Tuesday, March 31, 2015

Saudi-Maldivian Ties: An Opportunity or Threat for India?

Anushree Ghisad, 
Research Intern, VIF

The President of Maldives Abdulla Yameen Abdul Gayoom paid an official visit to Saudi Arabia from 18th March. A joint statement issued at the conclusion of Yameen’s visit to the Kingdom said that the two sides have expressed their desire to strengthen cooperation in foreign affairs, defence, Islamic affairs, justice, economic, investment and trade sectors, providing support to the issues of the Muslim nation as well as education, health and social affairs to realize their common interests. The Saudi Fund for Development will continue to finance development projects in Maldives. The statement also said that, “as part of efforts to deepen educational and cultural cooperation, Saudi Arabia will provide 150 scholarships to Maldives’ students.” Both the countries have rejected any foreign interference in their internal affairs. Discussions were also held on strengthening unity of Islam and increasing Saudi investments to give fillip to the Maldivian economy.

Implications of Gayoom’s Saudi Arabia visit

Amidst the ongoing Maldivian turmoil where former President Mohamed Nasheed has been sentenced to 13 years imprisonment without being given a fair trial, which has seen internal clashes in Malidvian society and has evoked a severe reaction from UNHRC and other countries, Prime Minister Narendra Modi cancelled his scheduled Maldives trip in mid-March, so as not to endorse Gayoom’s actions of trampling democracy by undermining opposition and appointing loyalist to all constitutional places. It is China alone which had categorically declined to comment on the developments in the Indian Ocean island citing it as an ‘internal matter’, and now Saudi has joined the hands by endorsing President Gayoom and his policies. This raises substantial concerns for India as Maldives is coming under the influence of China under Gayoom’s regime, wherein Beijing is securing this precious ‘pearl’ in its ‘string of pearls’ by ensuring its multidimensional dependence on China. Saudi too seems to be following in the Chinese footsteps, albeit under the religious garb of promoting ‘Unity of Islam’, however antithetical any pseudo autocratic regime might be in the eyes of Islamic tenets.

Saudi Arabia’s recent mollycoddling with Maldives

Diplomatic relations between the Maldives and Saudi Arabia were established in 1981.It is noteworthy that in 2008, Maldives opened its embassy in Riyadh, which was its first ever mission to the West Asia. Both the countries have always recognized the historic friendship and Saudi’s role in development of Maldives. Kingdom of Saudi Arabia has agreed to open an embassy in the island nation during the current visit of Maldivian President.

The Kingdom’s growing role in this Sunni littoral nation became palpable when in February last year many tourist reservations were cancelled with no prior notice as Prince Salman bin Abdulaziz al-Saud (the current Saudi head of state) allegedly booked three islands of Maldives. Tourism is the lifeblood of Maldivian economy and yet Maldivian government did not mind hampering its reputation for hospitality when it came to receiving the then Saudi prince, thanks to the Kingdom’s growing investment in the archipelago.

President Gayoom affirmed that the Republic of Maldives views the Kingdom of Saudi Arabia as the country that houses the two holy mosques and as the focus of the hearts of all Muslims as it represents their Qibla. He also emphasized that the Kingdom of Saudi Arabia is the primary partner of the Republic of Maldives.

It is this growing camaraderie which infused a confidence in Maldives to take the EU head on when the latter removed the duty free status of Maldives’ fish a couple of years ago. Maldives reacted by attacking EU’s policy and said it would certify its fish as halal and find new markets in countries like Saudi Arabia.

Maldives’ Infatuation with Saudi Arabia

Maldives, like the Kingdom of Saudi Arabia, is a Sunni Muslim country and considers Saudi Arabia the fountainhead of Islamic practices, which is a well-respected fact. Enamoured by Saudi’s Islamic heritage, Maldives seems to have started adopting the customs of the Kingdom, but is it at the cost of undermining its own ancient tradition? For example, the official Maldivian language Dhivehi belonging to Indo-Aryan group of languages and is closely related to Sinhalese. The original Dives Akuru script was replaced by Thaana by around 18th century, which is largely modelled on Arabic style of writing. As against this, Central Asian states continue to follow the local traditions and language despite being Islamic countries.

Does this paradigm shift in the native ethnic orientation of Maldivian society underline its eagerness to submit to Saudi Arabia’s hegemony over Sunni Islam? Two success stories of Asia- Japan and South Korea, are firmly rooted in their respective ancient heritages and do not ape India despite being ardent followers of Buddhism. Invoking religious aping out of a genuine religious awe can turn into formidable identity crisis for locals as is evident in the case of Pakistan. And if this is the case, then will Maldives not try to replicate Saudi’s education system which is largely based on Wahabi ideology, for which Saudi is believed to be funding in this island nation?

Going beyond Religion- Saudi stakes in Maldives

Maldives has undergone lot of struggle since 2003 to throw off the shackles of dictatorial rule to see the light of democracy. It finally succeeded in throwing the three decade long dictatorial yoke of Mohamed Gayoom in 2008, when Nasheed came to power by democratic means. With strings of high profile political ousters and in desperate attempts to consolidate power by throttling Nasheed from contesting next presidential election scheduled in 2018, the current Maldivian regime is undermining the very spirit of democracy which its citizens had fought so hard for. As a result, the Jamhoori Pary (JP) has parted ways with ruling alliance and joined hands with Nasheed’s Maldivian Democratic Party (MDP) to start a movement called ‘save the constitution’. Even the ultra-hardliner Adhaalath Party (AP) is disillusioned with the current government due to its brutality and its President Sheikh Imran Abdulla has called for the formation of a “national unity alliance” against the government. Occasional clashes between Gayoomists and Nasheedists on the streets of Male have further intensified this conflict.

Saudi Arabia finds itself cornered after Arab Spring as its roots are secured in economic and democratic reforms, the later one being the existential threat for monarchs of the Kingdom. Hence Saudi is clamouring hard to nip this spirit in its bud wherever it starts surfacing, and Maldives seems to be traversing the same path. Hence, Saudi Arabia might be willing to strengthen the hands of Gayoom by assuring investment and trade.

The usage of wordings in the recently released joint statement emphasises on ‘rejecting any foreign interference in their internal affairs.’ This implies that the arrest of Nasheed, a champion of democracy and human rights; which has clearly been orchestrated with Chinese blessings, has been upheld by Saudi Arabia.

In order to lose its clutches of overdependence on United States, Saudi has embarked upon what is touted in Riyadh as a ‘look east policy’ since mid of last decade, which is an attempt to diversify. Playing on its ‘custodian of holy mosque’ card, Saudi Arabia uses the non-oil Islamic countries like Maldives to ensure a master-client relationship based upon the broader connotations of ‘Islamic unity’. Also, it is in long term commercial interests of the Kingdom to have a stronghold in a strategically located island nation like Maldives, which falls on international sea lanes of communication through which a major chunk of Saudi oil passes.

Saudi Arabia’s alleged role in Indoctrination & Terror Financing

In the joint Communiqué, both the countries have repeatedly focused upon deepening of educational and cultural cooperation, for which, the Kingdom of Saudi Arabia has announced the allocation of one hundred fifty scholarships for students from Maldives. In 2014, Saudi scholars had pledged a grant of $ 100,000 for Islamic education, while the Saudi prince has pledged to build 10 world class mosques in Maldives.

According to Prof. Shireen Hunter, financial support received from abroad can be divided into two categories; one for maintaining Muslim institutions such as mosques and two, to exercise a degree of political control over various groups that are recipient of such funds. Saudi Arabia is the most important country mainly indulging in second kind of support. Though the impact of Saudi education is not uniform and does not necessarily transform into blind support for the Kingdom’s government as it also produces radical Wahhabis who are highly critical of country’s ruling elite. Yet any outcome, which rides on ‘mine is the only truth’ dictum and fails to appreciate the inherent pluralistic nature of human society, is inimical to long term stability and security structure of that region where such investment is being made. And due to modern tools of communication and social networking and rising people to people contact, the cascading effect of such ideologies can endanger the security structure of neighbouring countries as well.

Saudis follow the Wahabi school of philosophy in its own education model, and has a track record of funding for such education world wide. In India, we have the prime example of growing radicalism under the influence of Saudi funded Wahabi ideology in the Kashmir Valley. In a report in 2011, Asit Jolly indicated this trend and reported the mushrooming of mosques and madrassas, funded by the Ahl-e-Hadith. The report, quoting US intelligence sources, highlighted the House of Saud decision of 2005, to allocate US$35 billion for building mosques in South Asia. A large number of madrassas have also accompanied this growth, and have penetrated the poorer segment of Kashmiri society.
In this backdrop, Maldives can probably emerge as a smaller version of what they have done with PoK and Pakistan, a breeding ground of terrorism. According to Zahid Shahab Ahmed from Pakistan, Saudi Arabia was one of the prominent players who funded madrasas in Pakistan to promote anti- Shia Islam. It eventually resulted in the radicalisation of Pakistani youths.

