Game-changers ahead on the (long) Maritime Silk Road

Tuesday, 7 February 2017

Game-changers ahead on the (long) Maritime Silk Road

February 04, 2017

From the Bab al-Mandab to the strait of Malacca, from the strait of Hormuz to the strait of Lombok, all the way to the key logistical hub of Diego Garcia 2,500 miles southeast of Hormuz, the question pops up: How will the unpredictable new normal in Washington – which is not exactly China-friendly – affect the wider Indian Ocean?

At play are way more than key chokepoints in an area that straddles naval supply chains and through which also flows almost 40% of the oil that powers Asian-Pacific economies. This is about the future of the Maritime Silk Road, a key component of the Chinese One Belt, One Road (OBOR), and thus about how Big Power politics will unfold in a key realm of the Rimland.

India imports almost 80% of its energy from the Middle East via the Indian Ocean. Thus, for Delhi, protection of supply chains must be the norm, as in the current drive to develop three carrier battle groups and at least 160 naval vessels, including submarines, before 2022. That also implies boosting a cooperation agreement with the nations bordering the strait of Malacca – Malaysia, Singapore and Indonesia – and developing military infrastructure in the Andaman and Nicobar islands.

China for its part advances a relentless economic / infrastructural drive from Myanmar to Pakistan, from Bangladesh to the Maldives, from Sri Lanka to Djibouti – a counterbalance to the impossibility of fully implementing “escape from Malacca”, the complex, multi-pronged Beijing strategy for diversifying energy supplies.

The privileged infrastructure connectivity hub remains the megaport of Gwadar in the Arabian Sea – which will be controlled for the next 40 years by a Chinese company. Gwadar is the naval destination of the US$46 billion (and counting) China-Pakistan Economic Corridor (CPEC) originating in Xinjiang, which will be the economic New Silk Roads game-changer in South Asia.

This implies everyone jumping aboard the new Karakoram highway, currently under construction in Pakistan’s sublimely mountainous northern Gilgit-Baltistan, with the military watching over a frantic maze of Chinese engineers.

Islamabad/Rawalpindi took no prisoners in offering a sprawling support system to prevent possible interference by Uighur separatist groups. For all practical purposes, Pakistan’s Inter-Services Intelligence (ISI) is now focused on resident Uighurs in Pakistan like a laser, while not forgetting Balochistan’s separatist groups, who, with the right “incentive”, might also derail CPEC further on down the road.

Beijing treads a very fine – soft power – line. Islamabad offered the Chinese Navy a base in Gwadar, but was politely declined: the graphic message would totally freak out both Delhi and Washington. Gwadar will be inevitably developed over time as a trade hub for a vast swathe of South Asia, but Delhi’s anxieties relate to its virtually ready-to-roll capability for monitoring the Indian Navy in the Indian Ocean and the US Navy in the Persian Gulf.

Go North-South, young Eurasian

Gwadar happens to be not far away from Chabahar, in Iran – which is being designed as an Indian trade hub towards the markets of Central Asia, connecting India with Afghanistan via Iran and thus bypassing Pakistan. That’s the Southern – or Indian – Silk Road in action. Gwadar and Chabahar are the top two new hubs bound to link the Indian Ocean to central Eurasia, with Iran, India and Russia featuring as key members of the slowly-developing but potentially spectacular International North-South Transport Corridor (INSTC).

Moreover, Iran, China and India may all eventually converge towards a free trade zone with the Russia-led Eurasia Economic Union (EEU), as the CPEC for its part will allow Russia and Central Asia to boost trade with the Indian Ocean Rimland.

Then there’s the fascinating case of Sri Lanka. According to the
Institute of Policy Studies in Sri Lanka, from 2006 to 2015 China invested over US$5 billion, with Sri Lanka’s minister of development strategies and international trade adding that China has pledged over US$10 billion more up to 2019.

The key project is the deep-sea port at Hambantota – plus an international airport in nearby Mattala. Sri Lanka struck a deal with China Merchants Port Holdings at the end of 2016 to sell 80% of Hambantota for US$1.1 billion and to lease 15,000 acres of nearby land for 99 years.

Needless to add, the proverbial “concern” with this Chinese win-win was registered in both Delhi and Washington. The possibility that China will eventually acquire a permanent naval military base in the Indian Ocean is a full-time obsession of US Think Tankland. Colombo, though, has always been adamant: Chinese-financed infrastructure does not imply basing rights for the Chinese Navy.

In fact, any Chinese move – from leasing a Maldives island for 50 years for US$4 million to building a military base in Djibouti (officially a base for “technical and logistical support” to the Chinese Navy) by the end of 2017, close to the Americans and the French, is a source of “concern”.

Where China in South Asia is concerned, the Pentagon / Naval War College always fall back to the “string of pearls” threat. Especially now with the Maritime Silk Road, a “string of pearls” is a categorical imperative for Beijing. But that does not imply Chinese military hegemony.

For Beijing, conscious of cost-efficiency, the logistical nightmare of maintaining naval bases in foreign lands far, far away from the Middle Kingdom is definitely not a win-win. So the notion of having a Chinese carrier battle group in the Indian Ocean ready to confront the Indian Navy is idle geostrategic speculation. The very long game is all about establishing key trade nodes for the Maritime Silk Road.

I got a naval offer you can’t refuse

It will be fascinating to watch how mechanisms such as the South Asian Association for Regional Cooperation (SAARC) develop.

Let’s see what Delhi – deeply committed to an official Make in India campaign – may offer in the way of “free” markets to Nepal (which is leaning towards China), Bangladesh (always in a complex relationship with Pakistan) and Sri Lanka.

Since 2008, China has been India’s largest trading partner. China and India will be involved in deeper cooperation inside the BRICS, and in managing the New Development Bank (NDB). Moreover, India is about to become a full member of the Shanghai Cooperation Organization.

The notion of Delhi reigning supreme in the Indian Ocean is misguided. From now on, with the emphasis on the Maritime Silk Road, it will be more a case of serious India-China economic competition and/or cooperation, as both countries invest in the protection/expansion of their extensive, complex supply chains.

The Pentagon, under James “Mad Dog” Mattis, will, of course, be watching closely. India’s NDTV recently reported that the US Pacific Command had tacitly admitted the obvious: that the US and India are sharing intel on Chinese warships and submarines in the Indo-Pacific. Moreover, there was a hint that Beijing could deploy a carrier battle group in the Indian Ocean today if it saw fit.

It’s unlikely Beijing will accept the challenge – just to be slapped with more charges of “Chinese aggression” and “threatening freedom of navigation”. Better invest in non-stop, cumulative Maritime Silk Road deals.