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one belt one road

The Geopolitics of the Bay of Bengal

The Bay of Bengal is located in the North-East region of the Indian Ocean, and is bounded by Bangladesh to the North, Myanmar and the Andaman and Nicobar Islands of India to the East, India and Sri Lanka to the West. Some of the major sea ports in the Bay of Bengal include Chennai, Kolkata and Visakhapatnam in India and the port of Chittagong in Bangladesh making the region (of the Bay) a crucial economic hub. With an area of 2,173,000 square kilometres, the Bay of Bengal is the largest Bay in the world which is at the forefront of Asia’s experience of climate change[1]. Over the years the significance Bay of Bengal have been on the rise largely owing to the rapid economic growth of the littoral nations and the major powers involved in the bay.[2]

Brief History

Throughout the medieval, early modern and modern periods of world history from the indigenous city-states as well as empires, later to the British Empire the Bay of Bengal had been a singular civilisation united by a rice culture and common coastline that kept bringing trade and migrants along its shores.[3] Historically the Bay of Bengal has played a significant role of a connector- where trade, commerce and culture were intertwined for centuries. However in the early 20th century the British Empire used the Bay of Bengal for trade and other related activities, causing a significant increase in shipping between British India and British Burma. Yangon (Burmese Capital) was fascinatingly turned into one of the busiest ports in the world for migrant arrivals alongside the likes of New York; with majority of the flow from India towards Burma (now known as Myanmar)[4]. Strong ties between Burma and India developed as a direct consequence of the migration, which followed a downward curve in the years following the partition of India in 1947 and the Burmese independence in 1948 from Japanese occupation since world war II.[5]

Economic and Security issues

Bay of Bengal is rapidly becoming an area of key economic and strategic competition in the Indo-Pacific. A crucial geopolitical development was the creation of a regional body- the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) between Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, and Thailand- which seeks to promote regional cooperation and engagement in the area particularly between the two major geopolitical blocs of the region- the Association of Southeast Asian Nations (ASEAN) and the South Asian Association for Regional Cooperation (SAARC). However BIMSTEC’s focus is solely economic with their main objective being supporting free trade hence it does little to provide any support in terms of maritime security issues that have particularly grown in recent years with respect to Chinese and Indian interests.[6]

Crucial geopolitical factors concerning the Bay of Bengal

China’s economic and security interests over the past few decades have resulted in greater Chinese presence in the Indian Ocean. China has been successful in developing strong economic relations with major Bay of Bengal countries such as Bangladesh and Myanmar primarily through infrastructure development projects that include pipelines, roads and railway, port-development and power-plant construction.[7] Key strategists from India expressed concerns over the rising Chinese influence in the outposts of the Indian Ocean which they fear could enable China to turn them into military bases encircling India.[8] Although it is argued that China’s interests are more economic in terms of ease of connecting to the other parts of the world on their West, it has not stopped India from taking precautionary steps by making rapid developments in modernising their naval capabilities as well as developing multilateral and bilateral naval ties with key players of the Bay of Bengal.

China-India relations in the Bay of Bengal

China and India are playing a strategic and economic tug-of-war in Myanmar among other littoral nations along the Bay of Bengal. China has recently assisted in building key ports in Gwadar in Pakistan and Hambantota in Sri Lanka and according to recent reports it is funding the development of the Chittagong port of Bangladesh, while having reached an multi-billion dollar agreement to build a major deep sea port in Kyaukpyu, Myanmar on the coast of the Bay of Bengal.[9] China already have a significant presence in Myanmar with the gas pipeline connecting China’s Yunnan Province with Myanmar’s major Rakhine state already in operation and a parallel oil pipeline that is supposed to soon begin operations.[10] Since the launch of India’s Look East Policy in the 1990s it has strengthened its political, economic and strategic ties with South East Asian countries and beyond [11], with more actions being considered in order to have leverage over China. It is safe to say that while India had other priorities such as the inward economic orientation and preoccupation with troubled land borders mainly in the North and the North West, it was the growing influence of China’s maritime influence that prompted India’s strategic interests in the Bay of Bengal through its Look East Policy.[12] India and China are locked into this strategic competition for naval dominance as well as influence in the Indian Ocean’s littoral states and it can be argued that China might just have the edge due to its closer connections to some of the major littorals- i.e. Bangladesh and Myanmar.