Saudi is the main financier of Madrasas which creates Taliban type fighters. Saudi Arabia has also emerged as a large source for funds for terrorist groups like the Lashkar-e-Taiba (LeT). Former Maldivian President Mohamed Nasheed told the CNN-IBN news channel during his visit to India in 2009 that "Hundreds of Maldivians" have been recruited by the Taliban and are fighting in Pakistan. Dr. Azra Naseem of Maldives argues that Maldives is tilting towards Deobandi Islam, the religion of the Taliban. There are reports of Maldivian youths fighting alongside Taliban in Federally Administered Tribal Area (FATA) of Pakistan. The growing radicalism, funded by money received from charities and donations, has led to extremist views on religion and its influence on society.
Saudi’s commitment to build ten world class mosques in Maldives reiterates the taboo of ‘liquor mosques’ where praying in the mosques built out of tourism revenue ( as tourists indulge in relishing alcohol) is considered haraam. Otherwise what logic explains building ten more mosques in a country which has less than 4,00,000 of population and already had more than 725 mosques by mid-1991? Hence such commitments by Saudi Arabia need to be watched carefully as it raises many apprehensions for regional stability.

Saudi: A stabilizing factor amidst growing ISIS threats in Indian Ocean?

Amidst the rising clout of non-state actors and global extremism, Saudi and Maldives have reiterated their determination to fight extremism and terrorism in all their forms and manifestations, as both the countries are based on “tolerant principles of Islam”. This could also be interpreted as a hint towards curbing the ISIS menace. Saudi Arabia, during the early days of ISIS appeared to be smitten by it, as it had pledged to vanquish the Shiite crescent with Sunni fire. But later the Kingdom officially condemned Islamic State’s activities as it started taking shape in the heart of a historical Sunni patrimony and posed existential threat to the Kingdom’s monarchy by promoting the pristine Wahabi ideology of "One leader, One authority, One mosque: submit to it, or be killed". The ‘one leader’ here essentially meant the Caliph of Islamic State and not the king of the Saudi Arabian kingdom. As British diplomat Alastair Crooke observes, ‘On the one hand, ISIS is deeply Wahabist. On the other hand, it is ultra-radical in a different way. It could be seen essentially as a corrective movement to contemporary Wahabism.’ To add to its woes, neither the pro-reform (spring leaders) nor anti-reform leaders (ISIS) are giving any importance to the Kingdom of Saudi Arabia.

Former Maldivian President Mohamed Nasheed had earlier expressed fears that around 200 Maldivian youths have been recruited by ISIS. Even the Commissioner of Police Hussain Waheed has said that it is a cause of concern that Maldivians nationals are leaving the country to fight in wars abroad. The exact number of Maldivians abroad for Jihad remains unclear, with sporadic groups departing to Syria and Iraq every week. The Commissioner of Police has estimated that around 50 Maldivians are working with foreign rebel groups, dwarfing figures suggested by Home Minister Umar Naseer in December 2014. A jihadist group called Bilad Al Sham Media (BASM) – which describes itself as ‘Maldivians in Syria’ – revealed that a fifth Maldivian had died in Syria. Now the figure of youths joining extremist groups can be contested, but the fact cannot be denied that even a small group is potent enough to spread the poison of extremism in this tiny nation, which can have cascading effect over maritime security of Indian Ocean.

If both the nations are genuinely committed to fight the ghost of ISIS, then it is a welcome move as a stable and peaceful Maldives is in the interest of regional security of Indian Ocean Region at large and India in particular. But the question remains as to what Saudi and Maldives are aspiring for? To replicate a Pakistani model in India’s backyard or to create a win-win-win situation for all?

Maneuvering between Two Friends- Way Ahead for India

Saudi Arabia is a time tested friend of India with trade being the dominant factor in the relationship. Diplomatically, Saudi is the gateway into the wider Arab world. India has contributed a lot in the prosperity of Saudi, by buying oil at high prices and by helping in building up its economy. It is largely believed that the Kingdom granted a grace period of six months to correct and regularize status of illegal workers in Saudi Arabia post enactment of Nitaqat wok policy in 2011 (directed at illegal expatriates in Saudi Arabia), keeping in mind more than 280,000 Indians working in Saudi.
Similarly, Maldives has traditionally come under India’s sphere of influence and depends heavily on India for its maritime security and military requirements. New Delhi’s immediate intervention under the banner of ‘Operation Cactus’ after Maldives request in 1988 to thwart the attempted coup against the then President Mohamed Gayoom is still remembered with reverence in Maldives. But the ongoing turmoil in Maldives which essentially is inimical to Indian interest is raising the concerns in New Delhi. Any attempt by an external player to strengthen ongoing consolidation of power and exacerbate the radicalization can have detrimental effects for India.

Deepening Saudi-Maldives relation can prevent Maldives from turning into the launchpad of Islamic State in Indian Subcontinent. But at the same time, India cannot remain insulated if Maldives becomes a safe haven for other extremists due to generous pouring of money from Saudi, which may like to foil Islamic State by emboldening its arch rival Al-Qaeda or LeT. Even the common Maldivian is not willing to endanger the gains of hard earned democracy by turning his homeland into a fertile ground of extremism. The challenge for India is to ensure that the money emanating from Saudi goes for empowerment of Maldivian society by actually promoting ‘the tolerant version of Islam’ than further radicalizing them and to pull out its economy from the current slump, without undermining the friendly relations with both the countries. It is extremely important to turn this credible threat of growing camaraderie between Saudi and Maldives into an opportunity for strengthening regional security mechanism by exchanging information.

The timing of Yameen’s visit to Saudi, barely five days after the pronouncement of Nasheed’s thirteen years jail term is alarming and underscores the urgency with which China and the Kingdom of Saudi Arabia have legitimized President Yameen’s acts. India cannot in any case remain a mute spectator and has to steer the wheel if it aspires to be the ‘Net Security Provider’ of the Indian Ocean region.

Published date: 31st March 2015, Image source: http://vid.alarabiya.net
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

Centre-State Relations: The New Architecture

Parliament has just approved the vote on account and remitted the Budget proposal to the Parliamentary Standing Committee on Finance. The expenditure proposals will be considered by the individual ministries to whom the Demands for Grants pertain. The taxation and other tax related proposals will be examined by the Standing Committee on Finance. Both these would now be considered for final approval with such modification as the Finance Minister considers appropriate post the Parliamentary Recess period. These both would be approved and concluded in the first half of May. This will conclude the Budget Session. The Budget is essentially divided in three parts- first, which deals with the overall macroeconomic policies and behavioral pattern of key macroeconomic indicators; second, which deals with the proposed expenditure outlay of the central government and the third, which deals with the tax proposals.

On the first issue, this year it has generally been accepted that the Budget represents a credible balancing act and has given a decisive momentum to the new economic upturn which has commenced. What were the key policy options before the Finance Minister? How have these choices been exercised?

One, the classic choice: Growth versus Inflation. How much of fiscal flexibility was acceptable to enhance public outlays in infrastructure – railways and highways? The budget has adhered to the path of fiscal rectitude by meeting the fiscal deficit target of 4.1% this year. It has stretched out by a year the terminal fiscal path to reach the 3% target with somewhat higher intermediate targets. The rating agencies prefer a closer adherence to the fiscal roadmap. As compared to his predecessor, however, the Finance Minister has not pushed any Pause Button even after accepting what the analysts perceived to be the unrealistic target of 4.1% this year. Of course, the new fiscal time path must now be adhered. I have for long argued that parliamentary approvals on changes in the Fiscal Roadmap must be ex-ante than ex-post. Besides, the recommendation for the constitution of a Fiscal Council contained in the Finance Commission’s recommendations is sensible and should be considered in future. This along with the new Monetary Policy Framework Agreement between the Finance Ministry and the Reserve Bank of India would act in congruent ways. It will ensure harmony between monetary and fiscal policy.

Second, has enough been done to rationalise subsidies? There are significant gains in rationalising petroleum and fertilizer subsidies by de-regulating petrol and diesel and moving over to the Aadhar based LPG subsidy. Further action is needed on fertilizers, particularly Urea. There must be pari-passu progress as JAM (Jan Dhan-Aadhar-Mobile) gathers momentum.

Third, exogenously, oil prices have declined from $82 to $59, commodity prices have also softened and the current account deficit moderated. This opportunity could have been used to create greater fiscal space by retiring public debt or creating a Consolidated Sinking Fund for debt amortisation. The Finance Commission suggests this can “tide over, roll over risks and the weak cash management practices”.

However, a middle path has been preferred. Substantial benefit passed on to the consumers enhancing their purchasing power, oil companies allowed to recoup some losses and the Centre enabled to raise revenues to meet fiscal targets. Given the opportunity, some of the options mentioned above must be pursued.

