Silk Road to (economic) heaven

New Delhi is concerned about the China-Pakistan Economic Corridor project (CPEC), part of the new ‘Silk Road’, but it need not despair as India is an important part of the existing multi-polar Asia architecture.

The signing of the Chabahar port development agreement and the tripartite pact on a trade and transit corridor linking India, Afghanistan and Iran during Prime Minister Narendra Modi’s recent visit to Iran has re-opened the discussion in New Delhi about what position it should adopt on the Chinese-sponsored logistics project, One Belt, One Road (OBOR).

Some background to this would be useful.

In September 2013, during a visit to Kazakhstan, China’s president, Xi Jinping, announced a Chinese initiative — the setting up of connectivities across the landmass of Eurasia and the waters of the Indian Ocean that would collectively be known as the OBOR. He anchored this vision in the old ‘Silk Road,’ which in his view had originated with the encounters of imperial envoy Zhang Qian (200-113 BC) with Central Asian civilisations over two millennia earlier.

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Since then, the OBOR has become the most important element in Chinese economic and political diplomacy, as its leaders, officials and academics attempt to fine-tune their thinking and get more supporters – governments, officials and the corporate – on board for this dramatic enterprise that has the potential to fundamentally transform the world’s communications, and its economic and political landscape.

The old Silk Road

The old Silk Road had a vibrant life of over three millennia, linking Asia with Europe and emerging as the principal conduit for the movement of global trade, merchants, preachers, professionals and intellectuals. It was marked by hundreds of market towns: Xian, Chengdu, Kunming and Kashgar in China; Khotan, Samarkhand and Bokhara in Central Asia; Taxila, Persepolis, Bagram, Kandahar and Merv in India and Iran, and Tyre and Antioch in the Mediterranean.

The sea routes linked the ports of Northeast, Southeast and South Asia with the Arabian Peninsula, and then through the West Asian caravan routes, and the Persian Gulf and the Red Sea routes, went westwards to the Mesopotamian and Egyptian empires and culminated in Greece and Rome.

These new connections were in the areas of energy, trade and investment, and were shaped at a time of great economic resurgence across Asia. Thus, a decade before Xi’s announcement of the OBOR, a thriving “Silk Road” connectivity had already come to link the Asian countries and constitute their most important economic relationship.

The impact of these connections was both material and civilisational: China and India, as the American academic Craig Lockard has noted, “were the great pre-modern centres of world manufacturing, producing iron, steel, silk, cotton and ceramics for world markets”. Beyond commerce, over the centuries these land and sea routes also facilitated the movement of religious and civilisational concepts — beliefs and practices of Zoroastrianism, Nestorian Christianity, Buddhism, Hinduism and Islam interacted with each other through these time-honoured links and shaped the civilisations of Mesopotamia, Persia, India and China and imbued western culture with these ancient Asian reflections and belief-systems.

The new Silk Road connections

The old Silk Road ceased to have much regional importance from the 15th century onwards on account of political and military disruptions across Eurasia, and the discovery of sea routes from the West to Asian markets. These sea routes in time led to western military and political control of the high seas, including the Indian Ocean, as also of almost all of the Asian lands, which now came under British, French or Dutch control. Thus, the main economic links of Asian countries were now with European states, with the centuries-old intra-Asian commercial and civilisational connectivities now consigned to the margins of their day-to-day experience.

This scenario of western political and economic domination of Asia began to change after the end of the Cold War. First, from the 1990s, Asian countries such as China and India began to achieve high growth rates and emerge as major economic powers. Second, these high growth rates in Asia generated a substantial increase in demand for energy resources, particularly for oil and gas. These were available in plenty in West Asia, leading to a shift in energy supplies from west to east. This surge in energy demand also meant that the West Asian producers came to enjoy extraordinary inflows of financial resources for domestic infrastructure and welfare development, and to invest in world markets.

The third factor that served to change the global power equation was the emergence of the Central Asian republics as sovereign states and their ability to play an independent role in the global energy and geopolitical scenario. These developments together brought an end to Western hegemony over Asia and for the first time in two hundred years gave Asian countries the opportunity to re-establish age-old connectivity with each other.