The island nation of Sri Lanka also has strong economic ties with both India and China, with a growing regional and security cooperation with the former. However the recent takeover of Sri Lanka’s Hambantota port by China has had significant impacts- one of which is lessening the country’s debts to China, who has made a lot of investments in Sri Lanka over the years.[13]

Maritime disputes


Bangladesh, India and Myanmar have had their fair share of disputes regarding maritime territories. One of the most recent disputes was between Bangladesh and Myanmar as tensions were building when South Korea’s Daewoo began natural gas exploration for Myanmar in what Bangladesh claimed was their waters, prompting Bangladesh to submit a continental shelf claim to the United Nations’ Commission on the Limits of the Continental Shelf. Largely owing to Myanmar’s conflicting claims, the events led up to the mobilisation of naval forces along the disputed area although eventually a conflict was avoided.[14] The disputes were largely settled by the International Tribunal for the Land of the Seas (ITLOS) in 2012 and 2014 respectively.[15]

Myanmar relations with the littoral nations

Myanmar is regarded as a key player in the strategic equation along the Northern region of the Bay of Bengal that is fiercely contested by China and India. Myanmar have seen growing economic ties with India since the World War II while China have also been developing ties through various means primarily comprising infrastructure support.  Myanmar signed its first bilateral trade deal with India in 1970 and has been gradually increasing in volume since. According to some of the latest figures available, Indian exports to Myanmar totalled US$1.1 billion (1111.19 million) in the FY 2016-17 while imports were worth US$ 1 billion (1067.25 million), making it the fifth largest trade partner with Myanmar, despite trade said to remain below potential.[16] On the other hand Bangladesh and Myanmar established diplomatic ties in 1972 which resulted in progressing bilateral relations in the subsequent years. However in the mid-seventies as President Thein Sein’s government transformed Myanmar’s military government into a quasi-civilian government the bilateral relations never realised their full potential.[17] The end of their military rule in 2011 brought about a new glimmer of hope, however the recent Rohingya crisis has hindered any progress as Bangladesh are hosting a million refugees and have constantly failed in their repatriation due to the Bangladeshi government failing to have reached an agreement with the Myanmar government led by Aung (San) Suu Kyi.

Security/strategic issues

China are the largest trade partners to both Bangladesh and Myanmar and is also the biggest supplier of conventional arms to both the countries. Bangladesh had recently purchased two submarines from China to bolster its naval forces causing tensions in India, with Indian analysts claiming it “greatly enhances the mistrust between Delhi and Dhaka”.[18]

While most of the issues were regarding the littoral nations and China, major actors such as Japan, alongside China have significant interest in the Bay of Bengal, as they access it through the Malacca Strait for the purpose of trade in goods and energy.[19] One of the most significant reasons for China’s growing presence is to find reliable oil supplies and secure unencumbered SLOCs.

India on the other hand had been working towards a “Bay of Bengal community” envisaging greater security cooperation with the littoral nations.[20] It is obvious that other actors play a significant role however the Bay of Bengal does have significance for India’s own best interests as well as data from 2013 reveals that 95 percent of India’s foreign trade by volume and 75 percent by value were conducted by sea.[21] The economic growth also led to India’s expansion of its Navy as it claims is for the safety of the Ocean’s SLOCs regarding it a critical move to support and protect for themselves and for the global community.[22]

Other challenges to stability

There is little doubt about the significance of the Bay of Bengal to the Asia’s rising powers however there are some challenges especially for its low-lying littorals. Currently, the Bay is being reshaped by population growth, climate change, overexploitation of fisheries, degradation of critical habitats, pollution, and deteriorating water quality and it is getting increasingly clear that multilateral cooperation is vital for the littorals, especially important is that they keep aside their political differences to work together while maintaining a healthy competition. Currently there is already an initiative known as the Bay of Bengal Large Marine Ecosystem (BOBLME) Project designed to improve the lives of the coastal populations through improved regional management of the Bay of Bengal environment and its fisheries, and countries that are involved are as follows- Bangladesh, India, Indonesia, Malaysia, Maldives, Myanmar, Sri Lanka and Thailand.[23]

