By Talmiz Ahmad
China is today the world’s largest economy in terms of purchasing power parity; in terms of market exchange rates it is expected to overtake the US by 2030. Its spectacular economic success has been largely fueled by oil and gas: its share in global oil consumption rose from 4 percent in 1993 to 12.3 percent in 2016.
As oil imports now constitute 64 percent of its oil consumption, China has a central place in the economies of the principal Middle East nations, which meet 50 percent of China’s import requirements. As China’s import dependence rises to 79 percent by 2035, these relations will increase in importance.
China’s energy-related ties with the Middle East have been complemented by robust trade and investment partnerships. The value of such trade in 2016 was nearly $215 billion, with Saudi Arabia and Iran accounting for $43 billion and $32 billion respectively. China’s cumulative investment in the Middle East in 2005-17 was nearly $145 billion.
China’s Belt and Road Initiative (BRI), first proposed in 2013, envisions land-based connectivity from Xian in the east of China across Eurasia to Western Europe, and sea-links from China across the Indian Ocean to European ports. When completed, these connections, involving a number of Middle East and Indian Ocean territories and ports, will emerge as the “Silk Roads” of the 21st century.
Given China’s crucial dependence on energy supplies from the Middle East, its economic stakes in the region, and the realization of the maritime BRI projects, its central concern is the security of the sea lines of communications, particularly the choke-points – the Strait of Hormuz, the Suez Canal and Bab Al-Mandab in the west, and the Malacca Straits in the east. It has therefore prioritized the development of its navy to safeguard its crucial energy and economic interests.
The Indian Ocean is the economic life-line for all the littoral states. The bulk of Gulf hydrocarbon production is consumed in Asia, with energy trade extensively using the ocean’s waters; by 2040, about 90 percent of Gulf oil will go to Asian markets. Again, 40 percent of the trade of the GCC countries is with other Asian countries, while 90 percent of the food imports of GCC countries are sea-borne and pass through the choke-points of the western Indian Ocean. India has concerns relating to BRI and the entry of the Chinese navy in the Indian Ocean. Thus, the BRI-related China-Pakistan Economic Corridor involves the development of an Indian Ocean port by China at Gwadar, as also high-value energy and infrastructure projects in the state of Jammu and Kashmir that India views as under illegal Pakistani occupation.
India has also generally criticized the BRI for absence of consultations by China with littoral countries, lack of transparency in regard to the details of the projects and doubts about the financial viability of some of the proposals.
Again, India has logistical projects of its own that would provide links from Iranian ports to Afghanistan, Central Asia and Russia, particularly the International North-South Transport Corridor that will go from Bandar Abbas in Iran to Moscow and then connect with west European markets. These projects compete with the BRI proposals since, in some instances, they cover the same geographical spaces.
Not surprisingly, the China-led logistical connectivity projects in the Indian Ocean and the entry of Chinese naval forces into the ocean have created security concerns among littoral countries, including India, and other major powers, such as the US, Japan, Korea, Indonesia and Australia, which have an abiding interest in Indian Ocean security.
Clearly, the geo-economic importance of the Indian Ocean has caused geo-political tensions and confrontations that are simmering under the surface at present but could easily flare up into region-wide conflicts.
The Indian Ocean has two pan-oceanic institutions: the Indian Ocean Rim Association, a platform to promote economic cooperation among its 21-member countries; and the Indian Ocean Naval Symposium, which brings together the naval chiefs of 35 member-countries to discuss maritime security issues. However, there are no institutional arrangements in place in either organization to discuss and coordinate policies and action plans for ocean-wide security and stability.
It is proposed that the major Indian Ocean powers, led by India and China, pursue a diplomatic initiative to put in place government-to-government dialogue and policy coordination mechanisms that would bring the two oceanic institutions together, with the mandate to address regional security issues and coordinate trans-oceanic cooperation projects. Over time, confidence-building processes, institutionalized in specialized joint working groups, would improve region-wide stability and promote cooperative developmental projects. A major advantage of this consultation and coordination platform will be the ability of the Indian Ocean countries to pursue the expansion of regional logistical links as trans-Asian projects, rather than as initiatives of specific countries. As Gulf-based scholar N Janardhan has pointed out, India and China should work together to ensure that their projects are “less competitive geopolitically and more cooperative geo-economically.”
(The author Talmiz Ahmad is a former Indian ambassador to Saudi Arabia.)
By Talmiz Ahmad