These new connections were in the areas of energy, trade and investment, and were shaped at a time of great economic resurgence across Asia. Thus, a decade before Xi’s announcement of the OBOR, a thriving “Silk Road” connectivity had already come to link the Asian countries and constitute their most important economic relationship. The OBOR thus proposes giving a physical shape to the existing rich and substantial ties.

The OBOR routings

Reflecting at the land and sea routes of the old Silk Road linkages, the OBOR has land and sea dimensions that converge at certain points, which together constitute an extraordinary seamless connectivity that embraces all of Eurasia and the Indian Ocean littoral. The Eurasian land connection, known as the “New Silk Road Economic Belt” or simply the “Belt,” is made up of railways, highways, oil and gas pipelines, and major energy projects.

Beginning at Xian, the legendary starting point of the old Silk Road, the OBOR will have two routings: one, across China to Kazakhstan and then Moscow, and the other through Mongolia and southern Russia to Moscow. Both routes will merge and then go on to European cities — Budapest, Hamburg and Rotterdam. The southern route will branch into one that will cross Iran and Turkey, and end at Budapest. It will have another branch from the Pakistani port of Gwadar to the Chinese city of Kashgar in the western province of Xinjiang.

The sea route, known as the “Maritime Silk Road” or simply the “Road,” made up of ports and coastal development, begins from China’s eastern ports and goes on to Southeast Asia, South Asia, East Africa and then on to West Asia and the Mediterranean, embracing Greece and Venice and ending at Rotterdam. Both routes, again recalling the old Silk Road, will have a series of loops and branches, with the two main routes also meeting at important junctions, such as Gwadar, Istanbul, Rotterdam and Hamburg.

According to Korean scholar Jae Ho Chung, when completed, the OBOR will include 60 countries, with two-thirds of the world’s population, 55 percent of the global GDP and 75per cent of global energy reserves. It will consist of 900 infrastructure projects, valued at about 1.3 trillion US dollars. Much of the funding is expected to come from Chinese banks, financial institutions and special funds. The Hong Kong-based South China Morning Post has described the OBOR as “the most significant and far-reaching project the nation has ever put forward”.

Promoting the OBOR

The OBOR initiative has captured world attention for the sheer range and audacity of the concept, the extraordinary ambition that lies at its base and the significant resources — technological, human, financial and political — that will need to be garnered globally to realise the vision. Since the first announcement, Chinese officials and commentators have debated the project, fleshed out several loose ends and sought to bring as many countries as possible on board as partners.

These have included a series of engagements with policymakers in countries on the OBOR routes. The OBOR was of course initiated in Central Asia and China has obtained the support of these republics with promises of massive investment for regional development. Xi has said China will support the construction of 4000 kilometres of railways and 10,000 kilometres of highways in Central Asia, with nearly 16 billion US dollars of Chinese funding.

When completed, the OBOR will include 60 countries, with two-thirds of the world’s population, 55 per cent of the global GDP and 75 per cent of global energy reserves. It will consist of 900 infrastructure projects, valued at about 1.3 trillion US dollars.

The next most important interaction China has had on the OBOR is with Russia. China has benefited from Russian estrangement from the West following the events in Ukraine – and the consequent abandoning of the Russian “Greater Europe” project that would have linked Vladivostok with Lisbon – and developed energy, financial, technological and defence ties with Moscow. This has led to Russian acceptance of China’s presence in Central Asia and the merging of Russian President Vladimir Putin’s Eurasian Economic Union project with the OBOR.

In October 2013, Xi reached out to the ASEAN countries and sought to bring them within the fold of the maritime route by invoking 14th century Chinese mariner Zheng He (1371-1433/35), who explored South and Southeast Asia, and proposing the building of a close-knit China-ASEAN community. Following this, Xi met a Gulf Cooperation Council delegation in January 2014 and attempted to make West Asia a partner in the OBOR as well.

The drivers of the OBOR

In promoting the OBOR, China is being driven by domestic and foreign considerations. The urge to achieve development in all of China’s 31 provinces is a major factor and all provinces have already affirmed their active participation in different aspects of the enterprise. The western province of Qinghai has indicated that it will build a rail, highway and aviation network to link the provinces and countries along the OBOR; Guangdong province along the coast will execute some major infrastructure projects, such as a power plant in Vietnam and an oil refinery in Myanmar.

