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23 November 2017, Gateway House

Chinese manoeuvres further confounding Middle East

A conference in Doha on ‘Enriching the Middle East’s Economic Future’ offered many insights into the nature of geopolitical relations in the region and India’s significant role in it

Director, Gateway House

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I was in Doha, Qatar, for a conference on 13-14 November 2017, which was being held against the backdrop of the continued Saudi Arabia-led blockade of Qatar since June 2017 and the occurrence coincidentally of three other sensational, Saudi-related events on November 4.

The first and most astonishing of the three events was the arrest and incarceration of dozens of Saudi princes, serving ministers, and billionaires in the Ritz Carlton Hotel, Riyadh, on charges of corruption, linked to the country’s Crown Prince Mohammad bin Salman’s reform plans for Saudi Arabia. The second was the resignation of the Lebanese prime minister, announced on TV in Riyadh. The third was the firing of a missile on Riyadh airport by Houthi rebels from Yemen, which Saudi Arabia and its allies, including the United States, have been bombing for the last two and a half years: the Saudis took the opportunity to up the ante against Iran even further.

Despite the unprecedented nature of all four events, Doha was preternaturally calm, with the population united in defending their Emir, Sheikh Tamim bin Hamad Al Thani, most visibly by painting his face on high rise office buildings and homes. But the consequences of the blockade were visible in the nationalities of the participants at the conference, the 12th in an annual series. The opening and closing speakers respectively were the finance and foreign ministers of the state of Qatar, but experts on panels were predominantly American, some European and many from countries that are Qatar’s new friends – Iran, Turkey, Russia and Israel – which have been its supporters after the Saudi-led blockade. There were one too many Pakistanis, many of them living in Dubai, and only two Indians, an Indian-origin businessman, based in Ukraine, and yours truly.

The theme of the conference was ‘Enriching the Middle East’s Economic Future’ and it was organised by the Centre for Middle East Development of the University of California, Los Angeles. I was on two panels to discuss ‘The Role of China, India and Japan in the Region’ and ‘Central Asia and the Silk Road’.

In setting out India’s role and interests in the region, I spoke about the compelling geography whereby India had historically been joined to the Middle East by land (before the Partition of 1947), and by sea: both the Arabian sea and the Persian Gulf flow into the Indian Ocean. The continuous movement of people found expression in both trade – oil in modern times – and ideas, including religions. Even as Islam came to India so also Buddhism flourished in Afghanistan and beyond. A shrine to Guru Nanak is extant in Iraq to this day. The Muslim community in India is not only the third largest in the world, but also the largest Muslim minority in any country in the world.

Relations became complex following the Partition of India as Pakistan exploited religious affinities to distance the Middle Eastern countries from India, whose policy of Non-Alignment put it on opposite sides because of Cold War politics. Much of the Muslim world was leaning towards the West and against the godless communism of the Soviet Union.

The reality, though, is that rapidly growing India is today one of the largest and most reliable buyers of oil and gas and the provider of expatriate professionals and labour to sustain the oil-rich and people-poor Middle Eastern economies. India is also a source of food security for the region, providing 80% of the rice consumed and 60% of other basic food requirements. While annual remittances of around $60 billion from the Indian workers cover up to half the oil import bill the same workers have also had to be evacuated repeatedly, at great expense, from political conflagrations in the region.

At the same time, the smoothly executed evacuations provide the opportunity for India to show its capabilities as a net security provider, which are welcomed, in contrast to the uneasiness that Chinese displays of power engender. Apart from sea- and airlifts of hundreds of workers India has engaged in anti-piracy operations, developed counter terrorism cooperation with countries in the region, and conducted joint naval operations.

Two important points emerged from the discussions: Japanese scientists were working on extracting silicon from sand to generate electricity and developing marine wave alternate energy techniques. Second, Israel, following the discovery of the Leviathan offshore gas field, was in discussions to buy Chinese dredging knowhow for expanding rocks into artificial islands.

The second panel on ‘Central Asia and the Silk Road’ was a bit of a shambles because the Chinese panelist not only needed translation, doubling his assigned time, but he also spoke at great length about spreading world peace and harmony by sharing Chinese culture along the Silk Road. The European participant spoke of western reservations on the closing of the Chinese market to western investments even as China was snapping up hi-tech firms (such as, leading German AI company, Kuka) in Europe and the U.S.

In my presentation, I spoke of Indian reservations about the Belt and Road Initiative (BRI) on security grounds and the lack of transparency in the project contracts.

First, India believes that the China Pakistan Economic Corridor (CPEC) which is the flagship project of the BRI, violates India’s sovereignty in Pakistan Occupied Kashmir (POK) because it passes through the disputed territory of Gilgit-Baltistan. By upgrading a highway through this region China is signalling that it too regards Gilgit–Baltistan as belonging to Pakistan.

Secondly, Chinese motivation in investing up to $62 billion in Pakistan, a country at odds with all three of its neighbours – India, Afghanistan and Iran – with ongoing internal insurgencies in two of its five provinces and frequent terrorist attacks, does not fulfill any economic criteria. Rather, it is strategic and intended to encircle India.

At the same time, Pakistan, like Sri Lanka, could find itself the victim of a debt trap, building massive infrastructure projects it does not need, like the unused over $1billion Gwadar port, financed by high-cost loans that it will be hard put to repay. Sri Lanka is already so indebted to China that it has had to seek World Bank support to pay the interest. It has also ceded port operations at Hambantota to the China Merchant Port Holdings Company for 99 years – ironically enough, just as the U.K. had acquired Hong Kong. Although the Sirisena government in Sri Lanka won elections by campaigning against Chinese projects, it has had no choice but to continue to seek more Chinese investments – the classic debt trap. This concerns India because its neighbours could become vulnerable to Chinese pressures and assume postures inimical to Indian interests.

However, there is already pushback to the BRI in our part of the world. When Myanmar cancelled the Mytsone dam project it was threatened with arbitration proceedings and penalties of upto $800 million. Both Pakistan and Nepal have recently cancelled big ticket dam projects.

There is no financial transparency to the BRI projects: the European Union did not sign on to the final declaration at the May 2017 summit in Beijing, citing those very reasons. But American, European and even Japanese corporations are tempted by the contract potential, disregarding the fact that most Chinese loans are tied to procurement from Chinese companies.

Now, with the BRI incorporated into the constitution of the Communist Party of China, it cannot be challenged, much less criticised, within China. This is worrisome because there are many questions regarding it, and the CPEC segment, especially in India.

India does not have a closed mind about the BRI because of its own need for investment in infrastructure. But it can participate only after full consultation and transparency regarding the terms of contracts, repayment of loans, ownership and operating rights.

The high-pitched Chinese propaganda makes it seem as if the BRI is the only game in town. Far from it. The fact is that Japan has been investing in infrastructure in developing countries for decades at genuinely low rates of interest – 1% over 40 years – including building metro projects in metropolitan cities in India, the Mumbai- Delhi Cargo Corridor, and lately, the bullet train, linking Mumbai and Ahmedabad.

India has a Look East infrastructure building project, linking the state of West Bengal to Bangladesh and its North Eastern states to the ASEAN through Myanmar and Thailand.

India and Japan have announced joint infrastructure building projects in Africa.

Another exciting project underway is the India-Iran-Russia North-South corridor up from Chabahar port in Iran.

The turbulence in the Middle East and the challenge of China’s overreach in Eurasia will make this series of conferences even more exciting in the future.

Neelam Deo is Co-founder and Director, Gateway House: Indian Council on Global Relations, Mumbai and is a former Indian Ambassador.

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