Squeezed between giant arch-rivals India and China, the landlocked mountain kingdom of Bhutan was long isolated by icy Himalayan peaks.

But as Bhutan readies to elect a new parliament in Thimphu on Jan. 9, China and India are watching the contest with keen interest as they eye strategic contested border zones, analysts warn.

A "cooperation agreement" inked between Bhutan and China in October after talks over their disputed northern frontier sparked concern in India, which has long regarded Bhutan as a buffer state firmly under its orbit.