The realisation of the OBOR will of course see the western province of Xinjiang playing a major role — its cities of Urumqi, Kashgar and Khorgos will be at the centre of many of the proposed routes. OBOR-related projects will also provide an outlet for China to use its overcapacity in steel, cement and construction materials, as also its surplus financial reserves.

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Chinese scholar Tingyi Wang of Tsinghua University has explained that while the OBOR is prompted by China’s interests in energy, security and promotion of economic ties, it is actually driven by the vision of a “greater Eurasian idea” that calls for “strengthening economic and cultural integration” across this whole swathe of territory and building “a new type of international relations underpinned by win-win cooperation”. Wang summarises the Chinese strategy as “to guarantee its interests in this region and at the same time cooperate with the other powers”.

Former Indian Foreign Secretary Shyam Saran sees the OBOR not just as economic initiative but one that has clear political and security implications; it is for Saran “a carving out by China of a continental-marine geo-strategic realm”.

The China-Pakistan Economic Corridor

The one aspect of the OBOR that has caused the greatest concern in India, both in regard to its land and maritime implications, is the China-Pakistan Economic Corridor (CPEC). Finalised in April 2015 on the basis of 51 agreements, the CPEC consists of a series of highway, railway and energy projects, emanating from the newly developed port of Gwadar on the Arabian Sea, all of which taken together will be valued at 46 billion US dollars. These projects will generate 700,000 jobs in Pakistan and, when completed, add 2-2.5 per cent to the country’s GDP. The CPEC has been described as a “flagship project” for the OBOR.

Gwadar will be developed as a deep-water port capable of handling 300-400 million tonnes of cargo per year. A new 1100-kilometres motorway from Karachi to Lahore will be completed, while the Karakoram Highway from Rawalpindi to the Chinese border will be re-constructed. Railway lines across the country will be thoroughly upgraded and expanded, with the road and railway network reaching Kashgar in Xinjiang. Oil and gas pipelines will be constructed, including a gas pipeline from Gwadar to Nawabshah, carrying gas from Iran. Most of the money will be spent on energy projects — about 10,400 MW of electricity will be developed between 2018-20, besides renewable energy, coal and liquefied natural gas projects. An 800-kilometres optic fibre link to boost telecommunications in the Gilgit-Baltistan region is already under construction. These projects will promote national economic development through industrial parks and special economic zones.

Washington-based Council on Foreign Relations described CPEC as “part development scheme, part strategic gambit” in a recent report. By investing heavily in Pakistan’s development, particularly in its backward regions, China is clearly addressing its own concerns relating to security problems whose roots are in Pakistan. The most important of these is the threat from the East Turkestan Islamic Movement (ETIM), made up of Chinese-dissident Uighur militant groups that have taken sanctuary in the Pakistan-Afghanistan border areas and are said to be linked to al-Qaeda and the Taliban. The ETIM aims its violence at targets in China and also at Chinese interests in Pakistan.

Gwadar port, which will be developed and operated by Chinese companies will have both economic and strategic advantages for China. It will enable China to route the oil and gas purchases from the Gulf through pipelines that would bypass the West-dominated Malacca Straits, thus providing China with one more alternative route, besides the Sittwe-Kunming pipeline in Myanmar. Again, control over Gwadar would give China a permanent naval presence in the western Indian Ocean and a commanding position at the mouth of the Gulf. This dramatic expansion of the Chinese naval forces into what India sees as its home-ground is a matter of long-term concern for India.

India’s response to the OBOR

India’s official response to the OBOR has been cautious and relatively muted, but a perusal of academic writings and news reports affirm that India has deep concerns about the implications of the OBOR for its strategic interests. India shares the view of several countries in Northeast and Southeast Asia that far from being an enterprise founded on wide and substantial cooperation, the OBOR could in fact be the vehicle for China’s influence, if not hegemony, across Asia. After all, China is promoting the OBOR just when it is flexing its muscles in East Asia, particularly in regard to asserting its territorial claims unilaterally in the South China Sea.