On the second broad theme of the Expenditure Budget, the overarching considerations were the recommendations of the Fourteenth Finance Commission (FFC). The FFC has made far reaching changes in the model of Fiscal Federalism. The key features of the FFC were the enhanced devolution from the divisible pool of taxes and the change in formula which decided the sharing of taxes and grants among the states. Let us examine some overarching points associated with the FFC’s recommendations.

One, there is overwhelming precedence that on devolutions they have been treated as awards than recommendatory.The rise in tax devolution to States and the Non Plan grants to local bodies together represent a sharp cut of Rs. 214442 crore from the Centre’s resource block. In the shrunken resources for the Central government, the funding pattern of schemes has undergone a structural shift. Having accepted the recommendations, the Government had limited options. It could either significantly relax the fiscal consolidation programme to finance all central and centrally sponsored projects as before or could find a different mix. Relaxing the Fiscal Roadmap further would have serious consequences.

The Budget at a Glance highlights the middle path. It classifies Public Expenditure in three categories– schemes to be supported by the Union, schemes to be continued with change in sharing pattern and those fully de-linked from Central support. The major flagship programmes of the government remain in the Union list like the Sarva Shiksha Abhiyan, MGNREGA and National Health Mission. There are others which fall in the second category. Schemes de-linked from Central support are rather small, the most contentious being the Backward Region Grant Fund.

Two, in concluding the reduction of outlay on key social areas, some methodological errors have crept in. Perhaps, the Budget Expenditure (BE) of 2015-16 is being compared with the BE of 2014-15. This is never done because we have to always compare Revised Expenditure (RE) of the previous year with BE of the current year. Such comparison would suggest that allocations have been kept more or less intact. In the case of Integrated Child Development Scheme (ICDS), the reduction is sharp, but the pattern of funding is yet to be decided.

Three, in deciding whether the states have gained or lost their share in devolution from the Centre, one shall take into consideration the absolute gains or losses in the transfers than being bothered about the percent share. The Economic Survey released on February 26, 2015 well explains how each state will benefit in absolute terms. Thus, withdrawal of any grants or reduction in percentage share is aimed to reduce inter-state fiscal inequalities. In the long run, a progressive re-allocation of resources could promote fair and equitable growth.

Four, the report represents a quantum shift from an earlier period when a lot of the devolution took place through centrally sponsored schemes and schemes which were settled to the prevalent predilections and the policy preferences of the Central Government. The amount of untied funds transferred to the states have increased from Rs.696951 crore i.e. 62 % of revenue receipts to Rs.865185 crore i.e. 75 % of revenue receipts. The Graphs (1 & 2) below indicate show a comparison of transfer of untied funds from Centre to States. The FFC assigns the States more important obligations of deciding the welfare of their people and the path for their development. Complete decentralisation is anyhow not envisaged by any management text. States gain not significantly from the additional resources but more so from the flexibility they now have in conception, design and implementation of projects best suited to their local needs.

Source: Union Budget 2015-16

Source: Union Budget 2015-16

Five, the enhanced power to the states implies greater accountability and answerability on the part of the States. The States can decide their priorities, choose their preferred model of development, exercise tradeoffs on policy options. More broadly, States can devise their Production Possibility Frontier and their ‘Development Possibility Frontier’ and become accountable directly to the people. Besides putting Fiscal Federalism in operation, this also tends to promote Competitive Federalism. However, competition while promoting innovation and efficiency also brings forth the non-viability of the inefficient players. Hence, a mechanism to enhance and support governance in such states beyond providing monetary resources is important to promote equitable growth across states.

Six, allocation of funds from the Centre to States in India is dictated by Five Year Plans. The FFC was constituted and its recommendations leading to change in the pattern of funding of Centrally Sponsored Schemes, accepted in the middle of the Twelfth Five Year Plan. There remains an uncertainty on devolution of funds from Centre to the States pertaining to certain schemes covered under the Twelfth Five Year Plan. A path addressing the issue that how would the transfers be transitioned from being in accordance to XIII FC’s formulae to be in parlance to XIV FC’s. Designing a satisfactory transition path like a mid-term review of the Twelfth Five Year Plan or any other would remain a challenge for North Block and the NITI Aayog. For a better alignment of the Five Year Plans (if they are to be continued) with the successive Finance Commissions, it would be essential to align the 5 year term of the FYPs and the approved recommendations of the Finance Commission.

On the third issue of tax proposals, the tax rates are by and large kept stable. On the indirect tax side the decisive change will come with the implementation of the GST hopefully from 2016. This will make India a large common economic market, eliminate cascading impact, enhance revenues and create growth multipliers. Given the enormous work involved, there is some scepticism on adherence to the time frame.

Second, on the Direct Taxes, India’s high corporate tax rates detracted new investments, domestic or foreign. Its reduction by 5% over the four years is positive, though the time path is opaque. Individual tax rates have remained unchanged and stable but some new cesses have been added for Higher Secondary Education and could be imposed to support Swachh Bharat initiative.

The problem in general with Direct Taxes is its narrow base. Leaving out agriculture sector as a whole shrinks the tax base significantly. While poor farmers must be spared, the use of agricultural income as tax shelters by rich agriculturalists needs fresh consideration.

Third, on retrospective taxation the budget has reiterated the commitment that it would be avoided in future. GAAR has been put in the cold storage since on many issues like base erosion, profit sharing, treaty shopping, tax arbitrage consensus on best international practice is yet to emerge.

Finally, the Budget and the FFC as Two Sides of the Same Coin.

In the current era of globalisation, a growing incongruity in terms of GSDP, per capita income, tax base, population etc. among the States, heterogeneity in patterns of governance, rise of regional parties and increased global interdependence represent contemporary challenges to the dynamics of Centre-State relations. Thus the need to restructure Centre-State relations has gained recognition over recent past. This concern was voiced by the successive State Governments. The centrepiece of the complaints was the inflexibility and the predetermined project design and conditions of the Centre. The FFC was generally welcomed as a solution but the Budget has left some States and stakeholders critical based on inadequacies of allocation in the social sector.

The FFC has designed a new financial architecture of Centre-State relations. The Government had little option given the shrunken envelope after accepting the Finance Commission’s recommendations. After all you cannot have the cake and also eat it. States cannot have both the cake of large untied resources and eat the Centrally Sponsored Schemes as originally conceived. One can argue of whether this was the best approach or could the recalibration have been somewhat different.
Will this new model of Fiscal Federalism work? There are inherent risks but also existing opportunities for Team India. The risks are well known if the State Governments act irresponsibly or promote fiscal profligacy. But in the end, the Government at the Centre and the States are judged by the improvement and development of life quality by the Electorate whose periodic mandate they seek.

The new fiscal architecture eliminates the form of neo-colonialism like what Rudyard Kipling described as the White Man’s Burden viz. the Centre knows what was good for the States. A new social compact between the Union and the states has been ushered.

In the end, as said by Francis Bacon- “Demonstratio longe optima est experientia. By far the best proof is experience.”

(The author is a noted economist, former top bureaucrat and Ex-MP)

Published date: 31st March 2015, Image source: http://www.livemint.com
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

Friday, March 20, 2015

China’s Emerging Doctrine and Military Modernisation

Brig Gurmeet Kanwal, 
Visiting Fellow, VIF

Strategic Encirclement of India

When Asia’s leaders meet at the annual East Asia summit to discuss geo-strategic and economic issues of common interest, most of the discussions on the sidelines of the summit are centred on China’s aggressive posturing in its area of influence. China’s recent assertiveness in the South China Sea and its belligerence on the Senkaku/ Diaoyu islands are indicators of its growing proclivity to settle territorial and boundary disputes by force rather than through diplomatic negotiations.

India’s unresolved territorial and boundary dispute with China and an un-demarcated Line of Actual Control (LAC) on the Indo-Tibetan border do not augur well for long-term peace and stability between these two Asian giants. Territorial and boundary disputes that are carried over from history and left unresolved carry within them the seeds of future conflict. The next major transgression on the LAC could possibly lead to a localised border conflict as either Indian patience with Chinese intransigence wears thin or the Chinese view Indian attempts to build infrastructure and develop the border areas as the adoption of an aggressive forward posture.

Hence, the possibility of a limited border war between the two Asian giants cannot be entirely ruled out even though the probability is low. China’s continuing opposition to India’s nuclear weapons programme; its nuclear and missile collusion and intimate defence cooperation with Pakistan; its support to the military-backed regime in Myanmar; efforts at making inroads into Nepal; increasing activities in the Bay of Bengal; its relentless efforts to increase its influence in Bhutan and Bangladesh; and, its attempts to isolate India in the ASEAN Regional Forum (ARF) and keep India out of the Shanghai Cooperation Organisation; are all pointers to a carefully orchestrated plan aimed at the strategic encirclement of India.

