OBOR: Asian Project or Pax Sinica?

Ritika Passi| Samir Saran

The central feature of United States’ external engagement — financial institutions, military posture, diplomatic overtures — for much of post-WWII twentieth century and beyond has been the security of its energy interests. Likewise, recent conversations with Chinese scholars, party members and officials indicate that the ‘One Belt, One Road’ (OBOR) initiative of Xi Jinxing’s government is likely to become the lynchpin of Chinese engagement with the world in the decades ahead. If to understand American foreign policy of the days past, many have ‘followed the oil,’ to decipher Chinese interests going forward, we may just have to ride the Belt and the Road.

At the third edition of the India-China Think-Tank Dialogue in Beijing, hosted in early January, a cross-section of Chinese scholars (from Beijing, Guangzhou, Shanghai, Yunnan) and personnel from the official machinery discussed India-China relations and prospects for regional cooperation. Unlike at previous meets, this time around the conversation cursorily engaged with old tensions, contests and irritants in the bilateral relationship; instead, the centerpiece of all discussion was the OBOR initiative. Be it matters of security, climate change and sustainability, or trade and economics, each Chinese intervention located OBOR as its locus, projecting it as the response to a multitude of challenges and opportunities. To some Chinese scholars, OBOR represented but the second act of their country’s opening up and reform process, no doubt intended to be the crowning feature of Xi Jinping’s Chinese dream.

A Mandarin Tale

Every project must have a compelling narrative. Towards this end, the Chinese have begun to weave new formulations that are giving shape to Beijing’s vision for OBOR and Asia. Some facets could be discerned at this recent interaction.

The first was the novel idea of ‘entity diplomacy’. This construction argues for engaging within and across regions to secure the best interests of an entity that is necessarily larger and with interests broader than those of any sovereign. This follows from the argument of a revival of ‘continentalism’ as the Eurasian landmass deepens linkages and ‘Asia’ emerges, OBOR segues perfectly into this framework. It becomes, for the Chinese, an Asian undertaking that needs to be evaluated on the gains it accrues to the entity, i.e., Asia, as opposed to China alone. It therefore follows, from Beijing’s perspective, that Indian and other Asian nations must support and work for the OBOR initiative.

Entity diplomacy also translates into the establishment of “one economic continent,” the second theme undergirding the conversation. OBOR, then, becomes a vehicle that promotes convergence and alignment of infrastructure, trade and economic strategies. Indeed, for some Chinese speakers, India is already part of the initiative, as its own projects like Project Mausam and economic initiatives such as Make in India and Digital India complement and complete OBOR. Indian participation in the Asian Infrastructure Investment Bank and joint ownership of the New Development Bank only reaffirm India’s partnership in this Asian project for many in Beijing.

To counter popular allegations of OBOR being a “Chinese scheme” à la US Marshall Plan, the Chinese were quick to clarify that the original project is named the Belt and Road Initiative; the ‘One’ has been an English effect that has popularised a mien of exclusivity around OBOR, to the primary advantage of China, instead of an inclusive Asian economic project in which all participating nations would partake benefit.

The third formulation was that of a mutually beneficial ‘swap’ — India understanding and protecting Chinese interests in the Indian Ocean, and China securing India’s essential undertakings in their part of the waters, read the South and East China Seas. This was in the vein of prompting a “new thinking” of “inclusive collaboration” instead of “exclusive alliances.” However, there was unambiguous clarity that if India cannot assume more responsibility in the Indian Ocean, China will step in. (Coincidentally, this is telling of a Chinese Navy that is comfortable in securing its own extended waters.)

Core Conflicts

There are some structural challenges that confront the Chinese formulations and the OBOR proposal.

First, the perception, process and implementation till date do not inspire trust in OBOR as a participatory and collaborative venture. The unilateral ideation and declaration — and the simultaneous lack of transparency — further weaken any sincerity towards an Asian entity and economic unity. When questioned, the Chinese recognised this lacuna and remained convinced that the regime in Beijing is committed to pursuing wide-ranging consultations with 60+ nations OBOR implicates. An ‘OBOR Think Tank’ is also being established to engage scholars from these countries.