India has more immediate and specific concerns, which pertain to the CPEC. The CPEC was announced within a month of the publication of the OBOR vision and action plan document, which had highlighted the need for extensive consultations across Asia. Clearly, no such consultations took place with India and the CPEC was presented Chinese-dissident Uighur. While India might share China’s position that extremism should be countered with development, it cannot accept that the CPEC’s logistical projects should pass freely through large parts of Pakistan-occupied Kashmir.

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Officially, India has focused on the absence of consultation from the Chinese side. Speaking at the inauguration of the Raisina Dialogue on “Asian Connectivity” in Delhi in March, Indian Foreign Secretary S. Jaishankar said, “The key issue is whether we will build our connectivity through consultative processes or more unilateral decisions. … we cannot be impervious to the reality that others may see connectivity as an exercise in hard-wiring that influences choices”.

India’s connectivity projects

However, the logistics scenario in Asia is not as bleak from the Indian perspective as it might appear at first sight. While the OBOR captured global imagination when it was first announced over two years ago, it is important to recall that India is itself at the centre of major regional connectivity projects; these might lack the dramatic value of the OBOR, but taken together, they bring a number of solid partners and have the capacity of transforming the regional economic and geopolitical landscape to India’s advantage. India, thus, has little need to feel insecure about the OBOR.

Five points will govern China’s approach to project execution — policy coordination, infrastructure connectivity, free movement of goods, financial integration and people-to-people bonds.

The most important Indian connectivity project is of course the trade and transit corridor from Chabahar in Iran to Afghanistan, to link with the highway network of the latter; India has already contributed to this network with the Zaranj-Delaram highway.

This project has the greatest economic and strategic value for India since it provides unimpeded access to Afghanistan, enables India and Iran to contribute together to the economic development and political stability of Afghanistan, besides of course confronting the depredations of the Taliban. Over the long term, India would be in position to limit Pakistan’s quest for so-called “strategic depth” in Afghanistan, an aspiration that has caused great death and destruction in that country.

But, the importance of this project goes well beyond Afghanistan: it provides a highway across the relatively peaceful northern part of Afghanistan to all the Central Asian republics, culminating at Almaty in Kazakhstan.

The other connectivity project with which India is associated is the International North-South Transit Corridor (INSTC). Initiated in September 2000, over a decade before the OBOR, the INSTC had initially brought together India, Iran and Russia in an effort to create multi-modal links (ship-rail-road) from India to Europe, via the Gulf, Central Asia and Russia. The partnership was later expanded to include Turkey and the other Central Asian republics. A dry-run to check its viability was also successfully conducted in August 2014, after which transit and customs agreements were approved in September 2015.

These connectivity projects received a boost recently when the Indian cabinet approved India’s accession to the Ashgabat Agreement. This multi-modal transport agreement, that brings together India, Oman, Iran and the Central Asian republics, was initiated in April 2011, two years before the OBOR was announced. Its routing will be linked closely to the INSTC projects.

Closer home, India is looking at a number of connectivity proposals: these include the development of the Andaman & Nicobar Islands in the Bay of Bengal into a maritime hub, including a dry dock and a ship-building facility. Again, at the Sri Lankan port of Trincomalee, India has been looking at setting up a petroleum hub, besides activating the 80-year old tank farm in the strategically-located port city. India has also announced that it will develop a number of connectivity projects in South Asia, valued at 5 billion US dollars.

An OBOR-related project that involves India directly is the “Bangladesh-China-India-Myanmar Economic Corridor,” or “BCIM-EC”. It will involve a combination of infrastructure and trade facilitation arrangements between the four countries, as road, air and water links are set up from Kolkata to Kunming in Southeast China at a total cost of 22 billion US dollars. Conceived in the 1990s, the BCIM-EC was formally endorsed by the four countries in December 2013 and is viewed as a part of the OBOR connectivity projects. While India will benefit in terms of the development of the Kolkata port and the opening up of the economic potential of the northeast states, China will obtain one more route bypassing the Malacca Straits.

China clearly does not have the monopoly for envisaging major connectivity projects in Asia, and India is fully capable of leading a number of important projects for its economic and geopolitical benefit.

Other extenuating factors

Besides the fact that India is a major role-player in a number of strategically important connectivity projects in its neighbourhood, there have been a number of developments relating to OBOR-related projects that constitute a reality check on Chinese ambitions and encourage a more cooperative mind-set on its part.

