Challenges ahead as China flexes muscles
Against the backdrop of Sri Lanka’s economic collapse and China’s growing presence in the Indo-Pacific region, India has a key part to play G Parthasarathy reports
China is now playing an increasing role in developments across the Indo-Pacific region. It has undermined US influence in the oil-rich Gulf by getting Saudi Arabia and Iran to re-establish diplomatic relations. Moreover, Russia is also expanding its influence across the Indo-Pacific by using its vast energy resources to supply oil and gas. Washington, meanwhile, has acknowledged the reality that even friendly democracies like India will not join its economic boycott of Russia, as India receives a substantial portion of its oil supplies at very competitive prices from Russia.
Both the US and India, however, have a shared interest in dealing with growing Chinese maritime and economic power across the Indo-Pacific. India has manoeuvred carefully in dealing with its two important South Asian neighbours, Pakistan and Sri Lanka, in the face of challenges posed by China. Both these nations have close relations with China, and this has obvious implications for India’s security. Equally, New Delhi has also sought to ensure that Myanmar’s close relations with China do not adversely affect its security interests across its land and maritime frontiers.
The Sino-Pakistan relationship has been seen in New Delhi as primarily directed against India. It is a relationship which includes arms transfers, both conventional, and nuclear. Pakistan’s nuclear weapons and ballistic missiles, which can target Indian territory from New Delhi to the Andaman and Nicobar Islands, are of Chinese design.
Sri Lanka’s concerns about India were accentuated during the Sinhala-Tamil ethnic conflict of the 1980sat a time when there were concerns in Colombo about India’s links with the separatist Tamil LTTE. Although the ethnic conflict was confined to northern Sri Lanka where Tamils had lived for centuries and did not involve the ‘Plantation Tamils’ living in the country’s South, who were taken to Sri Lanka during colonial rule, there have been concerns in India over the manner in which Sri Lanka was compelled to virtually handover the strategic southern port of Hambantota to China after being unable to repay Chinese loans for its construction. The upshot is that Chinese naval vessels sailing across the Indian Ocean can now berth freely in Hambantota and these berthing facilities enable China to have a strategic naval base at the heart of the Indian Ocean, close to India’s shores.
Sri Lanka is going through an acute economic crisis, similar to what Pakistan is also facing. The virtually bankrupt Colombo government was therefore pleasantly surprised, indeed overwhelmed, when Prime Minister Modi announced that India would contribute $4bn, to tide it over its acute foreign exchange problems in imports of vital commodities such as fuel, oil and medicines. Interestingly, China stepped in rather late in the day, with a meagre pledge of $1bn. Many observers believe that Sri Lanka’s present crisis arose as a result of reckless spending and borrowing unwisely from International Sovereign Bonds (ISBs), issued at high interest rates. While the Export-Import Bank of China has offered Sri Lanka a two-year moratorium on debt repayments and said it would support the country’s efforts to secure a $2.9bn loan from the IMF, China has done precious little to reduce the debt burden it has foisted upon Sri Lanka.
What is now important for India is that China has led Sri Lanka, like many others, into ‘debt traps’, a situation which arose primarily because of Sri Lanka borrowing recklessly to finance China’s construction of a number of projects, principally the Hambantota Port, on its Southern shores. There was a disregard for the fact that the port was not financially viable and currently China administers and has all but taken over the port. Beijing now, therefore, has free rein to berth its warships and submarines moving across the Indian Ocean at Hambantota.
New Delhi has responded strongly to the Chinese presence in the Colombo port, through which large amounts of goods, including sensitive equipment for India, transit. The Adani Group in India has secured separate port facilities in Colombo, designated as the West Container Terminal, with a reported investment of around $700m for the transit of all imports and exports by India through Sri Lanka.
Amidst growing public anger against former President Gotabaya Rajapaksa, and the entire Rajapaksa family, Sri Lanka’s Parliament endorsed the appointment of veteran politician Ranil Wickremesinghe as the new President last year. As President Wickremesinghe has moved carefully and effectively in dealing with the virtual collapse of the Sri Lankan economy, many Sri Lankans have expressed their gratitude to Prime Minister Modi for his assistance to Sri Lanka as it went through very difficult times and appeared headed for bankruptcy. Talking to Sri Lankan friends during a very recent visit to Colombo, one was struck by the goodwill that India has earned in Sri Lanka in recent months which will be complemented further by increasing cooperation over a number of bilateral issues.
As devout Buddhists, the majority Sinhala population in Sri Lanka naturally seek better facilities for pilgrimages to the revered Bodh Gaya shrine in India. It is therefore imperative to improve train services for Sri Lankan Buddhist pilgrims to Bodh Gaya, while jointly exploring means to improving facilities for their stay in India. Moreover, measures are also needed to promote rupee payments in trade, travel and investment while the Talaimannar-Rameshwaram Ferry needs bringing back into operation to facilitate travel. New economic opportunities are set to open up when the Trincomalee Port becomes functional in the coming months and New Delhi and Colombo need to move imaginatively in encouraging and promoting private sector investment from India in this region of the Bay of Bengal. As India and Sri Lanka promote efforts for rupee payments in investment and trade, there are big opportunities for private investment and cooperation in areas such as airports, hospitality and higher education. Indeed, Sri Lanka believes that rupee trade arrangements with India will relieve it of the problems it faces due to a lack of adequate foreign exchange resources.
G. Parthasarathy, a career Foreign Service Officer, is currently Chancellor of the Central University of Jammu and President of the Indian Habitat Centre in New Delhi. He previously served as Ambassador of India to Myanmar, High Commissioner of India to Australia, Pakistan and Cyprus, and Spokesman of the Prime Minister’s Office