India,the Indo-Pacific

and OBOR
Ambassador Prabhat P. Shukla
Advisory Council
Vivekananda International Foundation
 The World after the Cold War
• Two historical force are at play today – the first is
the restructuring of the global economy, with its
attendant stresses on established value chains.
• The second is the fall-out of the collapse of the
USSR, with its consequences for the Eurasian
land-mass.
• All countries are positioning around these two
issues, some more influenced by the one, some
by the other, some by both.

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 Eurasia and its History
• The Eurasian super-continent saw the first of
the trading links, going as far back as the
Indus Valley civilisation – it stretched
gradually as more of the region came to
enjoy the fruits of civilisation.
• The links between the Roman Empire and the
east – India, Arabia, China – were the basis
for the silk road. However, the links were not
dominated either by silk or by land routes.
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 India’s Place in Olden Times
• Although quantification is difficult for this
period, we have Pliny the Elder bemoaning
Roman outflow of gold and silver to India
and other eastern countries.
• To India, the amount was 50 million
sesterces, to India, Arabia and China
combined, 100 million sesterces.

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 President Macron on the Silk Roads
• We also know that, after the Roman conquest of
Egypt, there were 120 ships annually sailing to
India.
• The best estimate is that they carried some 300
tons of cargo in each sailing.
• Hence the quote from President Macron in Xian:
“the ancient Silk Roads were never only Chinese
… By definition, these roads can only be shared.
If they are roads, they cannot be one-way.”
 End of the Land Routes
• These routes were frequently disrupted, usually
by war, but also by pestilence, such as the
Black Death.
• At such times, trade would stagnate, only to
find alternative means, as tastes and wealth
spread.
• The final blow to the east-west land routes
came with the fall of the Mongol Empire in
1369 and of Constantinople in 1453.
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 Voyages of Discovery
• This had two major consequences: the spread
of new knowledge to the Italian city-states
[“Renaissance”] and the need to find
alternative trade routes.
• The combination of new knowledge [including
the compass and the lateen sail] and the need
to find alternative routes led to the Voyages of
Discovery in the late 15th– early 16th centuries.

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 Searching for Spices
• Spain and Portugal took the lead – the
former sailing west, the latter east, an
understanding formalised by the Treaty of
Tordesillas, [7 June 1494].
• Both Columbus and Vasco da Gama were
looking for routes to India and the East
Indies – the search for spices, especially
pepper.

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 India and the East Indies
• From the days when Alaric the Goth
demanded 3000 pounds of gold, 10,000
pounds of silver and 3000 pounds of pepper
as ransom for lifting the siege of Rome [410
CE], pepper was much in demand.
• India was also the destination they sought
because it was the largest economy in the
world, and traded with both east and west,
including the East Indies.
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 Railways Challenge Maritime Dominance

• Thus began the maritime age, which has seen the

rise of the Iberian powers, then Britain, and finally
the US to global dominance.
• This maritime control of the trade routes was first
challenged by the advent of the Railway – a point
made by Halford Mackinder in his 1904 essay.
• The spread of road networks, and later still,
pipelines, posed further challenges to maritime
dominance. China and Europe are both investing in
pipelines, with Russia as the source.
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 The Berlin-Baghdad Railway
• This use of the Railway to challenge the maritime
dominance of Great Britain was adopted by the
Germans through the Berlin-Baghdad Railway –
finally seen off in the First World War.
• This was achieved by the expedient of breaking
up the territory of the German, Austro-Hungarian
and Ottoman Empires into mutually adversarial
sovereignties, preventing a land continuum from
being formed again.

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 Exit USSR, Enter Eurasia
• The break-up of the USSR brought Eurasia into focus
again as a possible single geography, and we
witnessed the revival of the silk road approach in
intellectual and strategic thinking.
• In China, the idea was given formal shape not by
President Xi, but by President Hu – he called it the
New Eurasian Land Bridge. Xi’s terminology softens
the hard edges of the strategy, but the substance is
the same. Xi also added the maritime dimension
with the 21st Century Maritime Silk Road.

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 Restructuring the Global Economy
• The second strand that emerged at the same
time was the reshaping of the global economy.
• Since the end of the Second World War, the US
has led the economy in which trade and
investment have led global growth.
• In the process, the US has provided its markets,
the largest consumer in the world, to direct the
growth first of Europe, then Japan, and finally
China.
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 Shifting Partners for the US
• Each time, the shift has been occasioned by its
economic partner beginning to threaten its
own dominance.
• In the 1970’s, it was the EEC [as it was called
then] reflected in the writings of Servan-
Schreiber and Mary Kaldor.
• In the 1980’s and 1980’s, it was Japan, and
there were a number of books proclaiming the
coming No 1 in the new world order.
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 The China Challenge
• En passant the US also fixed the Soviet challenge.
• All through these periods of structural change,
elite opinion kept saying, that the US was in
decline.
• By the 2000’s, it was China that was emerging as
the threat, and the year 2008 marks the watershed
in the rise of China. Its growth since then has
slowed, and is based on debt and largely
unproductive investment.