What’s Next

The geopolitics surrounding the Bay of Bengal is probably one of the most complex issues in the continent if not the world, with the region comprising a diverse range of social, economic and political factors. However there is little doubt that the key actors involved with the Bay of Bengal all have a crucial role to play in the progress of the region and for themselves in relation to prospects of regional strategic security and economic cooperation and transformation of the (developing) nations.

 

[1] http://blogs.bbk.ac.uk/research/2014/01/27/the-bay-of-bengal-in-global-history/

[2] https://hrcak.srce.hr/135023

[3] https://worldview.stratfor.com/article/critical-bay-bengal

[4] King’s College Discussion. “The Bay of Bengal: Rise and Decline of a South Asian Region”. YouTube.

[5] https://www.mea.gov.in/images/pdf/Indian-Migrants-Myanmar.pdf ; https://www.bbc.com/news/world-asia-33973982

[6] https://southasianvoices.org/bay-of-bengal-indias-centerpiece-springboard/

[7] https://www.cna.org/CNA_files/PDF/IRP-2012-U-002319-Final.pdf

[8] https://www.cna.org/CNA_files/PDF/IRP-2012-U-002319-Final.pdf

[9] https://www.hindustantimes.com/india-news/china-myanmar-ink-deal-for-port-on-bay-of-bengal-third-in-india-s-vicinity/story-Lbm4IwOMuqrNvXGv4ewuYJ.html ; https://www.ndtv.com/world-news/china-to-build-port-in-myanmar-third-in-indias-neighbourhood-1944916

[10]

[11] http://library.fes.de/pdf-files/bueros/indien/11043.pdf

[12] https://indianexpress.com/article/opinion/columns/chinese-takeaway-bengals-bay/

[13] https://www.defensenews.com/digital-show-dailies/navy-league/2018/04/09/sri-lanka-cedes-major-port-to-china-fueling-tensions/

[14] https://amti.csis.org/the-bangladeshmyanmar-maritime-dispute-lessons-for-peaceful-resolution/

[15] https://www.youtube.com/watch?v=RskGT2pUiIY

[16] https://www.mea.gov.in/Portal/ForeignRelation/MYANMAR_August_2017_new.pdf

[17] https://www.myanmarisis.org/publication_pdf/final-version-myanmar-bangladesh-relations-mmedits-ah2-1wpFhW.pdf

[18] https://thediplomat.com/2017/01/why-chinas-submarine-deal-with-bangladesh-matters/

[19] https://hrcak.srce.hr/135023

[20] https://www.deccanherald.com/national/india-wants-bay-bengal-be-688774.html

[21] Hughes, L., 2014. Examining the Sino-Indian Maritime Competition: Part 4 – India’s Maritime Strategy. Future Directions International. [online] January 30 2014. Available at: http://www.futuredirections.org. au/publications/indian-ocean/1516-examining-the-sino-indian- maritime-competition-part-4-india-s-maritime-strategy.html

[22] https://hrcak.srce.hr/135023

[23] https://hrcak.srce.hr/135023

Can India become a global power?

India is a country that is expected to play a central role in the 21st century. Having a large and fast-growing economy, it is also strengthening its military and is well positioned to dominate South Asia and extend its influence beyond it. But it must also face notable challenges, both domestically and geopolitically.

THE GEOGRAPHICAL BASES OF INDIA’S POWER

To understand India’s current international role and to anticipate the one it will have in the coming decades, it is necessary to analyse the geographic fundamentals of its power.

The first thing to consider is its dimension. India is a vast state and this has several positive and negative implications. On the one hand, this means that India can benefit from a notable strategic depth, but on the other it also means that connecting all the parts of its territory is a difficult endeavour.