Military Doctrine: Active Defence and Local Wars under Conditions of Informationisation

The People’s Liberation Army (PLA) is rapidly modernising itself and is known to be preparing to fight a “limited border war under hi-tech conditions”. According to several White Papers on China’s National Defence, China is engaged in developing a “revolutionised, modernised and regularised people’s army with Chinese characteristics. (It is) endeavouring to transform its armed forces from a numerically superior to a qualitatively superior type and from a manpower-intensive to a technology-intensive type, as well as to train high-quality personnel and improve the modernisation of weaponry in order to comprehensively enhance the armed forces combat effectiveness.”

Since China’s ill-conceived incursion into Vietnam in 1979, PLA doctrine has evolved from Mao’s “people’s war” to “people’s war under modern conditions” through a “limited/local war” phase to the current doctrine introduced in 1993. The new doctrine is more assertive than ever before and is not bound by any restrictions to confine and limit future conflict to within China’s national boundaries. Underpinning the new professionalism of the PLA is the basic doctrine of “active defence” (jiji fangyu) that seeks to conduct “people’s war under modern conditions” (better understood as “local wars under hi-tech conditions” – gaojishu tiaojian xia de jubu zhanzheng).

The active defence doctrine calls for integrated deep strikes – a concentration of superior firepower that is to be utilised to destroy the opponent’s retaliatory capabilities through pre-emptive strikes employing long-range artillery, short-range ballistic missiles (SRBMs) and precision guided munitions. David Shambaugh, a well-known China scholar in the US has written: “Rather than conducting a ‘people’s war’ (a strategy to ‘lure the enemy in deep’ into one’s own territory), the PLA doctrine of ‘active defence’ calls for forward positioning, frontier defence, engagement of the enemy at or over the border and potential engagement in conflict beyond China’s immediate periphery… this doctrine is essentially pro-active and seeks to take the battle into enemy territory.”

Beijing has identified the following five limited war scenarios as likely scenarios during future conflict: military conflict with neighbouring countries in a limited region; military conflict on territorial waters; undeclared air attack by enemy countries; territorial defence in a limited military operation; and, punitive offensive with a minor incursion into a neighbouring country.

The new doctrine and the strategy and tactics associated with it have been influenced by the lessons of Gulf War I in 1991 and the Iraq War of 2003, both of which have been extensively studied by Chinese scholars. The doctrine requires the creation of a capability to project force across China’s borders through rapid deployment, conventional SRBMs and cruise missiles, information warfare, electronic warfare, precision-guided munitions, enhanced night fighting capabilities and other advanced military technologies.

China also follows ‘anti-access and area denial’ (A2AD) strategies to deny the adversary access to his planned launch pads in an endeavour to prevent build-up of forces for a war against China. Planning for A2AD strategies flows from the apprehension that if superior, well-equipped forces (like the US and its allies) are allowed to arrive in the war zone with the force levels and in the time frame planned by them, they are bound to prevail. The Chinese calculate that “by mounting a credible threat to do so, they will be able to deter the United States from intervening in the first place, or at least limit the scale and scope of that intervention.” The Chinese aim to deter a conflict or at least delay the opponent’s preparation till the PLA is better prepared to react. The PLA seeks to achieve this aim through attacks against air bases and ports and other elements of the logistics chain and against information systems so as to disrupt command and control during build-up. While A2AD strategies are unlikely to succeed in preventing conflict completely, these could impose considerable delay and caution during build-up and cause attrition.

Modernisation of the PLA: RMA with Chinese Characteristics

The PLA expects to fight the next war under conditions of what it calls “informationisation” or “informationalisation”. In the 2004 White Paper on National Defence, informationisation was explained in the following terms: “To adapt itself to the changes both in the international strategic situation and the national security environment and rise to the challenges presented by the RMA worldwide, China adheres to the military strategy of active defence and works to speed up the RMA with Chinese characteristics:
  • To take the road of composite and leapfrog development.
  • To build a strong military by means of science and technology.
  • To deepen the reform of the armed forces.
  • To step up preparations for military struggle.
PLA analysts have called the ongoing RMA an “informationised military revolution”. It emerges that informationisation “clearly relates to the PLA’s ability to adopt information technologies to command, intelligence, training and weapon systems. This would include broad investment in new automated command systems linked by fibre-optic Internet, satellite and new high-frequency digital radio systems… The PLA can also contest the information battle space with its new space-based, airborne, naval and ground-based surveillance and intelligence gathering systems and its new anti-satellite, anti-radar, electronic warfare and information warfare systems… there is increasing ‘information content’ for new PLA weapons as it moves to link new space, airborne and ELINT sensors to missile, air, naval and ground-based ‘shooters’ to enable all its services to better use new precision-strike weapons.”

According to General Liu Huaqing, former Vice Chairman of the Central Military Commission, “Information warfare and electronic warfare are of key importance, while fighting on the ground can only exploit the victory. Hence, China is more convinced (than ever) that as far as the PLA is concerned, a military revolution with information warfare as the core has reached the stage where efforts must be made to catch up and overtake rivals.” According to the 2004 White Paper, “In its modernisation drive, the PLA takes informationalisation as its orientation and strategic focus.” The PLA has adopted what it calls a “double historical mission” and a “leapfrog development strategy” – accelerating military informationisation while still undergoing mechanisation.

Developing cyber warfare capabilities is seen as presenting a level playing field in an otherwise David versus Goliath scenario as Chinese hardware is no match for the weapons technology fielded today by the US and its allies. Recent cyber attacks directed against Taiwan and the US are indicative of the efforts to develop new techniques, viruses and logic bombs. Information warfare will be crucial in the opening phases of a war aimed at the re-unification of Taiwan or a border conflict with India as it will be important to knock out the adversary’s communications infrastructure by cyber as well as physical means. A private army of “laptop warriors” – young civilian hackers on whom the state can bank during crises – is being developed for this purpose besides the employment of regular PLA personnel.


Compared with China’s historically reactive stance of luring the enemy in deep and destroying him through strategic defence, the present doctrine is essentially pro-active and seeks to take the battle into enemy territory. It also strives to achieve surprise in a pro-active manner that is demonstrated by new “quick-strike” tactics. The aim is to catch the enemy unprepared in order to inflict substantial damage on strategic targets and disrupt logistics to gain psychological ascendancy. While the land frontier is expected to continue to generate some local tensions, the CMC has identified space and the oceans as the new areas where future conflict might take place.

China is modernising rapidly and steadily enhancing its military capabilities. The military gap between China and India is growing as India’s military modernisation is constrained by its low defence expenditure, which is now 1.78 per cent of the GDP, while China’s defence budget has kept up a steady double-digit growth rate for over a decade. At present there is a quantitative gap between the PLA and the Indian armed forces. If Indian military modernisation continues to stagnate, this will soon become a qualitative gap as well. With the rapid modernisation of the PLA, China will soon be in a position to dictate terms to India on the settlement of the territorial dispute. Hence, while China poses a long-term strategic challenge to India as a competing regional power in Asia, it will remain a major military threat till the territorial dispute is resolved.

India needs to take this reality into account and distinguish between what China professes, that is peaceful co-existence, and what it actually does and plan accordingly. In the near future, a situation of tenuous peace and tranquility is likely to continue to prevail along India’s Himalayan frontier. It will be punctuated increasingly by patrol face-offs, Chinese transgressions like those at Depsang in 2013 and Chumar in 2014 across the LAC, perhaps even incursions and intrusions, and new claims on Indian territory such as the Tawang Tract.

Published Date: 20th March 2015, Image source: http://headlinedigest.com
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

Tuesday, March 17, 2015

Modi’s Seychelles Visit & Its Geopolitical Implications

Anushree Ghisad, 
Research Intern, VIF

As part of his recent three nation Indian Ocean tour, Narendra Modi became the first Indian Prime Minister to visit Seychelles after 34 years; Indira Gandhi being the last in 1981. Modi led a high level delegation which included among others Foreign Secretary and National Security Adviser, and his visit saw signing of four pacts, including one on bolstering maritime security and closer cooperation in ‘ocean economy’.

Evolution of Bilateral Relations and Areas of Cooperation

India and Seychelles share historical socio-cultural ties and people to people contact due to Seychelles’ strategic location connecting eastern African and south Asian sea lanes of trade and communication. This 116 island nation is located 1350 to 1800 kilometers from the East African coast, and the pluralistic society of Seychelles encompasses people of French, British, Indian, Iranian and Chinese descent. Over 10 percent of its 90,000 population is of Indian origin. India established diplomatic ties with Seychelles soon after its independence in 1976. An Indian Mission was established in 1979 in Victoria with the High Commissioner based in Dar-es-Salaam concurrently accredited to Seychelles. The bilateral relationship has been marked by high level exchanges from both sides; the last one from Indian side being by former President Pratibha Patil in 2012 and by Vice President Danny Faure of Seychelles in February 2014.