First, there is little doubt that China has recognised the need for more extensive and intensive dialogue with principal role-players such as India, whose participation in the OBOR would be crucial for the success of the project. Thus, Chinese officials and academics are anxious to remind us that the OBOR is still an evolving concept; in a paper presented in August last year at the Cambridge Research Meeting, Wang said, “[The] OBOR is still an unclear and unspecific conception, without an authoritative definition.

Actually, lots of debates and discussions about this new Silk Road are still going on inside and outside China.” He recognised the numerous challenges that the project faced, particularly from “complex religious and ethnic issues, active terrorism and extremism”, historical divisions across the region and competing geopolitical interests.

Similarly, according to Jia Qingguo,member of the standing committee of the Chinese People’s Political Consultative Conference and dean of international relations at Beijing University, “the idea is still at the planning stage. It will take years to come to fruition and will face many serious challenges along the way”. Finally, Lu Xiankun, a former Chinese trade negotiator, pointed out that the “OBOR is far from a fixed blueprint with detailed actions to be taken by all countries along the OBOR” and that many aspects need to be “developed, designed and consulted” before concrete actions can take place.

The one aspect of the OBOR that has caused the greatest concern in India, both in regard to its land and maritime implications, is the China-Pakistan Economic Corridor (CPEC).

Second, China has already begun to understand the daunting challenges that would need to be addressed before the OBOR can become a reality. Wang, in his paper on OBOR’s connections with the Arab Gulf countries, noted the deep knowledge-gap between China and the Arab world, and even quoted a western observer who referred to their ties as “unnatural”.

Besides the geopolitical issues noted above, almost all the OBOR projects will be imbued with operational, financial, legal and regulatory, and sovereign risks on account of the wide diversity in the countries involved, and their geographical, political and economic situations. Thus, the Economist Intelligence Unit’s April 2015 report on the OBOR pointed out that just changes in governments following elections could place certain approved projects in jeopardy, as in Sri Lanka, or local activist groups could question certain projects on environmental grounds, as has happened recently with dam projects in Cambodia and Myanmar.

Hence, not surprisingly, while early writings on the project seemed to be China-centric, the principal focus of present-day comment by Chinese writers is on the need for participating countries to work closely together. Thus, Huang Yiping, a journalist for Caijing, and Chu Yin, associate professor of international relations at Tsinghua University, warned that the vision would not move forward if China were to adopt crude “great-power diplomacy” and excessive centralised planning.

Zhang Yuanyuan, speaking at a conference in Ulaanbaatar in October 2015, emphasised the “three togethers” in implementing OBOR — designing together, working together and sharing benefits together. Xiankun made this point robustly when he said, “OBOR emphasises a lot the need to integrate itself with the development strategy of OBOR countries, instead of imposing dragon claws on them.”

These considerations have led Yuanyuan to note that five points will govern China’s approach to project execution — policy coordination, infrastructure connectivity, free movement of goods, financial integration and people-to-people bonds. Thus, Yuanyuan is echoing the remarks of Jaishankar who said Asian connectivity would need to take into account “institutional, regulatory, legal, digital, financial and commercial connections”, besides “the common cultural and civilisational thread that runs through Asia”.

To allay regional misgivings, Yan Xuetong advocated that China needs “to improve its image and expand friendly relationships” through a “new diplomatic approach” in the neighbourhood.

Third, the problems that are already hampering the CPEC projects in Pakistan should reassure India that it is much easier to draw lines on the map than it is to realise projects on the ground. As of now, almost every aspect of the CPEC is mired in some controversy or difficulty. There have been criticisms in provincial assemblies over the routing of the railways and highways, and over non-transparency in financial matters.

There has also been opposition from Baloch nationalists and Gwadar residents. While the Balochis fear large-scale migration of outsiders and have attacked Chinese projects and workers, the people of Gwadar fear eviction from their homes. A dedicated force of 10,000 personnel has been deployed to protect the Chinese workers.