This must be considered along with India’s configuration. Its territory presents a wide range of environments and climatic areas. Far to the north there are the towering mountains of Himalaya, a formidable geographic barrier that separates it from China. This is important, considering the complicated relations between the two powers.

Then, there are the fertile valleys of the Ganges and other rivers, which are vital sources of water and useful communication lanes that have favoured agriculture, industrialization and energy production.

The Deccan Plateau that occupies the southern part of the Peninsula is another notable geographic feature, also because of its mineral resources.

India holds quite abundant ore deposits that have helped its industrialization. In terms of energy, while it has its own production of oil and other fossil fuels, this is not sufficient to meet the country’s large and expanding needs.

Other areas include jungles, arid deserts and tropical shores; which all present both advantages and challenges: for instance, the Thar desert between India and Pakistan is a useful buffer zone, but is also a problem for economic development.

Finally, in terms of position India occupies most of South Asia, and its location favours both defence and power projection. As seen before, it benefits from good natural barriers to the north, but at the same time its neighbours are not friendly.

To the north-east, China is getting everyday more powerful and its geopolitical ambitions are a matter of concern for India.

To the north-west lays Pakistan, which apart from being India’s arch-nemesis since the 1947 partition has also built close ties with the PRC. But while the situation to the north is very challenging for India, its southern borders are very favourable.

There, the coast extends for thousands of kilometres on the open Ocean. This means three things: first, that there are no hostile powers at the border that threaten India’s security; even though it does not see positively China’s activities in that maritime area.

Second, this grants India an easy access to offshore resources and most importantly to sea trade. This is also favoured by the fact that India is located mid-way between East Asia and Europe, two of the world’s richest economic areas, plus to the Middle East and its energy resources. Third, this enables India to project its power with little effort, notably through its Navy.

Yet, there are also challenges deriving from India’s position, notably linked to climate change. Having a typical monsoon climate characterized by cycles of abundant rainfalls and dry periods, South Asia is extremely exposed to its effects, as demonstrated by the seriousness and frequency of recent phenomena like drought, floods, and violent storms. Moreover, this also favours the spread of pests and disease. All such factors bear enormous costs both in the form of direct damage and of prevention efforts, and is a notable obstacle to India’s development.

India’s economic and military power

The rise of India as a major power largely lays on its economic development. In 2017, its GDP rose by 6.7% and today it is the world’s fourth in terms of Purchasing Power Parity. Its economy is diversified and several Indian firms have become major players in global business. Financially, India is generally stable, even though it experienced some troubles in recent years.

But the country is not yet fully developed. Infrastructures remain insufficient, and inefficiency exist in various sectors. While unemployment is low (less than 9% in 2017), larger shares of the population continue to live below the poverty line, and traditional agriculture still absorbs a considerable portion of the workforce. Income inequality remains strong, with large differences in wealth distribution between upper and lower classes and between different regions.

In the demographic dimension, India has a population of around 1.28 billion people, making it the second largest in the world just behind China, and it is expected to surpass it in the coming years. Most Indians are young, which is positive for its economic development. But at the same time having a big population also brings several challenges: achieving food and energy security becomes more difficult, as well as providing public services such as a healthcare.  Moreover, this raises the problem of overcrowding and pollution, especially in large cities. Finally, the differences in wealth distribution can result in to social tensions: most of the population lives in the north, where a considerable Muslim minority is also present, but these areas are poorer than the southern parts of the country. In this regard, it should be noted that India has been fighting for decades against the insurgency of a Maoist group called the Naxalites.

Nevertheless, India continues its rise, also in military terms. It can field a large force that regularly participates to international exercises, and over the past few years it has been spending around 2.5% off its GDP in defence expenditures to modernize its armed forces. The Navy holds a particular importance, as it represents the mean to project its power across the Indian Ocean. As of today, the Indian Navy operates a large fleet that includes an aircraft carrier, a nuclear-powered attack submarine and several other units. In cooperation with Russia, India is also developing the BrahMos hypersonic cruise missile. Finally, it must not be forgotten that India is a nuclear power with an estimated stockpile of more than 100 warheads.

