18/12/2015 8:23 AM IST | Updated 15/07/2016 8:25 AM IST

Can China's Inroads Into The Maldives Displace India?

Strategically located Maldives plays an important role in the alternative maritime routes that China is seeking to build through initiatives like the One Road One Belt. Much of Beijing's growing assertion in the Indian Ocean is focused on the US-centric club China perceives Washington is building along with India.

Chinese President Xi Jinping, right, walks with Maldives President Yaamin Abdul Gayoom upon his arrival at the airport in Hulhule' Island, Maldives, Sunday, Sept. 14, 2014. (AP Photo/ Fayaz Moosa)

Strategically located Maldives, sitting along major sea lines in the Indian Ocean, including the East-West shipping route that transports oil from Middle East to East Asia, has drawn the attention of many major powers like the US, Russia, UK and quite naturally India. The latest great power that has set its eyes on this island nation is China.

Why China has changed its strategy

It is interesting how China's foreign policy towards Maldives has been directly commensurate with its Indian Ocean strategy. Until the early 2000, most of the People's Liberation Army-Navy (PLA-N)'s operational patterns in the Indian Ocean were non-combatant and focused on protecting its sea lines of communication (SLOC). China's restrained posture in the Indian Ocean Region (IOR) was governed by two reasons.

First, feasibility assessments made it evident for China that bases in South Asia would be vulnerable to air and missile attack. Also, defending Chinese home waters while launching a simultaneous major combat operation in the Indian Ocean would be cumbersome for the PLA-N due to distance. Second, by its own assessment of strength in the IOR vis-a-vis other powers, the PRC felt it was far behind the US in terms of maritime power and did not enjoy geographic advantages that India does. Therefore a strategy of "moderation" and "maintaining the status quo" due to its existing inferior position in the IOR formulated China's "constructive engagement" in the region.

Much of Beijing's growing assertion in the region could be indirectly projected towards the US-centric club China perceives Washington is building along with India.

Until the first decade of 2000, China maintained that its investment in the littoral states of the Indian Ocean including Sri Lanka and the Maldives was purely economic and commercial in nature. In fact it was India that had the upper hand in the Maldives even in security matters during the run of the pro-New Delhi government led by Mohamed Nasheed (2008- 2012). In 2009, India signed a pact with the Maldives in which New Delhi committed to set up a network of 26 radars across the Maldives' 26 atolls to be linked to the Indian coastal command. Further, New Delhi also said it would build an air force station from where Dornier aircraft would carry out surveillance flights. The station was also intended to host Indian military helicopters. In 2012, further deepening its defence cooperation, India announced that it would jointly fight terrorists and non-state actors with Male, the Maldivian capital. Additionally, New Delhi also decided to extend the Indian ALH Dhruv helicopter, operating in Maldives since 2010, by two years. Apart from sending a team to train Maldivian Air Wing personnel, India also decided to station a defence attaché at Male.

In contrast, China, despite establishing bilateral relations with Male since 1972, opened a full-fledged embassy in Maldives only in 2011. However, Beijing has always been watchful of the US presence in the IOR and hence the America-India axis. Much of Beijing's growing assertion in the region could be indirectly projected towards the US-centric club China perceives Washington is building in the Ocean along with India. Interestingly, there are mentions about India's Look East Policy and the US-India axis in the Indian Ocean region in the Blue Book released by the Chinese Academy of Social Sciences (CASS), China's premier think tank, in 2013. It pointed out that the strategic position of the Indian Ocean has prompted the US to conceive the "Indo-Pacific" concept, and that Washington is pushing India to integrate itself into this system to contain China. It observed that China's Indian Ocean strategy based on "maintaining the status quo" needs adjustment due to the changing dynamics of international relations in the region.

With over 80% of its energy import through the IOR, China views any disruption of its SLOC in the region directly affecting its growth, and therefore a concrete strategy for the Indian Ocean has become mandatory. This hint at the shift in strategic focus was first visible in the Chinese Defence White Paper in 2013, which stresses on protecting national maritime rights and interests and armed forces providing reliable support for China's interests overseas. Notably, this was also the time when the term "Indo-Pacific" -- comprising partners like Australia and Japan apart from India and the US -- started doing frequent rounds in Western diplomatic circles.

As Robert Kaplan asserted in his book, Monsoon: The Indian Ocean and the Future of American Power, originally published in 2010, the US Navy's domination in the world's maritime routes and China's dependence on its energy imports through these routes presented a deadly vulnerability in Chinese eyes. Beijing responded in two ways: first by building up its own naval power, and second by seeking alternative maritime routes that were less vulnerable to any punitive measures that the US may target towards Beijing.

Inroads from Beijing

The launching of the One Belt One Road (OBOR) initiative in 2013 is one such step by China to seek an alternative trade route. Indian Ocean littorals are an important part of this initiative, not just because of their strategic location but also to check America's influence in the IOR by roping in these nations to the Chinese side.

It is no wonder that despite decades of bilateral relations, President Xi Jinping became the first head of state to visit Male in 2014 in more than 40 years. This was the first visit by a Chinese head of state since Maldives independence as a British protectorate in 1965. Ties between the two reached the next level as Maldives, following the visit, officially joined China's 21st century Maritime Silk Route (MSR) --- part of OBOR which envisions the development of a sea route from China's Fujian province to the Mediterranean Sea via South Asia and East Africa.

Critics opine there are strings attached in the assistance extended by China... these initiatives are a way to lay an infrastructural trap to feed Beijing's expansionist ambitions.

