to do with the more than 100,000 refugees living in the camps in Nepal remains unresolved. Talks between Bhutan and Nepal are ongoing.
At the Tenth JMLC round of talks held in December 2000, negotiators created a Joint Verification Team (JVT) to interview and verify the status of the Bhutanese refugees, but by the Eleventh round of JMLC talks held in August 2001, the verification process was moving at a rate of only 10 families per day. In addition to the JMLC talks, Foreign Secretary Level talks (FSLT) were held in November 2001, at which differences between the Nepali and Bhutanese positions on the issue of categorization of the refugees were clarified: Nepal proposed to reduce the four categories to two (Bhutanese and non-Bhutanese), a plan that was rejected by Bhutan. However, the two governments agreed that year to verify the identities of the refugees by family lineage, but the Bhutanese government did not give any indication of when these families may return to Bhutan. Further talks were held in August 2002.
There are also tensions between Bhutan and India's northeastern state of Assam. Two separatist groups from Assam—the United Liberation Front of Asom (ULFA) and the National Democratic Front of Bodoland (NDFB)—maintain well-entrenched bases in Bhutan. The separatist Kamatapur Liberation Organization (KLO) from West Bengal state is there as well. Bhutan refrained from taking direct action against the Indian separatists for fear of retaliatory attacks on its nationals, but in late December 2002, the Bhutanese government announced it would use military might to remove the separatists from bases within its borders. The Assam government has blamed Bhutan for the rise in militancy in the region, and welcomed the government's decision to launch a military response.
Reforms introduced by King Jigme Singye Wangchuck in June 1998 mark a milestone in Bhutan's political and constitutional history. Continuing his efforts toward modernization, the king issued a royal edict relinquishing some of the monarch's traditional prerogatives and giving a greater role in Bhutan's administration to elected government officials.
On 3 December 2002, the King of Bhutan issued a first draft of a constitution for Bhutan. The draft will be discussed in the country's 20 districts before it is presented to the National Assembly when it convenes in June 2003.
Bhutan in June 1999 took major steps toward modernization, legalizing television and the Internet. The first Internet cafe opened in Thimphu in 2000.