India’s geopolitics and foreign policy

For decades, India has maintained a nonaligned policy, of which it has been one of the leaders. But non-alignment does not mean neutrality.  As a matter of fact, India has pursued its own national interests and has been involved in several conflicts.

Its oldest rival is of course Pakistan. Immediately after the partition in 1947, the two fought a major war, followed by another two in 1965 and 1971, plus series of skirmishes. Today, the relations remain tense, but the conflict remains frozen because both states have developed a nuclear strike capacity.

The main point of the divergence is Kashmir, which remains divided between India, Pakistan and China (who controls the Aksai Chin since the 1962 war with India). Apart from having become a symbol of the Indo-Pakistani rivalry, Kashmir also has a strategic importance for these powers.

Ruling it allows to control the flow of water along the Indus valley, with all the consequences for human and economic development. For India, Kashmir is the gateway towards Central Asia as well as a region to control in order to prevent Pakistan from cooperating with its powerful Chinese ally.

On the other hand, for Pakistan dominating it is necessary to have more strategic depth and to preserve its connection with China, especially now that they are working together to develop the China-Pakistan Economic Corridor (CPEC), an ambitious infrastructure project to connect the two countries and that Islamabad considers fundamental to boost its economy, even though there are concerns over the debts its completion will bring.

This makes it clear that Pakistan is not India’s only strategic problem, and not even the main one. In recent years, China has become the prominent national security concern for India. One reason is the former’s close ties with Pakistan, but there also direct disputes between Beijing and New Delhi, namely over the aforementioned Aksai Chin and Arunachal Pradesh. The latter belongs to India, but is claimed by the PRC, and it represents a unique strategic challenge for New Delhi. As a matter of fact, it is connected to the rest of India only via a narrow passage chocked between China and Bangladesh and known as the “chicken neck”.  India fears that in case of a conflict the Chinese will rapidly overtake the Arunachal Pradesh by attacking this passage and cutting it from the rest of its territory.

In addition, Beijing and New Delhi are engaged in a geopolitical competition in South Asia. In 2017, the two powers faced each other in a military standoff over the Doklam Plateau, a strategic territory belonging to Bhutan (traditionally close to India) but claimed by the PRC; and since then they have been building up their military forces along the border.

China is also establishing ties with Nepal, raising concerns that the country me fall under its control, which would allow it to directly threaten Northern India. New Delhi has similar concerns over Bangladesh, because if it were to adopt a pro Chinese stance, the “chicken neck” would become even more vulnerable.

But the Sino-Indian rivalry is not limited to South Asia. The two are also competing in Indochina, where each of them is promoting its own economic and political projects. New Delhi is doing so on the basis of its “Look East Policy” launched in the 90s, whereas the latter considers this region an important element of its broader “One Belt, One Road” (OBOR) strategy. In this regard, it is notable that India has refused to cooperate with China in this ambitious project.

Another country where their interest collide is Iran. India considers it a potentially precious ally, because it would allow to take Pakistan between two fires. Moreover, it is also a source of oil. But for these very same result and to counter the U.S., China is also interested in building a partnership with Iran.

Last but not least, there is the maritime dimension. Beijing is fostering its ties and establishing a greater presence in the Indian Ocean, in the optic of developing its Maritime Silk Road to connect its territory with Europe and the Middle East and by sea. But New Delhi considers this as “its own” Ocean and as an essential area for its plans to extend its influence on a global scale. Therefore, it is concerned by Beijing’s initiatives; notably in countries like Sri Lanka and the Maldives. In regard to the letter, the political turmoil that has affected the archipelago was largely to be interpreted in the optic of the Sino-Indian rivalry; and the recent electoral victory of Mohamed Solih seems to have marked a point in favour of India.

As a consequence of its rivalry with Beijing, New Delhi is also developing closer ties with other capitals that share similar security interests. The most notable trend is the gradual rapprochement with Washington. Even though it was never openly opposed to the US, during much of the Cold War India sympathized with the USSR and its relations with America were rather cold. But now that both are concerned over China’s rise, they are gradually establishing more cooperation, notably in security terms. India is following a similar policy with Japan and Australia, two other powers that are worried over the initiatives of the PRC. Together, these four states form the Quadrilateral Security Dialogue, an informal framework to ensure stability in the Indo-Pacific.