Apart from signing a deal to modernise the Maldives' Ibrahim Nasir International Airport (INIA) -- after scrapping a deal with the Indian company GMR -- Beijing also offered aid for building the Malé-Hulhule Bridge. Dubbed as the "China Maldives friendship Bridge", the project will connect Male with the island airport Hulhule. According to reports, the project, awarded to Chinese contractor CCCC Second Harbour Engineering Company, is expected to be available for public use by 2017.

The investment pattern in the IOR littorals clearly point towards China ultimately trying to reduce its dependency on the security set-up controlled by the US in the SLOCs of Indian Ocean. Through MSR China wants PLA-N to play a greater role in controlling the security of the Indian Ocean on the pretext of providing protection for MSR ports and related facilities. An endorsement of its role, China hopes, will come from the growing base of MSR members that it has been building.

A case in point is China's involvement in the Ihavandhippolhu Integrated Development Project or iHavan, a link to the MSR, which lies in the northernmost atoll of the Maldives on the seven degree channel through which the main East-West shipping routes connect Southeast Asia and China to the Middle East and Europe. iHavan, located centrally at the IOR, has over US$18 trillion worth of goods passing through its waters annually. Reportedly, it gets huge concessional loans and aid financing from China. These financial aids, apparently, were given at a very high rate of interest that Male certainly would not be able to meet without a unilateral waiver. Experts say this is a common tactic applied by China -- relaxing loan conditions in exchange for control over maritime projects it helps finance. This also fits in well with Male's ambition of transforming itself into an international trade hub on par with Singapore. By endorsing the MSR, the Maldives seeks to promote itself as a vital trade and transit port.

Signs have been visible for quite some time now. Both countries signed a significant defence agreement in 2012. In fact many have speculated that China could be building a naval submarine base in Marao islands. Most of these reports remain unconfirmed. What is striking following the signing of agreement is the statement of Chinese Vice Admiral Su Zhiqian who said that the Chinese navy would like to get actively involved in maintaining the peace and stability of the Indian Ocean. This push was stepped up when the Chinese Defence Minister Chang Wanquan met with Mohamed Nazim, Minister of Defence and National security of Maldives in 2014. Both nations expressed a desire to deepen military cooperation in areas such as personnel training and maritime security. China has already started offering training to maritime personnel in the Maldives.

China is also trying to add dimensions to its relations with the Maldives -- rated, incidentally, as one of the top 20 island destinations for Chinese travellers. This could also be a move to divert attention from the growing bilateral military relationship. Taking the bilateral relation to the next level China and Maldives have begun a feasibility study on a free trade area (FTA) between the two countries. Trade between the two countries reached US$104 million, up 6.7% from 2013, as per official data.

The Maldives' Foreign Minister told Sushma Swaraj, "The Maldives' relations with India has sufficient depth and will not be shaken by the presence of Chinese investors."

Currently, the Maldivian government is formulating a Special Economic Zone Bill which aims to provide more incentives to foreign investors in terms of tax breaks, relaxed financial requirements and preferential land use. In its bid to step up Chinese investments the island nation also launched the Maldives Investment Forum, held in Singapore in 2014 and in Beijing in 2015. On the other hand, in multilateral platforms, Beijing got Maldives to pass the bill to seek full membership of the Asian Infrastructure Investment Bank (AIIB) in November 2015. Beijing is also encouraging smaller nations like Maldives and Sri Lanka to play greater role in the Shanghai Cooperation Organisation (SCO). In turn, Maldives supports Beijing's bid to step up its role in the SAARC.

Adopting the narrative of shared prosperity by helping smaller nations develop through its aid programs, Beijing constructed a building to house the Maldives Ministry of Foreign Affairs in the island nation, a national museum, and is involved in the 1,000 Housing Units Project. Additionally, Beijing is actively engaged in several renewable energy projects, as well as the tourism and telecommunication sectors.

India is still a key player

However, many opine there are strings attached in the assistance extended by China. Critics say these initiatives are a way to lay an infrastructural trap to feed Beijing's expansionist ambitions. There is no transparency on how these loans or aid would be repaid by the receiving countries. For instance, a report carried by the Financial Times quotes a study by Grison's Peak, a London based boutique investment bank, which says that the majority of the 67 overseas loans committed by the China Development Bank and the China EXIM Bank are in areas defined by the "One Belt, One Road" strategy. Most of these loans are controlled by government-held institutions. The concessional or free aid Maldives is seeking from China to build the bridge connecting the capital Male and Hulhumale, could be either in the form of grant aid or a loan facility from the Chinese EXIM Bank.

China is well aware that "choosing" one nation over the other is not an option for the Maldives or any of the IOR nations.

However, the Sri Lankan election, held in August 2015, may bring about a change in mindset in the IOR region. One of the key agendas of the Lankan election was corruption tied to Chinese infrastructure projects. Therefore the current Lankan government, promising a balance in foreign relations, took to mending ties with India. That Male has taken some clues from this is evident in its India First rhetoric. In a bilateral meeting, held in November 2015, the country's foreign minister Dunya Maumoon told the Indian Foreign Minister Sushma Swaraj, "The Maldives' relations with India has sufficient depth and will not be shaken by the presence of Chinese investors in the Maldives."

The Maldives' needs from the region's powers are complex. While it needs India for peace in the Indian Ocean for its own national security, it also needs the enormous Chinese investment to ensure its economic security. China is well aware that "choosing" one nation over the other is not an option for the Maldives or any of the IOR nations.

Given that exclusiveness is nearly impossible in the IOR, this region might soon have multiple alliances -- one that has the US and Japan in it, the other that has China. And in this, smaller nations -- if they play their cards well -- will emerge the largest beneficiaries.

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