The second poser for the Chinese is on the appetite in Beijing to commit its political capital to this project and to ensure the security of its economic interests. While for obvious reasons the Chinese would not want to be seen as projecting their military and political presence along OBOR, it was clear that China is willing to underwrite security through a collaborative framework, minimising the anxieties that are already palpable. The success of the OBOR initiative will depend on their ability to fashion such a new security arrangement.

The third challenge deals with the success of the ‘whole’ scheme. OBOR is a five-layered lattice that promotes regional integration — the Chinese vision document lays out five components of connectivity: policy, physical, economic, financial and human. While no developing country will turn away infrastructure development opportunities financed by the Chinese, they may not necessarily welcome a rules regime built on a Chinese ethos. Could the physical layer translate into a buy-in to a Chinese-led global economic and financial order or trade architecture?

Finally, how can this initiative navigate the irreconcilable geometries of South Asia that prevent India from providing full backing to OBOR? A formal nod to the project from India will serve as a de-facto legitimisation to Pakistan’s rights on Pakistan Occupied Kashmir and Gilgit Baltistan under the China-Pakistan Economic Corridor (CPEC) that is “closely related” to OBOR.

Options for India

The blueprint for OBOR remains fairly ambiguous as of now, and New Delhi does have options it can explore in the meantime. Fundamentally, it needs to resolve for itself whether OBOR represents a threat or an opportunity. The answer undoubtedly ticks both boxes. Chinese political expansion and economic ambitions, packaged as OBOR, are two sides of the same coin. To be firm while responding to one facet, while making use of the opportunities that become available from the other, will largely depend on the institutional agency and strategic imagination India is able to bring to the table.

First and foremost, India needs to match ambition with commensurate augmentation of its capacities that allows it to be a net security provider in the Indian Ocean region. This will require New Delhi to not only overcome its chronic inability to take speedy decisions with respect to defence partnerships and procurement deals, but will also necessitate a sustained period of predictable economic growth. OBOR can assist in the latter; in doing so, it becomes its own antidote that allows India’s political capacity to secure its strategic waters and territory.

Therefore, just as US trade and economic architecture underwrote the rise of China, Chinese railroads, highways, ports and other capacities can serve as catalysts and platforms for sustained Indian double-digit growth in the coming decades. Simultaneously, India can focus on developing last-mile connectivity in its own backyard linking to the OBOR — the slip roads to the highways, the sidetracks to the Iron Silk Roads. South Asia is among the fastest growing regions in the world. Such ‘niche’ infrastructure thus doubly makes sense, as India neither has the wherewithal to advance an alternate economic proposition nor the luxury to entirely shun OBOR.

Arguably, OBOR offers India another political opportunity. There seems to be a degree of Chinese eagerness to solicit Indian partnership, or at least a positive disposition; at the same time, the Chinese do realise that New Delhi is unlikely to endorse OBOR as long as CPEC remains part of the project. Can India, therefore, on its end, seek reworking of CPEC by Beijing in return for its active participation? It could, for instance, encourage progress in other regional connectivity offshoots of greater mutual interest — such as the Bangladesh-China-India-Myanmar Economic Corridor — or incentivise Chinese participation in newer tangents, such as in the maritime sphere or transport corridor projects across India. Effectively, OBOR could allow India a new track to its own attempt to integrate South Asia.

Furthermore, for the stability of the South Asian arm of OBOR, can Beijing be motivated to become a meaningful interlocutor prompting rational behavior from Islamabad? A new China-Pakistan-India equation has the potential to ensure that development concerns are not sacrificed at the altar of security considerations.

This is a longer version of an article that appeared in The Hindu.

Columns/Op-Eds, Politics / Globalisation

Engage the dragon on Balochistan

February 4, 2016, 2:38 am IST TOI

Original link is here

By Samir Saran and Abhijnan Rej

How New Delhi can counter Islamabad/ Rawalpindi’s good cop, bad cop routine

The Pathankot attack has once again confirmed that Rawalpindi – as a rational strategic actor – realises that playing “bad cop” to Islamabad’s “good cop” allows it use of a sub-conventional space to strike at India and undermine any Indian strategy on Pakistan. The shrill “talk/ don’t talk” debate in India post Pathankot is a case in point. The Indian strategic commentariat –predictably – went into overdrive with the usual liturgical analysis.