Two other noteworthy partners for India are Israel and the EU. The relations with the former are complicated by India’s tilts towards Iran, but the Jewish State remains an important partner as an arms supplier and for technological cooperation. On its part, the EU has a central role for India’s trade. Lastly, it should also be mentioned that New Delhi is increasing its economic cooperation with Africa as well.

Conclusion: India at the crossroad

This overview allows to draw some conclusion on India’s current and future role. The country finds itself at a crossroad. It has all the potential to emerge as a major world power, but to achieve this objective it must successfully solve the multiple challenges it is facing. Only time will tell to what extent it will manage to, but what is sure is that India is a power to monitor, and that in any case it will have a considerable impact in world affairs in the coming years.

This article was originally commissioned and first published by KJ Vids. It was written by Alessandro Gagaridis. You can visit his website at www.strategikos.it. Please request permission to info@kjvids.co.uk before re-posting.

Will China take over Europe?

For over a decade, Chinese political and corporate leaders have been hunting for investment opportunities around the globe with bottomless wallets. From Asia, to Africa, the U.S and Latin America, China has asserted itself as an emerging world power. The multi-billion dollar belt and road initiative which some have called as the “Chinese Marshall Plan,” is designed to encourage economic connectivity and integration to the Eurasia strategic landscape, by linking Europe and Asia by land.

Europe is a key piece in China’s grand ambitions and China has been significantly expanding its economic footprint in Europe. So much so that it has led the EU to devise a counter-strategy in order to prevent the creation of political and financial dependencies. I’m Kasim, welcome to KJ Vids and in this video we take a look at China’s investments in Europe.

Since 2008, the landscape of Chinese foreign direct investments in the European Union has changed dramatically. From $840 million invested in 2008, China’s annual FDI in Europe grew to $42 billion in 2017. According to a recent compilation by Bloomberg, total Chinese investments in Europe, including both mergers and acquisitions (M&A) and greenfield investments, amount to $318 billion, 45 percent more than Chinese investment in the U.S. between 2008 and 2017.

China has taken over approximately 360 European companies. In the first six months of 2018, research by global law firm Baker McKenzie found that the value of newly announced Chinese merger and acquisitions in Europe hit $22 billion by the mid-point of the year, nine times higher than in North America where it was just $2.5 billion.

China’s investments are broadly spread geographically, although the largest European economies – the United Kingdom ($70 billion in cumulative Chinese investment), Italy ($31 billion), Germany ($20 billion), and France ($13 billion) – attract the largest share of Chinese capital. Among China’s iconic investments in Europe is the Hinkley Point nuclear plant in southern England, which is one third funded by China.

For over a decade now, the City of London has been a magnet for Chinese cash as Beijing tries to build its currency, the Yuan, into a world currency. By and large, Chinese money has been going into real estate and finance, with Chinese state banks well represented and active in the bond market and the international exchange market. Chinese citizens represent almost half of the investor visas the UK granted in 2017, outnumbering Russians, the next largest group of investor visa recipients, by 250 percent. Despite the largely uncertain future of the UK as a market once it exits the EU, China is betting on the British capital as an emerging hub of Chinese finance.

In Germany, China’s investments started with the purchase of family-run industrial companies, such as machine-tool maker Putzmeister in 2010, and continued with the Chinese company Midea’s acquisition of robotics company Kuka AG in 2016 for $5.2 billion. More recently, a Chinese investor’s $1 billion acquisition made it became the top shareholder of Daimler AG. German debate over Chinese FDI has intensified since the launch in 2015 of China’s Made in China 2025 strategy, a national plan that aims to make the country a champion in key high-tech industries such as aerospace, robotics, and artificial intelligence. Many Chinese companies have eyed German companies with the goal of acquiring technologies and orchestrating transfers of these technologies.

In Italy, China’s Silk Road Fund helped China National Chemical Corporation, also known as ChemChina, buy tire maker Pirelli in 2015 for $7.7billion. ChemChina has also acquired a string of industrial and energy related companies.

