China-India Face-off in the Indian Ocean

India suddenly faced with having to share its own lake

By: Salman Rafi Sheikh

‘Ahoy – is that a PLA ship?’ Photo from India MOD

When a Chinese armed forces delegation visited the Indian Ocean states of Maldives, Sri Lanka, and Nepal in the second week of March, it signaled not just the military arrival of China in the region but also reveals a radical reconfiguration of the region’s geopolitics in favor of Beijing to the growing disadvantage of India. Against the backdrop of growing India-China rivalry in the Indian Ocean and New Delhi’s key role in the US-led alliance that seeks to roll back and ‘contain’ China’s influence, this is a major setback to ambitions to graduate to the status of a major regional power.

The visit followed an earlier decision by the Maldives government to have India withdraw its troops from the island country. China is clearly replacing India in Maldives as the country’s main security partner. As it stands, Maldives has already announced a “military assistance” deal with Beijing.

Maldives is also a country that owes more than 40 percent of its external debt to China. (In 2021, this was about US$3 billion.) In his latest visit to China, Maldives President Mohamed Muizzu requested Beijing to restructure its debt repayment. That request came against a revelation by the president that the country was facing difficulties in carrying out development projects while “we are trying to manage debt.” Yet, the country also announced fresh deals (the amount of the deal was not disclosed) with China to build new infrastructure, as if the restructuring of the debt repayment became possible only because China was allowed new ventures to earn more money in the long run.

But China’s move is not simply an outcome of what the West loves to call “debt trap” diplomacy. It is mainly motivated by India’s growing embrace of the US in the Indo-Pacific region, India’s own ambitions to treat the region as its exclusive zone of influence, and the regional states’ own growing apprehension of India’s pro-West geopolitics.

China, on the other hand, has its own ambitions that clash with India’s and its extra-regional allies. From a Chinese perspective, the idea is to build vast networks of trade which emerge from within China and allow Beijing to relocate its surplus industry. Ultimately, the plan is to give China a disproportional geoeconomic presence along these networks, which is simply bad news for countries like India.

Slowly but surely, countries that until recently seemed to be securely in the Indian nexus are slipping out. Since the ouster of Gotabaya Rajapaksa in July 2022, Sri Lanka has moved more clearly towards China. India was the first country that Gotabaya had visited right after his victory in the presidential elections in 2019. But ever since Ranil Wickremasinghe became Sri Lanka’s president in 2022, he has pushed to pivot his country towards China.

While Ranil was previously seen as pro-west, his last term as prime minister between 2016 and 2019 didn’t see any tangible investments from the west for the country. While Ranil was able to secure a US$3 billion package from the International Monetary Fund, his regime continues to rely more on China than India for non-IMF sources of help. Most importantly, Ranil was able to make a debt restructuring deal with China amidst the crisis – a development that helped Sri Lanka get the second tranche of a US$2.9 billion bailout package earlier approved by the IMF.

While India also offered US$4 billion to Sri Lanka in 2022 and Modi has indicated New Delhi’s intention to invest in Sri Lanka’s energy sector, China continues to out-invest India. In late November, Sri Lanka approved Chinese state-owned oil giant Sinopec's proposal to build a US$4.5 billion refinery in the southern port of Hambantota, the single largest investment in Sri Lanka since the economic crisis of 2022. This investment footprint is in addition to the fact that China is Sri Lanka’s single largest foreign lender, out-investing all other external actors.

Like Maldives and Sri Lanka, Nepal is yet another country in the region where China appears to be displacing India. A major glimpse came two weeks ago when Prime Minister Pushpa K. Dahal replaced his pro-India coalition partner with staunch pro-China ally K.P. Sharma Oil, head of the Communist Party of Nepal.

After the formation of the new government, the new foreign minister, who is also the country’s deputy prime minister, chose China for his maiden tour. He will be discussing new deals and meeting with officials of the Chinese Communist Party.

China’s Foreign Ministry Spokesperson Lin Jian, reacting to the upcoming visit, said that “China stands ready to work with Nepal to take this visit as an opportunity to further deliver on the important common understandings between leaders of the two countries, deepen political mutual trust, pursue high-quality Belt and Road cooperation, expand exchanges and cooperation in various areas and strive for new progress in building China-Nepal strategic partnership of cooperation featuring ever-lasting friendship for development and prosperity.” Lin also talked about the upcoming visit of Sri Lanka’s prime minister, further reinforcing the Indian Ocean region’s pivot to Beijing.

These states have not abandoned India in favor of China nor will move in this direction. Many, such as Sri Lanka, will continue to have strong ties with India. Having said that, the emerging pattern shows that they are explicitly moving towards a more regionally focused geopolitics. While India is also a regional player, its standing in the region is quite explicitly tied to Washington, which, for some of these states, is not a good sign, primarily because of the strictly military nature of the US engagement in the region.

Thus far, the US has mainly pushed the so-called Quadrilateral Dialogue, or QUAD as the main face of its presence in the Indian Ocean. While arrangements like the QUAD might be a necessity for countries like India and Japan that fear China’s rise, smaller states don’t necessarily benefit from it, nor do arrangements like QUAD address their core economic issues.

This is one key reason why many states in the region have developed a sense of apprehension vis-à-vis the nature of India’s geopolitics. While India continues to retain influence in countries like Bhutan and Bangladesh, reports indicate China’s push for a quick consensus around a Sino-Bhutanese territorial agreement, talks for which began late last year. India’s Modi is on a visit to Bhutan already. This visit comes in anticipation of this agreement bringing a radical shift in Bhutan’s ties both with India and China. It remains to be seen whether New Delhi can offset it to remain competitive in the region or not.