What, however, is significant this time around is how a cross-section of analysts openly advocated the need for India to acquire greater sub-conventional retaliatory capabilities. Among the pressure points that India could leverage are Balochistan’s festering separatist movements.

A year or so before Ajit Doval became national security adviser, he famously warned Pakistan that a repeat of the Mumbai 26/11attack could lead to Pakistan losing Balochistan. The Doval Doctrine – as it has now come to be known – involves what he calls a “defensive-offensive” strategy where India’s security establishment acquires a sub-conventional secondstrike capability, to be wielded as and when needed.

The Pakistan military establishment is aware that Balochistan is a natural weakness India could exploit with telling impact. In May last year, the Pakistan army’s media machinery all but accused India of fermenting secessionism there.

But here lies the twist. China – as part of the China-Pakistan Economic Corridor (CPEC) – sees the Balochistan port of Gwadar as an integral part of its One Belt, One Road (OBOR) initiative. Indeed, as former foreign secretary Shyam Saran recently wrote, Gwadar is significant precisely because it is where China’s Maritime Silk Route (“the Road”) meets its Eurasian landbased connectivity project (“the Belt”).

The geopolitical significance of Gwadar to China makes any Indian subconventional response in Balochistan exceedingly complicated. The reality is that the same Balochi rebels who want to secede from Pakistan have also opposed Chinese activities.

This was evident last March when Balochi rebels set fire to five oil tankers servicing a Chinese company. However, it is likely that unrest in that region, organic or manipulated, that hurts Chinese interests could be viewed by Beijing (or could be sold to them), as Indian provocation.

It is also inconceivable that China would sit idle if the separatists, allegedly backed by India, move from being a mere nuisance and acquire the potential to seriously jeopardise their prize – Gwadar – of the $46 billion CPEC investment. China could initiate and enhance its support for militants in the Indian northeast, or worse, encourage and abet Pakistan’s proxy warriors.

Meanwhile, an assertive US AsiaPacific re-balance in the region – in response to China’s naval activism in the South China Sea – is likely to ensure greater US control of the Malacca Strait in order to deter the Chinese from revising marine territorial borders.

China, therefore, seeks alternative routes for its energy supply and goods, which would connect the Strait of Hormuz to a port in the Arabian Sea, along with better land connectivity through the Eurasian landmass.

Even as these new realities reshape multiple arrangements in the region, the challenge for India is to ensure that Balochistan does not transform from being Pakistan’s quagmire to another thorn in the Sino-Indian relationship. India must wean China away from the Gwadar port, and CPEC in general, by offering credible alternatives.

India could fast track its commitment to the Bangladesh-China-India-Myanmar (BCIM) corridor and invite the Chinese to set up a land connectivity corridor from Kolkata to Gandhinagar, passing through Mumbai. It should also offer to partner with the Chinese to refurbish the NH-6 linking Kolkata to Mumbai.

Finally, it should get the Chinese on-board the Sagarmala initiative, and allow the Chinese to co-develop a port off the coast of Gujarat, which would link up with the Indian-Chinese land connectivity corridor running roughly parallel to the Tropic of Cancer. The financial model for this land initiative could be along the lines of what has been proposed for the Delhi-Mumbai Industrial Corridor in collaboration with Japan, and implemented through the China-led Asian Infrastructure Investment Bank in which India is the second-largest shareholder.

The land corridor would cut through central India, which means that access can be controlled at will in event of an India-China conflict, vastly diminishing its dual-use potential. The fact that China should be made a partner in servicing India’s infrastructure needs has been argued for some time; the proposed connectivity projects could help India target its infrastructure deficit.

The Kolkata-Gandhinagar land corridor could be developed into a full-fledged manufacturing hub, linking one of the most resource rich Indian states to one of the least. From the point of view of domestic politics, West Bengal state assembly elections are scheduled this year. A credible proposal for the land corridor with Chinese backing will certainly do no harm to BJP’s electoral prospects there.

