U.S. Secretary of State Rex Tillerson recently made his maiden state visit to India. As is the norm, before his departure he outlined the Trump administration’s policy towards India. From a geopolitical perspective, what was more interesting was that Tillerson, for the first time, laid out Washington’s view of China’s trillion-dollar, four continent infrastructure program, the Belt Road Initiative (BRI). Much to the pleasure of India, the country that has been the most vocally opposed to the BRI, the US Secretary was bitingly negative.
Tillerson gave as an example of “predatory economics” the “activities and actions of others in the region, in particular China, and the financing mechanisms it brings to many of these countries, which result in saddling them with enormous levels of debt.” He said that “it’s important that we begin to develop some means of countering that (…) we’re starting a quiet conversation in a multilateral way on how can we create alternative financing mechanisms.” During his October visit, he also warned about the strings Beijing attached to its cheap cash. “Countries have to decide, what are they willing to pay to secure their sovereignty and their future control of their economies?”
A few days before, Pentagon chief James Mattis had hinted at growing US concerns over the BRI, referring to it by its earlier name One Belt, One Road. “In a globalized world, there are many belts and many roads and no one nation should put itself into a position of dictating ‘one belt, one road’,” he said at a US senate hearing. He also noted that the Chinese were building in “disputed” territory.
In India this was interpreted as a reference to the China-Pakistan Economic Corridor (CPEC), the 62 billion dollar flagship program of BRI that runs from the Chinese western province of Xinjiang down through Pakistan to the Arabian Sea. However, it was the overall tenor of the US’s public statements – and the even harder position taken by senior Trump administration officials in private – that was music to New Delhi’s ears. Until recently, India had been a loud but solo voice in criticizing the BRI. While India publicly cites the fact that CPEC runs through a part of Pakistani-held Kashmir that is claimed by New Delhi, India’s primary objection is an entrenched belief that BRI will fundamentally tilt the geopolitics of Asia in China’s favor – even while officially supporting all connectivity initiatives.
The BRI, first announced in 2013, has a land-based Silk Road Economic Belt that would stretch from China across the Eurasian land mass, and a 21st Century Maritime Silk Road, which would include marine infrastructure in the western Pacific and Indian Ocean littorals.
Few doubt the benefits to trade and mobility that will ensue from these massive projects. It is the politics, financing and conditions China is putting on investment that worry skeptics like India, especially regarding the land portion of the initiative.
Chinese officials and scholars have sought to explain the CPEC to their Indian counterparts as a huge stabilizing influence on a volatile Pakistan.
New Delhi remained unconvinced, especially when it became clear that a large part of the money was given to the Pakistani military – which India sees as the source of the Pakistani state’s addiction to terrorism. Through 2015, New Delhi did not actively oppose BRI and offered to hold discussions with Beijing about the nature of the projects, offers Beijing rebuffed.
Last year, India hardened its stance. The reason: Sri Lanka. New Delhi supported the idea of Chinese capital being used to bridge the infrastructure funding gap in emerging economies. But it wanted the money to be provided through accepted global norms of transparency and viability. Hence India’s support for a slew of new Chinese-dominated development banks, like the Asian Infrastructure and Investment Bank.
The Chinese began developing the port of Hambantota in Sri Lanka in 2009, but when the country’s government allowed Chinese nuclear-powered submarines to dock there in 2014, India saw red.
This confirmed New Delhi’s suspicions that the BRI was not a global public good but a financial instrument meant to suborn other governments to Beijing’s will, using a mix of investment, debt and bribery. Indian officials looked further afield and saw that Beijing had done the same in Laos and Cambodia.
China’s moves command widespread support in Pakistan – although dissent has been heard and Pakistani businesses complain that the lion’s share of the contracts has gone to Chinese firms as has much of the employment. Beijing revealed that more than 90% of the corridor would be financed through debt that would be on Pakistan’s books.
The original China Development Bank master plan, recently published in the Pakistani media, outlined a reworking of Pakistan’s economy to make it a quasi-colony of China.
Against this backdrop, the Indian government has been surprised at how much effort China put into wooing India to endorse the BRI. Beijing repeatedly came up with different solutions, albeit symbolic, to get India on board.
The likely reason is that early last year, Beijing was insisting to various state-owned banks and funders backing the initiative that their projects be commercially viable.
In this context, India becomes much more important. Tom Miller, the author of a book on the BRI called China’s Asian Dream, says Chinese officials speak of losing 80% of their investment in Pakistan and 50% in Myanmar. But if BRI projects could tap into India’s 2.5 trillion dollar economy or even directly link to each other via India, they would become much more viable.
In an indication of how useful New Delhi’s cooperation could be to the BRI, a recent Credit Suisse report concluded that India could be the largest single recipient of Chinese investment in the initiative. Of an estimated 502 billion dollars that China would spend over the next five years on the BRI, it estimated India could receive as much as 126 billion.
While this gives India potential leverage with China, the prevailing mood in New Delhi seems to be to completely oppose BRI in South Asia and the Indo-Pacific region.
India’s hard line is being helped by the second thoughts expressed by key countries regarding the BRI. A number of governments have issued joint statements with India supporting the principle of “connectivity infrastructure” that is based on “international standards,” “responsible debt financing practices” and “respect of sovereignty.” This has included countries like Japan and, more guardedly, Russia. In private, Germany and some Southeast Asian countries have also informed India of their intention to quietly oppose BRI. However, no one has been willing to join India in openly calling out China – until Tillerson’s speech last month.
India has begun trying to piece together alternatives to the BRI in its immediate neighborhood and in the Indian Ocean. India has a poor record of building infrastructure, but backing from Japan, both technically and financially, has made other countries see its recent plans as credible.
Japan and India have been building a network of road, rail and port links along the Bay of Bengal. The infrastructure is designed to increase east-west connectivity between South and Southeast Asia and thus counter the north-south links being rolled out by China. Similar plans for ports are now being drawn up for Sri Lanka and other Indian Ocean islands. New Delhi has invited Tokyo to help it revive schemes for transport corridors from Iran’s coast to Afghanistan and Central Asia. The two recently announced plans for an India-Japan Africa Connectivity Corridor which will be both land and maritime, with its first nodes in Kenya and Mozambique.
Indian officials now openly call the BRI a “neo-colonial” project and see it largely as a cover for China to convert its financial muscle into political and military control.
© 2017 Aspen Institute Italia