JAKARTA -- Only a present day William Shakespeare could imagine the real life tragedy in Nepal when the Crown Prince eliminated an entire line of a royal dynasty that had ruled that land for more than 200 years.

In killing his father, the King, his mother, the Queen, his brother and sisters, an uncle - and then himself - the Crown Prince did more than recreate the most dramatic themes of Hamlet, Romeo and Juliet and Macbeth. He also plunged Nepal into its most serious crisis ever - one that can affect the rest of this volatile region.

Before last month, Nepal was known in the West primarily for its small size and remoteness. But in geostrategic terms it is neither small nor remote. The Himalayan kingdom is sandwiched between the world's two most populous countries - China and India. Nepal's 25 million people are divided among more than a dozen ethnic groups that speak 48 languages and dialects. And although the King relinquished most of his powers in 1990 in favor of becoming a constitutional monarch with a parliamentary democracy, the monarchy has been the glue that held the country together. Indeed, in the 11 years of constant political party infighting, there have been eleven governments and six prime ministers.

All of this turmoil has been an open invitation for China - and its surrogate, Pakistan, to try and extend their influence both in Nepal and into India's turbulent northeastern states.

The hijacking of an Indian passenger plane taking off from Katmandu by Islamabad-backed Kashmiri rebels two years ago, the arrest of a Pakistan diplomat allegedly planning to sell explosives to Nepalese insurgents, and the emergence of Nepal as the passage to India for Pakistan's Inter-Services Intelligence furnishes more than enough of a security reason for New Delhi not to take its ties with the kingdom for granted.

India is by far Nepal's most important economic, military and political ally. But Delhi expects complete loyalty in this unequal partnership, especially vis-à-vis China. When Nepal talked of procuring Chinese anti-aircraft guns in 1988, for instance, India responded by closing its markets to Nepal, increasing the landlocked kingdom's economic isolation.

Compounding its recent problems, and virtually unnoticed by the outside world, Nepal has been subjected for the past five years to a Maoist guerrilla insurgency spreading to most rural districts. The insurgency's intellectual godfather boasts that like Mao Zedong's guerrillas, once they control the countryside, the capital, Katmandu, will fall and, "We will hoist the hammer-and-sickle red flag atop Mount Everest." Sadly, with the death of most of the royal family, and the accession of a new king who may use the army to restore law and order, the nation may find itself in a full-scale civil war.

The oxygen feeding Nepal's instability is its abject poverty. Fully half of the population is unemployed and living below the poverty line. That is Nepal's real tragedy. The country could be rich. It has a crucial natural resource, water. Hundreds of rivers gushing south between the Himalayas have massive hydroelectricity potential to serve all of its domestic needs and the growing demand from India and Bangladesh.

So why hasn't Nepal exploited this limitless, renewable source of energy? A fear of increasing dependence on India, its principal consumer, has been the prime concern.

But with Nepal and nearby Bhutan endowed with enormous water resources, India with its coal and Bangladesh with its natural gas, these four neighboring countries could develop a mixed energy system for all to benefit. And massive investment capital from the West, the World Bank and the IMF to build the dams and the hydroelectric plants would surely be forthcoming.

Whether concerned about economics or security, there is too much at stake not to bring peace and prosperity to the kingdom and transform a Shakespearean tragedy into a happy ending.

Stanley A. Weiss is founder and chairman of Business Executives for National Security. The views he expresses are his own.