Geo-economics – as defined by the scholar and former US ambassador to India, Robert Blackwill – is the theory and practice of leveraging economic tools for strategic gains. A vigorous India-China connectivity partnership that offers China what it seeks on the Arabian Sea in return for the freeing up of sub-conventional space for India and/ or to encourage good behaviour from Pakistan, is a way by which India’s geo-economic strategy would serve India’s security strategy.

Samir Saran is Vice President, Abhijnan Rej is Fellow at Observer Research Foundation

Columns/Op-Eds, Water / Climate

Indian climate policy in a post-Paris world

2 Feb 2016|Samir Saran and Aniruddh Mohan

Original link is here

Pic new 2

Most experts agree that the consensus achieved at COP21 in Paris, like most global agreements, produced a sub-optimal outcome, and by itself, is unlikely to limit global average temperature rise to two degrees centigrade (much less 1.5 degrees). The real work will happen within nations, as countries begin to roll out the implementation of their Nationally Determined Contributions (NDCs).

Going forward, India’s climate policy and energy policies are likely to be shaped by three documents: the Paris Agreement, the Sustainable Development Goals (SDGs) Agenda and the Indian NDC submitted to the United Nations Framework Convention on Climate Change (UNFCCC). All three have implications for India’s national ambitions to grow infrastructure, ensure inclusive development and maintain sustained economic growth. The agreements also raise questions around financing, namely whether the global financial architecture can respond to the needs of this new development paradigm.

India requires in excess of $1 trillion in the next five years for meeting its stated national goals. Besides the domestic mobilisation of resources, there are two fundamental challenges that need to be resolved if the country is to meet its climate and energy goals. The first is to ensure steady global funding for its traditional infrastructure and energy projects in a carbon-constrained world. That will be difficult. The World Bank has already restricted loans for building coal-fired power plants since 2013; and in November 2015, the Organization for Economic Cooperation and Development (OECD) agreed to limit most state financing to ‘ultra-supercritical plants,’ which burn less coal to produce the same amount of electricity.

The second challenge is to reform the structural bias in the global financial architecture, which, since the global crisis, pays more attention to ‘credit adequacy’ rather than the ‘credit enhancement’ that India and other developing countries so urgently require. Aligning those banking needs and the global banking mood is an imperative for traditional, renewable and low-carbon projects.

Understanding India’s energy options is also a crucial task. On the mitigation front, the Indian NDC commits to reducing the emissions intensity of its economy by 33–35% by 2030 from 2005 levels and achieving 40% of its installed electrical capacity from non-fossil fuel sources by 2030. The latter commitment is conditional on receiving adequate technological and financial support. The NDC also signals that India’s per capita energy consumption may grow up to more than six times beyond 2015 levels.

As of the end of 2015, the installed capacity of clean energy sources (renewables, hydro and nuclear) in India was 30% of the total installed capacity. Therefore, even if that were to be scaled up to 40% by 2030, 60% of capacity would still be based on fossil fuels. The real room for India to maneuver is in this large block of base-load conventional generation, which will account for a majority of the actual power generation, given the low capacity factors of renewable sources of power.

According to analysis done by the Centre for Policy Research, India could have something between 600–800 GW of total electrical capacity by 2030. Taking the median figure of 700 GW, 60% of fossil fuel capacity would add up to 420 GW. The current fossil fuel capacity stands at 198 GW with 173 GW of coal and just over 24 GW gas. India is therefore likely to more than double its fossil fuel capacity by 2030, alongside the impressive commitment on increasing renewable installations.

To ensure that India’s path to development doesn’t compromise its climate action, India has a few options. First, it can ensure that the additional 200 GW of fossil fuel capacity that’s to be added up to 2030 is significantly fueled by gas. Gas-based power has roughly half the emissions of coal fired power plants. 24 GW of current gas capacity points to the limited presence of gas in India’s current energy mix and also to the potential to dramatically scale that up.