The close relationship between the two countries is based on the twin planks of maritime security and development cooperation. India has been involved with Seychelles in helping bolster its need for maritime security as it has a large Exclusive Economic Zone (EEZ) of 1.3 million square kilometers.
Development cooperation encompasses capacity building where more than one percent of the Seychelles’ population is trained under ITEC, provision of patrol vessels, hydrographic surveys etc besides cooperation in counter piracy and counter terrorism in high seas, which is critical for India’s extended maritime security as well. There is a tradition of bilateral development cooperation in health, science & technology, renewable energy, providing advisors in critical areas and in bilateral exercises.

Seychelles is a part of the Pan African e-Network project between India and the African Union, that seeks to connect the 53 member states of the African Union through a satellite and fiber optic network to India and to each other to enable access to and sharing of expertise between India and African states, particularly in the medical and education field.

India has traditionally been the main defence provider for Seychelles, providing armaments and training to its Seychelles Peoples' Defence Forces. The two sides also have a military cooperation agreement, whereby, India has trained Seychelles People's military personnel in combat operations. Though India is not part of the 25-nation combined Task Force 15 (CTF-150) battling piracy out of Bahrain, its ships and boats have patrolled the region, which was acknowledged and appreciated by President James Michael during his India visit in 2010.

Why Seychelles is Important for India?

Seychelles’ strategic importance traces back to the Napoleonic era when Britain gained control over this island which straddled the trade route to the East Indies.1 Given its proximity to the oil sea lanes and oil producing nations, US wanted to build a base at Aldabra Island in the Seychelles, but had to shift it to Diego Garcia due to political constraints.

India is trying to influence Indian Ocean Region by extending economic, military and diplomatic cooperation and through strategic partnership. From 2005, India has embarked upon a policy to engage four western Indian Ocean island nations and Seychelles forms a crucial part of it.
Apart from its strategic location on international sea lanes of communication as discussed earlier, Seychelles is a leader among SIDS group (Small Island Developing States) which has multifold areas of convergence with India. It is a leader in advancing the concept of ‘blue economy’, which covers a huge panoply of aspects like environment, hydrocarbons, marine economy, renewable energy and exploration of continental shelf and as Modi said, ‘this Ocean Economy is indispensable to meeting our future challenges.’

China has been making inroads into these island nations with infrastructure projects that have raised India's eyebrows. A report published in a Namibian newspaper on November 11 of last year, quoting a Chinese media report that China plans to set up 18 naval bases in Indian Ocean Region including Seychelles has further added to Indian concerns. Hence, it is imperative for India to actively engage with this island nation to neutralize economic or commercial advantage that China offers to that country, thereby limiting its use for the Chinese as a `resupply` base.2

This island nation also forms the entry gate to eastern Africa with which India has had historical socio-commercial links and now forms a huge market for Indian firms.

Outcome of Visit

India secured a pact to develop infrastructure of Assumption Island in Seychelles, which as Modi said, gives a strong boost to this partnership. Spread over 11 sq.kms, it is strategically located in the Indian Ocean, north of Madagascar. ‘Island development’ is an internationally accepted euphemism for developing strategic assets, with US and China known to be developing infrastructure in islands all over the world.

Modi launched a costal surveillance radar project which is set up with Indian assistance. It will enable Seychelles to combat piracy while helping India keep a track of Chinese moves.

India agreed to help Seychelles in mapping its hydrology reserves under four agreements signed with it, which is the science of measurement and description of features which affect maritime navigation, marine construction, dredging, offshore oil exploration/drilling and related activities, thus helping Seychelles bolster its maritime security. Also, India will be giving a second Dornier maritime patrol aircraft to Seychelles.

India also agreed to provide free of cost visas for three months for citizens of Seychelles and making it available to them on arrival.

Modi thanked President Michel for his government’s consistent support to India on international fora, including the endorsement for India’s permanent membership of United Nations Security Council. He also remarked that the impressive progress of this island nation shows that ‘size is no barrier to the scale of achievements.’

Making a Difference for Seychelles

While it is no secret that every major power is trying to expand its strategic footprints in Indian Ocean Region for securing its own national interests, Prime Minister Modi, in his speech at the civic reception, pointed out how India’s growth story is intricately woven with Seychelles’ growth and success. The Indian defence sector has always helped Seychelles secure its maritime boundaries. Tourism is not only a tool for deeper economic engagement, but also a medium to connect mankind. A better people to people connect ensures deepening trust and respect for shared values of democracy and inclusiveness. This is where India makes the difference which is attested by the fact that Seychelles finds in India “a non-threatening stable ally”. Calling India a leader, President Michel said his country looks up to India and is looking forward to his visit here.

Thus this ‘Dakshinayan’ is a step in the right direction to secure and generate confidence in India’s extended neighbourhood and the success of the Seychelles trip spells good omen for Indian efforts in connecting dots, with no string (of pearls) attached!3

  1. http://www.idsa.in/idsacomments/TheProposedPLANavalBaseinSeychellesandIn...
  2. Mandip Singh, The Proposed PLA Naval Base in Seychelles and India’s Options, December 2011
  3. Shri. Bhushan Deshmukh

Published Date: 17th March 2014, Image source: http://media2.intoday.in
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

Monday, March 16, 2015

The Coast Guard Action on 31st December 2014: Need for Consensus on National Security

Dr M N Buch, 
Dean, Centre for Governance and Political Studies, VIF

Two small vessels, probably trawlers, slipped out of Keti Bandar, a small fishing port near Karachi and headed towards the Indo-Pak maritime border. The radio communications between these vessels and people on shore were intercepted by NTRO, which passed them on to the Coast Guard. Apprehensive of an operation similar to the one enacted by Pakistan in Mumbai on 26th November 2008 (26/11), in which 154 innocent people were butchered by ten terrorists, the Coast Guard immediately acted. One of the boats was seen by an aircraft of the Coast Guard as it crossed the maritime border and thereafter a Coast Guard warship was dispatched to intercept it. Meanwhile the search for the second vessel continued, but it mingled with other fishing boats and is suspected to have turned back towards Pakistan. The vessel in question was intercepted, asked to halt, two warning shots fired over its bow, but the vessel did not stop. It was chased and ultimately overtaken at about 23:30 hours on the night of 31st December 2014. The crew of the vessel briefly appeared on deck, but quickly went inside again and blew up the vessel. There was a loud explosion which indicated that the boat carried explosives.

On 11th September 2001 (9/11), two passenger aircraft were taken over by terrorists in the United States and the pilots were forced to crash into the Twin Towers in New York. About four thousand people died in this incident. Simultaneously two other aircrafts were taken over by terrorists, one was forced to hit the Pentagon in Washington, causing several casualties and the pilot of the fourth aircraft, in a rare case of selfless patriotism, preferred to cash the aircraft in an open field, rather than allow the aircraft to be turned into a living bomb. The United States government declared that it would wage a global war against terror and would also strengthen the United Stated security set up to the extent where another attack of the 11th September variety never took place. Entry point security was made watertight and rules were framed whereby security forces were given the authority to intercept, intervene, arrest and conduct searches even without a warrant. The questioning, profiling and intrusive searches at entry points are so thorough that they can be extremely annoying. Anyone who looks a Middle Easterner, has a beard or a Muslim name is liable to even more exhaustive questioning and searches. Our permanent representative to the United Nations (Ambassador), Hardeep Singh Puri, a Sikh, was asked to remove his turban and treated in a way which normally is not done with a diplomat. Similarly, Meera Shankar, our Ambassador to the United States, was physically searched despite her telling the security staff that she was our Ambassador and should not be subjected to such humiliation. This did not cut much ice with the security staff. The US Government apologises, but neither makes restitution nor in any way has relaxed the security rules in this behalf. In the United States everyone, regardless of position or social status, is treated exactly the same way at airports and the people have to appreciate that all this is being done in the interest of their safety. Certainly the fact that a 9/11 type of attack has never occurred in the United States is because of the security regime in that country. Of course in Israel the security arrangements are even stricter, but one can understand that a country which lives in the midst of hostile Arab nations is bound to be paranoid about its security and, therefore, Israel is number one in the world in security at airports.

We Indians are very status conscious, have overinflated egos and take insult at small things. We consider being questioned by security personnel to be an insult, a search to be even more of an insult, standing in a security queue to be infra dig and we all want to be included in the list of VIPs who are exempted from passing through the security arrangements. A jawan on duty at an airport, railway station or seaport has clear-cut orders regarding passengers and others seeking entry to produce proof of identity, authorisation of entry such as a flight ticket and with instructions about questioning and search of the persons seeking entry. Generally the security personnel are quite polite, but if a passenger is being obdurate, the security personnel have to take suitable action. Instead of cooperating, many of us take umbrage and sometimes this can lead to ugly scenes. Do these people not realise that by demoralising a security officer doing his duty we are weakening the system and jeoparadising security?

