China is rapidly expanding its strategic influence in the north western Indian Ocean through Pakistan, which is the centre of gravity for Chinese influence in South Asia.
President Trump’s newly imposed sanctions on Iran may have unintended strategic consequences that enhance China’s regional influence while diminishing India’s.
China’s co-operation with Pakistan in the military sphere, including through the use of Pakistan’s facilities, will enable China to project greater military power throughout the northern Indian Ocean region, thereby further intensifying great power rivalry in the Indian Ocean region.
President Trump’s unilateral decision to withdraw the US from the ‘Iran nuclear deal’ in May 2018 has unwittingly provided an opportunity for China to further increase its military and economic presence in the Arabian Sea. This is not all good news for Australia in the long-term, as this will assist China to progressively expand its military presence into the northern Indian Ocean region.
A direct consequence of President Trump’s decision is the reimposition of US sanctions on Iran. Needless to say, this will have an impact on foreign companies’ willingness to invest in a country under the cloud of US sanctions which will include penalties for doing business with Tehran. An immediate casualty of these US sanctions will be the development and expansion of the Iranian port of Chabahar on the Arabian Sea.
Chabahar was opened in December 2017 and one of its major external stakeholders is India, which in 2016 agreed to invest US$500m in the development of the Chabahar Special Economic Zone and an additional US$2bn in the construction of a rail link from Chabahar to the Afghan border. The vision by the Iranians is to turn Chabahar into a commercial hub which would be a gateway to Afghanistan and beyond to Central Asia. This may now be in some doubt.
Whilst the Indians were already slow at meeting some of their commercial obligations, the US sanctions will certainly put a question mark on India’s continued involvement in this Iranian flagship project. Given India’s growing commercial connections with the US, the sanctions place India in a more challenging position in its attempts to balance ties with Iran and the US, both of which are major trading and strategic partners to India. However, already Washington has demanded that Delhi cease all import of oil from Iran by 4 November or face sanctions. To India, Iran is a strategically important partner for its interests in the Middle East, West and Central Asia. Iran would not necessarily wish to sever all its ties. This is where China comes into the picture.
China has been investing in neighbouring Pakistan around US$50bn in the development of the China-Pakistan Economic Corridor (CPEC), a massive multi-purpose project which includes the construction of roads, railroads, oil and gas pipelines and solar power stations, and the development of the deep-sea port of Gwadar, and an adjoining airport. This 15-year project, which started in 2015, will link by road and rail western China to the Indian Ocean, effectively making China a two-ocean nation. CPEC is a key component of China’s trans-Asian Belt and Road Initiative.
Once fully operational, Gwadar (which is about 175km to the east of Chabahar), will be able to handle some 300-400mn tons of goods per year. This is significantly more than the maximum capacity of 80mn for Chabahar. Still, China would like to include Chabahar in its CPEC project. As opposed to India, investing in Chabahar would not be an issue for China. Importantly, a Chabahar-Gwadar association could potentially transform these two ports into a formidable commercial hub. Beijing’s involvement in Chabahar would help China project itself into Central Asia and Afghanistan, where it has about US2bn in investment. So all in all, given the question mark over India’s long-term commitment to Chabahar, and the massive trade potential down the road, Iran may well look increasingly towards China as its new strategic trade partner.
China’s involvement in Chabahar would add an additional strategic asset to China’s growing presence in the western Indian Ocean region. Besides the commercial port of Gwadar—where it has a 40-year lease, China has a military base in Djibouti since August 2017 and has a 99-year lease for the port of Hambantota in Sri Lanka, which has potential to service naval ships. But more worrying is the construction of a joint Pakistan-Chinese operated naval and air base in Jiwani, about 80km west of Gwadar. This would be China’s second foreign military base. It would also be located at the mouth of the Gulf of Oman, the strategic entrance to the Persian Gulf.
So while, on the one hand, increased commercial activity in the western Indian Ocean would be good news for Australia, including Western Australia, on the other hand, an increase in Chinese military presence would not be a welcome development for peace and security in the region. This is a situation that will need to be monitored closely.