Two market conditions allow India to pursue that policy path aggressively. First, the slump in global gas prices following the restart of Japanese nuclear reactors and an oversupply in the market means that it’s the perfect time for India to negotiate new gas deals and secure long term supply at competitive prices. In fact, a lot of Indian gas plants were idle in 2015 as the prices of importing gas was more expensive than the cost of selling power. The Indian government has had to recently renegotiate the price with Qatar, its main supplier, and achieved a price reduction of about 50%. The second follows from the Iran nuclear deal, which could see Iranian gas becoming available as a viable source. Just last month, it emerged that India and Iran are considering a US$4.5 billion undersea pipeline that would connect Iran to India’s west coast via the Oman Sea. Iran has the largest gas reserves in the world and the availability of Iranian gas changes India’s energy calculus significantly.

India’s second option is to significantly scale-up nuclear power. Nuclear energy has the advantage of being both carbon free and, like gas power, available all the time. It’s therefore the only clean energy option to substitute coal in the electricity grid. However, India’s tardy rate of growth in the nuclear sector so far, with only 5.8 GW of current capacity, as well as issues with the liability law, procurement of technology and long construction times, mean that gas remains the only viable and cleaner option over the short term.

However, to make this shift to gas India needs to work on three key areas. First, the country’s gas infrastructure needs to be scaled-up so that it can link to transnational pipelines, draw from regasification terminals of Liquefied Natural Gas (LNG) and develop last-mile connectivity to consumers.

Second and more importantly, the political will to allow for the development of an integrated gas market is needed. The difficult decision to remove direct and quasi control over pricing and end-use needs to be taken. Such a move will create conditions where benefits and costs are accrued through market operations and will help attract interest from investors, producers and distributors.

Finally, India’s geopolitical overtures need to support this new energy agenda. Financing and infrastructure development require strong global support and partnerships. India’s relationships with Iran, Qatar and Turkmenistan among others also needs to be re-energized and must be seen as part of the national imperative of seeking energy security and more robust climate action.

Samir Saran is Vice President and Aniruddh Mohan is Junior Fellow at the Observer Research Foundation in New Delhi, India. Image courtesy of Flickr user UK DFID.

Columns/Op-Eds, Politics / Globalisation

Seizing the ‘One Belt, One Road’ opportunity

Updated: February 2, 2016 00:17 IST | Samir Saran, Ritika Passi

Original link is here

Pic new

“The ‘One Belt, One Road’ initiative of Xi Jinping’s government is likely to become the lynchpin of Chinese engagement with the world.” Picture shows Iranian President Hassan Rouhani with the Chinese President at the Sa’dabad Palace in Tehran, Iran. The two leaders signed several agreements, including on the OBOR. | AP

China’s ‘One Belt, One Road’ could potentially allow India a new track on its own attempt to integrate South Asia.

The central feature of much of the post-World War II American external engagement has been the security of its energy interests. Likewise, recent conversations with Chinese scholars, Communist Party of China members and officials indicate that the ‘One Belt, One Road’ (OBOR) initiative of Xi Jinping’s government is likely to become the lynchpin of Chinese engagement with the world. If, to understand American foreign policy of the years past, many have ‘followed the oil’, to decipher Chinese interests going forward, we may just have to ride the Belt and the Road.

At the third edition of the India-China Think-Tank Dialogue in Beijing, hosted in early January, a cross-section of Chinese scholars and officials discussed India-China relations and prospects for regional cooperation. Unlike at previous meets, this time the conversation cursorily engaged with the usual tensions in the bilateral relationship; instead, the centrepiece of all discussion was the OBOR initiative.

A Mandarin tale

Some facets of the new formulations that are giving shape to Beijing’s vision for OBOR and Asia could be discerned at this recent interaction.

The first was the novel idea of ‘entity diplomacy’. This construction argues for engaging within and across regions to secure the best interests of an entity that is necessarily larger and with interests broader than those of any sovereign. This follows from the argument of a revival of ‘continentalism’ as the Eurasian landmass deepens linkages and ‘Asia’ emerges. OBOR segues perfectly into this framework. It becomes, for the Chinese, an Asian undertaking that needs to be evaluated on the gains it accrues to the entity, i.e. Asia, as opposed to China alone. It therefore follows, from Beijing’s perspective, that Indian and other Asian nations must support and work for the OBOR initiative.