We have unfortunately exempted a large number of persons from the normal security procedures adopted at airports, etc. The list even includes such private persons as the son-in-law of Sonia Gandhi, Robert Vadra, his wife and children. Members of Parliament tried to have the rules amended to include themselves amongst the exempted persons. What is not realised is that a person who is otherwise exalted may come under some hidden pressures, including blackmail, to carry a weapon into a secured area or to otherwise facilitate commission of an offence which can jeopardise lives. The purpose of the security protocol is to ensure that neither wittingly nor unwittingly should any person carry into a secured area any item which might be used as a weapon. For example, there is a restriction on the amount of liquid one can carry into a secured area because explosive substances in liquid form are also available. A person who is searched would be detected if he had more than the permitted quantity of liquid in his possession. A person who is not searched could become a carrier of such harmful substance because he would pass through undetected. Can we afford to take such risks? What if the exempted person’s mobile telephone has been replaced by a device which could cause an explosion? If he were to pass through the normal search procedure the device would be detected and detained. Not searching him can facilitate the entry of such dangerous substances into a secured area. That is the logic of the search at the airports and other entry and exit points. Not everyone who carries harmful material into a secured area is a terrorist or a guilty person, but he can be used as a carrier either on his volition or because he does not know that he is carrying dangerous material That is why exempting anyone from passing the security points without following the security protocol is in itself dangerous.

The list of persons exempted from normal security search must be drastically pruned. The President, Vice President, Prime Minister, Speaker of Parliament, Chief Justice of India and the Governors and Lieutenant Governors of States, the three Service Chiefs when travelling on duty should be the only persons exempted from search. The Defence Minister and Home Minister when travelling on official work and accompanied by their authorised security personnel may also be so exempted, but not when travelling on private work. Everyone else, including the Chief Minister of a State and judges of the Supreme Court and High Courts, must pass through the normal security barriers. The security personnel may be specially instructed to be extra polite to such highly placed people, but should not relax the normal practice of search as prescribed by the instructions given by the government. The hurt ego of an individual can always be assuaged, but a security lapse which causes casualties can never be condoned.

The spokesperson of the Congress Party has asked government to present proof that the sunk boat was in fact a terrorist vessel. That is exactly what the Pakistanis are saying. Why should government produce proof? Even in matters of national security, is the Opposition insisting that government has to prove its own bona fides for action taken by the security forces? What does the Congress want from those who are required to guard our borders? The United States, which has land borders with friendly nations towards the north and south and which in the east and west has large oceans which must be crossed to reach the United States, nevertheless takes precautions which are not less than those which would be adopted in a situation of belligerency. India is much less insulated than the United States and it has long hostile borders on the land. Perhaps in international law India and Pakistan do not share a state of belligerency, but for all practical purposes Pakistan has no hesitation in allowing terrorist groups who target India to pass through the Pakistani lines. Therefore, both by land and sea we have to guard against intruders from that country. This is as good a definition of the belligerency as may have been given by Lauterpacht or Oppenheimer. We do have intruders from across the borders whose intentions are to create trouble in India. If the actions of an intruder appear to be suspicious or in any way hostile, the doctrine has to be to shoot first and then ask questions. This is not a case to be covered by Chapter IV of the Indian Penal Code, the General Exceptions. Under normal circumstances even the police, if it causes death except when ordered to disperse an unlawful assembly, has to show that it acted in the right of private defence. In the case of an intruder from outside India, we are dealing with an act which may amount to belligerency and here the rules of war apply. If you cannot identify yourself as a friend or you do not obey an order to halt, then the Indian security forces have every right to take extreme action, including causing your death. There is no question of the Coast Guard having to explain to the Congress spokesperson or to anyone else why action was taken against the intruding vessel.

After 26/11, any vessel coming from Pakistan has to be treated with suspicion and action against
it has to be applauded rather than called into question.

Published Date: 16th March 2015, Image source: http://im.rediff.com
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

Monday, March 9, 2015

Modi’s Visit and Importance of Indian Ocean Region

Anushree Ghisad, 
Research Intern, VIF

According to Will Durant, discovery of agriculture and invention of printing press are two breakthroughs which have fashioned and transformed the course of history. Modern historians believe that another invention which drastically altered the course of history was the discovery of trade winds by Hippolus in 45 AD. It gave rise to Indian Ocean trade, which was stable, continuous and less risky due to predictability of monsoon winds. India has always been at the fulcrum of this network of trade route which encompassed diverse players and resources that connected many port cities in Indian Ocean. Only once did this ever flourishing trade see a decline, i e during the Mongol empire when land routes became safer and cheap, but it emerged again in the 14th century. This Indian Ocean Region (IOR) trade facilitated unprecedented level of people to people interaction and brought about exchange of ideas which shaped the world view of these ‘Monsoon societies’.

Island nations emerged as jewels of the Indian Ocean due to their critical locations. The thriving cultural connect was visible during the colonial era when thousands of Indians were taken to these islands as indentured labour, and the vibrant India connect remained a feature of decolonization and post decolonization era, which automatically brought them under India’s sphere of influence.

Scramble for Indian Ocean: Where does India Figure?

In this globalized era, the IOR has emerged as the most dynamic yet coveted and unstable region. Major sea lines of the world, accounting for two third of global trade, pass through this region which is surrounded by energy scarce developing countries. Even pre and post-cold war geopolitics have opened this region for proxy wars. Hence, muscle show in Indian Ocean has become a tool of diplomacy to secure allies who are vital for surveillance and to protect trade and military interests of a nation. Hence, be it under the pretext of cold war or pivot to Asia or Maritime Silk Route; every major power wants to establish its dominance on Indian Ocean, by bringing littoral nations under its sphere of influence. This has challenged India’s historical preeminence in this region.

Indian Initiatives

The new Indian government had spelt out the priorities of its foreign policy by inviting the Prime Minister of Mauritius along with heads of SAARC nations at the swearing in ceremony of Prime Minister Narendra Modi, which was followed by the External Affairs Minister’s travel to Mauritius and Maldives. Modi’s upcoming visit to three island nations; Sri Lanka, Mauritius and Seychelles is another step in the direction of India’s ‘neighbourhood first’ policy.

Recognising the strategic importance of this region, UPA government in 2005 had embarked upon a policy to influence IOR by engaging four western Indian Ocean islands – Mauritius, Maldives, Seychelles and Madagascar - economically, militarily and through diplomatic cooperation. On the sidelines of the 17th SAARC Summit in Addu Atoll, India, Sri Lanka & Maldives decided to begin fusing of naval operations and common exercise programmes. India’s brainchild like ‘Indian Ocean Naval Symposium’ (IONS) seeks to increase maritime co-operation among navies of the littoral states of the IOR by providing an open and inclusive forum for discussion of regionally relevant maritime issues.1 The 2014 Biennial International maritime exercise off Anadaman, ‘MILAN’, saw unprecedented participation of western Indian Ocean nations like Maldives, Mauritius, Seychelles and Sri Lanka. Former President Pratibha Patil’s visit to Seychelles in 2012 and the External Affairs Minister’s visit to Mauritius in 2015 are among the other steps taken in the recent past to intensify bilateral relations.

Assessing Diplomatic Damages

Despite recognizing the crucial location of SIDS (Small Island Developing Nations) and their centrality in India’s foreign policy, India’s profile in its neighbourhood is shrinking rapidly, not only due to China’s aggressive surge or USA’s centrality to Asia-Pacific in its rebalancing, but also due to some diplomatic miscalculations on India’s part. More than two thirds of Mauritian population is of Indian origin, yet continuing uncertainties over the tax treaty with India are having a negative impact on employment opportunities as well as existing jobs in the island nation's financial services industry.2 Sri Lanka is a maritime hub connecting India with rest of the world, and has the potential to play similar role in China’s growing trade with Africa. Yet narrow political considerations during the former coalition regime of UPA soured the Indo-Lanka ties, and the vacuum thus created was swiftly filled up by China and Pakistan. India’s failure to take a firm stand on the internal political turmoil in Maldives led to the emergence of a dynastic Islamist regime which, under covert Chinese support, threw out the Indian firm GMR from the Male Airport contract and challenged India’s eminence in the region. In the ongoing face-off between Nasheedist and Gayoomists, India has failed to break the ice between two leading to cancellation of Modi’s visit to Maldives on the backdrop of a ‘probable Chinese choreographed’ arrest of the former President and champion of democracy, Mohamed Nasheed. The cost of mismanagement of neighbourhood policy would be severe, as India’s rivals would spare no stone unturned to encash the situation in their favour.