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 G2 or Confrontation?
• It has taken President Trump to express the reality
of the China problem.
• The trade squeeze has already affected the Chinese
economy – it has run up its national debt to 300%
of its GDP, and growth is still slowing.
• An economy as large as China’s would naturally
slow down, but the Chinese leaders themselves
seem to consider that a problem – and their growth
rates are certainly falling behind their stated targets.

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The Chink in China’s Economic Armour

• The essential fact is that it is economic

growth and external surpluses that allow
China to play an outsize role in Eurasia.
• However, as its trade and current account
surpluses shrink – and now, as the Yuan
loses value against the $ – its capacity to
make sizable investments also falters.

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Investment Declines in OBOR

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 Can China Find Domestic Drivers
• So this is where the confrontation comes to a head:
on the strategic side, the concept of Eurasia meets
the concept of the free and open Indo-Pacific.
• On the economic side, the issue is whether in the
new epoch – where trade and investment are
constrained, tariffs go up, and currencies re-align –
can China sustain its growth and surpluses to feed
its military ambitions and economic expansion,
including overseas investment.

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 Eurasia Vs Indo-Pacific
• There is no inherent clash between the
strategic concepts, and, of course, China has its
own Maritime Silk Road [though historically
there never was such a thing].
• In practice, though, they are counter-poised –
India’s effort has been to stress that the Indo-
Pacific concept is “inclusive”.
• But there are few takers for it so far where it
matters, to wit, Russia and China.
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 Economics of Sea Vs Land Trade
• In commercial terms, sea routes have a clear
advantage – a ship is slower, but it carries at least
10 times the cargo of a train, and frequently more.
• In terms of cost, sea freight between China and
most European ports is at least 30% cheaper,
despite 40-50% subsidies on rail freight given by
China.
• But in terms of pipelines, the cost factor is neutral.
China imports about equal quantities of natural gas
by land and sea; oil is a different story.
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 The Importance of Hard Power
• The problem, however, is that the contest
may not be purely commercial.
• Just as the land routes were disrupted by
war, and power vacuums, sea routes are
also vulnerable to disruption.
• Iran has already threatened, and
occasionally made good on the threat, to
block one choke point; there are others too.
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 Eurasia has it Own Choke-Points
• The Chinese have a declared military base in
Djibouti, which can choke Bab-el-Mandab, and
through it, the Suez link.
• Counter-blockading China – as one discusses in
seminars – will not work. It has not worked even on
Qatar. China is a continental economy, and has the
Russian landmass behind it. They are unlikely to
repeat the mistakes of Napoleon and Hitler.
• Russia, and Xinjiang, are in fact, the “choke points”
of China’s Eurasia strategy.
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 Eurasia Holds No Attraction for India
• India faces a unique dilemma: it has no interest
in a Eurasia strategy. Under it, it would be strung
out at one end, and with no independent access.
Its only access routes are through Pakistan –
which can be ruled out as far as the eye can see,
or Iran, which is also out for the count.
• This is why, even without the CPEC sovereignty
issue, India would stand to lose from the success
of a Eurasia strategy.

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 Acting East
• In the maritime domain, by contrast, India is in the
middle of one of the busiest trade routes in the
world.
• In pursuit of this approach, India has been building up
its links under the “Act East” rubric. ASEAN remains
the centre-piece of this strategy and has accepted the
concept at its last Summit in June 2019.
• The US and Japan are the anchors in the broader
Indo-Pacific.

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In Line With its Maritime Tradition
• At the same time, India is also working with
the wider Indian Ocean covering our
immediate neighbours, and countries on
Africa’s east coast.
• Not to neglect the sceptics, we are also
engaging Russia and China – the former has
given some indication of flexibility after the
recent Vladivostok Summit between PM
Modi and President Putin..
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 Need for Accommodation
• It would be helpful if China were also to moderate its
activities in the Indo-Pacific region.
• The nibbling of territory, the ignoring of international
law, unreasonable territorial claims against India and
several other countries, the weaponisation of its
finances – these are all causes for concern.
• Our partners would be well advised to remember that
support on J&K is both a necessary and sufficient
condition for a strong foundation for ties with India.

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 Getting the Economy Right
• India would do well to get back on its high
growth path, recognising that the old economic
policies will not work.
• Going forward the basic parameters would have
to cover low taxes, high tariffs, no policy of
weakening the Rupee, and light but firm
regulation. Corollaries apply.
• Walk away from regional arrangements like TAPI,
RCEP and push to join TPP-11.

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Keep in Touch

Wilt thou show PPS: No, that’s just 0.025%

the whole of the whole. For more:
wealth of thy
wit in an
instant? prabhat.shukla@gmail.com

[Merchant of Venice, Act

III Scene 5]

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