In the EU’s immediate neighbourhood, Switzerland has captured the lion’s share of Chinese FDI with ChemChina’s acquisition of Syngenta, one of the world’s largest agri-business conglomerates. The deal was finalized in 2018 for $46 billion, making it the world’s single largest acquisition by a Chinese company.

The islands of Cyprus and Malta, both full EU member-states, are throwing open the gates to Chinese investors, especially in finance and real estate. Both have also become strong supporters of China. Then there are the cases of Greece and Portugal, two Southern European countries that together account for a modest 2.5 percent of the EU’s GDP in 2017.

China has become a key-investor in Greece, mainly through a central investment project. In 2016, a Chinese state-owned corporation, China Ocean Shipping Company (Cosco), took over 67 per cent of Athens’ Piraeus harbour. China has signalled that it intends to use this port as the main platform for its maritime Silk Road, part of Beijing’s “Belt and Road” Initiative. Most Chinese companies are now using Piraeus as their principal port of entry in Southern Europe. Visiting China in 2016, Prime Minister Alexis Tsipras declared that Greece intends to “serve as China’s gateway into Europe”.

To the west, Portugal has become a key recipient of Chinese investment. Per capita, it is one of the largest in Europe. During a Euro region’s crisis in 2011, the Lisbon government was under pressure from the European Commission, the European Central Bank, and the International Monetary Fund (IMF), the so-called “troika,” to sell state assets. China stepped forward to offer foreign investment. As part of the bailout, China Three Gorges bought 26 per cent of EDP, and State Grid Corp. of China bought a stake in Portugal’s power distributor, REN-Redes Energeticas Nacionais SA. Fosun Group, a privately-owned Shanghai-based company, controls the Portugal’s largest insurer, Fidelidade, and a group of private hospitals. The list of Chinese investments seem endless, but does any of this translate into political influence?

According to Thomas Wright, the Director of the Centre on the United States and Europe at Brookings, the Chinese leadership’s seeking of political influence in the EU is driven by two interlocking motivations: ensuring regime stability at home and presenting its political concepts as a competitive way of political and economic governance to a growing number of third countries.

Unlike the current Russian government, Beijing is interested in a stable — but pliant and fragmented —EU and the large and integrated European single market that underpins it. Properly managed, the Chinese leadership has concluded, parts of Europe can be a useful conduit to further its interests. Politically, it is seen as a potential counterweight to the U.S. – one that is even more easily mobilized in the era of the Trump administration’s “America First” approach. Beijing is also acutely aware that Europe has many assets like technology and intellectual property, which China needs for its industrial upgrading, at least in those domains in which it has not yet established its own technological leadership. The EU is also useful as a ‘legitimizer’ of Chinese global political and economic activities, such as the Belt and Road Initiative (BRI).

Beijing pursues three related goals. The first is aimed at building support among third countries like EU member states on specific issues and policy agendas, such as gaining market economy status from the EU or recognition of territorial claims in the South China Sea. A part of this short-term goal is to build solid networks among European politicians, businesses, media, think tanks, and universities, thereby creating layers of active support for Chinese interests. Recent Chinese attempts to discourage individual EU countries from taking measures that run against Chinese interests, such as supporting a coordinated EU response to China’s territorial claims in the South China Sea, meeting with the Dalai Lama, or criticizing Beijing’s human rights record, are cases in point.

According to Thomas Wright, the second related goal is to weaken Western unity, both within Europe and across the Atlantic. Beijing realized early on that dividing the U.S. and the EU would be crucial to isolating the U.S., countering Western influence more broadly, and expanding its own global reach. China senses that a window of opportunity to pursue its goals has opened, with the Trump administration seen as withdrawing from the role as guardian of the liberal international order that the U.S. has long played. This comes in addition to the challenges Western liberal democracies face from the rise of illiberal-authoritarian political movements.