China Angle

Some believe that Indian foreign policy need not be seen through Chinese prism as being an emerging power, China has legitimate aspirations to expand its footprints and secure its trade and commercial interest. India has always endorsed peaceful coexistence, and has maintained that it wants an open, transparent and inclusive security structure in the Indian Ocean. If China is heavily dependent on the strait of Malacca and Lombok, then over 90 percent of India’s international trade by volume is dependent on sea, where China is flexing its muscles by building ports in Bagamoyo (Biggest port in Africa once completed, it will handle twenty times more cargo than Dar-es-Salam port) to Hambantota, Sittwe and Gwadar and securing naval bases by injecting soft loans in SIDS like Maldives and Mauritius. While no one has any objection to a healthy competition for economic ventures, alarm bells ring when China turn these ‘economic’ prepositions into strategic and political ones by docking nuclear submarines at Hambantota or sending a military delegation to Seychelles. This defeats the purpose of the very ‘transparent, open and inclusive security structure in Indian Ocean’ which India wants.

China is resorting to neo imperialistic tactics by using tourism diplomacy to promote its presence in these island nations and thus making their tourism driven economies dependent on China. As per Minivan News daily of Maldives, ‘in a phenomenon that caught many industry experts by surprise, the number of Chinese tourists visiting the Maldives tripled from about 100,000 in 2010 to more than 300,000 last year. In 2014, Chinese tourists accounted for nearly one-third of arrivals with a 30% market share, representing the single biggest source market for tourists to the Maldives.’ Timing and signaling is vital in diplomacy, and the nature of signals emanating from China at such a juncture raises questions about the ‘peaceful rise of China’ amidst the hunt for string of pearls.

According to India’s former Foreign Secretary Shyam Saran, China’s Indian Ocean Policy is to ‘select location meticulously, make deployment discreetly, give priority to cooperative activities and penetrate gradually’. The ‘roll out’ of guidance is apparent in the wake of the recent Chinese activities of port building, ship visit and Maritime Silk Route project in India’s neighbourhood, he argues. China has spelt out its Indian Ocean Strategy in a ‘Blue Book’ prepared by a Chinese think tank, which says, ‘ If China cannot have a positive impact on the Indian Ocean littoral states, then future situation will be even more severe, affecting China’s development and peace negatively.’ It further adds, ‘A clear development strategy in the Indian Ocean Region is not only a sign of China’s self-confidence, but a clear demonstration of its strategic interests.’3

As for the comparison between Indian Ocean and the South China Sea, India has always stood for mutual cooperation and reciprocity in Indian Ocean region, as against China’s expansionist and obstinate stance in South China Sea, and this startling difference of stratagem provides a furtive look into the psyches of respective governments.

The 21st century is being projected as the ‘Asian Century’. With two of its rising powers poised to take the global center stage, many academicians have opined that ‘cooperation and not confrontation’ is the way forward. China has slightly twisted the mantra; it is ‘convenient cooperation and calibrated confrontation’ for CPC. Despite the fact that China is much ahead of India on economic and military fronts and on some social parameters as well, India’s meteoric rise on the global panorama has undoubtedly left China frantic, which is absolutely in no mood to ‘accommodate’ India in Asia’s success story. And this is evident from the way in which China is clandestinely clamouring to reshape the geopolitics of Indian Ocean Region.

The Way Ahead

As Shyam Saran says, ‘India is at the cross-roads of the many connecting corridors that bound this space together in the past. These corridors are being revived and we must ensure that they do not by pass us.’

Modi’s proposed visit to the three island nations is to reassert that this is our historical and cultural neighbourhood. Geography favours us, but geopolitical equations demand that we develop an innovative strategy to respond to new challenges in IOR, not only for India’s security, but also for its continued prosperity. India has to push for ‘region centric development’ where these island nations also benefit from India’s success story. Ambassador of Bangladesh Ahmad Tariq Karim has already proposed an idea of SAARC minus Pakistan to rejuvenate SAARC, and in that context, expanding SAARC’s horizons to include Mauritius and Seychelles can be a step in the direction of regional cooperation. Seychelles is already working with India in developing ‘Blue Economy’, which can be further extended to Mauritius, Maldives and Sri Lanka. With a stable democracy and rising middle class, India has to play a constructive role in ensuring stability in its backyard which constitutes more than 10 percent of global GDP.

Apart from neighborhood first, there are two more angles to Modi's visits, which is domestically engaged foreign policy and public diplomacy. Modi’s Sri Lanka visit is to push soft power & project India’s Buddhist links, and his visit to Mauritius coincides with Mauritian national day which is celebrated on 12th March (the date of launch of Dandi Salt March), as a tribute to Gandhiji and the Indian freedom struggle. Like PAN-African satellite tele-medicine system of which Seychelles is a part, Mauritius and Maldives too can be brought under a similar scheme as they anyway avail a lot of medical tourism which is evident from the fact that around 70 Maldivian nationals fly directly into Bangalore daily, mostly seeking medical treatment. India has to engage with Maldives even if the current visit of PM has been called off, as Maldives is India’s old friend and strategically located in western Indian Ocean. Half of the Maldivian population is below the age of 30, so engaging them with India’s youth can produce long term dividends.

In reaching out to its extended neighbourhood, India will need to demonstrate that its sub-continental neighbours are not mere passage-ways to the realms lying east, west and north, but fellow travelers on a shared and exciting journey that echoes their glorious past and beckons a bright future.4
As geostrategist A T Mahan appropriately puts it, “the destiny of the world would be decided on Indian Ocean’s waters’”. Hence, Modi’s proposed visit to the four island nations is not just to reassert that Indian Ocean is India’s historical and cultural neighbourhood, but to ensure that it remains ‘India’s Ocean’.

  1. http://ions.gov.in/about_ions
  2. http://articles.economictimes.indiatimes.com/2014-02-02/news/46923731_1_...
  3. The Hindu, 9th June 2013
  4. India and East Asia – Moving from the Margins to the Centre, India International Centre, February 14, 2015,Shyam Saran

Published Date: 9th March 2015, Image source: http://archive.thedailystar.net
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

India-US Civil Nuclear Deal: A Dependence Entrapment?

Sarosh Bana

India needs to proceed with utmost caution on its civil nuclear deal with the United States.

The pathbreaking agreement, dramatically ‘operationalised’ in a 25 January meeting with India’s Prime Minister Narendra Modi by U.S. President Barack Obama during his three-day state visit to India, has raised high expectations in both countries and elevated their partnership to a new dimension. However, the advancements made by India in the atomic energy sector compel the question whether the country needs to be buttonholed into such an arrangement.

India’s planned $182 billion expansion of its nuclear capacity on line from the present 5,780 MW from 21 operating reactors to 14,600 MW by 2020 and 63,000 MW by 2032 is evoking a renaissance in the global nuclear energy industry. The 2.57 per cent share of nuclear power in India’s overall installed generation capacities of 224,680.24 MW, as on 31 December 2014, is aimed to be raised to 25 per cent by 2050.

This development is especially paving the way for the revival of the nuclear power industry in the U.S., where no nuclear power plants (NPPs) have been built since 1973 after as many as 103 had been erected over the previous decade. American vendors like Westinghouse Electric Company, a Toshiba Corporation group company, and GEH (General Electric, allied with Hitachi Nuclear Energy) – apart from France’s Areva and Russia’s Atomstroyexport - have been enthused by the business potential India holds out for them.

Westinghouse has been provided land at Chhaya-Mithi Virdi, in Gujarat, to host six of its 1,110 MW Advanced Passive 1000 (AP1000) Pressurised Water Reactors (PWRs), the pre-project activity of groundbreaking having already been done in 2012. GEH will be building six of its 1,520 MW generation III+ Economic Simplified Boiling Water Reactors (ESBWRs) on land allotted to it in Kovvada, in Andhra Pradesh. The first concrete pour is expected early this year.

Obama exulted that a “breakthrough understanding” had been reached on two issues that were holding up the India-U.S. civil nuclear cooperation, while Modi expressed relief that India was moving towards commercial cooperation on civil nuclear trade with the U.S. six years after the two sides had signed a landmark deal on it in 2008.

The process towards an agreement had actually begun much earlier, in July 2005, when then Prime Minister Manmohan Singh had signed the ‘joint statement’ with then U.S. President George W. Bush, a move that had seriously threatened the survival of the Indian government amidst political outrage on a perceived sell-out to Washington.

The two issues Obama was referring to included India’s Civil Liability for Nuclear Damages Act of 2010 that holds suppliers, designers and builders of NPPs directly liable in case of a nuclear accident. The U.S. has been urging India to limit this liability to plant operators. The other issue pertained to “administrative arrangement”, a defined procedure Washington has been insisting on for it to monitor nuclear material supplied by it or produced in U.S.-supplied reactors.

