Chinese trick: Unviable port turns strategic asset
Colonel R Hariharan-Dec 13, 2017
India's inability to respond in time to arrest China's growing power in Sri Lanka, particularly after then Sri Lankan president Mahinda Rajapaksa's ascent, is the flip side of the tale. During the Eelam war, India could not meet Sri Lanka's request for supply of arms due to strong opposition from Tamil Nadu, and China stepped in to meet the demands.
Hambantota is not the only strategically important infrastructure project to be completed with Chinese aid. Others include the Colombo container terminal expansion and the Colombo reclamation project overlooking Colombo port, a vital hub of India's shipping.
In 2006, I availed an invitation to meet Rajapaksa on issues affecting Sri Lanka. When I asked him why he offered the Hambantota project to China instead of India, he laughed and said that he had invited India first. When India didn't respond for nearly a year, he approached China. I later learned that India did not respond as the project was not economically viable.
India's assessment has proved correct as both the Hambantota port and the Mattala airport are losing money. But strategically, India's decision had proved costly. China took the risk of making huge investments in economically unviable projects, to ensnare Sri Lanka into a US$8 billion debt trap and leverage it to draw the island nation within its strategic orbit. China has shown that taking economic risks for gaining strategic advantage is what grand strategy is all about. After Hambantota proved a burden on Sri Lanka economy, China is enacting as the saviour by agreeing to the debt-equity swap on Hambantota project, while gaining control of it.
In July 2017, Sri Lanka signed an agreement with the state-owned China Merchants Ports Holdings Company (CMPort) which agreed to pay $1.12 billion for 85% share of Hambantota port for 99 years. After a hue and cry was raised at home over the unfavourable terms of the agreement, Sri Lanka renegotiated it, under which the CMPort (85%) and Sri Lanka Ports Authority (SLPA) (15%) became partners in the Hambantota International Port Group (HIPG) to develop the port into a commercially viable asset.
India had been watching with concern China's control of the port as it legitimises its strategic presence within India's sphere of influence in the Indian Ocean. President Maithripala Sirisena and Prime Minister Wickremesinghe after coming to power had tried to balance the relations with India, which were skewed in favour of China, under President Mahinda Rajapaksa. In response to India's strategic concerns, they had assured that Hambantota port would not be permitted to be used as a military base.
Hambantota International Port Services Ltd. (HIPS), owned by HIPG (58%) and SLPA (42%), is, however, taking over common user facilities in Hambantota port including port security. This would indicate the near impossibility of excluding the Chinese from port security activities. But, can a small country like Sri Lanka do much, if China rides roughshod over its objections to gain military advantage in times of Sino-Indian military confrontation?
China is now gaining not only a military advantage but also a commercial edge in South Asia. When the China-Sri Lanka free trade agreement (FTA) comes through, Chinese business will be capable of using India's FTA with Sri Lanka to gain backdoor entry into Indian markets. China has sprung a surprise by signing an FTA with Maldives, a country till now dependent on India for almost everything. When China's FTA with Sri Lanka and Maldives fully bloom, Chinese goods flooding South Indian markets, is a real possibility. It is time India took a hard look at its military and commercial strategies as the Chinese behemoth is breathing down its neck.
(The writer served as the head of intelligence with the Indian Peace Keeping Force in Sri Lanka)