The third goal is broader in terms sense of “making the world safe more China’s autocratic model.” This means creating a more positive global perception of China and presenting its political as well as economic system as a viable alternative to liberal democracies. In large part, this is motivated by China’s continued fear of the appeal of so-called Western ideas like liberal and democratic values. From the vantage point of Beijing, European and Western ‘soft power’ has always had a sharp, aggressive edge, threatening the Chinese regime. At the same time, this goal is based on the idea that as China rises in economic and military terms, it should command more respect in the court of global public opinion. Activities geared towards long-term shifts in global perceptions include improving China’s global image through measures like media cooperation, making liberal democracy less popular globally by pointing out real or alleged inefficiencies in democratic decision-making processes, and supporting illiberal tendencies in European countries.

Given the rapidity of China’s economic development in the past 30 years it has taken the EU some time to acknowledge the growing power and influence of Beijing. Not only has China become a trading giant, it sits on the world’s largest currency reserves and is an increasingly important provider of foreign investment including in Europe.

Recently, however, a number of developments have generated a sense of caution among European politicians and policymakers. On 19th September 2017, the EU published its much-anticipated strategy to counter China’s increasing economic influence in Europe.

China’s refusal to tackle the dominant position of its state-owned enterprises led the EU to refuse to grant China market economy status. Beijing’s targeting of European technology has also led to plans for screening of Chinese investments in Europe. But it was the massive infrastructure investments under BRI that raised concerns in Brussels, as well as Washington, Delhi and other capitals about the implications of China’s approach.

In the spring of 2018 EU ambassadors in China penned a report critical of the BRI for being economically, environmentally, socially and financially unsustainable. It also criticised China for discriminating against foreign businesses, the lack of transparent bidding processes and the limited market access for European businesses in China.

China’s involvement in the EU and its neighbourhood also rang warning bells. In 2014, Montenegro concluded an agreement with China Exim Bank on the financing for 85% of a highway construction project, with the estimated cost equalling 25% of the country’s GDP.

The IMF has repeatedly stated that construction should only continue on the basis of concessional funds. Many believe that a debt default is likely, which may result in the involuntary handover of critical infrastructure to China.

Likewise, China’s entire or partial acquisition of ports in Belgium, the Netherlands, Spain, Italy and most notably Greece has not gone unnoticed. Without serious hindrance, China is buying up critical infrastructure in Europe, whereas European foreign direct investment in China is decreasing.

China has already reaped some political benefit from these investments with some member states blocking resolutions critical of human rights in China or condemning Beijing’s conduct in the South China Sea.

Similarly, European officials have also questioned the environmental and economic sustainability of various Chinese connectivity projects. The planned construction of six coal-based power plants in Pakistan whose joint output capacity equals 27% of the country’s current capacity has been criticised as environmentally unsustainable.

Sri Lanka has been unable to repay Chinese loans for the construction of the Hambantota port. As a result, the port and surrounding acres of land, strategically located at the crossroads of the Indian Ocean, the Bay of Bengal and the Arabian Sea, will now be under Chinese control until the year 2114.

Malaysia and Myanmar are also seeking to renegotiate loans taken out under the BRI.

These examples have increased EU concerns as China has expanded its influence in Asia, Central Asia and Europe. But the EU was well aware that mere peer pressure would not drive China to reconsider its strategy. To secure its own political and economic interests, the EU had to put forward an ambitious and comprehensive response, which was to strengthen its own links with the host countries and to present them with a credible and sustainable alternative offer for connectivity financing.

The new strategy will give Asian and European states a much clearer idea on the basis of which the EU wishes to engage with them, and what they can expect. Although some financing is mentioned in the EU paper, we will have to wait and see how the ongoing negotiations for the next EU budget will be in allocating sufficient EU funds to connectivity financing in order to mobilise additional investment from private and multilateral investors. The EU strategy will also need united support from member states, a solid public communications strategy, and broad bi- and multilateral outreach programmes to the EU’s partners.

Geopolitical competition in Eurasia will undoubtedly increase with China, Russia, the US and the EU competing for influence. The connectivity strategy of the EU has set down a marker that the EU is part of the Great Game.

Thanks for watching another KJ Vid, see you next time.

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