New Delhi has rejected multi-layered scrutiny, maintaining that all nuclear material supplied by the U.S., and all countries it has similar civil nuclear accords with, will anyway be subject to International Atomic Energy Agency (IAEA) safeguards. Washington has hence dropped its insistence, though there was previously the possibility that as India was not a signatory to the Nuclear Non-Proliferation Treaty (NPT) that it finds discriminatory, the U.S. Nuclear Regulatory Commission (NRC) was not likely to approve nuclear reactor sales to India in the absence of such U.S. supervision. Obama has also backed India’s phased entry into the Nuclear Suppliers Group (NSG), the Missile Technology Control Regime (MTCR), the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, and the Australia Group to strengthen non-proliferation and export control regimes.

India overcame the liability impasse without amending its law, but by proposing an ‘insurance pool’ to indemnify suppliers against liability. State-owned GIC Re of General Insurance Corporation – India’s only reinsurance company – is considering an insurance-linked bond of Rs750 crore ($122 million) towards an overall Rs1,500 crore ($244 million) compensation fund to be set up by all general insurance companies in the country. No present policy covers nuclear risks in India as insurers lack the means to assess liabilities. The 2010 liability statute incorporated the proviso for a plant operator to seek secondary recourse against a supplier in view of the myriad unresolved claims from the 1984 chemical leak disaster at the U.S.-owned Union Carbide plant in Bhopal that by official estimates had slain 5,295 people. Union Carbide could virtually walk away from the episode in the absence of such a framework.

While the 2010 liability act limits any recourse sought by the operator against a supplier to $244 million, the Indian government will cover additional compensation of up to 300 million IMF Special Drawing Rights ($420 million). Beyond that, India will need to join the IAEA Convention on Supplementary Compensation for Nuclear Damage (CSC) to access international funds, the Convention apportioning shared risk to the number of nuclear plants of each member state.

Curiously, the U.S., which pioneered the world’s first comprehensive nuclear liability law, the Price Anderson Act of 1957, is not party to any international nuclear liability convention, except for the CSC, of 1997, which has yet to come into force, on 15 April 2015. India signed the Convention in 2010 and is expected by the U.S. to ratify it in the near future.

In the civil nuclear sector, countries are guided by their own legislations as also by the 1988 Joint Protocol that links the IAEA’s Vienna Convention on Civil Liability for Nuclear Damage of 1963 that entered into force in 1977, and the OECD’s Paris Convention on Third Party Liability in the Field of Nuclear Energy of 1960, which entered into force in 1968. The Price Anderson Act, however, provides for $10 billion in cover without cost to the public or government and without fault needing to be proved. It was renewed for 20 years in 2005 and requires individual operators to be responsible for two layers of insurance cover.

The fine print of the India-U.S. agreement is, however, not yet public as the agreed text is to be finalised only in the next couple of months. The 25 January summit joint statement simply notes that the “Leaders welcomed the understandings reached on the issues of civil nuclear liability and administrative arrangements for civil nuclear cooperation”, implying that details were yet being worked upon.

India’s liability law will clearly impose a financial burden on nuclear suppliers as they will need to factor in supplementary safeguards and protective systems into their plants as also contribute towards the ‘nuclear pool’. Evidently, to recoup their outgoings, they will need to charge more for their plants.

Indigenous reactors are already reflecting this cost increase. The approved cost of the first two of the four 700 MW Pressurised Heavy Water Reactors (PHWRs) being built, and to be completed by 2020-21, at Gorakhpur, in Haryana, is Rs20,594 crore ($3.35 billion), while that of units 5 and 6 at Kaiga, in Karnataka, construction on which will begin in December 2016, is Rs 22,000 crore ($3.58 billion). In comparison, the earlier planned units 7 and 8 at Rawatbhatta in Rajasthan, scheduled for commissioning in June and December 2016, are being built at a cost of Rs12,320 crore ($2 billion), and units 3 and 4 at Kakrapar in Gujarat, to be commissioned in June and December 2015, cost Rs11,459 crore ($1.87 billion).

Even with this approximately 80 per cent inflation, Indian reactors are highly cost competitive and suit Indian needs. While an Indian-made two 700 MW-unit plant, that is, of 1,400 MW, is priced at around $3.5 billion, the cost of the U.S.’s first nuclear project in over three decades, the two 1,117 MW AP1000 units 3 and 4 of Westinghouse at the Vogtle Electric Generating Plant in Georgia, has spiralled from $14 billion to $16.2 billion. In proportion, at 2,234 MW, Indian PHWRs would cost $5.59 billion, almost a third of the AP1000. GEH’s 1,520 MW ESBWR being built for Unistar, a consortium of Constellation Energy and Electricite de France, at Bell Band, Pennsylvania, is estimated to cost $9.6 billion.

The Indian government opted for GEH’s ESBWR though the reactor is as yet untried and untested, having secured sanction for commercialising only last September when its design was approved by NRC. Also, not a single AP1000 of Westinghouse is in commercial operation, though eight are under construction, two each at the Vogtle and V.C. Summer sites in the U.S. and at the Sanmen and Haiyang sites in China. Its cost escalation at Vogtle has, however, been driven by delays of about 20 months that has led to a $900 million lawsuit being filed by Westinghouse and Vogtle co-owner Georgia Power against each other, the latter citing deficiencies in design and poor execution for the cost overrun and delays. In 2013, Duke Energy cancelled its contract to Westinghouse for two AP1000 reactors and the matter ended up in court after project costs skyrocketed from $10 billion to $24 billion and original in-service dates were delayed by eight years. These instances belie the U.S.’s Energy Information Administration (EIA) estimates that construction costs of new nuclear power plants will average $5,335 per kilowatt of capacity.

Neither GEH nor Westinghouse has disclosed the capital costs of their six reactors each planned for India. But it is clear they will extract huge investments, even though construction costs are lower in India than in the West. This will unquestionably affect the country’s hitherto moderate nuclear power tariff rates that range from 92 paise (1.5 cents)/kWh for Tarapur 160 MW boiling water reactor (BWR) units 1 & 2 to Rs2.4 (3 cents)/kWh for Narora 220 MW PHWR units 1 & 2 to Rs3.4 (5.5 cents)/kWh for Rawatbhatta 220 MW PHWR units 5 & 6.

Nuclear plants in India are designed, executed, operated and maintained by Nuclear Power Corporation of India Limited (NPCIL), a public sector enterprise under the administrative control of the Department of Atomic Energy (DAE). The Corporation has achieved about 407 reactor years of experience in safe operation of nuclear power plants.

Since India’s new government came to power in May 2014, the country has been seized of the “Make in India” mantra of Prime Minister Narendra Modi that seeks to encourage indigenous manufacturing by building skills and competences.

Nuclear power is one area in which India has indigenised to the highest degree of self-reliance, and competences, having managed to standardise and improve upon the Canadian-designed 220 MW PHWRs and then scale this up to 540 MW reactor size. A momentous milestone was reached in September 2005 when the country’s first indigenously designed and fabricated 540 MW PHWR unit 4, at Tarapur, became commercial seven months ahead of schedule. Using the same core of 540 MW, Indian enterprise has designed and developed the 700 MW PHWR, eight of which are under construction. Capabilities have also been developed in front and back ends of the fuel cycle, from mining, fuel fabrication and storage of spent fuel, to reprocessing and waste management. Indeed, India is now capable of selling its 220 MW reactors, which are the best in their class, to developing countries that require compact, affordable and easily manageable plants.

India’s deal with the U.S. is thus driven less by technology requirements than by the need to be integrated into the global nuclear community that will gain it access to uranium imports that it is now denied and which can fuel its plans for expansion. Its concerted indigenisation of its nuclear programme was prompted by technology, and uranium, sanctions imposed by the Western world, led by the U.S., against its atomic tests of 1974 and of 1988. As of now, the country’s nuclear power generation is largely dependent on its depleting, and poor grade, endemic supplies that are among the lowest grades in the world, of 0.06 per cent.

The on-going first stage of India’s three-stage nuclear power programme is based on indigenously available natural uranium. The subsequent stages, with manifold higher potential, do not need any additional uranium, but what India is looking at is the possibility of imported uranium as additionality, which comes within the contracts for foreign reactors.

Instead of being drawn into an arrangement which may not be advantageous to it, India would be better placed to build on its own uranium resources. The country needs to avoid any recurrence of the sort that happened after its nuclear test of 1974. A year after the U.S. Congress passed the Nuclear Non-Prolifera-tion Act (NNPA) in 1978, Washington reneged on its own 30-year agreement for fuel supplies – of low enriched uranium (LEU) - for India’s maiden atomic power station at Tarapur, almost leading to a shutdown of the facility and forcing its downgradation from 210 MW to 160 MW ratings.

(The author is Executive Editor, Business India)

Published Date: 9th February 2015, Image source: http://www.c4learn.com
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)