Entity diplomacy also translates into the establishment of “one economic continent”, the second theme undergirding the conversation. OBOR, then, becomes a vehicle that promotes alignment of infrastructure, trade and economic strategies. Indeed, for some Chinese speakers, India is already part of the initiative, as its own projects like Project Mausam and economic initiatives such as Make in India and Digital India complement and complete OBOR. Indian participation in the Asian Infrastructure Investment Bank and joint ownership of the New Development Bank only reaffirm India’s partnership in this Asian project for many in Beijing.

To counter popular allegations of OBOR being a “Chinese scheme”, à la the U.S. Marshall Plan, the Chinese were quick to clarify that the original project is named the Belt and Road Initiative; the ‘One’ has been an English effect that has popularised a mien of exclusivity around OBOR, to the primary advantage of China, instead of an inclusive Asian economic project.

The third formulation was that of a mutually beneficial ‘swap’ — India protecting Chinese interests in the Indian Ocean, and China securing India’s essential undertakings in their part of the waters, read the South and East China Seas. However, there was unambiguous clarity that if India cannot assume more responsibility in the Indian Ocean, China will step in.

Core conflicts

Structural challenges confront the Chinese formulations and the OBOR proposal. First, the perception, process and implementation to date do not inspire trust in OBOR as a participatory and collaborative venture. The unilateral ideation and declaration — and the simultaneous lack of transparency — further weaken any sincerity towards an Asian entity and economic unity. The Chinese participants explained that Beijing is committed to pursuing wide-ranging consultations with the 60-plus nations OBOR implicates; an ‘OBOR Think Tank’ is also being established to engage scholars from these countries.

The second poser for the Chinese is on Beijing’s appetite for committing its political capital to the project. While for obvious reasons the Chinese would not want to be seen as projecting their military and political presence along OBOR, it was clear that China is willing to underwrite security through a collaborative framework.

The third challenge deals with the success of the ‘whole’ scheme, given that the Chinese vision document lays out five layers of connectivity: policy, physical, economic, financial and human. While no developing country will turn away infrastructure development opportunities financed by the Chinese, they may not necessarily welcome a rules regime built on a Chinese ethos.

Finally, how can this initiative navigate the irreconcilable geometries of South Asia that prevent India from providing full backing to OBOR? A formal nod to the project will serve as a de-facto legitimisation to Pakistan’s rights on Pakistan-occupied Kashmir and Gilgit-Baltistan under the China-Pakistan Economic Corridor (CPEC) that is “closely related” to OBOR.

Options for India

Fundamentally, New Delhi needs to resolve for itself whether OBOR represents a threat or an opportunity. The answer undoubtedly ticks both boxes. Chinese political expansion and economic ambitions, packaged as OBOR, are two sides of the same coin. To be firm while responding to one facet, while making use of the opportunities that become available from the other, will largely depend on the institutional agency and strategic imagination India is able to bring to the table.

First and foremost, India needs to match ambition with commensurate augmentation of its capacities that allows it to be a net security provider in the Indian Ocean region. This will require New Delhi to not only overcome its chronic inability to take speedy decisions with respect to defence partnerships and procurement, but will also necessitate a sustained period of predictable economic growth; OBOR can assist in the latter.

Therefore, just as U.S. trade and economic architecture underwrote the rise of China, Chinese railways, highways, ports and other capacities can serve as catalysts and platforms for sustained Indian double-digit growth. Simultaneously, India can focus on developing last-mile connectivity in its own backyard linking to the OBOR — the slip roads to the highways, the sidetracks to the Iron Silk Roads.

Arguably, OBOR offers India another political opportunity. There seems to be a degree of Chinese eagerness to solicit Indian partnership. Can India seek reworking of the CPEC by Beijing in return for its active participation? Furthermore, for the stability of the South Asian arm of OBOR, can Beijing be motivated to become a meaningful interlocutor prompting rational behaviour from Islamabad? OBOR could potentially allow India a new track to its own attempt to integrate South Asia.

(Samir Saran is vice president and Ritika Passi is associate fellow at the Observer Research Foundation, Delhi.)