While both China and Pakistan remain committed to the successful completion of the proposed projects, this “flagship” proposal does exemplify the daunting difficulties that other OBOR projects will face as well. To divert attention from these problems, Pakistan’s army chief General Raheel Sharif declared that India has “openly challenged” the CPEC and is “blatantly involved in destabilising Pakistan”.

Fourth, interactions with other countries appear to have made clear to China that there are misgivings about the OBOR in several Asian capitals. Hence, Chinese writers are at pains to assert that the OBOR is nothing like the Marshall Plan: it is not the result of occupation; it will not be a “tool of geopolitics”; and all countries, the US, Japan, Russia and India, are welcome to join it.

To allay regional misgivings, Yan Xuetong advocated that China needs “to improve its image and expand friendly relationships” through a “new diplomatic approach” in the neighbourhood. Chinese comment now tends to play down the geopolitical aspects of the OBOR: the need for greater sensitivity and accommodativeness is the central feature of the “vision” document and action plan. The paper upholds the centrality of policy coordination across Asia, the need for trade liberalisation and financial integration, and above all, the importance of promoting “people-to-people links”. It recognises that the OBOR would be meaningless without policy coordination in crucial areas such trade, finance and investments.

Thus, though initiated by China, the OBOR can no longer be a Chinese project; for its success, it now needs to be an Asian enterprise.

Multi-polar Asia

In his remarks at the inauguration of the Raisina Dialogue, Jaishankar urged that China eschew the unilateral approach in promoting its connectivity projects on account of their obvious geopolitical implications. In this context, he observed that such a cautious approach was particularly important in Asia “in the absence of an agreed security architecture in Asia”. Instead, he advocated a “multi-polar Asia,” which he felt would be best achieved through “open-minded consultations on the future of connectivity”.

Jaishankar’s intervention has placed the connectivity issue at the heart of emerging regional and global strategic scenarios, highlighting the importance of matters such as — the nature of the world order that is taking shape at present, what role India will assume to define it, and where it will finally fit itself in these structures. Unfortunately, the discussion on these issues, in India and in several other world capitals, is often distorted by “zero-sum” thinking, a simplistic view that separates “us” and “them” into firm dichotomous categories. This is also what informs much Indian academic response to initiatives and projects with which China is associated.

There is little doubt that, as a major country, with pride in its history and civilisational values and the sense of its own destiny, China will be India’s rival and will compete for influence in different sectors — geographical, political, economic, cultural and ideational. But, this will still leave huge spaces where there will be a convergence of interests, and it is here that the two nations will explore how they can coordinate their capabilities to achieve the best results. Such cooperative efforts will take place both bilaterally and within multilateral fora, such as the BRICS, G-20, the Shanghai Cooperation Organisation and even the UN Security Council; they can also take place in regard to the OBOR.

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Both countries accept the importance of expanding connectivities in Asia, a continent that is rich in resources but unable to move these to markets where they are required. If connectivity projects were to be negotiated among the various stakeholders and decisions taken in accordance with the cooperative spirit, the strategic value of the projects would increasingly give way to their more important economic value, which would be the true “win-win” that Chinese policymakers have been emphasising lately. This would open the space for an active Indian role in respect of projects that serve its interests, such as BCIM-EC and those that would promote links to Central Asia and Russia.

This would apply to the security scenario as well. In coming years, it is most unlikely that a neat Asian security architecture will be put in place. At the same time, no sharp, dichotomous lines are likely to divide major world powers immutably. We will continue to have several polarities representing diverse interests, with different poles coming together from time to time to support specific issues. India will of course need to manoeuvre actively among the various interest groups, depending on the issues at stake.

Thus, while India has every reason to watch developments relating to Gwadar with close attention, there is no reason to despair: India is not without assets of its own in the shape of its place at Chabahar and its naval partnership with Oman. Indeed, India enjoys far greater influence in the Gulf than China does and is a more acceptable role-player in addressing the security concerns of that region in conflict. The major powers in the region – Saudi Arabia, Iran and Turkey – will also avoid firm alliances with world powers and, like India, will generally pursue policies of flexible alignment. A multi-polar Asia already exists and India is an important part of it.

There is no need to fear the OBOR—both the OBOR and China need India as a partner.

This was originally published in The Wire, India

The writer is the former Indian ambassador to Saudi Arabia, Oman and the UAE.